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AIR NewsSummary December - January 2005 - DVB Bank

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AIR NewsSummary December - January 2005 - DVB Bank Powered By Docstoc
					                              December 1, 2004
                              - January 31, 2005
                              Q          General Developments

                              Q          Regional Developments

                              Q          Individual Airline News

                              Q          Manufacturers News

                              Q          Aircraft Orders & Deliveries

                              Q          Equipment Sales & Leasing Market

                              Q          Aircraft Availability and Storage
Sources: DVB-AIR, AAPA, AEA, Airbus, Airclaims, Aircraft Value News, Airline News, Airline Monitor, Airliners.net, Airwise, ATA, ATI, ATW, AVAC,
Boeing, Bombardier, Company News & Reports, DoD, DoE, DoT, EADS, Embraer, Factiva.com, Flight International, IATA, ICAO, Just Planes, OAG,
                                                             SpeedNews, Yahoo!
                              Compiled by Polis D Polycarpou, DVB-AIR (London) Tel: +44-207-618-9603
Q AIR NewsSummary – December 2004/January 2005


Introduction

DVB’s AIR NewsSummary is published on a bi-monthly basis by the Aviation Industry Research
department of DVB Bank AG. The NewsSummary is intended to provide an overview of relevant
developments within the aviation industry and contains mainly news-articles from a range of sources,
including the Internet, trade magazines and company news releases, in addition to our own analyses,
comments and opinions.
Aviation Industry Research regrets that for practical reasons it is not possible to credit sources and
authors of individual articles; however, the front cover of this NewsSummary states the sources most
frequently used in compiling this publication.

On behalf of the “AIR”-team, may I take this opportunity to wish you all a very Happy New Year “2005”!

                                                                                                    Polis D. Polycarpou
                                                                                                     DVB Aviation Industry Research
General Developments

IATA - International Traffic and Capacity:

"The traffic recovery in 2004 was phenomenal across all regions," said Giovanni Bisignani, the Director
General of the International Air Transport Association (IATA). Bisignani reported that 2004 full year
international scheduled passenger traffic increased 15.3% and cargo traffic 13.4% over 2003 levels at a
meeting of the Civil Air Navigation Services Organization (CANSO) in Maastricht.
All regions reported double-digit year-on-year growth with the Middle East and Asia Pacific leading the
way at 24.8% and 20.5% growth for passenger traffic. Freight also saw double digit growth in all regions
with the Middle East carriers reporting the highest growth at 26.8%.
The one-off recovery from SARS contributed an estimated 5% of the global passenger traffic growth.
Going forward IATA forecasts average annual growth of 6.0% for the period to 2008, in line with the
historical trend.
"The challenge for 2005 is to turn traffic growth into profitability with improved cost efficiency across the
industry's value chain," said Bisignani.
The industry ended 2004 with an estimated loss of US$4.8 billion. IATA forecasts an industry profit of
US$1.2 billion for 2005*. The price of fuel remains a critical factor for airline profitability.
"Airlines enter 2005 with a renewed determination to increase efficiency and reduce industry costs," said
Bisignani. "We ask the same of our partners, many of whom are monopolies. The bill for air navigation
services has increased by 9.4% since 1999 to a total of US$8 billion. Over the same period airline yields
declined by over 10%. The level of cost efficiency among air navigation service providers (ANSPs) is
simply not good enough."

*Based on an average price of US$34 for Brent Crude


                                 December 2004                                              Year-End Results
                      (Percentage Change over December ‘03)                                  (2004 over 2003)
 Carriers                  Passenger            Freight                                 Passenger             Freight
                      RPK%       ASK%       PLF%        FTK%          ATK%     RPK%       ASK%     PLF%      FTK%        ATK%
 Europe                  6.9        7.9      72.1         12.3           8.8     10.1        8.4    75.1       10.7         8.9
 N America               8.3       10.6      77.1         14.4           9.4     14.8       11.0    78.9       11.8         9.1
 S America              10.4       13.5      71.7          4.2          11.0     12.7        9.8    73.9       10.4         9.9
 Asia Pacific            5.6        7.3      72.1         12.5           9.8     20.5       15.5    72.4       14.4        15.3
 Middle East            14.7       14.0      72.9         25.5          16.8     24.8       21.6    71.7       26.8        25.2
 Africa                 10.1        7.9      70.5         17.6           8.7     10.3        8.9    67.8       17.0         9.9
 Overall                  7.6        8.9       72.9        13.3          9.8      15.3      12.1    74.2        13.4        12.1
All figures are provisional—represent total reporting plus estimates for missing data




DVB-Aviation Industry Research (AIR)                              2                                                DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


IATA Industry Results vs. Year 2000:

                                           December 2004                                                     Year-End Results
                               (Percentage Change over December 2000)                                         (2004 over 2000)
                                            Passenger                      Freight                       Passenger             Freight
                               RPK%          ASK%        PLF pts      FTK%        ATK%        RPK%         ASK%        PLF pts      FTK%    ATK%
 Overall                             14.9         8.8           3.9      19.2          15.1        8.8         7.3            1.0    16.7     12.9



                                              Monthly Passenger and Freight Traffic - IATA International Scheduled Services



                35%

                                       RPK                FTK



                25%




                15%
 % Change YoY




                 5%




                 -5%




                -15%




                -25%
                   Jan-01   Apr-01   Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04



“International Cargo and Passenger to Grow at 6.0% Yearly to 2008”

IATA released cargo and passenger traffic forecasts for 2004-2008 indicating 6.0% growth annually for
international passengers and 6.0% annually for international cargo tonnage.
"It looks like we will finish 2004 with the strongest traffic rebound that the industry has seen since the
1991 recovery from the effects of the Gulf War. Expectations for the rest of the forecast period are in line
with historical industry trends. If nothing changes in the operating environment, this is the start of a good
news story for the industry," said Giovanni Bisignani, IATA's Director General and CEO.
Passenger numbers for 2004 are expected to grow by 11% over 2003 (14% if measured in revenue
passenger kilometers). While this phenomenal growth is largely related to a recovery from the disastrous
impact of SARS in 2003, two underlying factors are important. First, the robust economic expansion is the
strongest in three decades. Second, increasing liberalization and intense competition in many markets is
driving growth with declining yields.
China and India will be the main engines of growth for passenger traffic. International markets within Asia
Pacific are expected to grow at 8.3% over the forecast period. Europe-Middle East growth, while from a
much smaller base, will also be exceptional at 7.7% reflecting rapid expansion plans by Middle Eastern
carriers.


DVB-Aviation Industry Research (AIR)                                               3                                                    DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Freight will also see double-digit growth in 2004, increasing 10.1%. The 6.0% freight growth forecasted
through 2008 relies heavily on Asia-Pacific with markets linked to China and India expected to growth
most rapidly. Europe to Asia-Pacific will be the fastest growing market with 7.0% annual growth. Traffic
within Asia Pacific and between the Middle East and Europe will also be above the global average at
6.1%.
"Strong traffic growth is only half the story. Damaged balance sheets from four successive years of record
losses totally in US$35 billion and three years of lost growth will take more than a rebound in traffic to
repair. Structural change is essential to return the industry to health," said Bisignani.

IATA Chief Economist Brian Pearce told a media symposium in Geneva that modest net earnings are
projected conditionally for 2005 but international airlines will post net losses of $4.8-$5 billion in 2004--
owing mainly to soaring oil prices that will have hiked cumulative industry losses since 2001 to more than
$35 billion.
Should oil prices recede to about $34-$36 a barrel in 2005--as is forecast--the industry could generate a
slim net profit of $1-$2 billion next year, Pearce said. Fuel cost IATA airlines $62 billion in 2004, he
added, about $15 billion more than in 2003, and carriers have been unable to pass on the full burden to
passengers.
IATA DG and CEO Giovanni Bisignani termed the overall figures "terrible." Even if airlines were to make
profits of some $1-$2 billion next year out of revenues of some $350 billion, "that is a long way from
making us a good investment," he said. "Nevertheless, we still have the basis of a profitable industry."
"With oil prices expected to decline only moderately in 2005," Pearce stated, "the small net profit that we
forecast" hinges on "further successes by the airlines and by IATA on their behalf in taking costs out of
the business."
The bleak industry outlook came against the backdrop of a rise to 1.8 billion passengers that will have
been carried by IATA's 270 member airlines by the end of this year, an increase from 1.6 billion travellers
in 2003.
"Profitability, as measured by the EBIT margin, has remained negative in 2004 purely as a result of the
price of oil," Pearce declared. "If the price of oil had remained at $25, its 2002 average and still above the
10-year average of $21, then profitability at the operating EBIT level would have 'recovered' to 5%--the
sort of profitability seen in the late 1990s."




ICAO - International Traffic and Capacity:


ICAO said preliminary figures show a 14% increase in world revenue passenger-kilometers for its 188
contracting states in 2004 compared 2003. Capacity during the year also rose but at a slower rate. This
resulted in a 2-point hike to 73% in average load factor. The number of passengers carried worldwide on
scheduled services is estimated to have grown 5.9% to 1.8 billion. On a regional basis, strong growth
again was shown by airlines in the Middle East followed by Asia/Pacific, which in 2003 was affected
negatively by the SARS outbreak. The growth for airlines in North America was similar to the world
average while Europe, Africa, Latin America and the Caribbean showed strong increases but were below
the world average.




DVB-Aviation Industry Research (AIR)                  4                                           DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Regional Traffic and Performance:

By grouping together and contrasting the operating figures from the three main airline associations of the
world – the AAPA (Association of Asia Pacific Airlines), the AEA (Association of European Airlines) and
the ATA (Air Transport Associations) of America – we are clearly able to see that the industry has more
or less recovered, even without including all the low-cost traffic in these statistics.

Revenue Passenger Kilometres (RPKs):
                100.0%

                90.0%


                80.0%                                AAPA                 ATA             AEA

                70.0%


                60.0%

                50.0%

                40.0%
 % Change YoY




                30.0%

                20.0%

                10.0%

                 0.0%

                -10.0%

                -20.0%

                -30.0%

                -40.0%

                -50.0%
                         Jan-   Feb-   Mar-   Apr-   May-   Jun-   Jul-    Aug-   Sep-   Oct-   Nov-   Dec-   Jan-   Feb-   Mar-   Apr-   May-   Jun-   Jul-   Aug-   Sep-   Oct-   Nov-   Dec-
                          03     03     03     03     03     03    03       03     03     03     03     03     04     04     04     04     04     04     04     04     04     04     04     04



All the major regions have managed to maintain traffic figures positively above 2003 levels for the whole
year 2004. However, as the chart depicts year-on-year change, the results must not be too positively
interpreted, as this year’s results are compared to generally a very bad year in civil aviation last year. This
is clearly seen in the results from the Asia-Pacific airlines, reaching a “SARS-reflecting” high of 91.6%
change in May, falling steadily, but dramatically, to August at 9.9%, before levelling off from September
and reaching a modest November (preliminary) figure of 6.3%. The American airlines have followed a
similar growth curve as the European over the second half of 2004, with figures for December in the
Americas showing a 6.0% growth on December 2003. The figures for December in Europe show a
healthy 8.3% growth compared to the same period in 2003.

Passenger Load Factors:

PLFs for all regions have shown a general positive trend, increasing overall from February 2004, peaking
in July/August, and gradually slightly decreasing for the winter. From its 2004-high in July and August at
78.9%, the load factors for Europe went on to fall to 70.3% in December. For the Americas, a PLF year-
high of 83.5% was achieved in July, though now much lower, a credible 74.6% in December was
achieved. PLF in the Asia Pacific reached its 2004-high, at 77.5% in July and has since decreased
gradually, levelled off just above 73% in October and November.



DVB-Aviation Industry Research (AIR)                                                                   5                                                                        DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


                             85.0%




                             80.0%




                             75.0%
 Passenger Load Factor (%)




                             70.0%




                             65.0%




                             60.0%


                                                                                                                                                                          AAPA

                             55.0%                                                                                                                                        ATA

                                                                                                                                                                          AEA


                             50.0%
                                     Jan-   Feb-   Mar-   Apr-   May- Jun-   Jul-   Aug- Sep-   Oct-   Nov- Dec-   Jan-   Feb-   Mar-   Apr-   May-   Jun-   Jul-   Aug- Sep-   Oct-   Nov- Dec-
                                      03     03     03     03     03   03     03     03   03     03     03   03     04     04     04     04     04     04     04     04   04     04     04   04




Regional Developments

Asia Pacific:

AAPA (Association of Asia Pacific Airlines) traffic reached another milestone in October 2004, as the
number of passengers carried surpassed the 10 million mark after growing by 10.5%.
Passenger traffic in revenue passenger kilometres (RPKs) terms posted a 9.2% increase. Capacity grew,
at 8.2%, resulting in a one-percentage point improvement in load factor, to 73.3%. The improvement
halted the deterioration in load factor for the past two months. In comparison to October 2002, passenger
traffic (RPKs) and passengers carried rose by 8.4% and 9.0%, respectively.
On regional traffic, growth on Intra-Asia Pacific routes at 11.9% was twice as strong as long-haul traffic,
similar to September’s results (11.7%). Traffic within Northeast Asia, the largest sub-region, grew fastest
at 18.5%, 1.4 percentage points higher than last month. Traffic between Northeast Asia and Southeast
Asia, however, remained unchanged from last month’s result, at 13.9%, while traffic within Southeast Asia
was up just 1.3%. Traffic within the relatively small Southwest Pacific increased by 17.5%, comparatively
higher than the 9.7% growth in September. Traffic between China and the rest of Asia maintained the
strong upward trend, at 32.7% growth this month.
Contributing 11% of total AAPA traffic, the North America routes (+7.7%) continued to post positive
growth rates this year, in line with the stronger global economy. Likewise, traffic between Asia and
Europe was 5.0% higher than the same month last year. On the other hand, traffic to/from the Middle
East weakened, falling 5.5% after posting a rather insignificant 4% growth in September in comparison
with the strong double-digit growth rates during the summer period.
On an individual airline basis, with the exception of Royal Brunei Airlines, all carriers recorded an
increase in passenger traffic. The fast-expanding Vietnam Airlines reported RPK growth of 41.0%. Other
carriers recording double-digit growth were Asiana Airlines (19.3%), Cathay Pacific Airways (15.7%),
Singapore Airlines (12.5%), Malaysia Airlines (12.0%) and Philippine Airlines (11.8%).


DVB-Aviation Industry Research (AIR)                                                                     6                                                                        DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Stronger than expected October traffic allowed the majority of the carriers to enjoy improved load factors
compared to last month, in spite of the additional amount of capacity mounted, albeit at a slower pace.
Vietnam Airlines (34.8%), Asiana Airlines (16.6%), Malaysia Airlines (15.4%), Singapore Airlines (13.9%)
and Cathay Pacific Airways (10.1%) were the notable carriers mounting double-digit increases in
capacity. Among them, only Malaysia Airlines (–2.1 percentage points) and (Singapore Airlines –0.9 p.p.)
experienced a slight deterioration in load factors. All Nippon Airways (78.0%) emerged with the highest
load factor in October, followed by nine other carriers with load factors in the 70% range. Among them
were Cathay Pacific Airways (77.6%), EVA Air (76.8%) and China Airlines (73.9%).
Freight traffic, measured in freight tonne kilometres (FTKs), rose by 10.7% in October. Capacity grew by
10.5%, resulting in a fractional increase in freight load factor to 69.3%.
Growth in cargo movements for the intra-Asia Pacific region was slower this month, at 6.1%, when
compared to the double-digit growth in September. Contributing to the result was traffic within Northeast
Asia (5.8%), growing half as strongly as in September. Similarly, traffic between Northeast Asia and
Southeast Asia moderated, growing by only 5.2% this month, after 9.0% growth in September. Within
Southeast Asia, cargo traffic growth was 7.2%, after posting almost 19% growth last month. Traffic
to/from China, however, maintained strong double-digit growth, up 20.4%.
Generally, October saw marginally slower traffic growth in all major regions. Traffic between Asia and
Europe grew at 8.6%, when compared to the 11.8% growth in September. Meanwhile, traffic to the USA
remained robust, up 14.1%, albeit not as strong as in September (17.0%).
On an individual airline basis, Vietnam Airlines (53.4%) posted the largest FTK increase, followed by
Malaysia Airlines (32.5%), China Airlines (17.0%), EVA Air (12.4%) and Korean Air (11.0%). On the other
hand, Garuda Indonesia (–0.1%) and Asiana Airlines (–1.5%) experienced slight declines in FTKs.
Garuda Indonesia reported another big improvement in load factor (9.9 p.p.), but this was achieved on the
back of a significant reduction (–19.3%) in capacity as in the previous month. Vietnam Airlines enjoyed an
8.6-percentage point improvement in load factor, despite boosting its capacity by 21% year-on-year. Six
other carriers also reported improvements in load factor, ranging from 3.8 percentage points for All
Nippon Airways to 1.8 percentage points for EVA Air.
Carriers with the highest freight load factors were China Airlines (77.4%), EVA Air (75.2%), Korean Air
(74.9%), Cathay Pacific Airways (71.3%) and Asiana Airlines (71.2%).


                                             October 2004
                                                   October 2004             October 2003       % Change
Passengers Carried (000)                                  10,116                   9,158             10.5
Revenue Passenger Kilometres (000)                    42,625,561              39,035,244               9.2
Available Seat Kilometres (000)                       58,192,377              53,779,028               8.2
Passenger Load Factor                                     73.3%                   72.6%         0.3 points

Freight Tonne Kilometres (000)                            4,503,456             4,070,130            10.7
Available Freight Tonne Kilometres (000)                  6,500,613             5,882,591            10.5
Freight Load Factor                                          69.3%                 69.2%        0.1 points


                                   January – October 2004
                                               Jan-Oct 2004                 Jan-Oct 2003       % Change
Passengers Carried (000)                             96,767                       76,975             25.7
Revenue Passenger Kilometres (000)              413,841,665                  340,582,628             21.5
Available Seat Kilometres (000)                 565,337,772                  494,350,640             14.4
Passenger Load Factor                                 73.2%                       68.9%         4.3 points

Freight Tonne Kilometres (000)                          39,884,410             34,933,213            14.2
Available Freight Tonne Kilometres (000)                59,379,264             52,338,556            13.5
Freight Load Factor                                         67.2%                  66.8%        0.4 points



DVB-Aviation Industry Research (AIR)                7                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


The AAPA announced that its member airlines carried 10.1 million passengers in the month of November
2004 (preliminary data), up 11% compared to the same month last year, boosted by strong intra-regional
travel. Taking into account distances flown, passenger traffic measured in RPKs, or revenue passenger
kilometers, also grew by 6% in November, slightly ahead of a 5% increase in capacity.

“These figures reflect a continuation of the very strong rebound in traffic we have seen this year, with
sustained double digit growth in passenger numbers over the past eight months.” said Andrew Herdman,
AAPA’s Director General. “Travel demand in the final quarter of the year remains robust, and for the year
as a whole we expect passenger numbers will have grown by about 22% compared to last year.
However, margins will have been constrained by high fuel costs and competitive pricing pressures,”
added Herdman.

Cargo traffic, measured in freight tonne-kilometers, was also up 5% in November, and is projected to
have grown by about 13% for the year as a whole, led by strong growth in Asian exports.


                                                                                  November 2004 (Preliminary)
                                                                                                            November 2004                           November 2003                          % Change
Passengers Carried (000)                                                                                             10,09                                   9,087                               11.1
Revenue Passenger Kilometres (000)                                                                              41,169,208                              38,718,260                                 6.3
Available Seat Kilometres (000)                                                                                 56,231,592                              53,660,788                                 4.8
Passenger Load Factor                                                                                                73.2T                                  72.6%                           0.8 points
Results are preliminary and are based on traffic figures submitted by members of the AAPA


                         100%                                                                                                                                                                      80%




                         80%
                                                                                                                                                                                                   75%


                         60%


                                                                                                                                                                                                   70%
                         40%
                                                                                                                                                                                                         Passenger Load Factor
  Traffic % Change YoY




                         20%                                                                                                                                                                       65%




                          0%
                                                                                                                                                                                                   60%


                         -20%

                                                                                                                                                     % Change in RPKs
                                                                                                                                                                                                   55%
                                                                                                                                                     % Change in FTKs
                         -40%
                                                                                                                                                     Load Factor %


                         -60%                                                                                                                                                                      50%
                                Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04




DVB-Aviation Industry Research (AIR)                                                                          8                                                                           DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


America:

The American Air Transport Association (ATA) figures for the month of July peaked in passenger
traffic (RPMs), compared to the same period in 2003, before dropping in August. After the summer
season, RPMs but still remained above the results of the previous three years, with December 2004
producing YoY %-change of 6.0%.
 Billions
                                                                                                          TRAFFIC: Revenue Passenger Miles
 70
                                                               2001                                       2002
 65
                                                               2003                                       2004
 60

 55

 50

 45

 40

 35

 30
                                                   January        February               March                April                  May                June                 July                August             September              October            November             December


This positive growth was due to boosts in passenger traffic across all regions of comparable proportions,
with Latin American traffic increasing by 13.6%, Pacific traffic showing an increase of 9.3%, an increase
of 7.9% in Atlantic services, and Domestic travel showed an increase of 4.6% over December 2003.
                                                    70.0%



                                                                                                 Domestic
                                                    60.0%

                                                                                                 Atlantic

                                                    50.0%                                        Latin

                                                                                                 Pacific
                                                    40.0%
                                                                                                 System
       % Change in Traffic (RPMs) vs. Prior Year




                                                    30.0%



                                                    20.0%



                                                    10.0%



                                                      0.0%



                                                   (10.0%)



                                                   (20.0%)



                                                   (30.0%)



                                                   (40.0%)
                                                             Jan-03   Feb-03   Mar-03   Apr-03   May-03   Jun-03   Jul-03   Aug-03   Sep-03   Oct-03   Nov-03   Dec-03   Jan-04     Feb-04   Mar-04   Apr-04   May-04   Jun-04   Jul-04   Aug-04   Sep-04   Oct-04   Nov-04   Dec-04




DVB-Aviation Industry Research (AIR)                                                                                                                            9                                                                                                       DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


For the period January-December 2004, Systemwide traffic increased by 10.0% compared to the same
period of the previous year. Capacity was also increased by 7.0%. Load Factors subsequently also
enjoyed a modest increase of 2.1 percentage points, reaching 76.3%.

Overall, 2004 has been very positive for all ATA routes, fluctuating from 5.8% above and 4.2% below year
2000 levels, and substantially higher than both 2002 and 2003 figures. 2000 has always been considered
as the last normal year for the industry before the events of 9/11, and hence it could be said that the
American Air Transport industry has now returned to “normality”! December 2004 figures for RPMs
hugely surpassed 2000 levels by 5.8%, though capacity (ASMs) was 1.8% below.
                         10.0%



                          5.0%



                          0.0%



                         (5.0%)
    % Change vs. 2000




                        (10.0%)



                        (15.0%)



                        (20.0%)


                                                                                                                                   Traffic (RPMs)
                        (25.0%)
                                                                                                                                   Capacity (ASMs)

                        (30.0%)



                        (35.0%)
                              Jan-01         Jul-01         Jan-02              Jul-02      Jan-03          Jul-03        Jan-04              Jul-04


Cargo Traffic

ATA cargo traffic figures for the month of November 2004 increased in RTMs, compared to November
2003, climbing 8.0.5%, maintaining this year’s run above 2003 and even 2001 levels:

                    Millions                                    Domestic Cargo Revenue Ton Miles
                        1,150


                        1,100                    2003                        2004

                        1,050


                        1,000


                         950


                         900


                         850


                         800
                                  January   February    March        April          May   June       July     August   September    October      November   December




DVB-Aviation Industry Research (AIR)                                                       10                                                               DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


All regional services for November 2004 showed a Total Cargo increase in RTMs over November 2003,
with the figures for Freight & Express and for Mail were all positive. Best overall performance was
witnessed in the Pacific services with a 13.6% increase, followed by Atlantic with a 10.7% overall
increase, and smaller increases in Latin American and Domestic services at 7.2% and 3.9% respectively.
Towards the end of 2003 and for the beginning of 2004, cargo traffic finally exceeded 2000 levels, and
performance seems to be fluctuating closely to this benchmark. November figures show 2004 figures
once again surpassing those of 2000:

                                    30.00%


                                    20.00%


                                    10.00%


                                     0.00%
   % Change in Ton Miles vs. 2000




                                    -10.00%


                                    -20.00%


                                    -30.00%


                                    -40.00%

                                                                                                                                                                      Freight and Express Ton Miles
                                    -50.00%
                                                                                                                                                                      Mail Ton Miles

                                    -60.00%


                                    -70.00%
                                              Jan-   Mar-   May-   Jul-   Sep-   Nov-   Jan-   Mar-   May-   Jul-   Sep-   Nov-   Jan-   Mar-   May-   Jul-   Sep-   Nov-   Jan-   Mar-   May-   Jul-   Sep-   Nov-
                                               01     01     01     01     01     01     02     02     02     02     02     02     03     03     03     03     03     03     04     04     04     04     04     04



Europe:

The Association of European Airlines (AEA) has issued its detailed traffic report for the month of
November 2004.

The weakening growth trend observed in recent months continued, with an overall plus 3.9% in
passenger-km and a +2.3% in passenger boardings. With capacity 5.6% up on the previous November,
load factors were down 1.2 points to 71.0%, with almost all operating regions registering decreases.

Significant among the regional results was a 1.7% traffic decrease on the North Atlantic, the first negative
on the route for eighteen months. Capacity growth was low, but positive nonetheless at 0.4%.

US airlines’ North Atlantic figures for the month show both a capacity increase, and a load factor
increase, with the evident result that they are gaining market share at the expense of the European
carriers.

In other regions, the growth on Eastern routes dipped below 10% for the first time since February, with a
plus 9.4%; nevertheless, this sector is set to finish the year very close to 20% above 2003, indicating a
full recovery of the SARS-related losses in that year, with a solid growth on top. In Europe, the monthly
increase was 4.1% on cross-border routes but Domestic showed no growth.
Said AEA Secretary General Ulrich Schulte-Strathaus: “Clearly, November is not a month you would
choose to represent the broader picture. Nevertheless the slowing growth, and in particular the
competitive situation on the key Atlantic routes, is a signal that the European airlines cannot relax their
focus on cost if they are to return to a semblance of economic stability”.

DVB-Aviation Industry Research (AIR)                                                                                   11                                                                               DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


The AEA has produced its preliminary traffic report for December 2004. The figures are based on the
AEA’s weekly survey of its members’ traffic and capacity trends and provide an indication of the final
figures.
Trends were similar to those in the previous month, with a strong showing by traffic on Eastern routes
offsetting the continuing weakness in the North Atlantic market. Eastern routes traffic was up 13.3%,
while the North Atlantic posted a traffic decrease, of 1.7%.

An increase of 6.1% was recorded on intra-European routes, and the overall growth was 5.8%. This
would point to a growth rate for the year 2004 of close to 10% on international services – a figure
evidently inflated by the depressed 2003 baseline including SARS and Iraq war effects.

AEA has not released results for week 53 (Dec 27 – Jan 2) since in 2003 the week beginning Dec 29 was
counted as 2004 week 1. However, comparing these two periods with each other, traffic to the
Asia/Pacific region was 1.4% down – in contrast to recent double-digit growth – and load factor fell by 7.4
percentage points.


RPK %-growth rates for week 52 in 2004 (December 20th – December 26th) show a year-on-year
increase of 12.0% for Europe, a 1.5% decrease for the North Atlantic, and an 12.6% increase for Far
East/Australasia Traffic. Total International traffic grew by 8.3%.


  % growth vs
 previous year                  Association of European Airlines - 2004 RPK % CHANGE YEAR ON YEAR


 60.0




 50.0




 40.0



 30.0




 20.0



 10.0




   0.0




-10.0
      2004-01    2004-05   2004-09    2004-13   2004-17    2004-21   2004-25    2004-29   2004-33   2004-37    2004-41      2004-45    2004-49


                                     Geographical Europe                 North Atlantic              Far East Australasia




DVB-Aviation Industry Research (AIR)                                    12                                                            DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Jet Fuel Spot Prices
                                                                               Spot Prices for Kerosene-Type Jet Fuel (cents/gallon)
                             170



                             160



                             150



                             140
 Spot Price (cents/gallon)




                             130



                             120



                             110



                             100


                                                                New York, NY Jet Fuel Kero
                              90



                              80



                              70
                               Jan-03   Feb-03 Mar-03   Apr-03 May-03 Jun-03   Jul-03   Aug-03 Sep-03 Oct-03   Nov-03 Dec-03   Jan-04   Feb-04 Mar-04   Apr-04 May-04   Jun-04   Jul-04   Aug-04 Sep-04 Oct-04   Nov-04 Dec-04   Jan-05

Source: US Energy Information Administration




DVB-Aviation Industry Research (AIR)                                                                                           13                                                                                      DVB Bank AG
Individual Airlines (Highlights)

The Americas:

North America:

Latest US Airlines Financial Results (as of January 31, 2005):




Allegiant Air acquired an MD-83 from SAS. The aircraft is the second of five deliveries contracted for by
Allegiant in Sept. The transaction was arranged by Sigma Aircraft Management.

Alaska Airlines revised third-quarter and nine-month earnings for 2004 owing to a "clerical error" the
carrier said it discovered in its deferred Mileage Plan revenue, according to a filing with the Securities and
Exchange Commission.
The revision increases the total Mileage Plan liability and deferred revenue balance from $379.2 million to
$387.6 million and results in an $8.4 million pre-tax decrease to other revenues for both the third quarter
and nine months ended Sept. 30.
The revised 2004 third-quarter consolidated net income now totals $74 million, while net income for the
nine-month period is now $29.6 million. The carrier originally reported third-quarter net income of $79.2
million and net income for the nine months of $34.8 million.

Aloha Airlines filed for Chapter 11, becoming the second Hawaii-based carrier to seek bankruptcy
protection after Hawaiian Airlines filed for Chapter 11 in March 2003. Privately owned Aloha said that
despite an 8% increase in enplanements in the third quarter, it was unable to post a profit in the period
owing to rising fuel costs and lower ticket prices. Through Nov., the airline said it had paid $24 million
more for fuel than in the same period in 2003, a 48% increase.

American Airlines said it successfully completed the closing of a new $850 million credit facility,
replacing its $834 million revolving credit facility that was soon due to mature.
Citigroup and JP Morgan acted as lead arrangers and book runners for the transaction and the new
facility, which is payable over a six-year period, was supported by Merrill Lynch, Credit Suisse First
Boston and Goldman Sachs, who served as documentation agents. American said it also received
support from other key financial institutions including CIT, UBS, WestLB and Calyon, who served as
senior managing agents.

America West Airlines will not submit a bid to purchase ATA Airlines out of bankruptcy, the carrier
announced, stating it did not believe "the potential value justified the anticipated cost." The Phoenix-
based airline also said it was not interested in cherry-picking ATA assets and that its interest
"encompassed acquiring the entire company." Although it was able to attract sufficient capital to make a
bid, it was unable to "come to acceptable lease terms on enough aircraft with ATA's existing lessors."
ATA and AirTran previously announced an agreement under which AirTran will pay $87.6 million to
acquire gate leases and slots from ATA. The deal is subject to bankruptcy court approval among other
things.
Q AIR NewsSummary – December 2004/January 2005


Battered by high fuel prices and overcapacity, America West Airlines Holdings reported a $49.7 million
net loss for the fourth quarter ended Dec. 31, which included several special items.
This compares to a net income of $6.8 million in the prior-year period. Excluding one-time items, the
company posted a net loss of $47.8 million in the quarter versus a net profit of $10.4 million in the 2003
fourth quarter.
Revenue rose 2.8% to $578.7 million while operating expenses climbed 9.4% to $602.4 million. As a
result, operating loss totalled $23.7 million compared to operating income of $12.4 million in the prior-year
period.
Passenger RASM dropped 3.4% to 7.21 cents with the decrease driven mainly by low yields, which fell
5.8% to 9.31 cents owing primarily to excess capacity. Operating CASM rose 0.6% to 7.90 cents but
decreased 4.3% to 6 cents when fuel and special items are excluded.
For full-year 2004 including one-time items, AWAH recorded an $89.9 million net loss, reversing a $57.4
million net profit in 2003. Excluding special items, the loss totalled $90 million compared to a net loss of
$11.1 million in 2003. Revenue increased 3.7% to $2.34 billion and expenses jumped 6% to $2.36 billion,
producing a $17.6 million operating loss versus a $31.8 million operating profit in 2003.
The company is projecting a loss for the current quarter and Parker said it appears that 2005 will be
another difficult year. AWAH lowered its growth plans for 2005 from 3%-5% to 2%-4% and announced
that owing to fare responses from other carriers and high fuel prices, it will cease three of its transcon
flights.

Chairman and CEO Gerard Arpey reported that the parent of American Airlines, AMR Corp., lost $387
million in the period, significantly worse than the loss of $111 million recorded in the 2003 fourth quarter.
Excluding special charges, the current-period loss widened to $473 million compared to just $95 million in
2003. Arpey cited "high fuel prices and a tough revenue environment" for the dismal results, the same
factors that "plagued the industry throughout 2004." AMR noted that it paid $477 million more for fuel in
the fourth quarter than it would have if prices had been at 2003 levels. In fact, it would have earned $90
million for the quarter at the year-ago prices.
For the full year, AMR's net loss totalled $761 million, narrowed from $1.23 billion in 2003. Excluding
special items, the 2004 loss widened to $896 million while the 2003 deficit rose to $1.47 billion.
Fourth-quarter operating revenues totalled $4.54 billion, up 3.4% from the 2003 quarter. Operating
expenses climbed 6% to $4.9 billion, resulting in an operating loss of $355 million versus a loss of $227
million in 2003. Excluding special charges, the losses were $295 million and income of $103 million in
2004 and 2003 respectively.
Yield per RPM at American fell 6.7% to 11.32 cents while passenger revenue per ASM dropped 3.1% to
8.41 cents. Cost per ASM was flat at 10.25 cents but declined 10% year-over-year if fuel is excluded.
Full-year revenues totalled $18.64 billion, up 6.9%, while total operating expenses rose 2.8% to $18.79
billion and operating loss narrowed to $144 million from $844 million. If fuel prices had stayed at 2003
levels, AMR said it would have reported full-year earnings of $345 million. The carrier expects to lose
money again in the 2005 first quarter.

AirTran Airways reported a small net profit of $1.1 million in the fourth quarter ended Dec. 31, down 95%
compared to income of $21.7 million in the prior-year period. Excluding net credit and tax adjustments,
2004 final-period income was just $0.3 million compared to $16 million in the previous year.
Operating revenue rose 17% to $279.4 million while operating expenses increased 26.5% to $275.8
million, in large part owing to a 70.3% jump in fuel expense. This resulted in operating income of $3.5
million, down 83% compared to income of $20.8 million in the 2003 fourth quarter.
During the period, yield per RPM declined 5% to 11.73 cents, due in part to increased stage length and
"intense price competition" on the East Coast. The decline coupled with a 0.5-point drop in load factor
pushed passenger RASM down 5.6% to 8.14 cents. Operating CASM increased 2.5% to 8.32 cents, but
fell 5.9% to 7.64 cents on a fuel-neutral basis. The airline said the cost improvement was helped by the
introduction of 737-700s into its fleet.
For full-year 2004, net income fell 87.8% to $12.3 million from $100.5 million in 2003. Operating revenue
rose 13.4% to $1.04 billion and operating expenses climbed 21.3% to $1.01 billion. This produced
operating income of $32.8 million, a 61.9% decrease versus operating income of $86.3 million in 2003.
AirTran is projecting net capacity growth of 11% and 19% respectively for the current quarter and full year
2005.

DVB-Aviation Industry Research (AIR)                 15                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


ATA Airlines selected Southwest Airlines' $117 million bid for certain of its assets at Chicago Midway
over a broader but less valuable agreement it had struck with AirTran Airways when it filed for Chapter 11
protection.
Under terms of the deal, Southwest will pay ATA $40 million to acquire leaseholds on six gates and a
maintenance hangar at Midway. It will provide a further $40 million in debtor-in-possession financing,
which will be converted into a term loan upon ATA's emergence from bankruptcy.
In addition, Southwest guaranteed payment of an ATA construction loan to the City of Chicago for $7
million. Finally, Southwest agreed to purchase for cash $30 million of convertible preferred ATA stock in
exchange for 27.5% of a reorganized ATA. The stock is nonvoting and Southwest said it intends to
liquidate that position "in an orderly manner" over time.
ATA also said that although it expects to shrink its fleet by about 20% as it scales back its service in
Chicago, it will remain a larger airline than it would have under its voided agreement with AirTran.
Southwest's bid includes a codeshare agreement with ATA that will represent the first significant
codeshare for both airlines. Southwest said it believes the agreement could add $25-$30 million per year
to each airline's annual revenues.

Continental Airlines said that its recent order for 10 7E7s could be in jeopardy if it cannot achieve the
$500 million in annual savings from its employees.
In addition, absent the reductions, Continental ultimately could have inadequate liquidity to meet its
obligations under current market conditions. It said in the filing that it has $984 million in debt and pension
payments due in 2005, approximately $500 million more than last year.

Continental Airlines retired its last MD-80, reducing its fleet to just three Boeing types--777s, 767s/757s
and 737s. However, the number of types will increase in 2009 when the carrier begins taking delivery of
the 10 7E7s it ordered recently. It said the fleet simplification is the result of a 10-year strategic effort to
"eliminate complexity and expense in Continental's operations."

Continental Airlines reported that the carrier lost $206 million in the fourth quarter compared to income
of $47 million in the final period of 2003. Excluding special items, the 2004 loss narrowed to $174 million.
It was calculated that without special gains, CO would have lost $38 million in the year-earlier period.
Special charges in the 2004 quarter included $18 million related to future frequent-flier mileage liabilities
and a $14 million write-off owing to the retirement of the airline's MD-80s. In 2003, special gains included
$132 million from the sale of holdings in Hotwire and Orbitz and $24 million from a readjustment of future
frequent-flier liability partially offset by $21 million in charges related to early MD-80 lease terminations.
Operating revenues rose 6.6% to $2.4 billion. Load factor climbed 2.4 points to 77.9% on a 10.1% hike in
RPMs, but yield fell 4.2% to 11 cents, resulting in a 1% drop in passenger RASM to 8.57 cents. Operating
expenses climbed 14.6% to 2.56 billion, producing an operating loss of $161 million versus operating
income of $16 million in 2003. Cost per ASM rose 4.7% to 9.98 cents but declined 3.8% if fuel expense
and special items are excluded.
The carrier plans for more than $900 million in cost cuts, including achieving approximately $300 million
of savings from its best business partners and suppliers. The airline is seeking $500 million in wage and
benefit givebacks from its employees and has imposed $169 million on non-union workers. It hopes to
reach agreements with its unions covering the remaining $331 million by Feb. 28. The cuts are necessary
for it to finalize the order for 10 7E7s.
For the full year, Continental lost $363 million compared to income of $38 million in 2003. If special items
are excluded from both periods, the 2004 net loss totalled $255 million versus a deficit of $209 million in
2003. Operating revenues rose 9.9% to $9.74 billion while operating expenses climbed 15.1% to $9.97
billion. Operating loss totalled $229 million against operating income of $203 million in 2003.

Delta Air Lines entered into "definitive agreements" with aircraft lessors and lenders under which it
expects to save $57 million annually between 2005 and 2009. In exchange, it issued approximately 4.35
million shares of common stock to affected lenders and lessors.

Delta Air Lines, which is in the midst of a massive restructuring, reported a hefty net loss of $2.21 billion
for the fourth quarter ended Dec. 31 including $1.4 billion in non-cash charges, the majority of which were



DVB-Aviation Industry Research (AIR)                   16                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


related to reductions in the fair market value of its wholly owned Delta Connection carriers Atlantic
Southeast Airlines and Comair.
This compares to a net loss of $332 million available to common shareowners in the 2003 fourth quarter.
Excluding unusual items in both periods, the company posted a $780 million net loss in the 2004 quarter
compared to a $207 million net loss in the prior-year period.
Results for full-year 2004 were even worse. Including one-time items, Delta reported a $5.21 billion net
loss available to common shareholders, significantly greater than the $790 million net loss recorded in
2003. Excluding unusual items, the 2004 net loss totalled $2.28 billion compared to $1.04 billion in the
previous year.
Revenues for the quarter rose just 0.9% to $3.64 billion while operating expenses skyrocketed 48.4% to
$5.9 billion on a 75.5% increase in aircraft fuel expense. As a result, operating loss amounted to $2.26
billion. This compares to an operating loss of $365 million in the 2003 fourth quarter.
At the unit level, passenger yield fell 7.1% to 11.84 cents on a 7.3% increase in traffic while passenger
RASM decreased 5.6% to 8.73 cents on a 1.1-point gain in load factor. Operating CASM including fuel
and one-time items climbed 40.2% to 15.46 cents. However, on a fuel-neutral basis with one-time items
excluded, CASM dropped 2.2% to 10.15 cents.
For the full year, revenues increased 6.5% to $15 billion and operating expenses soared 23.1% to $18.31
billion, producing a $3.31 billion operating loss compared to a $785 million operating loss in the previous
year.
During 2005, Delta said it will continue to implement its transformation plan that aims to achieve $5 billion
in annual savings by 2006 compared to 2002. It already has accomplished $2.3 billion in cost cuts and is
on track to deliver the remaining $2.7 billion through implementation of several initiatives, including
elimination of 6,000-7,000 jobs by Dec. 2006; a 10% across-the-board cut in wages for executives,
supervisory, administrative and frontline employees; revamping its hub in Atlanta, and de-hubbing its
operations at Dallas/Ft. Worth.

Delta Air Lines reached an agreement with Republic Airlines Holdings to operate 16 Embraer 170s for
Delta Connection. Republic will take the first eight aircraft in 2005 and the remaining eight in 2006. They
will replace eight ERJ-145s previously scheduled for delivery to Chautauqua Airlines, a Republic
subsidiary.

ExpressJet reported net income of $33.6 million for the fourth quarter ended Dec. 31, up 20.5% over net
income of $27.9 million in the year-ago period. Revenue for the quarter rose 13.5% to $387 million while
operating expenses climbed 12.8% to $332 million, resulting in operating income of $55 million, up 18.2%
compared to operating income of $46.6 million in the prior-year period. CASM for the quarter declined
3.7% to 12.24 cents. For full-year 2004, the company posted net income of $122.8 million, a 13.1%
increase versus net income of $108.5 million in 2003. Revenue rose 15% to $1.51 billion, which helped
offset a 15.3% jump in operating expenses to $1.3 billion. This produced an operating income of $205.4
million, up 12.9% over operating income of $182 million in the prior year.

FedEx Corp. reported net income of $354 million for its FY05 second quarter ended Nov. 30, much
improved over income of $91 million in the year-ago period.
Company revenues during the period rose 24% to $7.33 billion while operating expenses climbed 17% to
$6.73 billion, resulting in operating income of $600 million, up significantly versus operating income of
$183 million in the prior-year period.
The FedEx Express division posted a 13% increase in revenue to $4.83 billion, which was offset slightly
by a 5% growth in operating expenses to $4.5 billion. This produced operating income of $333 million, a
sharp increase versus a $33 million operating loss last year. The company said the improvement was
driven by revenue growth, savings from business realignment programs and ongoing cost-control efforts.
For the six months ended Nov. 30, FedEx reported net income of $684 million, up 212% from net income
of $219 million in the first half of FY04. Revenue rose 23% to $14.31 billion and operating expenses
jumped 17% to $13.13 billion. Operating income increased substantially to $1.18 billion from $383 million
in the corresponding period last year.




DVB-Aviation Industry Research (AIR)                 17                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Hawaiian Airlines reported an operating profit of $6.2 million in Dec., down 54% compared to an
operating profit of $13.4 million in Dec. 2003. Revenue for the month fell 3.1% to $66.5 million and
operating expenses rose 9.2% to $60.3 million.

Independence Air, which recently announced plans to cut 144 daily flights from its schedule, reached
new agreements with GE Commercial Aviation Services that could allow the airline to return up to 20 of
its regional jets, parent company FLYi announced.
The accord provides for early termination of the leases on 10 RJs during the first quarter. They will be
removed from service Feb. 1 and the action will not affect current operations, FLYi said.
Independence Air also entered into an MOU with GECAS that addresses the restructuring of leases on 27
additional RJs. The leases of 6-10 aircraft will be terminated in the second quarter under terms similar to
the first 10 and GECAS also will "consent to the restructuring of rentals to defer a significant portion of the
payments due through April 30, 2006."
In addition, GECAS agreed to provide the airline with a five-year loan of $19.5 million. However, the MOU
is subject to a number of conditions, including the requirement that the company reach similar
agreements with the lenders and lessors of its other aircraft.

JetBlue Airways posted a narrow $2.4 million net profit in the fourth quarter ended Dec. 31. This was an
87.8% decrease compared to a fourth-quarter 2003 net income of $19.5 million. Full-year 2004 net
income totalled $47.5 million, down 54.3% versus 2003 net income of $103.9 million, which included
$22.8 million in federal security rebates.
Revenue for the quarter rose 27% to $334 million while operating expenses climbed 41.2% to $321.8
million, producing operating income of $12.2 million, down 65.1% compared to $35 million in the prior-
year period. At the unit level, yield fell 7.1% to 7.58 cents on a 36% increase in traffic, while passenger
RASM dropped 7.3% to 6.29 cents on a 0.2-point fall in load factor. Operating CASM rose 3.7% to 6.32
cents, primarily owing to the higher fuel prices.
For 2004, operating revenues were ahead 26.8% to $1.27 billion and operating expenses climbed 39% to
$1.15 billion. Operating income amounted to $112.9 million, down 33.1% versus operating income of
$168.8 million in 2003.

Mesa Air Group reported net income of $13.9 million for the fiscal first quarter ended Dec. 31, more than
triple its earnings of $4.1 million in the prior-year period. On a pro forma basis excluding unusual items,
earnings for the quarter totalled $12 million compared to $7 million in the corresponding quarter last year.
Operating revenues for the quarter rose 41.2% to $264.8 million while operating expenses climbed 34.4%
to $236.5 million, resulting in an operating profit of $28.3 million, more than double an operating profit of
$11.6 million in the 2004 quarter. At the unit level, yield declined 1.1% to 18.7 cents on a 43.2% increase
in traffic while passenger RASM rose 3.1% to 13.3 cents on a 3.5-point gain in load factor. Operating
CASM excluding one-time items improved 2.6% to 12 cents

Midwest Air Group reported a $19.4 million net loss for the fourth quarter ended Dec. 31. This compares
to a $1.6 million net loss in the prior-year period. Operating revenue rose 5.7% to $103.6 million on
increases in both passenger and cargo revenue, but this was offset by a 22.9% jump to $122.8 million in
operating expenses on a 52.6% surge in fuel expense and a 57.5% hike in maintenance expense related
to an engine maintenance contract. As a result, operating loss widened to $19.2 million from $1.9 million
in the 2003 fourth quarter. At Midwest Airlines, yield increased 2.1% to 12.28 cents while revenue per
scheduled service ASM rose 1.4% to 8.61 cents. CASM was up 18.5% to 11.68 cents but increased just
7.6% with fuel price held constant. For full-year 2004, the group posted a $43.1 million net loss, worsened
from a deficit of $13.3 million in 2003. Operating revenue improved 8.2% to $415.2 million but expenses
jumped 11.1% to $460.5 million to produce an operating loss of $45.3 million, widened from $30.5 million
in 2003.

Northwest Airlines exercised 10 of 175 options it holds for CRJ200s. The latest aircraft are likely to be
operated by Northwest Airlink partner Pinnacle Airlines. The transaction increases the number of firm
orders from Northwest to 139.




DVB-Aviation Industry Research (AIR)                  18                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Northwest Airlines reported a $420 million net loss for the fourth quarter ended Dec. 31, which included
several unusual items. This compares to net income of $363 million in the 2003 fourth quarter. Excluding
unusual items, NWA posted a 2004 fourth-quarter net loss of $359 million, significantly worse than the
$129 million net loss it recorded in the 2003 quarter. Total operating revenues for the quarter climbed
6.4% to $2.75 billion while total operating expenses jumped 22.2% to $3.18 billion. Operating loss totalled
$424 million compared to an operating loss of $12 million in the 2003 quarter. At the unit level, passenger
yield declined 4.3% to 11.01 cents on an 8.9% increase in traffic, while passenger RASM dropped 3% to
8.67 cents on a 1-point gain in load factor. Operating expense per total ASM rose 11.7% to 11.36 cents.
Excluding fuel and unusual items, unit costs decreased 6.1%. For full-year 2004 including unusual items,
the company posted a net loss of $878 million versus net income of $236 million in 2003. Excluding
unusual items, it reported a full-year net loss of $713 million versus a $565 million net loss in the prior
year. Revenue increased 11.9% to $11.28 billion and operating expenses rose 13.9% to $11.78 billion,
resulting in an operating loss of $505 million versus an operating loss of $265 million in 2003.

Northwest Airlines placed an order with Airbus for eight additional A330s that it will use to replace on a
one-for-one basis its DC-10-30s on transatlantic routes beginning in 2006.
The order includes six dash 300s configured with 34 seats in business class and 264 seats in coach, and
two dash 200s with 32 seats in business class and 211 seats in coach. All will be powered by PW4168As.
Northwest currently operates 15 A330s--eight dash 300s and seven dash 200s--that are part of an order
for 24 placed in Jan. 2001. The remaining nine aircraft from that order will be delivered between 2005 and
2007. As part of the new order, deliveries of three aircraft from the 2001 order were accelerated from
2007-08 to 2006.

Primaris Airlines, a Las Vegas-based start-up that has announced plans to purchase 20 7E7s and 20
737-800s, engaged investment banking firm Calyon Securities as lead placement agent in a private
equity raise to fund scheduled operations. It currently operates a single 757 providing charter services to
the White House press corps.

Republic Airways Holdings added 16 firm orders for Embraer 170s, bringing its total firm orders to 39.
The new contract is valued at $400 million. If the company exercises its 39 options, the value could reach
$1.5 billion. The latest 170s will be operated for Delta Air Lines. To date, Republic has taken delivery of
13 170s that it operates for United Airlines.
As of the end of Dec. Embraer had logged 343 firm orders and 427 options for the 170/190 aircraft family.

The hotly competitive US transcon markets will get another low-fare player this summer when Delta Air
Lines' Song unit enters them as part of a broader expansion accompanying a 33% increase in its fleet
from 36 to 48 757s. The aircraft are coming from the mainline beginning in May. As a result, Song will add
36 new flights through Sept. 2, bringing total daily departures to 176.

Southwest Airlines was not immune to the current harsh environment as its fourth-quarter net income
fell 15.2% to $56 million, including an $8 million charge related to fuel hedging, from $66 million in the
prior-year period. The airline noted that without the gains from its hedging program, which reduced fuel
and oil expense in the quarter by $174 million, the carrier would have lost money for the period.
Total operating revenues rose 9.1% to $1.66 billion on an 8.2% increase in passenger revenue, while
operating expenses climbed 9.2% to $1.54 billion. This resulted in operating income of $120 million, up
8.1% over operating income of $111 million in the 2003 quarter. Passenger RASM was down 2.1% and
passenger yield fell 3.9% to 12.08 cents. Operating CASM declined 1.3% to 7.59 cents, or 4.5% to 6.22
cents when fuel is excluded. For the 12 months ended Dec. 31, the company reported net income of $313
million, a 29.2% drop versus net income of $442 million in 2003. Excluding a federal grant received in
2003, net income in 2004 increased 5.6% from 2003's $298 million. Revenue jumped 10% to $6.53 billion
while operating expenses grew 9.6% to $5.98 billion, producing an operating income of $554 million, a
14.7% improvement from operating income of $483 million in the prior year.
Tampa Cargo took delivery of its second 767-200 Special Freighter converted from passenger
configuration by Israel Aircraft Industries' Bedek Aviation division. Two more 767s are being converted for
the Colombian carrier, one by IAI and the other by Varig Engineering and Maintenance, IAI's selected
conversion provider for South America. They are to be delivered in the first quarter.

DVB-Aviation Industry Research (AIR)                19                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


UAL Corp., parent of United Airlines, reported a $664 million net loss for the fourth quarter ended Dec.
31. The total included $111 million in special items consisting of a $158 million gain from the sale of
UAL's remaining shares of Orbitz, $222 million in reorganization expenses and a $47 million increase in
frequent-flier liability primarily associated with revised estimates. Excluding one-time items, 2004 fourth-
quarter net loss amounted to $553 million. This compares to a net loss of $476 million in the 2003 fourth
quarter. Operating revenues during the period climbed 5% to $4 billion while operating expenses jumped
14% to $4.48 billion. This resulted in an operating loss of $493 million compared to an operating loss of
$134 million in the 2003 quarter. Yield fell 0.4% to 10.65 cents on a 4.7% increase in traffic, while
passenger RASM dipped 0.2% to 8.26 cents on a 0.3-point gain in load factor. Operating CASM rose
8.4% to 10.68 cents, or 0.5% to 8.34 cents when fuel is excluded. For the full year, the company posted a
net loss including one-time items of $1.64 billion compared to a $2.81 billion net loss in 2003. Excluding
one-time items, 2004 net loss was $1.2 billion. Operating revenues rose 9.8% to $16.39 billion and
operating expenses climbed 5.4% to $17.17 billion. As a result, operating loss totalled $777 million. This
compares to an operating loss of $1.36 billion in the previous year. United said it expects first-quarter
system mainline capacity to be down about 2% year-over-year, and down about 3% for full-year 2005.

US Airways received bankruptcy court approval to proceed with a previously announced aircraft leasing,
financing and engine service agreement with GECAS and GE Engine Services. The accord provides the
airline with $140 million in interim liquidity through a new bridge facility and the deferral of aircraft debt
and lease payments coming due over the next six months, as well as annual cash savings of $80 million
in aircraft ownership and engine maintenance costs. As part of the deal, GECAS will lease up to 31 new
70- and 90-seat regional jets to the carrier over the next three years and US Airways will return 25 of its
281 mainline aircraft over the same time period. In exchange, upon successful emergence from Chapter
11, US Airways said it will issue to GECAS a 15-year convertible note for $125-$216 million depending on
future lease options selected by the airline.

US Airways said it reached leasing and financing agreements with Embraer, Bombardier and DVB Bank
for six additional regional jets, clearing the way for it to take delivery of three 72-seat Embraer 170s and
three 70-seat CRJ700s by the end of the month. The aircraft will be the first US Airways has taken since
filing for Chapter 11 in Sept.

WestJet will team with Aviation Partners Boeing to certify Blended Winglets for the 737-600.
The Canadian LCC was the North American Blended Winglet launch operator of 737-700s in 2003.
Flight testing with a WestJet-provided aircraft will run from March to May 2006 with FAA and Transport
Canada certification expected the following July. Apparently, blended Winglets will give WestJet the
additional range and fuel margins to help initiate longer ETOPS-type operations to international
destinations.


Central/South America:

Aeromexico and Mexicana will be merged and then sold for up to $2 billion by mid-2005 under a new
plan that the Mexican government was expected to approve, according to press. Two smaller Mexican
carriers, AeroCaribe and Aerolitoral, also will be merged and sold.

Avianca emerged from Chapter 11 bankruptcy protection after a 21-month reorganization process that
saw the company, with the aid of The Seabury Group as financial adviser, restructure $238 million in
financial obligations and reduce its aircraft and lease obligations by $70 million. Entrepreneur German
Efromovich and his business group Sinergy/Ocean Air of Brazil have injected the first tranche of a total
$63 million recapitalization, which is scheduled to be completed in 13 months. Efromovich will hold a 75%
stake in Avianca and the Colombian Coffee Growers Federation is to own 25%.
Gol said it exercised options to purchase four additional 737-800s in Jan. The transaction is part of an
agreement it signed earlier this year to acquire 43 737-800s, 15 of which were firm orders and 28
purchase options. With the new agreement and the exercise of two other purchase options in July, the
carrier increased the number of its firm orders to 21. The aircraft will be delivered between 2006 and
2009.

DVB-Aviation Industry Research (AIR)                  20                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


TACA signed a firm contract to purchase 14 additional single-aisle Airbus aircraft. According to the
manufacturer, the airline will become the first in Latin America to operate the A321 as of Sept. 2005. With
the new order, TACA now has 26 aircraft on order--five A319s, 16 A320s and five A321s--which will be
delivered between April 2005 and Sept. 2009. At present, the airline operates a fleet of 32 Airbus aircraft
comprising eight A319s and 24 A320s.


Europe:

Air Berlin and Niki selected the CFM56-5B to power the 70 firm A320s the airlines ordered in Nov. The
order is valued at approximately $1.5 billion at list price including spares, CFM said. The airlines also hold
40 options for additional aircraft. Air Berlin said CFM won the order because its engines are similar to
those powering the carrier's existing 737 fleet. Also, spare parts can be used for both aircraft types and its
technicians do not need to be retrained.

Spain's Air Europa became the first customer for Airbus's proposed A350 after signing an MOU for 10
GEnx-powered A350-800s with options for two more.
The aircraft will be delivered between 2010 and 2012. The MOU comes 11 days after EADS and BAE
Systems gave the go-ahead for Airbus to begin making commercial offers to potential customers.
The dash 800 that Air Europa has selected will seat 245 passengers in a long-range, three-class
configuration and have a range in excess of 8,600 nm (15,900 km.), according to Airbus. Its larger sibling,
the A350-900, will seat 285 passengers in three classes with a range of more than 7,500 nm.
Air Europa, which currently is renewing and expanding its fleet, also signed a deal to receive one A340-
200 leased from Airbus and intends to lease two new A330-200s in the spring of 2006. The carrier
currently operates an all-Boeing fleet of 31 aircraft consisting of one 737-300, six 737-400s, three 737-
600s, 17 737-800s and four 767-300ERs. It begin operating scheduled services in 1986 and signed a
codeshare deal with Air France at the end of 2002, potentially paving the way for eventual membership in
SkyTeam

Air Europa also signed a firm contract with Boeing for three 737-800s as part of its ongoing fleet renewal
program. Deliveries are expected to begin in Jan. 2006 and the order is valued at $195 million (list).

Air Europa parent Globalia posted operating revenue of eur2.1 billion ($2.7 billion) in its 2004 fiscal year
ended Oct. 31, up 14.6% on the prior year. Profit after tax increased 58.7% to eur30 million. The Spanish
tourism company, which is controlled 97.5% by the founding Hidalgo family and 2.5% by French hotel
chain Accor, said it expects operating revenue to grow 16% in the current fiscal year. Air Europa's
operating revenue amounted to eur800 million and pre-tax profit for Globalia's air transport division, which
includes ground-handling as well as Air Europa, amounted to eur30 million, press reported.

Air France confirmed that its first three A380s will join the fleet in spring 2007 and said it will present the
new aircraft officially in Toulouse on Jan. 18. The French carrier will be the first European airline to deploy
the A380. AF signed an agreement on June 18, 2001, to acquire 10 A380-800s with another four on
option. They will be powered by GP7200s.

The French government announced the sale of 18.4% of Air France, a step that in conjunction with a
planned future stock distribution to the airline's employees will see its ownership position fall below 20%.
The move comes just six months after the merger of AF and KLM resulted in a de facto privatization of
the French carrier with the government stake dropping from 54% to 44.1%.
The 18.4% holding in AF-KLM, representing some 49.5 million shares, is being offered in two tranches:
17.7% to institutional investors and 0.7% to employees of the two airlines. French bank Societe Generale
and Dutch bank ABN Amro Holding were appointed bookrunners for the placement, which based on the
closing price will bring the French state about eur700 million ($932.5 million).
Early next year, a further 7% of the government's holding will be offered to airline employees. Of these
shares, 8.2 million will be offered at a discount under a rights issue and 13.2 million will be transferred for
free under a "wages for shares" scheme. Subscriptions to the employee rights issue and wages for


DVB-Aviation Industry Research (AIR)                  21                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


shares program will be launched before the end of Feb., AF noted. When the offerings are complete,
employees will hold 17.4% of the capital of AF-KLM Group.
According to the offering details, the state intends to keep 18.4% in AF-KLM "in the long term," which
confirms earlier statements that it plans to remain an "important" shareholder of the group.

Polish start-up Air Polonia halted operations, grounding its three 737s. The press reported that Air
Polonia suspended operations after an investor cancelled plans to inject $10 million into the airline.

Alitalia shareholders authorized the board to increase the group's capital by eur1.2 billion ($1.59 billion).
The rights issue will be launched by next July and is aimed at financing Alitalia's Business Plan 2005-08.
The European Commission however, will launch an in-depth probe into Alitalia's restructuring plan,
stressing that there were no "negative presumptions" that the restructuring plan contains illegal state aid
that contravenes EU rules. Several European network carriers including British Airways, along with
several no-frills airlines, have expressed their concern to the EC over the rescue plan and the possible
injection of government funds.

Austrian Airlines, which revised its 2004 EBIT forecast from eur50 million ($66.5 million) to eur10
million, is expecting a further drop in yields for 2005. "This year we lost around 7% of the yield, and it
continues to fall, especially on our routes to middle Europe," CEO Vagn Sorensen said, acknowledging
that "We put too much capacity on some markets." The carrier, which brought around 20% more capacity
to its network, most of it to Eastern Europe, expects a lower growth rate of around 10% in 2005. It
expects to introduce a new, larger business class in its 767/777 fleet in the first or second quarter.

Austrian Airlines Group took a 62% stake in Bratislava-based Slovak Airlines through an investment of
eur2.8 million ($3.6 million) in the formerly state-controlled carrier.
The remaining 38% of the tiny airline is in the hands of the Slovakian government and other investors.
Slovak Airlines currently operates a single 737-300, which serves Moscow regularly in addition to
providing charter services. The carrier may take over Bratislava-Brussels services from Austrian Airlines
in the future.

FlyBE placed an order with Bombardier Aerospace for 20 additional Q400 turboprops. The transaction is
valued at roughly $485 million and represents the conversion of 20 options to firm orders. The aircraft will
boost the Regional's Q400 fleet to 41.

Germanwings, the low-cost subsidiary of Eurowings, said it enjoyed its first profitable year in 2004 as
sales rose 60% compared to a year earlier to around eur245 million ($333.2 million). Passengers
increased 46% to 3.5 million. The carrier operates a fleet of 17 A319s/A320s to 30 destinations from
Cologne and to 16 points from Stuttgart. Germanwings will lease nine former US Airways A319s via an
unnamed US leasing company.

Flugleidir Icelandair Group, parent company of Icelandair, placed a firm order with Boeing for 10 737-
800s with options for five more. Deliveries are slated to begin early next year and the value of the firm
order is $650 million at list prices. The group said it plans to lease the aircraft to other carriers as part of
its strategy to "grow its business outside Iceland. The company said the target market for the aircraft is
China and it is optimistic that leasing contracts will be closed by year end. Including the new order, the
group has inked deals for 16 aircraft during the past six weeks.

KLM will add two new 777-200ERs to its fleet in the first quarter of 2006 under a deal with Boeing. The
aircraft will boost KLM's 777 fleet to 12.
LOT Polish Airlines' new low-fare subsidiary Polishwings looks set to take off in Feb. Initial fleet will
consist of five 737 Classics that will fly from Warsaw and Katowice--where it will go head-to-head with
Wizz Air--with the focus on serving cities in Eastern Europe. The airline also will take over LOT's charter
operations and is evaluating the possibility of cooperating with Germanwings, the low-cost subsidiary of
Eurowings, linking up at the latter's bases at Cologne and Stuttgart. The new company is capitalized at
eur1 million ($1.33 million).



DVB-Aviation Industry Research (AIR)                   22                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


LOT Polish Airlines reported a net profit of 3 million zlotys ($960,000) for 2004 compared to a loss of
109 million zlotys a year earlier, press reported. "We managed to achieve a profit, thanks mainly to a
sensible policy of hedging for fuel purchases, and to currency movements. The weak dollar helps us,"
LOT spokesperson Leszek Chorzewski told the news agency. No other financial figures were released.
The Polish government is still seeking a buyer for a 25% stake in LOT.

Lufthansa supervisory board approved the purchase of seven additional Rolls-Royce Trent-powered
A340-600s for delivery in 2006-07. Lufthansa already operates 10 A340-600s. The new aircraft will be
used to replace existing capacity and meet forecast demand.

Lufthansa is trying to sell its stake in bmi in an effort to avoid having to buy the airline outright, according
to press, which also said the German carrier has offered its shareholding to both British Airways and
Virgin Atlantic.
Lufthansa acquired an initial 20% holding in bmi from SAS in Nov. 1999 and added 10% minus one share
in 2002, leaving founder and Chairman Michael Bishop with 50% plus one share (SAS retains 20%).
It is no secret that Lufthansa is not thrilled with its investment, which was made as part of a
counterstrategy against BA--which at the time owned Deutsche BA--with a goal of gaining access to the
transatlantic market out of London Heathrow, where bmi holds 14% of the slots. However, the restrictive
Bermuda II bilateral is still in place and a transatlantic open aviation area that would allow LH to use bmi
slots at LHR for flights to the US has not materialized. Also, bmi has been loss-making since 2002,
forcing Lufthansa to reflect a portion of those losses in its financial results.

Malev withdrew its last 737 Classic Jan 3. It is in the process of replacing them with 16 737NGs, with two
arriving this year. They will bring its fleet to 18 aircraft comprising five 737-800s, seven 737-700s and six
737-600s

Niki, the Austrian low-fare carrier and Air Berlin partner, added a former Volare A320 to its fleet, giving it
a total of five A320s/321s. Niki, which will get 10 new A320s from a joint order with Air Berlin, will add the
first in Sept.

Ryanair CEO Michael O'Leary, speaking at the Future of Air Transport Conference in London, said
Europe and Ryanair are nowhere close to reaching the saturation point of LCC service. He said that in 10
years when Ryanair's passenger load gets to 100 million a year, "we'll be straining around the edges."
Confident of Ryanair's low costs, O'Leary said that if oil gets to $60 a barrel, "we'll be the only profitable
airline in Europe. If it gets to $70 a barrel, we'll be the only breakeven airline in Europe and probably the
only airline in Europe." He added that the entire Ryanair fleet will soon be equipped with in-flight
entertainment systems.

SAS is planning a takeover of airBaltic if the government decides to sell its remaining 52.6% share,
according to a Swedish newspaper, which quoted SAS CEO Joergen Lindegaard. SAS currently holds
47% of airBaltic. The report also said SAS is considering selling its 95% stake in Spanair if the price is
right.

SN Brussels Airlines will have to pay back a eur125 million ($163 million) state-granted subordinated
loan in 2017 instead of next year. The loan originally was granted by the Belgian government to Sabena
and was transferred to its regional carrier DAT after Sabena collapsed in Nov. 2001.

Austrian Regional carrier Styrian Spirit ordered a CRJ700 and optioned a second. The firm order is
valued at an estimated $30.2 million and follows a firm order placed in July for three CRJ200s.
Swiss International Air Lines unveiled new cost-cutting measures designed to shed Sfr300 million
($253.1 million) in annual costs. The carrier plans to trim its fleet by at least 13 aircraft, restructure its
operations at Zurich, Geneva and Basel and cut its staff by 800-1,000. It said it hopes to negotiate new
deals with its unions and suppliers as part of the moves. As a result, the fleet will be trimmed by 13
aircraft, although Swiss said it is unsure exactly which aircraft will be affected. In addition, it will reduce its
workforce by 800-1,000 positions. Previously, Swiss announced plans to cut annual costs by Sfr1.6 billion



DVB-Aviation Industry Research (AIR)                    23                                            DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


in order to return to profitability. This included staff cuts of roughly 3,000 and reducing its fleet from 132 to
85 aircraft.

THY Turkish Airlines said its profit for the first nine months of 2004 totalled 121 trillion lira ($85 million).
According to press, pre-tax profit was 193 trillion lira while passenger boardings rose to more than 9
million from 7.8 million in the year-ago period.

After months of speculation, German banking giant WestLB sold its 31% stake in Europe's largest tourism
services conglomerate, TUI AG.
The stake shifted for nearly eur1 billion ($1.34 billion) to Deutsche Bank, which then sold 17.3% of the
shares to a Spanish consortium led by privately owned hotel concern Riu. The Riu family will hold 10% of
TUI while Spanish savings bank CAM and hotel chain Grupo de Empresas jointly will control a 7.3%
share.
The sale of the TUI holding is part of WestLB's effort to bolster a balance sheet battered by eur2.2 billion
worth of loan-loss provisions that pushed the bank into the red last year.

TUI AG signed a contract with Boeing to purchase 10 CFM56-7-powered 737-800s scheduled to be
delivered from early 2006 to mid-2007. The aircraft will be used to renew TUI subsidiary Hapag-Lloyd
Flug's fleet, which currently consists of 28 737-800s and five A310s. TUI said the latter will be sold in due
course to give it an all-Boeing fleet.

Virgin Express reported a net profit of eur3.4 million ($4.6 million) for the third quarter ended Sept. 30,
almost doubling the eur1.9 million net profit achieved in the year-ago period.
Driven by additional cost savings and increased productivity, operating profit was up more than twofold
over last year to eur4.3 million.
Revenue declined 12% to eur54.7 million on a planned fleet reduction from 13 to 11 aircraft in order to
remove excess seats from the market, while total operating expenses decreased 16% to eur50.4 million,
or 21.4% when the negative impact of fuel price increases is excluded.
RPKs during the three months fell 15% to 863.7 million, which was in line with a 15% reduction in ASKs
to 1.03 billion. However, block hours flown were down just 11%. Load factor remained stable at 84.2%.
Unit costs for the quarter dipped 1.4% to 4.88 euro cents per ASK.
The Brussels-based no-frills carrier is being merged with rival SN Brussels Airlines. German competition
authorities informed the parties that no notification of the concentration would be required, and
competition clearance from Belgian authorities is "expected soon".
                                                                 th
Volare Group, which suspended operations November 19 2004, was placed under "extraordinary"
administration by the Italian government following the approval of an emergency decree by the cabinet.
The group was subsequently declared insolvent by a court in Busto Arsizio near Milan.

Hungarian LCC Wizz Air said it completed a "term sheet" for a eur25 million ($33.2 million) financing with
a group of investors led by Indigo Partners, the investment partnership that has invested in Tiger Airways.
Wizz said the commitment by Indigo and its existing shareholders "is closely linked to an agreement in
principle being negotiated" with debis AirFinance, which leases six A320s to the airline, and Lufthansa
Technik, which provides MRO services including line and base maintenance and engineering support.


Asia Pacific:

AirAsia Chief Executive Tony Fernandes cited Airbus's commitment to his airline and the economics of
the deal as key factors in the decision to turn away from the 737 in favour of the A320.
AirAsia will sign an MOU with Airbus covering 40 A320s worth $2.5 billion plus 40 options.
On price, Fernandes said that the A320 was in front on economics but quickly added that "price
advantage can be eroded very quickly if the support is not there." He said the A320s will have lower
operating costs than AirAsia's 737-300s despite being brand-new aircraft.




DVB-Aviation Industry Research (AIR)                   24                                           DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


The first A320 will be delivered in Jan. 2006 and the first 40 will enter the fleet over five years. Engine
selection is yet to be made. AirAsia's fleet now comprises 23 737-300s that will be phased out as the
A320s arrive. Fernandes said he expects all the options to be exercised by 2012.
Airbus will provide "extensive support functions" to the airline, including pre-delivery support and training
for pilots, cabin crew, engineers and maintenance personnel.
Funding will be mainly from borrowings, a filing with the Malaysia stock exchange said. The loans will be
guaranteed by the European export credit agencies. AirAsia said it currently is negotiating with various
financial institutions and credit agencies.

Air China raised $1.06 billion in the launch of its IPO in a market that was buoyed by oil prices retreating
from record highs and the bullish rise of air travel in China.
The IPO was for 2.8 billion shares, representing 31% of the airline, at HK$2.98 ($0.38) each. According to
stock market sources in Hong Kong, the listing was heavily oversubscribed. Cathay Pacific bought 905
million shares, or 32.3% of the offering, for HK$2.69 billion.
Air China, which recently took over China Southwest Airlines and Zhejing Airlines under the country's
consolidation policy, has a 35% share of China's 20 busiest routes and 51.3% of its international market.
The airline has forecast earnings of $13.6 million in 2005 and 3 billion yuan ($362.5 million) in 2006.

Airbus is finishing off the year with a rush of orders for its A320 models, including a new order for 30
aircraft from India's Air Deccan. Airbus secured AirAsia's fleet upgrade order for 40 A320s and 40
options and India's Kingfisher placed an order for 10 with 20 options. Air Deccan currently flies three
leased A320s on services among Indian cities. Two more leased A320s plus two ordered A320s are due
to join its fleet in Feb. and Sept. respectively. The airline, owned by Bangalore-based helicopter charter
firm Deccan Aviation Private Ltd., plans to quadruple its fleet to 60 aircraft in five years, enabling it "to
bring affordable travel to even more people." It is charging fares 30% below the country's three main
domestic carriers, Indian Airlines, Jet Airways and Air Sahara.

Air Hong Kong, as expected, converted two options for A300-600 General Freighters to add to the six it
has in service or on order. The two A300-600GFs will be delivered in May and June 2006.

Air New Zealand has strengthened its balance sheet, paving the way for introduction of its first 777-
200ERs in the final quarter of 2005, by successfully bedding down its NZ$185.5 million ($133.2 million)
rights issue. The New Zealand government as 82% shareholder in the airline contributed a further
NZ$150 million by taking up its share of the 1-for-6 issue at NZ$1.30 per share. The funds raised will be
used to pay down debt and assist ANZ's investment in a fleet of eight 777-200ERs to replace its aging
767s from Sept. next year. Non-government shareholders also supported the issue. The new shares
generated through the offering will begin trading on the NZ Stock Exchange.

Asiana Airlines took delivery of the first of six A330-300s that will be deployed on regional routes to
Japan and other points in Asia. Deliveries of the remaining aircraft will continue through mid-2007, with
the A330 fleet replacing 767s on Asiana's regional network. The airline introduced Airbus models into its
fleet with the A321 in March 1998 and operates 15 aircraft on domestic and regional services.

A new Indonesian low-fare airline took to the skies following the re-launch of PT AWAir International in
partnership with AirAsia.
Reportedly, AirAsia has paid a token $2 to acquire a 49% stake in the carrier, which suspended
operations in March 2002, less than two years after inaugurating service in June 2000.
Cathay Pacific Airways expects to decide in the first half of 2005 on its long-term fleet plan; the airline
will be evaluating the A380/A340-600 and the 747-400ADV/777-300ER. Cathay has been mulling for
some time the future direction of its long-haul fleet and has three A340-600s in service on the Hong
Kong-New York route. Those aircraft are on short-term lease from ILFC. The carrier has been pushing
Boeing on the 747-400ADV with the Trent 1000 engine being developed for the 7E7. Tyler said that so far
Cathay has liked the initial numbers on the new 747 variant, but its proposed delivery in 2010 may be a
problem although Airbus Chief Commercial Officer John Leahy said that the first available A380 slots are



DVB-Aviation Industry Research (AIR)                 25                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


in 2010. However, it is understood that ILFC has earlier uncommitted slots. Airbus is making a strenuous
effort to place the A380 in the Cathay fleet and there has been a flurry of activity in recent months.

Cebu Airlines selected the CFM56-5B to power 12 A319s scheduled to be delivered from mid-2005 to
2007. According to CFM, the order is valued at $140 million at list prices, including spares.

China's airlines posted combined profits of 6.23 billion yuan ($752.7 million) in 2004, reversing a loss in
2003. According to press, the country's three major carriers--Air China, China Eastern Airlines and China
Southern Airlines--accounted for a combined profit of 5.39 billion yuan. Airline profits together with the
results of related aviation industries boosted the entire civil aviation sector's profits to 8.69 billion yuan,
which was equivalent to the total of all profits for the previous decade. Passenger numbers totalled 120
million last year, up 38% on 2003.

Boeing and Airbus announced a total of 65 orders from China's airlines for the 7E7--renamed the 787 at
the occasion--and the A380, marking the first orders from China for both programs.
The preliminary commercial agreement covers orders for 60 787s from six Chinese airlines: Air China,
China Eastern, China Southern, Hainan Airlines, Shanghai Airlines and Xiamen Airlines. Value of the 60
aircraft was put at around $7.2 billion based on "average" list prices. Boeing said each airline is
scheduled to receive its first 787 in time for the 2008 Beijing Olympics. Specific numbers of airplanes for
each were not supplied. Engine selection was not announced as each carrier is expected to want to
negotiate its own engine choice.
The order provided a "wonderful opportunity" to adopt the 787 identity to honor the size of the order as
well as the fact that the airlines are now members of the 787 launch customer team. In the Chinese
culture, the number eight represents good luck and prosperity.
Airbus, CASC and China Southern Airlines signed a General Terms Agreement covering five A380s for
China Southern. Delivery schedule was not announced, but Airbus indicated at least one will arrive in
time for the Olympics. With this agreement, Airbus said it has 154 A380 orders and commitments from 15
customers.

China Aviation Supplies Import and Export Group Corp. will acquire 23 A320 family aircraft, Airbus
announced. Terms of the deal were not released, but press stated that the aircraft are intended for Air
China.

China Eastern Airlines will purchase six 737-700s for $240 million, the press reported. The aircraft will
begin arriving in Jan. 2006.

EVA Air, which placed a launch order for three 777-200LRs prior to 9/11, appears to be emerging as the
launch customer for the freighter variant of the type. According to airline sources, EVA is close to ordering
at least four 777Fs plus options to replace its 12 MD-11Fs. In April the airline firmed its order for eight
777-300ERs. The carrier has ordered another A330-200, its 11th. Of the first 10, eight will be leased from
GECAS and two purchased directly from Airbus.

Hong Kong Express Airways will lease four Embraer 170s from GE Capital Aviation Services with
deliveries beginning in the second half of 2005. HKE, formerly Helicopters Hong Kong Ltd., operates
helicopter services between Hong Kong and Macau and between Macau and Shenzhen and is one of the
largest commercial helicopter companies in the world, according to Embraer.

Japan Airlines ordered both the long-range dash 8 model and the short/medium-range dash 3 variant 7E7 and will
use the aircraft to replace its fleet of 58 767s and A300s. The 7E7-3s will be configured to seat 300 and the 7E7-9s
with 250 seats. The carrier also took options on 20 aircraft. Engine choice has yet to be made. The 7E7s will enter
service a year before Tokyo Haneda's fourth runway comes into operation, significantly reducing JAL's need to
operate larger aircraft.

The carrier also signed a contract with Bombardier to acquire two CRJ200s on behalf of its wholly owned subsidiary
J-AIR. The transaction raises to eight the number of CRJ200s ordered by JAL on behalf of J-AIR since its initial buy
of two in Jan. 2000.


DVB-Aviation Industry Research (AIR)                     26                                            DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Jetstar Asia, a Singapore-based low-fare airline, announced that it will inaugurate service on Dec. 13,
operating daily between Singapore and Hong Kong followed by Taipei on Dec. 16 and Pattaya on Dec.
20. Jetstar Asia is a partnership between Qantas (49%), Singaporean businessmen Tony Chew (22%)
and FF Wong (10%) and Temasek Holdings (Private) Ltd., the government investment arm that also
holds a controlling interest in Singapore Airlines and Changi Airport. Jetstar will operate A320s.

India's Kingfisher Airlines signed a contract with Airbus to acquire 10 A320s with options for 20
additional aircraft in a deal valued at $1.8 billion.
The low-cost carrier also inked a deal to lease four A320s from debis AirFinance that it will use to launch
operations. Deliveries of the leased aircraft are expected to begin in April while the ordered aircraft will
begin arriving in Sept. All will be powered by IAE V2500s. The airline is seeking to outsource its
maintenance to Indian Airlines, which also operates A320s.
Kingfisher, which is backed by United Breweries, plans to have a fleet of eight A320s by the end of 2005,
building to 16 by 2006. "The orders and leases for Airbus A320s that we are announcing are just the start
of what will soon be a fleet of more than 30 aircraft, allowing Kingfisher to expand its 'fly the good time'
approach to all of the major cities in India," Chairman Vijay Mallya said in a statement.

Pemco Aviation Group and Malaysia Airlines signed an agreement that creates an alliance to convert
passenger aircraft to freighters by offering in-region conversion services at the MAS facilities at Subang
Airport in Kuala Lumpur.

Singapore Airlines and Boeing finalized a previously announced order for 18 GE90-115B-powered 777-
300ERs valued at $4.1 billion at list prices, bringing SIA's total 777 position including orders and
deliveries to 77 aircraft.

Singapore Airlines Group CEO Chew Choong Seng said that his carrier will not order the proposed
747ADV. Analysts had speculated that SIA could be a launch customer, but Chew said that the airline's
long-range strategy is built around the A380, 777-300ER and dash 200ER. "We would rather misuse the
A380 than order the 747ADV," he quipped.
According to sources at Cathay Pacific, Boeing is close to offering the 747ADV with seating for 450 with
either Rolls-Royce Trent 1000 or GE Aircraft Engines GEnx engines. The 747ADV will have an 11.7-ft.
(3.6-m.) stretch over the dash 400 and a range of 8,000 nm (14,816 km.).

Qantas and Thailand-based CTI Holding signed a joint venture agreement formalizing the establishment
of Thai Air Cargo, a new Asian airline that will be based in Bangkok and expects to take off in mid-2005.
The carrier, which will be owned 51% by CTI and 49% by Qantas, primarily will serve Asian sectors within
5-6 flying hours of Bangkok and at first will target markets in Japan, China, India and Europe. It initially
will operate a fleet of MD-11 freighters, but a team from Qantas and Thai Air Cargo said they will meet
with manufacturers of suitable aircraft.

Vietnam Airlines placed an order for 10 A321s for delivery starting in 2006. They will add to the five the
carrier currently has in service along with 10 A320s. President Nguyen Xuan Hien said, "The A320 and
A321 have proved to be an enormous success in service with Vietnam Airlines and the latest order will
meet the needs of a rapidly growing Vietnamese market."

Virgin Blue has secured its first joint venture in the Pacific, winning the bidding to become the preferred
cornerstone partner in Samoa's international carrier Polynesian Airlines. The Samoan government chose
the Australian budget operator ahead of rivals Air New Zealand and Qantas's 46%-owned Air Pacific to
form Polynesian Blue, which will act as flag carrier for the island. Terms of the deal still are being
finalized, but Virgin Blue is expected to take up to 49% of the new venture. According to the government,
Polynesian Blue will begin operating "no-frills" one-class services from the first half of 2005.




DVB-Aviation Industry Research (AIR)                 27                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Middle East & Africa:

Air Namibia is in final talks to add two former Sabena A340-300s to its fleet. Currently it has one ex-
Swiss MD-11 in operation on its four weekly Windhoek-Frankfurt services. "With the A340-300s we are
also looking to open London again," CEO and Technical Adviser Riedel Gernot said. The airline's aging
fleet of three 737-200s will be flying until 2006 when their leases expire.

El Al's net profits for the third quarter ended Sept. 30 tumbled 22% to $47.4 million from $61 million in the
prior-year period on a 10.5% rise in revenues to $413.7 million.
Operating profits fell 19% to $51 million as the operating profit margin slipped from 17% to 12%.
Cumulative nine-month net earnings climbed to $58.9 million from a $3.2 million loss in the 2003
timeframe as total revenues soared 21% to $1.04 billion. Shapira, whom observers credit with
orchestrating the airline's turnaround since joining El Al in June 2002, said the carrier has pared costs by
$25 million since start of the year--"2.4% of commercial turnover for the (Jan.-Sept.) period."
European operations contributed $192 million in revenue to the quarterly total, up 6%, while traffic to and
from North America generated $149 million, up 10%. Turnover from Asian markets climbed 40% to $57
million. El Al controlled 40.7% of the market at Ben Gurion Airport during the quarter while charter
subsidiary Sun D'or booked a 15.3% slice of local charter business.
Fully privatized since mid-2004, El Al is the target of a takeover bid by Knafaim-Arkia Holdings Ltd.
Knafaim Arkia Holdings will take a controlling stake in El Al by raising its holding in the carrier to 40%.
According to the press, the move will cost Knafaim $16 million. El Al has been controlled by the Israeli
government for 55 years.

Emirates SkyCargo and EADS EFW signed a contract for the conversion of three A310-300s formerly
operated by Aeroflot into freighters. The A310-300Fs are expected to enter Emirates' fleet from the
middle of next year, one in July and the other two in Jan. 2006.

Emirates signed a $138 million Japanese Operating Lease for the acquisition of a new A340-500, the
airline's eighth from an order of 10. The lease, structured as a 13-year JOL, is funded using a
combination of Japanese equity and commercial debt, Emirates said.

Ethiopian Airlines is evaluating an order for up 17 7E7s or A350s, assuming the latter program is
launched. The aircraft will be needed to increase frequencies on existing routes to China, where
Ethiopian serves Hong Kong and Guangzhou, the US East Coast and India. It was also reported that
Ethiopian is preparing itself to be a desirable partner for Oneworld or Star, "by offering more frequencies
in our network and adding new destinations”.

Etihad Airways finalized an order with Boeing for five 777-300ERs. The order, which was announced in
Sept. is valued at $1.09 billion at list prices. The aircraft will be delivered this year, with the first scheduled
to arrive in Oct. followed by two each in Nov. and Dec. Etihad noted that the early delivery date will
advance its ability to provide service on long-haul routes. Currently, it operates a fleet of four ex-TAM
A330-200s, one former Singapore Airlines A340-200 and one 767-300 from Amiri Flight.

The Republic of Ghana and US consortium GIA-USA signed definitive agreements to create Ghana
International Airlines, a new carrier that will replace the old national airline of Ghana, which is winding
down operations.

Kuwait-based Jazeera Airways placed an order with Airbus for four A320s with options for four more.
Each will be outfitted with 165 seats in a single-class layout and deliveries are expected to begin in Oct.
Jazeera selected the CFM56-5B to power the ordered aircraft, valued at roughly $45 million.




DVB-Aviation Industry Research (AIR)                    28                                            DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


AIRCRAFT EQUIPMENT (Western-Built Jets)




DVB-Aviation Industry Research (AIR)      29     DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


November 2004 produced several significant orders for the main manufacturers:

                                   NEW JET AIRCRAFT ORDERS - November 2004
                Airbus (1)                       Boeing (19)                                              Others (11)
EVA Air – 1 x A330-203                     Turkmenistan – 2 x B717-22K                   Northwest Airlines – 10 x CRJ-200LR
                                           Unannounced Customer – 3 x B737-700           Styrian Spirit – 1 x CRJ701
                                           Unannounced Customer – 1 x B737-700BBJ
                                           Unannounced Customer – 4 x B737-700
                                           Unannounced Customer – 3 x B767-300ER
                                           Unannounced Customer – 1 x B767-300ERF
                                           Unannounced Customer – 5 x B777-300ER

                                          Total November 2004 Orders = 31


Firm Backlog (As at December 14th 2004):

Aircraft Manufacturer                  Total Aircraft % Share           Dec-00        Dec-01       Dec-02         Dec-03        Dec-04
Airbus                                           1385    43.15
                                                                         4,607         4,361        3,584          3,406         3,210
Boeing                                           1069    33.30
Embraer                                           437    13.61
Bombardier (Canadair)                             236     7.35        Backlog - Top Ten Airlines                   Total Aircraft % Share
Boeing (McDonnell-Douglas C17)                     53     1.65        JetBlue Airways                                         215     7.79
Avcraft                                            23     0.72        ANA                                                     116      4.2
Fairchild/Dornier                                    4    0.12        Emirates Airlines                                        98     3.55
Harbin Embraer Aircraft Industry                     3    0.09        easyJet                                                  94     3.41
TOTAL                                           3,210 100.00%         Ryanair                                                  90     3.26
                                                                      Southwest Airlines                                       87     3.15
Backlog - Top Ten Owners               Total Aircraft % Share         Unannounced commercial customer                          70     2.54
ILFC                                              346    10.78        Delta Air Lines                                          66     2.39
JetBlue Airways                                   215     6.70        MidAtlantic Airways                                      63     2.28
US Airways                                        122     3.80        Air Canada                                               63     2.28
ANA                                               116     3.61        TOTAL                                                   962
General Electric Capital Corp                     113     3.52
easyJet                                            94     2.93
Ryanair                                            90     2.80        Backlog - Operating Lessors                   Total Aircraft % Share
Southwest Airlines                                 87     2.71        ILFC                                                     346    58.05
Air Canada                                         71     2.21        General Electric Capital Corp                            113    18.96
Unannounced commercial customer                    70     2.18        CIT Leasing Corp                                          49     8.22
TOTAL                                           1,324 41.25%          debis AirFinance BV                                       27     4.53
                                                                      Boullioun Aviation Services Inc                           18     3.02
Backlog - Top Ten Operators            Total Aircraft % Share         Singapore Aircraft Leasing Enterprise Pte Ltd             14     2.35
JetBlue Airways                                   215     6.70        Pembroke Group                                            13     2.18
ILFC                                              194     6.04        Finnair Aircraft Finance Ltd                              12     2.01
ANA                                               116     3.61        GATX Third Aircraft Corp                                    2    0.34
Emirates Airlines                                  98     3.05        Sunrock Aircraft Corp Ltd                                   2    0.34
easyJet                                            94     2.93        TOTAL                                                    596
Ryanair                                            90     2.80        Aircraft Manufacturer                         Total Aircraft % Share
Southwest Airlines                                 87     2.71        Airbus                                                   388     65.1
Unannounced commercial customer                    70     2.18        Boeing                                                   183     30.7
Delta Air Lines                                    66     2.06        Embraer                                                   16     2.68
MidAtlantic Airways                                63     1.96        Bombardier (Canadair)                                       9    1.51
TOTAL                                           1,093 34.05%          TOTAL                                                    596




Manufacturers News


Airbus:

New maintenance intervals for the A320-family have been approved by the European ASA, the US FAA
and Transport Canada, Airbus said. The time between A checks will increase from 500 to 600 hr. while C
checks will go from every 15 months to every 20 months or 6,000 flight hr. In addition, the five-year
heavy-maintenance check interval can be extended to six years and the 10-year heavy maintenance
check to 12 years.




DVB-Aviation Industry Research (AIR)                             30                                                        DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


A318 powered by PW6000A engines made its first flight. Certification of the aircraft/engine combination
should occur near the end of 2005 after some 500 flight hr. of testing.

Airbus dubbed 2004 "another landmark year" in which it once more maintained its lead position over
Boeing in terms of both orders and deliveries.
Airbus delivered 320 aircraft, exceeding early-2004 expectations that deliveries "at best" would equal
2003's total of 305. Turnover from deliveries in 2004 was estimated at slightly more than eur20 billion
($26.56 billion). The deliveries comprised 233 A320 family aircraft, 12 A300-600Rs--all freighters, 25
A330-200s and 50 A330-300s and A340s of all types.
Boeing announced that it delivered 285 aircraft consisting of 12 717s, 202 737NGs, 15 747s, 11 757s,
nine 767s and 36 777s.
In terms of orders, Airbus also maintained its lead with 370 new firm orders, up from 284 new firm gross
orders in 2003. The 2004 total comprised 279 A320 family jets; two A310s/A300s, both believed to be
freighters; 79 A330s/A340s and 10 A380s. During the year the company registered four cancellations,
reducing its net order figure to 366. This compares with net orders for 272 jets received by Boeing, which
increased its 2004 net order book by 14% over 2003.

On the eve of the rollout of the A380 passenger version, Airbus secured an order for 10 A380Fs with
options on 10 more, with deliveries beginning in 2009 and running through 2012 for the firm aircraft.
Engine selection was not announced, nor was price. As part of the deal, UPS is cutting its order for
A300Fs from 90 to 53, of which 40 have been delivered. The remaining 13 will be delivered by July 2006.

Emirates and Virgin Atlantic are pressing Airbus to launch a stretched version of its A380. Emirates
“wants another 150 seats" on the aircraft as soon as possible. Virgin told media that they also want the
larger version for its six options.

Airbus President and CEO Noel Forgeard reiterated that China probably will order A380s before
summer, permitting Air China to operate the aircraft for the 2008 Olympic Games.
Airbus at present has 149 firm orders for the A380, including the recent commitment by UPS for 10. "With
149 orders from 14 airlines, including the most recent order from UPS, plus options, we are not far from
the 250 which we expected to reach by 2008," stated the manufacturer.
British Airways indicated that it might consider the A380 although it has no current plans to buy the
aircraft. "The A380 may well have a role in our long-term fleet development program," said BA CEO.


Boeing:

Boeing rolled out its 500th 777 at a ceremony at its Everett, Wash., facility. The aircraft is scheduled for
delivery to ILFC and operator Air France.

Boeing has decided to rechristen the 7E7 as the 787. Apparently the company is delaying the
announcement pending finalization of a large order from Chinese airlines--at least 60 airplanes, according
to the press. The number 8 is considered good luck in China, the report said.

Boeing said it intends to increase aircraft production this year as it announced that it received net orders
for 272 jets in 2004, up nearly 14% over 239 orders in 2003. Citing "stronger demand," the company said
it plans to roll out approximately 320 airplanes in 2005, up from 285 last year, "with further increases
expected in 2006."

Last minute orders from Continental Airlines and Vietnam Airlines for a total of 14 7E7s were not enough
to keep Boeing Commercial Airplanes from falling well short of bold mid-year pronouncements that it
would receive orders and commitments for 200 Dreamliners by the end of 2004. The newest deals bring
the order book to 126, of which 56 are under firm contract. Vietnam Airlines will take four 7E7-8s, and
Continental ordered 10 7E7-8s valued at $1.3 billion with deliveries beginning in 2009.



DVB-Aviation Industry Research (AIR)                 31                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Boeing is close to revising its 7E7-9 to carry another 20-30 passengers, according to sources in Dubai.
The dash 9 was at the lower end of the stretch spectrum but the advent of the A350-900 and customer
pressure prompted the upward shift. Originally the dash 9 was to seat 257 in a three-class layout while
the revised version will carry 280. This puts the 7E7-9 closer to the 777-200 in terms of capacity, but in
the future most 777 sales are expected to be 365-seat 777-300ERs. The revised 7E7-9 is expected to
appeal in the first instance to Singapore Airlines, Qatar Airways and Emirates. Boeing was unavailable for
comment.

Boeing is close to offering the 747ADV with seating for 450 with either Rolls-Royce Trent 1000 or GEnx
engines, according to sources at Cathay Pacific. The 747ADV will have an 11.7-ft. (3.6-m.) stretch and a
range of 8,000 nm (14,816 km.). Seat-mile costs will be 6% below the 747-400's. Compared to the A380,
Boeing claims the 747ADV has a 19% improvement in trip costs, 3% lower seat-mile costs and a 15%
better fuel burn rate

Boeing confirmed that Thai Airways has placed an order for six Rolls-Royce Trent 892B-powered 777-
200ERs valued at approximately $1.1 billion at list prices. Deliveries will begin in Aug. 2006 and continue
into Oct. 2007.



Bombardier:

Bombardier said it will slow production of the 50-seat CRJ200 further to bring total deliveries to 54 in the
fiscal year beginning Feb. 1. The cutback reflects a further production slowdown to one aircraft every five
days.
The manufacturer made the announcement as it reported that net income for the three months ended
Oct. 31 plunged 92.5% to $10 million compared to $133 million earned in the year-ago period.
Consolidated revenues totalled $3.63 billion, up slightly from $3.58 billion last year.
Bombardier Aerospace reported a pre-tax loss of $7 million compared to pre-tax income of $121 million in
2003. Revenue declined 5.5% to $1.63 billion. Deliveries of regional aircraft fell from 54 to 41 as CRJ200
deliveries plunged from 37 to 22. Nine-month deliveries totalled 140, down from 167 in 2003, again on
lower 50-seat volumes. The company booked new orders for 50 regional aircraft, improved from 35 in
2003 on higher sales of Q300 turboprops.
For the nine months ended Oct. 31, the parent company lost $141 million compared to income of $255
million. Although no new layoffs were announced in the aerospace segment beyond the previously
reported decision to eliminate 2,000 positions, Bombardier said it would cut 2,200 jobs in its
transportation unit.

Bombardier confirmed that the General Administration of Civil Aviation of China has allowed operators to
resume passenger services using CRJ200s. Three Chinese airlines operate the type: China Eastern
Airlines, Shandong Airlines and Shanghai Airlines. The CRJ200s were grounded by CAAC on Nov. 23 as
a precautionary measure following a Nov. 21 accident in Baotou, Inner Mongolia, involving a China
Eastern aircraft.

Bombardier continues to move forward with an evaluation of the proposed CSeries program for aircraft
in the 100/150-seat range. The evaluation will be presented to the board of directors in early March for a
decision, he said, adding, "We are confident we will have a launch customer for the aircraft. All of the
airlines we've spoken to since we began the evaluation in the spring have a really strong interest." He
pointed out that aviation forecasts are predicting that more than 5,000 aircraft in the 100/150-seat range
will be needed over the next 20 years in a market valued at $250 billion.




DVB-Aviation Industry Research (AIR)                 32                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Embraer:

Embraer 195 made its first flight at the company's Sao Jose dos Campos headquarters, performing a
range of flying quality and system validation tests. The flight lasted nearly 2 hr. Certification of the 100-
seat derivative of the 170 is expected in the second quarter of 2006.

Embraer announced increased efficiencies on its new 170 that yield a 2% better fuel burn rate than
previously predicted. The improvement was attributed to engine specific fuel consumption with
manufacturing enhancements that reduced drag on the production aircraft.
Embraer has been able to confirm the final fuel burn numbers more accurately with the more than 40
170s in operation, and said it will revise related aircraft manuals to reflect the lower consumption rates.
Operators could save an estimated $30,000 per aircraft per year based on 2,600 flight hr., according to
the company. A fleet of 15 aircraft could produce savings of close to $5 million over a 20-year period on a
present-value basis.
Embraer also increased payload capabilities of the 170 by adding the structural reinforcements of the
175, raising 170 payload by 750 lb. to 19,842 lb. The higher payload feature will become standard on all
170 products slated for delivery starting in early 2005.

Embraer announced enhanced versions of its 190/195 offering increased MTOW translating into up to
300 nm in additional range. JetBlue, which launched the 190 program with orders for 100 plus options on
a further 100, has opted to take the new 190AR (Advanced Range) instead of the 190LR it originally
ordered. According to Embraer, the 190/195 AR series features structural reinforcements in the fuselage,
wings, pylons and flight control surfaces. Range of the 190AR in standard conditions is 2,300 nm while
the 195AR's range is 2,100 nm.


Other:

Pemco Aviation Group, Taikoo Aircraft Engineering Co. and Taikoo (Shandong) Aircraft
Engineering Co. signed an agreement establishing a cargo conversion partnership for China and the
Asia/Pacific region. Under the pact, the companies will market freighter conversions jointly and perform
them at TAECO/STAECO's facilities in China. The alliance said it will focus initially on 737s and plans to
cooperate on other models. Pemco will provide technical, operational and quality oversight and guidance
while TAECO/STAECO will supply mainland-based production facilities and the workforce.


Aircraft Sales and Leasing Market

Q Aviation LLC of Forth Worth, Texas has acquired four more ex United Airlines 737-500s from
SNECMA, in a deal arranged by Aircraft Leasing & Management (ALM).

KLM has sold the last of its 747-200 Stretched Upper Deck aircraft to the US cargo airline Southern Air,
in a deal arranged by the British remarketing agent, Cabot Aviation. The aircraft had been in storage in
the Mojave Desert in California since June 2003.

Xian based Chang’an Airlines, part of the HNA Group, has leased two 1999 build ex Virgin Blue 737-
700s from Babcock & Brown Aircraft Management (BBAM). They are the airline’s first mainline jets and
will open new routes, joining a fleet of Q400s and 328JETs.
Club Air of Italy is to add its fifth 146-200 (1993 build, ex Meridiana), in December on-lease from BAE
Systems Regional Aircraft.

Cayman Airways has leased its second 737-300, built 1993, from ILFC.

The A320 fleet of Vueling Airlines of Spain has been doubled to four with the lease of an ex Air Malta
aircraft (2002 build) from GATX and a 2001 build (ex Iberworld) from GECAS.


DVB-Aviation Industry Research (AIR)                 33                                          DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Aeromexico has leased a new 737-700 aircraft from ILFC, MSN 33793, received in November and
leased for 7.5 years.

Philippine Airlines has leased an ex Iberia 1999 A320-200 (CFM56-5B4 engines) from Babcock &
Brown (BBAM), to replace a 737-300 returning off lease.

MNG Airlines of Turkey will lease two ex-Finnair A300B4s (with forward facing cockpits) which have
been acquired by Vakif Deniz Leasing. They were most recently used in the UK charter market by Air
Scandic.

Swedish regional operator Swe Fly, currently using two Fokker 50s, is undertaking major expansion by
leasing a 1988 build 767-219ER aircraft from ILFC, powered by CF6-80A2 engines. The lease term is for
5 years and the aircraft will be used on charters from Stockholm Skavsta to points in Asia.

ILFC has placed two used A310-300s, 1989/GE ex-Air India lease will be placed with Saga Airlines of
Turkey for 5 years from May 2005 and 1992/GE, ex-Royal Jordanian lease will be leased to SATA
International in April 2005 for 3.5 years.

Two UK LCCs have added more 737-300s on lease from ILFC. Bmibaby is taking three, ex-Ryanair/buzz
Stansted unit; the first is in service and 2 more follow this month, increasing their 737 fleet to 16.
Thomsonfly, a subsidiary of TUI, takes two, adding to their four 737-500s. The lease terms are for 5
years each.

THY has leased two used A321-200 aircraft from ILFC for 3 years, powered by V2533-A5 engines and
are scheduled to be delivered in April 2005 after return from bmi.

AWAS has leased a 767-300ER aircraft to South American carrier LAN Airlines. The General Electric-
CF6-80C2B6F powered aircraft was most recently leased to Asiana and is the airline’s fifteenth 767-
300ER.

French charter airline Air Mediteranee has leased A320-200 from ILFC. The ex-Air Malta aircraft is
powered by CFM56-5A1 engines and was delivered on December 9th. The lease term is for 8 years and
is the airline’s first A320, joining five A321s and four 737s.

Boullioun Aviation Services has leased a 2002-build 737-700 aircraft on medium-term lease to
Aeromexico, their first lease with the carrier, on December 2nd. Barcelona-based Vueling Airlines
leased a 2003 vintage A320-200 (ex-MyTravel) on December 3rd. This lease is Boullioun’s second with
the low-fare carrier and their sixth A320. It began operations on July 1st and provides service to domestic
destinations and the main capitals of Europe and the West Mediterranean.

USA3000 Airlines has leased a new A320-200 aircraft from Boullioun, their first with the three-year-old
carrier that provides low-fare, full-service scheduled flights from cities in the Northeast and Midwest to
Florida, the Dominican Republic and Mexico, as well as charter flights in conjunction with Apple
Vacations.

Focus Aviation has completed the sale of Boeing 747-400 aircraft to Boeing Aircraft Holding Company,
on behalf of China Airlines. The aircraft, a 1990 build PW4056 powered, was withdrawn from service on
12th December and delivered to Boeing on 17th December. Boeing will modify the aircraft into a special
747-400 Large Freighter that will haul the large fuselage and wing structures of the 7E7 from points in
Japan, Europe and the United Sates to Everett, for final assembly.

BCI 2004-8 LLC, an SPC controlled by BCI Aircraft Leasing Inc has acquired the equity interest in A319
(on lease to US Airways) from MarCap Holdings, in a deal arranged by Sigma Aircraft Management LLC.
Simultaneously, the SPC also assumed the existing EETC debt issued at the original closing in 1998.

UK charter airline Astraeus has leased ex First Choice 757-200 from Pembroke.

DVB-Aviation Industry Research (AIR)                34                                         DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Aeromexico is to lease its first 777s with an agreement to take two new 777-200ER aircraft from ILFC in
February and March 2006. The aircraft will be equipped with General Electric GE90-94B engines and will
operate routes from Mexico City to Madrid and Paris, replacing 767s. The lease terms are for 10 years
each.

Italian start-up MyAir has leased and ex Volare A320 from ILFC. Germanwings is also leasing the three
ex V-Bird A320s from ILFC, with the first already delivered. Blue Panorama has leased an ex-Lauda Italy
767-300ER.

Air India has leased the first of three ex United 777-200ERs, from US Bank.

German charter carrier Blue Wings is to acquire three A330-200s currently on short term lease to
Lufthansa; it currently leases three A320/321s. The first aircraft has been rolled out at Hamburg.

Boullioun has arranged a medium-term lease with Singapore based LCC Tiger Airways for two new
V2527 powered Airbus A320 aircraft. Tiger took delivery of the first of the 180 seaters on January 11th;
the second arrives later this month.

Las Vegas-based low cost carrier Allegiant Air has acquired an MD-83 aircraft from Scandinavian
Airlines System (SAS) in a transaction arranged by Sigma Aircraft Management. The aircraft is the
second of five deliveries contracted for by Allegiant in September 2004. The aircraft was previously
operated by SAS as an MD-82 and upgraded to MD-83 status as part of the transaction with Allegiant.

Recent leases include A320s to MyAir from ILFC (2002 build), Niki from SALE (1999 build); 737-300
(1998) from GECAS to Shenzhen and -300SF to Bluebird Cargo; 737-800 to Air Berlin from RBS
Aviation Capital (one of the Delta ordered 800s RBS is acquiring new).

debis AirFinance has placed an Airbus A320-200 aircraft with new charter airline Eirjet, based at
Shannon Airport in Ireland.

SALE has confirmed that it has sold and leased back four new A319s delivering to Spirit Airlines
between September and December 2005.

Air Canada will lease a used A340-300 from ILFC for four years starting in March 2005.

United Airlines has parked seven more 737-300s and four 737-500s; ATA has parked six 737-800s

Boullioun Aviation Services delivered a CFM56-7-powered 737-700 on medium-term lease to
Aeromexico, a CFM56-5B4/P-powered A320 on medium-term lease to Vueling Airlines and a CFM56-
5B4/P-powered A320-200 on medium-term lease to USA3000 Airlines.

Cabot Aviation announced that it delivered an ex-Ansett 767-200 to AeroTurbine.

AWAS delivered a CF6-80C2B6F-powered 767-300ER to LAN Airlines, which the carrier will use on its
international network.

AWAS delivered a CFM56-3B1-powered 737-300 to Blue Air of Romania. The 148-seat, all-economy
aircraft will operate from the start-up’s hub at Bucharest to destinations in Italy, France and Spain in
addition to offering holiday charter flights.
AWAS delivered a 737-400 to Air Sahara that the carrier will use to support its domestic and
international network.

Boullioun delivered nine new and 10 used aircraft to airlines in Asia, Europe, Latin America and the US
in 2004. In addition, the company extended leases for three aircraft. Most of the deliveries went to low-
fare and charter carriers.



DVB-Aviation Industry Research (AIR)               35                                        DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Bavaria International Aircraft Leasing ordered six more 737-700s in a deal valued at $330 million. The
deal includes options for six additional aircraft. Deliveries will begin this year and extend through 2007.
Two of the 737s will be leased to China Southern Group's Xinjiang Airlines and the remaining four and six
options will be leased to customers to be determined at a later date.

DVB Bank AG acquired four 747-400s from Singapore Airlines through Deucalion Capital III Ltd., one of
the aviation funds managed by DVB.


Market Changes


Transactions:

According to the Airclaims CASE database there are at least 93 jet and 29 turboprop aircraft returning
off lease during February 2005. All transactions are subject to lease extensions.


Availability Statistics:

Airclaims are currently aware of at least 922 aircraft offered for sale and/or lease (532 Jets, 344
Turboprops & 46 smaller aircraft). 58 aircraft are new additions for January 2005, and are as per the
following table:

                                       AVAILABILITY ADDITIONS @ JANUARY 2005
                                           Jets                     Turboprops / Other
                            A300                       +1        ATR 42                +2
                            A310                       +2        ATR 72                +3
                            A320                       +4        DHC-6 Twin Otter      +3
                            A340                       +1        Dash 8                +2
                                                                 CASA 212              +2
                            B737 CFM “Classic”         +9        Bandeirante           +2
                            B747                       +1        Merlin                +3
                            B757                       +1        F.27 Friendship       +1
                            B767                       +1        Raytheon 1900         +3
                                                                 SAAB 340              +3
                            Fokker F100                +3        King Air              +6
                            MD-80                      +2        Caravan               +1

                            Sub-Total                  + 25                          + 33
                                         Grand Total                        + 58




DVB-Aviation Industry Research (AIR)                        36                                 DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005



  No. of Aircraft Available
                                                      Monthly Jet Aircraft Availabilty
 1200



           1042      1028     1021
                                     1003
 1000                                         981     970
                                                              917

                                                                      851     865
                                                                                      838

  800




                                                                                                       602
  600                                                                                                          580     574
                                                                                               563
                                                                                                                               536     545     532




  400




  200




     0
          Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May 04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05
NB: The drop in Aircraft availability during July 2004 has been partly caused by a general “clean-up” of the official availability list.



Storage:
                                                                                   th
Airclaims is aware of at least 2,121 Western-built jet aircraft in storage as at 14 December 2004:


         No. of Aircraft                               Monthly Jet-Aircraft Storage Development                                              Stored Fleet %
                                                                                                                                                       13%

         18000


                                                                                                                                                         12%
         16000



         14000
                                                                                                                                                         11%


         12000

                                                                                                                                                         10%
         10000



          8000                                                                                                                                           9%



          6000
                                                                                                                                                         8%


          4000                                                                                                            Stored
                                                                                                                          In Service
                                                                                                                                                         7%
          2000                                                                                                            Stored %


             0                                                                                                                                           6%
                  Sep-00 Sep-01 Sep-02 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May 04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04




DVB-Aviation Industry Research (AIR)                                             37                                                              DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


         Manufacturer & Type                              Fleet Stored Total Fleet Fleet Stored %
         Romaero S.A. One-Eleven                                     4           4         100.00
         Lockheed L-1011 TriStar                                    80        120            66.67
         BAE SYSTEMS (BAC) One-Eleven                               57          90           63.33
         Fokker F.28                                                64        147            43.54
         Fairchild/Dornier 328JET                                   47        108            43.52
         Boeing 727                                                429       1022            41.98
         Boeing 720                                                  2           5           40.00
         Boeing (McDonnell-Douglas) DC-8                            62        203            30.54
         Boeing (McDonnell-Douglas) DC-9                           176        585            30.09
         Fokker 100                                                 77        267            28.84
         Boeing 737 (JT8D)                                         220        825            26.67
         Boeing (McDonnell-Douglas) DC-10                           80        303            26.40
         BAE SYSTEMS (HS) 146                                       47        210            22.38
         Boeing (McDonnell-Douglas) MD-11                           39        195            20.00
         Boeing 707                                                 48        274            17.52
         Airbus A310                                                34        234            14.53
         Boeing 747                                                144       1083            13.30
         Boeing (McDonnell-Douglas) MD-80                          122       1156            10.55
         Boeing 767                                                 78        906             8.61
         Airbus A300                                                36        430             8.37
         BAE SYSTEMS (Avro) RJ Avroliner                            12        165             7.27
         Boeing (McDonnell-Douglas) MD-90                            8        115             6.96
         Bombardier (Canadair) CRJ700 Regional Jet                  12        179             6.70
         BAE SYSTEMS (BAC) VC10                                      1          19            5.26
         Bombardier (Canadair) CRJ Regional Jet                     43        979             4.39
         Boeing 737 (CFMI)                                          71       1953             3.64
         Boeing 757                                                 33       1038             3.18
         Airbus A320                                                42       1331             3.16
         Airbus A330                                                 8        322             2.48
         Embraer ERJ-145                                            15        627             2.39
         Airbus A321                                                 6        321             1.87
         Boeing 777                                                  8        496             1.61
         Airbus A340                                                 3        288             1.04
         Boeing 737 (NG)                                            11       1616             0.68
         Embraer ERJ-135                                             1        151             0.66
         Airbus A319                                                 1        645             0.16
         Aerospatiale Caravelle                                      -           2            0.00
         Airbus A318                                                 -          18            0.00
         Airbus A380                                                 -           -            0.00
         Avcraft 328JET                                              -           -            0.00
         Boeing (McDonnell-Douglas) C-17                             -        131             0.00
         Boeing 717                                                  -        136             0.00
         Boeing 7E7                                                  -           -            0.00
         Bombardier (Canadair) CRJ900 Regional Jet                   -          27            0.00
         Embraer 170                                                 -          49            0.00
         Embraer 175                                                 -           2            0.00
         Embraer 190                                                 -           2            0.00
         Embraer 195                                                 -           1            0.00
         Embraer ERJ-140                                             -          75            0.00
         Fokker 70                                                   -          46            0.00
         Harbin Embraer Aircraft Industry ERJ-145                    -           4            0.00
         VFW 614                                                     -           1            0.00
         TOTAL                                                   2,121     18,906            11.22


DVB-Aviation Industry Research (AIR)                 38                                       DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005


Aircraft Engines

Engine Alliance's GP7200 for the A380 made its first flight Dec. 3 on GE's Boeing 747 testbed. The
flight lasted for nearly 3 hr. Engine certification is targeted for the third quarter of 2005, with first flight on
the A380 in Nov. 2005 and EIS in Oct. 2006 with Emirates.

DVB Bank created an Aero Engine Finance Unit to provide financial services to the global engine market.



For questions, comments and suggestions regarding the AIR NewsSummary, please contact DVB
Aviation Industry Research (A.I.R.) direct:

                                         AIR@dvbbank.com
Aviation Industry Research Team:

Bert van Leeuwen
Senior Vice President
DVB Rotterdam
Tel:    +31-10-206-79-86
bert.van.leeuwen@dvbbank.com

Polis D. Polycarpou
Assistant Vice President
DVB London
Tel:     +44-20-7618-9603
polis.polycarpou@dvbbank.com

Vincent van Tooren
Assistant Vice President
DVB Rotterdam
Tel:    +31-10-206-79-67
vincent.van.tooren@dvbbank.com



And Finally…

Boeing is to shut down production of the 717-200 in mid-2006, marking the end of civil airliner
manufacturing in California and terminating the lineage of the McDonnell Douglas-designed commercial
product line.

"Unfortunately, the overall market for the aircraft does not support continuing 717 production," says
Boeing Commercial Airplanes president Alan Mulally.
The closure is believed to have been prompted by the decision of leasing company Pembroke to cancel
its 14 outstanding commitments. Boeing is making a $615 million write-down to cover the cancellation of
the 717 and charges associated with the development of the 767-200C for the aborted US Air Force KC-
767 tanker programme.

The 717's backlog has dwindled to 18 with the loss of the Pembroke orders, taking the orderbook down
from 169 to 155, of which 137 have been delivered. Last year was another lean one for the programme,
with only eight new orders and 12 aircraft delivered.




DVB-Aviation Industry Research (AIR)                    39                                            DVB Bank AG
Q AIR NewsSummary – December 2004/January 2005




The final blow by Pembroke also came after a succession of failed sales campaigns in 2003 and 2004,
the latest large-scale defeat being the loss of the Cebu Pacific DC-9 replacement to Airbus with the A319.
The sales problems in 2004 compounded the company's failure to expand the 717 family with the
possible -300X stretch derivative in 2003.

The final aircraft will be delivered at monthly intervals to AirTran, which has a further eight on order;
Midwest, with an additional eight; and Turkmenistan, which has two still outstanding. The 717 closure will
cost $340 million or $60 million less than expected by Boeing in March 2004, when it issued its first
specific warning of a possible line closure at Long Beach. At the time, the company announced it would
take a "forward loss charge" because orders fell significantly below expected sales, and so increased the
programme's overall costs.

The move also represents a blow to Rolls-Royce and the BR715 engine, for which the 717 is the sole
application. The BR715 earned a launch position on the then MD-95 project with its selection by ValuJet
(now AirTran) in 1995.




 Disclaimer: This report has been prepared by DVB Group’s (“DVB”) London-based Aviation Industry Research department
 (“DVB-AIR”) for internal use within DVB. Although DVB has checked the information contained in this research report carefully,
 DVB does not warrant that the information in this report is complete, correct or up-to-date. Except to the extent that liability
 under any applicable law or regulation cannot be excluded, neither DVB nor any member of the DVB Group is liable for loss or
 damage of any kind arising as a result of any opinion or information expressly published or implied in this report notwithstanding
 negligence, default or lack of care by DVB or that such loss or damage was foreseeable. Neither DVB nor any member of the
 DVB Group accepts liability in any way (including by reason of negligence) for errors in, or omissions from, the information in
 this report. The contents of this report are proprietary and cannot be disseminated and distributed to other parties without DVB-
 AIR’s prior written consent.



DVB-Aviation Industry Research (AIR)                            40                                                    DVB Bank AG

				
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