ROAD SHOW December 2005
Disclaimer DISCLAIMER •
The following presentation (the "Presentation") has been prepared by Centrobanca SpA (“Centrobanca”) and Banca Profilo S.p.A. (“Joint Global Coordinators”) based on information and guidelines coming from Eurofly S.p.A. (“Eurofly” or the “Company”).
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Information, opinions, estimates and forecasts contained herein have been obtained from, or are based upon, sources believed by Centrobanca to be reliable but no representation of warranty, express or implied, is made and no responsibility or liability is accepted by Centrobanca (and its own employees and management) as to their accuracy or completeness.
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The Document is for information purposes only and is not intended as an offer or solicitation of an offer to sell or to buy any financial instrument.
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All unauthorized use, duplication or disclosure is prohibited. The acceptance of this presentation implies a personal responsibility to maintain the greatest confidentiality as regard to all information contained, avoiding any disclosure to third parties.
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CONTENTS
BUSINESS & COMPANY OVERVIEW …….……………………….. 4 INDUSTRY OVERVIEW & ACHIEVEMENTS..…………………….
8
OPERATIONS ………….…………..………………………………….. 23 FINANCIALS……………………………………………………………. 27 STRATEGY & INVESTMENTS CONSIDERATIONS……………… 33 OFFER STRUCTURE…………………………….…………………….. 42 Q&A
3
BUSINESS & COMPANY OVERVIEW
4
Consolidated Expertise 9 New positioning, from a pure charter carrier to a leisure carrier, with a multi-channel distribution
2004-present BUSINESS BUSINESS INNOVATION INNOVATION
9 Portfolio Optimization (Routes and Products) 9 Actions to mitigate seasonality
2001-2003 COMPANY’S COMPANY’S REORGANIZATION REORGANIZATION
9 New aircrafts with improved cost-pricing mix 9 Back to Profit 9 Independence from Alitalia
1998-2000 DIVERSIFICATION DIVERSIFICATION
1989-1998 FOCUS FOCUS ON ON MH MH
9 Expansion in Long Haul: reverse seasonality compared to Medium Haul 9 Charter arm of Alitalia 9 The first Italian Medium Haul carrier
5
The Existing Models Flag Flag Carrier Carrier
Low Low Cost Cost
Charter Charter
Low Cost Safety
Flag Carrier
Lean Cost Structure
Holiday Destinations Market consolidation
Charter
Leisure Leisure
Leisure
Eurofly is a leisure carrier characterized by a cost-driven organization, that flies mainly point-to-point to tourist destinations and targets people who travel for holidays
6
Key People 594 employees (Avg. at 06/30/2005) 9128 Pilots 9268 Flight attendants 9189 Employees 98 Managers
Operating Operating Unit Unit
Commercial Commercial Unit Unit
7
INDUSTRY OVERVIEW & ACHIEVEMENTS
8
Air Transportation Demand Rising demand both in domestic and international markets (expected 2005-2008 CAGR: 6% - source: Airbus, Boeing)
International International Market Market
Domestic Domestic Market Market
INTERNATIONAL FLIGHTS (2004 vs 2003)
INTERNATIONAL PASSENGERS
15.3%
Industry
12.7%
S America
24.8%
Middle East
0.0%
5.0%
20.5%
Asia Pacific
Source: ASSAEROPORTI
10.3%
Africa 0.0%
5.0%
10.0%
15.0%
10.0%
Chg. % pax
10.1%
Europe
13.5%
2004 vs. 2003
14.8%
N America
12.2%
I H 2005 vs. I H 2004
20.0%
25.0%
30.0%
Chg. % RPK Source: IATA RPK: Revenue Passengers Kilometers
9
15.0%
Tourism Demand 2004 witnessed a return to growth of tourism demand (+10%, source WTO), a lower percentage of holiday packages against total holiday spend and a growing on line (DIY) tourism
European European Mkt Mkt Tourism Tourism on-line on-line (€ (€ mln) mln)
30 CAGR 38%
20 10 0 2002
2003
Source: BCG analysis 2005
10
2004
2005
The Reference Market 9 Italian charter flights account for approx. 15% of total traffic 9 Spain and Egypt are the main leisure markets in terms of passengers: 1,5 million (18% of total) and 1,3 million (15% of total) respectively. Italian Carriers 63%
PASSENGERS (000)
10.000 Foreign Carriers 37%
8.000 6.000
5.125
5.509
5.608
5.808
Charter outgoing: historic reference Market for Eurofly
4.000 2.000
2.722
2.944
2.980
3.087
Foreign Carriers 91%
0 2001
2002 Incoming Traffic
2003
2004
Italian Carriers 9%
Incoming traffic: Room to grow
Outgoing Traffic
Source: ENAC Data - 2003
Eurofly is gradually transforming itself into a leisure operator from a pure charter. As a result, the current reference market of 5,8 million of passengers is progressively expanding
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Italian Airlines Overview Airline Companies from 1999 to 2005
Med Airlines National Jet Italia Panair Air Sicilia Neos
Eureca Silfly Federico II Airways
Closing down
13
At risk
Going concern
4
14
Many but weak competitors: 9 nearly 50% of airline companies have ceased to operate over the last 6 years or are currently at risk 9 increasing competitive pressure on yield factor due to the entrance of foreign operators and low-cost carriers active on the most congested routes 12
Competitive Positioning Main Leisure Italian Carrier Mkt Share 2004
International Air Traffic Passengers Mkt Share 2004
19%
19,7%
28,9%
Alitalia Eurofly
2,2%
Neos
1,1% 1,7% 1,1%
7
15%
2
1
9
,7
%
2
2 , 1
% ,1
%
1 1 ,1 ,7 % % 1
,7
,5
%
%
Livingston + Lauda Air
1,5%
Blue Panorama 14%
72,7%
Volare + Air Europe Altri vettori
23%
Source: Assaeroporti (2004 international traffic data - 57.950.770 pax) and company data
.
Peer group comparison (Blue Panorama, Lauda Air e Livingston, Neon, Volare and Air Europe) suggests Eurofly is the leader in the Italian leisure market with a market share of approx. 29%
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Medium Haul Business Unit Medium Haul: flight duration of up to 5 hours involving mainly European and Mediterranean destinations 2004 Revenues (% on total MH)
Canarian Baleari 7% 7% Greece 13%
Egypt 41%
Rest of MH 32%
2004 Market Shares
10,5%
Israel
8,0%
Bundle
Greece Canarian
23,3% 13,8%
Baleari Egypt
25,6% 0
400
800
1,200
1,600
Passengers (000) COMPETITORS
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EUROFLY
2,000
Long Haul Business Unit Long Haul: flight duration over 5 hours, i.e. typically intercontinental flights 2004 Revenues (% on total LH)
Kenya 5%
S. Domingo 16%
Maldive 37%
Rest of LH 23%
Mexico 19%
2004 Market Shares
50,4%
Fascio
MALDIVE
26,3%
KENYA
21,7% 20,4%
SANTO DOMINGO MEXICO 0
50
100
150
200
Passeggeri (000) COMPETITORS
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EUROFLY
250
Main Achievements: Strong Growth And… Eurofly’s operations have grown at a very steady pace underpinned by a successful strategy Passengers 1,600,000 1,400,000
+51% 11 sett.
CAGR 01-04: +13%
-21%
1,000,000
CAGR 02-04: +35%
800,000 600,000 400,000 200,000 0 2001
2002
2003
2004
9 M 04
9 M 05 Revenues
11 sett.
250,000
CAGR 01-04: +6% CAGR 02-04: +38%
+45%
+16%
+31%
200,000 €/000
n. pax
+3%
+20%
1,200,000
-38%
150,000 100,000 50,000 2001
2002
16
2003
2004
9 M 04
9 M 05
…Milder Seasonality Monthly Flight-H per aircraft Medium Haul
Medium Haul and Long Haul routes seasonality comparison suggests:
450 400 350 300
9 Medium Haul: Strong seasonality with a summer peak demand. Restrained monthly aircraft productivity
2004
250 200 150
2003
Increased productivity
100 50 0 January
February
March
April
May
June
July
August
September October
November December
9 Long Haul: Lower seasonality and high aircraft productivity, excepting spring and autumn Monthly Flight-H per aircraft Long Haul 600
2004 data show a reduction in seasonality, thanks to: 9increased weight of Long Haul flights on total 9increased the productivity on both business units
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2004 500
2003
400
300
200
Increased productivity
100
0 January
February
March
April
May
June
July
August
September
October
November
December
Innovation In Established Markets… Reverse Model from Egypt: 9 First European carrier to implement such a system 9 Direct link from the Red sea (Sharm) to secondary airports in Italy 9 Passengers increased by 40% in 1H 2005 WINTER SEASON 2003/04
WINTER SEASON 2004/05 MXP 2 AEREI
MXP 3 AEREI
BGY 1 AEREO
SSH 2 AEREI
BLQ 1 AEREO VRN 1 AEREO
BGY VRN MXP° ° ° BLQ
BGY MXP° ° °VRN ° TRN ° BLQ VCE °° PSA FCO
°
°
NAP BRI ° °
CTA °
°
SSH
°
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SSH
… And In New Markets Launch of the “NYC Leisure” product: 9 Intercontinental product that offers more convenient point-to-point connections and avoids busy hubs 9 Leisure-oriented market characterized by high incoming flows and reverse seasonality with respect to “traditional” Long Haul destinations 9 Achieved Load factors in the first year of activity : Bologna 63%, Naples 75%, Palermo 75%
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Solid Tour Operators Client Base Relationships with Tour Operators will continue to represent a major asset for the Company
9 Eurofly is a partner of the major Italian and European Tour Operators 9 The Company is the official carrier of: • FC Inter Football Team and Italy’s National Football Team • Ferrari Racing Team • Italian Military Forces 20
A New Way Of Planning… Eurofly’s marketing and sales approach will more and more be consistent with the company’s evolution to Leisure Carrier Charter:
Leisure: Eurofly’s Eurofly’s route route planning planning
Tour Tour Operator Operator
Tour Tour Ops Ops
Eurofly’s Eurofly’s route route planning planning
9 Network not always efficient
Travel Travel Ags Ags
Direct Direct Sales Sales
9 In-house valuation of market opportunities
9 Potential high variability in traffic routes
9 Improvement in and productivity 21
efficiency
…With Access To New Distribution Channels 9 From the summer of 2004 throughout 2005, tickets have been sold through different channels: • The Internet • Call centres • Travel Agencies
9Access to new small-mid sized Tour Operators (12,4% of 1H2005 sales) thanks to fewer barriers to access Eurofly’s product 9Around 4,500 Travel agencies (45% of the Italian market) are currently registered on the Eurofly’s website 9Call Centres’ activity went from 230 phone calls in summer 2004 to 1,000 phone calls in summer 2005
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OPERATIONS
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The Fleet: Young And Homogeneous A320 Avg Age: 4,3 yrs Seats: 180
A330 Avg Age: 3,4 yrs Seats: 286
A319 Age: 6 months Seats: 48
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Flexible Capacity: Fleet 2003 – 2005 Eurofly has adopted a variety of methods to mitigate seasonality. Increasing productivity and customer satisfaction are among Eurofly’s main objectives
Progressive acquisition of MD80 aircraft and subsequent divestment
Stage by stage aircraft substitution and fleet overlapping during the summer peak
Active WET lease
Passive WET lease
14 12 10
8
MH
6
LH
4 2
25
Dec-05
Oct-05
Nov-05
Sep-05
Aug-05
Jul-05
Jun-05
May-05
Apr-05
Mar-05
Feb-05
Jan-05
Dec-04
Nov-04
Oct-04
Sep-04
Aug-04
Jul-04
Jun-04
May-04
Apr-04
Mar-04
Feb-04
Jan-04
Dec-03
Nov-03
Oct-03
Sep-03
Aug-03
Jul-03
Jun-03
May-03
Apr-03
Mar-03
Jan-03
Feb-03
0
Training And Mixed Fleet Flying Training Training
““Mixed Mixed fleet fleet flying flying”” -- MFF MFF
9 Eurofly uses its own training service, which is certified by ENAC 9 Eurofly is able to sell training service to third parties
9 Eurofly is the only Italian flight carrier currently enabled to use its pilots on each of its aircrafts, therefore increasing productivity and flexibility
Improving the quality and the productivity of crews is among Eurofly’s primary goals
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FINANCIALS
27
Revenues Revenues
+ 16%
CAGR 39%
Strong revenue growth thanks to increased volumes 225
232 195 158 120 2002
2003
2004
9 M 04
Revenues Breakdown
9 M 05
37%
Gradual expansion of long-haul routes *, characterized by a milder seasonality
63%
2002
47%
41%
37%
53%
59%
63%
2003
2004 Medium Haul
* First half 2005 lower weght of Long Haul activity on total revenues is due to Tsunami.
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44%
56%
30/09/2004 30/09/2005 Long Haul
Operating Activity Strong increase in activity in terms of hours flown, thanks to more aircrafts and improved productivity Flight Hours Including Wet Lease
38 26
20
2002
2003
2004
30/09/2004 30/09/2005
Medium Haul Aircraft Productivity
2.365
2.476
Long Haul Aircraft Productivity
2.855 4.276
107 67
34
30
4.932
5.462
24
24
2003
2004
76 14
2002
2003
2004
2002
Fleet Productivity
Fleet Producitivity
N. month/Aircraft Eurofly (Comm. Availibility)
N. month/Aircraft Eurofly (Comm. Availibility)
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Profit And Loss 2003 2003 Return Return to to profit profit
INCOME STATEMENT Euro/000 Flight and ancillary revenues Other Revenues Total Revenues
31/12/2002
119.592 2.983 122.575 100%
Direct Selling Costs Net Revenues EBITDAR
31/12/2003
(51)
0%
122.524 100% 12.574 10%
31/12/2004
158.149 2.962 161.111 100% (968)
-1%
160.144 99% 27.406 17%
232.113 2.278 234.391 100% (1.090)
0%
233.300 100% 24.261 10%
EBITDA
(12.888) -11%
7.777
5%
8.100
3%
EBIT
(14.996) -12%
3.577
2%
4.263
2%
EBT
(5.439)
-4%
4.115
3%
7.904
3%
Net Income/Loss
(6.014)
-5%
2.722
2%
6.835
3%
30
January - September 2005
31
Balance Sheet 31/12/2002
31/12/2003
31/12/2004
30/09/2005
1.814 3.278 5.515 10.606
10.575 4.075 5.449 20.098
35.742 5.043 8.632 49.417
11.699 7.900 12.518 32.118
Net Working Capital
(22.920)
(32.305)
(32.769)
529
Net Invested Capital
(15.606)
(16.681)
11.334
26.538
Common Shares Reserves Net Income/Loss Shareholder's Equity
7.678 4 (6.014) 1.667
6.667 0 2.722 9.389
6.667 2.722 6.835 16.224
7.065 4.159 2.963 14.187
Net Financial Position
(17.273)
(26.070)
(4.891)
12.351
BALANCE SHEET Euro/000 Tangible Assets Intangible Assets Financial Assets Total Fixed Assets
32
STRATEGY & INVESTMENTS CONSIDERATIONS
33
Strategic Guidelines Eurofly’s vision is to become the leading Italian private carrier in the leisure segment, focused on international routes, innovative and fast in exploiting new market opportunities
9 Focus on Long Haul in order to decrease seasonality
Long Long Haul Haul Focus Focus
Multi-channel Multi-channel distribution distribution
Diversification Diversification
9 Focus on traditional markets in the winter season and on the North Atlantic market in the summer season 9 Continue to evolve from charter to leisure carrier 9 Expand the client base further penetrating the DIY segment 9 Launch of ancillary products in order to stimulate a “non flight” offer 9 Pursue the growth of cargo activity 9 Launch of the “All Business” flight from Milan to New York 34
Medium Haul: Consolidation Actions:
Strategies:
9 Consolidation of Egypt and of Mediterranean routes
9 Volume consolidation
9 Utilization of wet lease in order to manage capacity 9 Further seasonality
improvement
of
9 Development of inbound tourist traffic (Reverse Model)
9 Less market concentration
This strategy aims at improving profitability and diversifying risk
35
Long Haul: Development Strategies:
Actions: 9 Increasing frequencies of weekly flights
9 Consolidation of existing routes 9 New routes and destinations
9 In 2006 and 2007 Eurofly will operate one new aircraft A330 per year
9 Development of summer routes and destinations
9 Add to traditional winter routes the new North Atlantic routes in the summer period
The strategy aims at expanding Eurofly’s business, developing into the Long Haul market, where competition is weaker and there is less seasonality
36
All Business A new intercontinental “All Business” route Milan-New York will be operative starting February 2006 Actions:
Strategy: 9 Exploitation of niche opportunity: • growing demand for business services on specific routes • low customer satisfaction in the specific client segment
9 Possibility to operate the flights from Milan Linate Airport (city airport) 9 Eurofly will operate the flights with one A319 Corporate Jet fitted with 48 all business seats
This strategy is expected to further contribute to Eurofly’s diversification of risk, lessening of seasonality as well as entrance into a promising niche with first mover advantage
37
Eurofly’s Strengths Leadership Leadership Effective Effective Business Business model model
9 Leader in the leisure market 9 A well-balanced Medium and Long Haul mix of routes 9 Exploitation of interesting market niches 9 Internal control of core activities (maintenance and training) 9 Low Capital Employed 9 Mixed Fleet Flying 9 Multi-channel distribution network 9 Key sector competences
38
Eurofly’s Strengths Time Time to to Market Market and and innovation innovation
9 The first European carrier to open a base in Egypt 9 Development of new incoming traffic flows 9 “All Business” Milan-New York flights
Capability Capability to to react react to to extraordinary extraordinary events events
9 Recent shocks arising from terrorism and Tsunami negatively hit the industry. Despite this scenario Eurofly was able to minimize negative effects thanks to: i)
a contingency plan aimed at reducing costs;
ii)
a flexible network i.e possibility to relocate flights
iii)
capacity released to third operators by wet leasing aircrafts
39
Eurofly’s Strengths Partnership with Airbus
Launching Launching customer customer A350 A350
9 First Italian carrier to acquire the new aircraft type A350-800: Eurofly will be “launching partner” in Italy for Airbus 9 Letter of intent signed on the 12th of October 2005; delivery scheduled for 2013-2014, subject to the success of the IPO 9 Remarkable economic advantages in the future
“…We believe that, with this modern and efficient fleet, Eurofly, a very dynamic and fast growing carrier, is well positioned in order to continue its far-seeing growth” Airbus CEO
40
Use Of Proceeds Eurofly is committed to strengthen its leadership and to continue to develop both through external and internal growth
Equity Equity enhancement enhancement
Fleet Fleet enhancement enhancement
Acquisitions Acquisitions
More favourable conditions from capital providers, particularly with regard to aircraft lessors
Three new A350, which will be delivered in 2013-2014
Opportunities of external growth
41
OFFER STRUCTURE
42
Offer Structure 9 Actual number of share
7.065.302
9 Shares offered • o/w issued (Capital Increase)
max 6.300.000 max 5.900.000
9 Greenshoe
max 900.000 (in subscription)
9 Free Float
51,9% (post Greenshoe)
9 Offer Structure • Public offer in Italy
min 1.600.000 (25%)
• Employees
max 300.000
• Public
max 30% of Public Offer
• Institutional offer
max 4.100.000 (65%)
• Private Placement
max 600.000 (10%)
9 Lock-up
12/18 months
9 Market
MTA
9 Timing • Offer
12th – 16th of December, 2005
• Trading
21st of December, 2005 43
Shareholders Structure Current Current Singins Lda * 9.44%
Post Post IPO IPO including including Greenshoe Greenshoe
Others 1.4%
Market 51,9%
Spinnaker Luxemborg S.A 89.1%
Spinnaker Luxembourg S.A. 42,5%
Other Shareholders 0,7%
Spinnaker Luxembourg plans to reduce its stake in Eurofly (beneath “de jure” control) * Singins Lda is a company owned by Captain Augusto Angioletti
44
Singins Lda 4,8%
Q&A
45