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INDUSTRY PROFILE

Airlines in
Asia-Pacific

Reference Code: 0200-0756


Publication Date: October 2010

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
Market value
The Asia-Pacific airlines industry shrank by 17.6% in 2009 to reach a value of $81.5 billion.
Market value forecast
In 2014, the Asia-Pacific airlines industry is forecast to have a value of $143.3 billion, an increase of
75.9% since 2009.
Market volume
The Asia-Pacific airlines industry grew by 9.9% in 2009 to reach a volume of 522.3 million passengers.
Market volume forecast
In 2014, the Asia-Pacific airlines industry is forecast to have a volume of 805.1 million passengers, an
increase of 54.1% since 2009.
Market segmentation I
The domestic segment is the largest in the airlines industry in Asia-Pacific, accounting for 81.8% of the
industry's total volume.
Market segmentation II
Japan accounts for 32.6% of the Asia-Pacific airlines industry volume.
Market rivalry
The Asia-Pacific airlines industry is characterized by strong rivalry and supplier power.

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CONTENTS

TABLE OF CONTENTS
EXECUTIVE SUMMARY 2

MARKET OVERVIEW 6

Market definition 6

Research highlights 7

Market analysis 8

MARKET VALUE 9

MARKET VOLUME 10

MARKET SEGMENTATION I 11

MARKET SEGMENTATION II 12

COMPETITIVE LANDSCAPE 13

LEADING COMPANIES 18

Air China Limited 18

Korean Air Lines Co., Ltd. 22

Qantas Airways Limited 25

Singapore Airlines Limited 30

MARKET FORECASTS 34

Market value forecast 34

Market volume forecast 35

APPENDIX 36

Methodology 36

Industry associations 37

Related Datamonitor research 37

Disclaimer 38

ABOUT DATAMONITOR 39

Premium Reports 39

Summary Reports 39

Datamonitor consulting 39

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CONTENTS

LIST OF TABLES
Table 1: Asia-Pacific airlines industry value: $ billion, 2005–09 9
Table 2: Asia–Pacific airlines industry volume: million passengers, 2005–09 10

Table 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009 11


Table 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009 12
Table 5: Air China Limited: key facts 18

Table 6: Air China Limited: key financials ($) 20


Table 7: Air China Limited: key financials (CNY) 20
Table 8: Air China Limited: key financial ratios 20

Table 9: Korean Air Lines Co., Ltd.: key facts 22


Table 10: Korean Air Lines Co., Ltd.: key financials ($) 23
Table 11: Korean Air Lines Co., Ltd.: key financials (KRW) 23
Table 12: Korean Air Lines Co., Ltd.: key financial ratios 23
Table 13: Qantas Airways Limited: key facts 25
Table 14: Qantas Airways Limited: key financials ($) 27
Table 15: Qantas Airways Limited: key financials (A$) 27
Table 16: Qantas Airways Limited: key financial ratios 28
Table 17: Singapore Airlines Limited: key facts 30
Table 18: Singapore Airlines Limited: key financials ($) 31
Table 19: Singapore Airlines Limited: key financials (Si$) 32
Table 20: Singapore Airlines Limited: key financial ratios 32

Table 21: Asia-Pacific airlines industry value forecast: $ billion, 2009–14 34


Table 22: Asia–Pacific airlines industry volume forecast: million passengers, 2009–14 35

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CONTENTS

LIST OF FIGURES
Figure 1: Asia-Pacific airlines industry value: $ billion, 2005–09 9
Figure 2: Asia–Pacific airlines industry volume: million passengers, 2005–09 10

Figure 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009 11


Figure 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009 12
Figure 5: Air China Limited: revenues & profitability 21

Figure 6: Air China Limited: assets & liabilities 21


Figure 7: Korean Air Lines Co., Ltd.: revenues & profitability 24
Figure 8: Korean Air Lines Co., Ltd.: assets & liabilities 24

Figure 9: Qantas Airways Limited: revenues & profitability 28


Figure 10: Qantas Airways Limited: assets & liabilities 29
Figure 11: Singapore Airlines Limited: revenues & profitability 33
Figure 12: Singapore Airlines Limited: assets & liabilities 33
Figure 13: Asia-Pacific airlines industry value forecast: $ billion, 2009–14 34
Figure 14: Asia–Pacific airlines industry volume forecast: million passengers, 2009–14 35

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MARKET OVERVIEW

MARKET OVERVIEW
Market definition
The airlines industry comprises passenger air transportation, including both scheduled and chartered, but
excludes air freight transport. Industry volumes are defined as the total number of revenue passengers
enplaned (departures) at all airports within the country or region, excluding transit passengers who arrive
and depart on the same flight code. For the US and Canada, transborder passengers departing from
either country are considered as part of the international segment. Industry value is defined as the total
revenue obtained by airlines from transporting these passengers. This avoids the double-counting of
passengers. All currency conversions in this profile were carried out using constant 2009 average annual
exchange rates.
For the purposes of this report, Asia-Pacific comprises Australia, China, India, Japan, Singapore, South
Korea, and Taiwan.

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MARKET OVERVIEW

Research highlights
The Asia-Pacific airlines industry had total revenue of $81.5 billion in 2009, representing a compound
annual growth rate (CAGR) of 3.6% for the period spanning 2005-2009.
Industry volumes increased with a CAGR of 7% between 2005 and 2009, to reach a total of 522.3 million
passengers in 2009.
The performance of the industry is forecast to accelerate, with an anticipated CAGR of 12% for the five-
year period 2009-2014, which is expected to drive the industry to a value of $143.3 billion by the end of
2014.

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MARKET OVERVIEW

Market analysis
The effects of the global economic downturn were felt in the Asia-Pacific airlines industry as it
experienced a sharp double-digit decline in 2009. However, the industry is expected to rebound strongly
and post double-digit growth until 2014.

The Asia-Pacific airlines industry had total revenue of $81.5 billion in 2009, representing a compound
annual growth rate (CAGR) of 3.6% for the period spanning 2005-2009. In comparison, the Chinese and
South Korean industries grew with CAGRs of 12% and 0.9% respectively, over the same period, to reach
respective values of $25.2 billion and $2.8 billion in 2009.
Industry volumes increased with a CAGR of 7% between 2005 and 2009, to reach a total of 522.3 million
passengers in 2009. The industry's volume is expected to rise to 805.1 million passengers by the end of
2014, representing a CAGR of 9% for the 2009-2014 period.
The domestic segment had the highest volume in the Asia-Pacific airlines industry in 2009, with 427.1
million passengers, equivalent to 81.8% of the industry's overall volume. In comparison, the international
segment had a volume of 95.3 million passengers in 2009, equating to 18.2% of the industry total.

The performance of the industry is forecast to accelerate, with an anticipated CAGR of 12% for the five-
year period 2009-2014, which is expected to drive the industry to a value of $143.3 billion by the end of
2014. Comparatively, the Chinese and South Korean industries will grow with CAGRs of 15.6% and 9%
respectively, over the same period, to reach respective values of $52 billion and $4.3 billion in 2014.

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MARKET VALUE

MARKET VALUE
The Asia-Pacific airlines industry shrank by 17.6% in 2009 to reach a value of $81.5 billion.
The compound annual growth rate of the industry in the period 2005–09 was 3.6%.

Table 1: Asia-Pacific airlines industry value: $ billion, 2005–09

Year $ billion € billion % Growth


2005 70.8 50.9
2006 82.5 59.3 16.6%
2007 92.5 66.5 12.1%
2008 98.9 71.1 6.9%
2009 81.5 58.6 (17.6%)

CAGR: 2005–09 3.6%

Source: Datamonitor DATAMONITOR

Figure 1: Asia-Pacific airlines industry value: $ billion, 2005–09

Source: Datamonitor DATAMONITOR

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MARKET VOLUME

MARKET VOLUME
The Asia-Pacific airlines industry grew by 9.9% in 2009 to reach a volume of 522.3 million passengers.
The compound annual growth rate of the industry in the period 2005–09 was 7%.

Table 2: Asia–Pacific airlines industry volume: million passengers, 2005–09

Year million passengers % Growth


2005 399.2
2006 438.8 9.9%
2007 476.1 8.5%
2008 475.1 (0.2%)
2009 522.3 9.9%

CAGR: 2005–09 7.0%

Source: Datamonitor DATAMONITOR

Figure 2: Asia–Pacific airlines industry volume: million passengers, 2005–09

Source: Datamonitor DATAMONITOR

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MARKET SEGMENTATION I

MARKET SEGMENTATION I
The domestic segment is the largest in the airlines industry in Asia-Pacific, accounting for 81.8% of the
industry's total volume.
The international segment accounts for the remaining 18.2% of the industry.

Table 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009

Category % Share
Domestic 81.8%
International 18.2%

Total 100%

Source: Datamonitor DATAMONITOR

Figure 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009

Source: Datamonitor DATAMONITOR

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MARKET SEGMENTATION II

MARKET SEGMENTATION II
Japan accounts for 32.6% of the Asia-Pacific airlines industry value.
China accounts for a further 30.9% of the Asia-Pacific industry.

Table 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009

Category % Share
Japan 32.6%
China 30.9%
India 8.6%
South Korea 3.5%
Rest of Asia-Pacific 24.4%

Total 100%

Source: Datamonitor DATAMONITOR

Figure 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009

Source: Datamonitor DATAMONITOR

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Competitive Landscape

COMPETITIVE LANDSCAPE
The airlines market will be analyzed taking airline companies as players. The key buyers will be taken as
leisure and business travelers, the latter considered as business-to-business (B2B), and fuel suppliers,
aircraft manufacturers, and skilled employees as the key suppliers.
The Asia-Pacific airlines industry is characterized by strong rivalry and supplier power.
Despite the large number of buyers, their power is strengthened by high price sensitivity as product
differentiation tends to be minimal, with negligible switching costs. Budget airlines can compete intensely
on price with the legacy carriers. Supplier power is strong as airlines must enter into contracts with aircraft
suppliers. Boeing and Airbus dominate the jetliner market; the relative lack of alternatives increases their
power. Fuel prices remain historically high, although lower than their peak in 2008, and this pressurizes
margins. Strong rivalry results from factors such as low switching costs for buyers, and a focus on
passenger transport that leaves carriers vulnerable to declines in demand in an industry that is highly
sensitive to the state of the wider economy.

Airlines generally have a large number of buyers. Many of these are individual consumers purchasing
flights directly from the airline, although there are B2B sales to charter companies, discounters, and
similar buyers. Price sensitivity is high; a result of factors such as the growth of online price comparison
sites, corporate travel expense policies for business flyers, and, for the legacy airlines like JAL, Air China,
and Qantas competition from low-cost carriers such as Jetstar and Virgin Blue. This tends to strengthen
buyer power in the airlines market. However, airlines can defend themselves against this by differentiating
their service in several ways. A common strategy for easing price competition is to focus on the additional
features available on higher-priced flights, such as extra leg room, in-flight entertainment, and so on.
The inherent switching costs for buyers in the airline market are negligible, which strengthens buyer
power. In response, airlines often use loyalty schemes, such as JAL’s Mileage Bank or China Southern
Airlines’ Sky Pearl Club. The air miles lost should a buyer choose to travel with another airline can be
viewed as a switching cost.
Where the buyers are individual travelers, whether leisure or business, there is no opportunity for them to
integrate backwards or for the airlines to integrate forwards; however, vertical integration is more feasible
between airlines and companies such as travel agents. Overall, buyer power is moderate.

Airlines must enter into contracts when buying or leasing aircraft from suppliers. Breaking these contracts
can often imply a heavy financial cost. Furthermore, Boeing and Airbus effectively form a duopoly of
suppliers of new jetliners, especially in the large jetliner category, with planes such as the 747 and A380.
In the market for lower-capacity regional jets and propeller-driven aircraft, companies such as Embraer,
ATR, and Bombadier are significant suppliers. The relative lack of alternative manufacturers or substitute
inputs increases supplier power. Air India’s passenger fleet consists of 46 Boeing, 78 Airbus, seven ATR,
and seven Bombadier planes. JAL’s fleet consists of 184 Boeing, 22 Airbus, 25 Bombardier, 30 Douglas,

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Competitive Landscape

and 18 other suppliers’ planes. Air China’s passenger fleet consists of 158 Boeing and 98 Airbus planes,
following the 2009 introduction of 30 additional jetliners made by these companies.
In an industry where reliability and safety are critical, the quality of the planes and their maintenance are
highly important; another factor that boosts supplier power.
Staffing costs for an airline are substantial, with large numbers of flight and ground personnel, including
mechanics, reservation and transportation ticket agents required for an efficient service.

Aviation fuel is another vital input. IATA data indicates that for the global industry, the high price of crude
oil and its derivatives in 2008 meant that fuel accounted for 33% of total airline costs, compared to less
than 15% before 2003; the proportion remains (2010) at around 25% of total costs. JAL reported that in
the fiscal year ending March 2009, 29% of its total costs were fuel. In fiscal 2009, Air China reported that
32% of its operating costs were due to fuel, compared to 36% in the previous fiscal year. In the fiscal year
ending March 2010, Singapore airlines reported that 33% of its costs were fuel, down from 43% in the
previous FY. Again, relatively few companies supply aviation fuel, strengthening supplier power, although
airlines generally defend against price rises using hedging strategies.
Supplier power is restricted by the improbability of these suppliers integrating forwards into the airline
business. In addition, although a company like Boeing has alternative sources of revenue, notably
defense aerospace, civil aviation remains a very significant part of its business. In 2009, Boeing
generated around 50% of total revenues from its global commercial airplanes division. For Airbus itself,
civilian airliners are highly important to its operations, although parent company EADS also has significant
activity in military aircraft, helicopters, satellites, and defense systems. Lack of diversity weakens
suppliers by making them more dependent on airliners as customers.
Airlines are forming and expanding alliances with one another, not only to achieve network size
economies through code sharing, but also to achieve scale economies in the purchase of fuel, and even
of aircraft. Combining forces to make purchases serves to increase the industry players' bargaining power
and therefore reduce supplier power. It is currently virtually impossible to find substitutes for the inputs
required for airlines to operate – an airline must have aircraft, a supply of aviation fuel and a sufficient
workforce before it can offer flights. Unlike other modes of transport, airlines have no alternative source of
energy. Overall, supplier power is assessed as strong.
The economic entrance barriers to the airlines industry are relatively high. For an entirely new company,
they include the considerable up-front outlay needed to obtain planes, although this may not be an issue
for an existing airline beginning to offer flights to a new country or region. Distribution is not particularly
easy, as new players need to establish an online booking system, and relationships with travel agents
and other sales intermediaries. It is also vital to obtain airport ‘slots’ for take-off and landing.
There has been a growth in air traffic over recent years which mean that congestion at airports in many
countries is expected, especially the major hubs. The time slot given to an airline is important, and is
something all airlines negotiate with airports. Established airlines will already hold the monopoly over slots
at certain airports, making it harder for new airlines to infiltrate. This creates difficulties for a new airline

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Competitive Landscape

aiming to negotiate prime slots at busy airports and can result in it being restricted to offering flights only
at off-peak times, or having to fly to airports further away from popular destinations. This can be a
deterrent to new airlines, as customers may seek more convenient alternatives.
While there is some debate as to whether traditional scale economies are significant in this industry, it
seems likely that being able to offer a wide range of routes is advantageous. The larger airlines achieve
this not only through their own fleet, but through code sharing agreements with other carriers in alliances;
however, a new entrant will not necessarily be approved for membership.
Market value growth had been strong during the 2005-2008 period, but a decline in 2009 wiped out much
of that revenue expansion. CAGR for the 2005-2009 period was a respectable 3.6%, and forecast growth
is expected to be stronger, which should attract new entrants. However, should fuel prices continue to rise
towards 2008 levels, it may be difficult to maintain margins, thus discouraging new players.

Regulation forms an additional barrier. Authorities such as Japan’s Civil Aviation Bureau and the Civil
Aviation Administration of China are responsible for security, safety, environmental impacts and related
issues. Compliance with regulation increases the height of entry barriers.
For airline markets, there is an additional regulatory issue to consider. Cabotage is the provision of
domestic transport services in a country by companies based in a different country. Airline cabotage is
generally forbidden, unless explicitly permitted by an agreement between two or more countries. For
example, cabotage by any EU-based carriers is permitted in any other EU-country; also, the Open Skies
agreement, finalized in mid-2010, accords cabotage rights to US carriers in the EU. However, until and
unless similar rights are extended by individual countries in Asia-Pacific to other countries, access to what
are often substantial domestic markets by foreign carriers will be severely restricted. Overall, there is a
moderate likelihood of new entrants to this industry.
Other forms of transport such as road, rail and marine travel are considered as substitutes to airline
travel. Buyers take into account not only the cost of travel but also how long the journey will take on
corresponding forms of transportation. In larger countries, air travel makes it easier to overcome long
distances and has certain benefits such as shorter travel time than rail travel, even including the time to
check in. However in smaller countries, domestic air travel may not be so appropriate, and rail and road
transportation become more attractive alternatives. Furthermore, many consumers are now aware of the
environmental impact of air travel, and are turning to rail travel instead. It is possible to travel around
much of the world by long-distance bus or train, although levels of service vary and some border
crossings may present a difficulty.
Domestic flights, which account for 81.8% of air passenger volumes for the region as a whole can be
substituted by car, bus, or rail. (These volumes refer to the sum of domestic passengers within individual
countries, and exclude inter-country flights within Asia-Pacific.) Most available data does not distinguish
between the length of journeys made by passengers, so the threat posed by substitutes in inter-city
domestic rail travel – the only domestic journeys for which passengers would take a plane – is not easy to
assess. With that proviso, usage of rail travel, as measured by per capita rail passenger-km (PKM)

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Competitive Landscape

volumes, allows some comparisons to be drawn. In 2009, per capita volume was 1,565 PKM in Japan,
the highest of all the countries considered in these reports. This no doubt in part reflects the well-
developed rail infrastructure and fast, reliable trains that are typical of Japan. India, which also has an
extensive rail network, had per capita volume of 775 PK, and China 599 PKM. In comparison, per capita
rail travel was 950 PKM in Western Europe, and 930 PKM in Europe as a whole; while in the US, it was
just over 170 PKM.
International air travel is generally less vulnerable to road and rail substitution in this region. Japan,
Australia, and Taiwan are islands with no links to mainland Asia, and land access from the South Korean
peninsula to the rest of the continent is complicated by the need to travel via North Korea. Singapore is
connected by a road and rail bridge to Malaysia. Travel from the more developed regions of China to the
west is technically possible over land, but the distances make this impractical. In contrast, international
land travel in Europe is favored by a dense road and rail infrastructure, and is a more significant substitute
to air travel in that region.
For business travel, alternatives include ‘virtual meetings’ via videoconferencing and similar technologies.
The switching costs here are the cost of the equipment required. At present it is not clear how completely
such technologies will replace face-to-face meetings. Overall, the threat from substitutes is assessed as
moderate.

Rivalry in the Asia-Pacific airline industry is strong. The competitive landscape has several large
companies, such as JAL, alongside smaller competitors. Rivalry is increased by the presence of low-cost
carriers in the market, as these companies can compete more intensely on price. Switching costs for
buyers are low, which means that it is easy for them to change to a competitor.
In this market, ‘storage costs’ are actually the costs associated with unsold seats on a flight, equivalent to
unsold inventory in the manufacturing industry. Given the cost of fuel, staffing, and so on associated with
operating a flight it is important to maximize the number of seats sold, hence the common policy of selling
slightly more tickets than there are available seats on the understanding that some buyers will not make
their plane. Where storage costs are high, rivalry is intensified.
Diversification in the passenger airlines industry ranges from moderate to little. Most carriers generate
additional revenues through freight, but this is often a small proportion of their total sales. For example, in
fiscal 2009, JAL reported that 80% of its total revenues came from passenger services, 12% from cargo
and mail, and the rest from other services; Air China had a revenue breakdown of 83%, 11%, and 6%,
respectively. Such revenue splits are quite typical of the airline industry in other regions of the world.
There are some carriers with more balanced revenue streams; for example, Taiwanese company China
Airlines reported in fiscal 2009 that only 55% of its total revenues came from passenger services, 36%
from cargo, and the remainder from other services. A lack of diversity forces players to compete more
intensely in their single core business.
Exit costs are moderate. Planes are important assets with a high purchase price, which depreciate in
value with time and require frequent maintenance expenses. The difference between the outlay on them

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Competitive Landscape

and the amount they can be sold for represents a sunk cost for an airline exiting the market. However,
they are mobile. If conditions become tough in the airlines market in one country, a carrier that wishes to
exit is not obliged to try to sell these assets where other companies are trying to do the same thing. It
could sell them in a location where there is high demand for second-hand planes. However, the airline
industry is quite labor-intensive; thus large numbers of employees may need to be offered severance pay
should a company lay them off on exiting this market.

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LEADING COMPANIES

LEADING COMPANIES
Air China Limited

Table 5: Air China Limited: key facts

Head office: 9th Floor Blue Sky Mansion, 28 Tianzhu Road, Zone A Tianzhu
Airport Industrial zone, Shunyi District, Beijing, CHN
Telephone: 86 10 6146 2777
Fax: 86 10 6146 2805
Website: www.airchina.com.cn
Financial year-end: December
Ticker: 601111, 00753
Stock exchange: Shanghai, Hong Kong

Source: company website DATAMONITOR

Air China is engaged in providing airline and related services, including aircraft engineering services, air
catering services and airport ground handling services. It is a member of the Star Alliance, an airline
alliance with flights to 1,077 destinations in 175 countries, operating over 18,100 daily flights. The
company has its operations in China, Hong Kong, Macau, Europe, North America, Japan, Korea, and
Asia-Pacific.

The company operates in four segments: airline operations, engineering services, airport terminal
services, and others

The airline operations of the company comprise of the air passenger and air cargo services.

In the engineering services segment, the company provides aircraft engineering services, including
aircraft maintenance, repair and overhaul services. It has setup project technology branches, with Beijing
as the headquarters, 7 maintenance bases in Chengdu, Chongqing, Hanzhou, Tianjin, Huhehaote,
Shanghai and Guiyang, 4 affiliate enterprises, 79 domestic maintenance centers and 45 international
maintenance centers. Thus, Air China has established a maintenance network covering both inland and
overseas. The company has nine major hangars through which it is able to conduct maintenance on all
Boeing and Airbus aircraft. It can also offer flight course maintenance to Boeing and Airbus aircraft, and
provide repair and overhaul for Rolls-Royce, Pratt & Whitney and CFM56 engines. It has nearly 10,000
annex repair and overhaul capabilities.

The airport terminal services segment consists of ground services, including check-in, boarding, premium
class lounge, ramp, luggage handling, loading and unloading, cabin cleaning and transit services.

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LEADING COMPANIES

Air China also offers ground services for 35 foreign airlines, three domestic aviation groups and airlines at
the Beijing Capital International Airport, which occupies 55% of ground service of the airport. Ground
services include passengers' entry, departure and transit services, special passenger services, irregular
flight passenger services, passenger luggage services, tarmac load and unload services, cabin cleaning
services and the supply of various ground equipments and special vehicles.

The others segment of the company includes air catering services and other airline-related services.

Air China has a fleet size of 257 Boeing and Airbus planes, with a further 232 on order. At present the
company operates 185 destinations worldwide. It provides more 5,090 weekly flights internationally,
offering more than one million seats.

The company's flights reach 81 domestic destinations and 42 international and regional destinations
through its global route network, with Beijing as the major hub.

Air China has several branch companies, such as: Southwest, Zhejiang Province, Chongqing, Inner
Mongolia, Tianjin, Guizhou Province, Tibet and bases in Shanghai and Southern China. It also owns a
project technology branch, a business plane branch, Aircraft Maintenance & Engineering (Ameco Beijing),
China International Freight Transport Airline and Beijing Air Food.

Air China also has a stake in the following airlines: Air China Cargo Company Limited, Air Macau
Company Limited, Shenzhen Airlines Company Limited, Shandong Airlines Company Limited and Cathay
Pacific Airways Limited. In terms of domestic cargo, Cargo Air China is the 5th largest airline in the world.

Key Metrics

The company recorded revenues of $7,469 million in the fiscal year ending December 2009, a decrease
of 3.4% compared to fiscal 2008. Its net income was $735 million in fiscal 2009, compared to a net loss of
$1,369 million in the preceding year.

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LEADING COMPANIES

Table 6: Air China Limited: key financials ($)

$ million 2005 2006 2007 2008 2009


Revenues 5,597.4 6,568.8 7,467.2 7,734.1 7,469.1
Net income (loss) 361.1 483.1 575.4 (1,369.3) 735.2
Total assets 9,969.8 12,273.8 13,346.2 14,676.6 15,775.6
Total liabilities 6,819.5 7,634.7 8,850.9 11,686.4 12,273.9
Employees 78,447 78,872 19,972 20,494 23,807

Source: company filings DATAMONITOR

Table 7: Air China Limited: key financials (CNY)

CNY million 2005 2006 2007 2008 2009


Revenues 38,291.0 44,936.6 51,082.0 52,908.0 51,095.4
Net income (loss) 2,470.4 3,305.1 3,936.0 (9,367.0) 5,029.5
Total assets 68,201.9 83,963.6 91,300.0 100,401.0 107,919.0
Total liabilities 46,651.3 52,227.9 60,548.0 79,945.0 83,964.6

Source: company filings DATAMONITOR

Table 8: Air China Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009


Profit margin 6.5% 7.4% 7.7% (17.7%) 9.8%
Revenue growth 14.2% 17.4% 13.7% 3.6% (3.4%)
Asset growth 2.3% 23.1% 8.7% 10.0% 7.5%
Liabilities growth (4.1%) 12.0% 15.9% 32.0% 5.0%
Debt/asset ratio 68.4% 62.2% 66.3% 79.6% 77.8%
Return on assets 3.7% 4.3% 4.5% (9.8%) 4.8%
Revenue per employee $71,352 $83,285 $373,882 $377,383 $313,737
Profit per employee $4,603 $6,126 $28,809 ($66,813) $30,882

Source: company filings DATAMONITOR

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LEADING COMPANIES

Figure 5: Air China Limited: revenues & profitability

Source: company filings DATAMONITOR

Figure 6: Air China Limited: assets & liabilities

Source: company filings DATAMONITOR

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LEADING COMPANIES

Korean Air Lines Co., Ltd.

Table 9: Korean Air Lines Co., Ltd.: key facts

Head office: Korean Air Operations Center, 1370, Gonghang Dong, Gangseo gu, Seoul 157
712, KOR
Telephone: 82 2 2656 7857
Website: www.koreanair.com
Financial year-end: December
Ticker: 3490
Stock exchange: Korea

Source: company website DATAMONITOR

Korean Air Lines is a Korea-based airline company engaged in providing passenger and cargo air
transportation services. The company has operations primarily in South Korea. The airline is the official
flag carrier for South Korea and the largest airline within the country with a fleet size of 132 aircraft with a
further 54 on order. Korean Air is also a founding partner airline in SkyTeam, the world's second largest
airline alliance.

The company is also engaged in providing maintenance service, training and building lease services. In
addition, it provides catering, hotel and in-flight sales services. Korean Air also operates an aerospace
division, which is engaged in research and development, and production of aircraft and aircraft parts.

Korean Air operates to 13 cities domestically and 104 cities in 38 countries internationally. Its fleet
comprises Boeing 737-800, Boeing 737-900, Boeing 747-400, Boeing 777-200, Boeing 777-300, Airbus
300-600, Airbus 330-200 and Airbus 330-300 aircraft.

The company partners with many other airlines, including the SkyTeam by code-sharing and seat-trading.
Some of its partners include: Aeroflot, Aeromexico, Air Europa, Air France, Alaska Airlines, China Airlines,
Delta Air Lines, Shanghai Airlines, Garuda Indonesia, Kenya Airways, and Vietnam Airlines.

Key Metrics

The company recorded revenues of $7,329 million in the fiscal year ending December 2009, a decrease
of 8.0% compared to fiscal 2008. Its net loss was $48 million in fiscal 2009, compared to a net loss of
$1,528 million in the preceding year.

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LEADING COMPANIES

Table 10: Korean Air Lines Co., Ltd.: key financials ($)

$ million 2005 2006 2007 2008 2009


Revenues 5,917.0 6,302.2 6,874.9 7,967.6 7,328.8
Net income (loss) 156.3 298.8 8,581.9 (1,527.5) (48.0)
Total assets 10,585.9 10,598.5 11,825.4 12,334.6 13,266.7
Total liabilities 7,442.7 7,184.9 8,382.0 10,177.2 10,895.4

Source: company filings DATAMONITOR

Table 11: Korean Air Lines Co., Ltd.: key financials (KRW)

KRW million 2005 2006 2007 2008 2009


Revenues 7,584,200.0 8,077,900.0 8,812,000.0 10,212,600.0 9,393,703.0
Net income (loss) 200,400.0 383,000.0 11,000,000.0 (1,957,900.0) (61,495.0)
Total assets 13,568,600.0 13,584,700.0 15,157,339.0 15,809,991.0 17,004,700.0
Total liabilities 9,539,700.0 9,209,300.0 10,743,777.0 13,044,755.0 13,965,300.0

Source: company filings DATAMONITOR

Table 12: Korean Air Lines Co., Ltd.: key financial ratios

Ratio 2005 2006 2007 2008 2009


Profit margin 2.6% 4.7% 124.8% (19.2%) (0.7%)
Revenue growth 5.2% 6.5% 9.1% 15.9% (8.0%)
Asset growth (1.2%) 0.1% 11.6% 4.3% 7.6%
Liabilities growth (3.9%) (3.5%) 16.7% 21.4% 7.1%
Debt/asset ratio 70.3% 67.8% 70.9% 82.5% 82.1%
Return on assets 1.5% 2.8% 76.5% (12.6%) (0.4%)

Source: company filings DATAMONITOR

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LEADING COMPANIES

Figure 7: Korean Air Lines Co., Ltd.: revenues & profitability

Source: company filings DATAMONITOR

Figure 8: Korean Air Lines Co., Ltd.: assets & liabilities

Source: company filings DATAMONITOR

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LEADING COMPANIES

Qantas Airways Limited

Table 13: Qantas Airways Limited: key facts

Head office: Qantus Centre, Level9, Building A, 203 Coward Street, Mascot, New South Wales
2020, AUS
Telephone: 612 9691 3636
Fax: 612 9691 3339
Website: www.qantas.com.au
Financial year-end: June
Ticker: QAN
Stock exchange: Australian

Source: company website DATAMONITOR

Qantas Airways is an Australian airline company, engaged in the operation of international and domestic
air transportation services, and the provision of time definite freight services. The group is also involved in
the sale of international and domestic holiday tours and associated support activities, including
information technology, catering, ground handling, and engineering and maintenance.

The group operates through five business divisions: Qantas, Jetstar, Qantas frequent flyer, Qantas
freight, and Jetset Travelworld Group.

The group's main business is the transportation of passengers using two complementary airline brands:
Qantas and Jetstar. Qantas comprises commercial, customer and marketing, and operations arms. In
addition to Qantas mainline sales and distribution, the commercial group includes QantasLink, Qantas
Freight Enterprises, and alliances. The customer and marketing arm includes product and service
development, cabin crew, marketing, and in-flight services. The operations group comprises engineering,
airports, catering, flight operations, operations planning and control, and Qantas Aviation Services.

During the course of the year, engineering, airports, catering, flight operations, operations planning and
control, and associated businesses were regrouped into a single airline operations unit, Qantas signaling
a renewed focus on core aviation excellence. Qantas is a founding member of the oneworld global airline
alliance. Qantas' Tasman services are operated by Jetconnect, a wholly-owned Qantas subsidiary based
in New Zealand.

Jetstar is the Qantas group's low fares airline and the world's largest low-cost long haul carrier. It has
focused heavily on regional expansion in the Asia-Pacific over the past year, increasing its strategic
holdings in affiliated businesses, with Jetstar Asia in Singapore and Jetstar Pacific based in Vietnam. It
has also launched New Zealand domestic and additional trans-Tasman services. As a result, the Jetstar

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LEADING COMPANIES

brands, including Jetstar Asia and Jetstar Pacific, grew strongly in FY2009, carrying 13.4 million
passengers to 50 destinations in Australia, New Zealand, Asia, and to Honolulu.

Domestically, Qantas, QantasLink, and Jetstar operate around 5,300 flights a week, serving 59 city and
regional destinations in all states and mainland territories (Qantas, 2,300; QantasLink, 1,900; and Jetstar,
1,100). Jetstar also operates nearly 170 domestic flights a week in New Zealand. Internationally, Qantas
and Jetstar operate more than 900 flights each week (Qantas 600 and Jetstar 320). The group's network
comprises 173 destinations in 42 countries, including Australia and those served by codeshare partner
airlines. At present Qantas has a fleet of approximately 136 aircraft plus a further 51 on order. As of June
2010, Qantas and its subsidiaries operate 256 aircraft, which include 52 aircraft by Jetstar Airways, 52 by
the various QantasLink-branded airlines, seven by Jetconnect, four by Express Freighters Australia and
four by Qantas Freight.

The Qantas frequent flyer division represents the customer loyalty program of the group with 5.8 million
members. Members can earn points into their single frequent flyer account with over 400 program
partners in Australia and worldwide, including car rental companies, hotels, financial institutions,
restaurants, and retailers. Members can use their points to redeem on Qantas, Jetstar, and 23 partner
airlines; or online at the Qantas Frequent Flyer Store (strengthened to offer over 1,000 products, services,
and vouchers).

The freight division operates through Qantas Freight Enterprises (QFE), which markets the freight
capacity of all Qantas and Jetstar international aircraft. QFE includes the following wholly-owned
subsidiaries: Express Freighters Australia, Qantas Road Express (trading as Jets Transport Express),
and DPEX Worldwide. Through Express Freighters Australia, QFE maintains an air operator's certificate
and operates four B737 freighter aircraft, which are wet-leased to Australian Air Express (Australia's
leading domestic express air freight service company) on long term contracts.

Jets Transport Express, the bonded trucking business, continues to benefit from the domestic shift to
lower cost road transportation of freight. DPEX Worldwide, the Qantas group's Asia-based express
courier business, has expanded to offer a full range of branded express envelopes and small parcel
services to cost-conscious consumers and small-to-medium enterprises in Australia. QFE also operates
two joint ventures with Australia Post: time-definite express services with Australian Air Express; and Star
Track Express, a premier road express transport and logistics solutions provider.

In July 2008, Qantas Holidays and Qantas Business Travel were merged into Jetset Travelworld Group,
creating a vertically integrated travel company offering wholesale, retail, and corporate travel services.
Since the merger, synergies have been realized through cross-selling, volume aggregation, and the
recruitment of new retail shops, together with efficiency and productivity improvements.

The group has investments in other airline and airline related businesses. Qantas holds a 49% interest in
Newstar Investment Holdings, which owns all the shares in Orangestar Investment Holdings, which in turn

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LEADING COMPANIES

owns and operates the value based intra-Asia airlines Jetstar Asia and Valuair, based in Singapore. The
group also holds a 27% stake in Vietnam's Jetstar Pacific, a 46.3% interest in Air Pacific, and a 58%
interest in Jetset Travelworld.

Key Metrics

The company recorded revenues of $11,358 million in the fiscal year ending June 2009, a decrease of
10.1% compared to fiscal 2008. Its net income was $96 million in fiscal 2009, compared to a net income
of $756 million in the preceding year.

Table 14: Qantas Airways Limited: key financials ($)

$ million 2005 2006 2007 2008 2009


Revenues 9,872.4 10,651.2 11,836.8 12,637.8 11,357.8
Net income (loss) 596.0 374.2 561.6 756.3 96.0
Total assets 14,153.9 14,972.6 15,302.2 15,375.9 15,648.2
Total liabilities 9,137.7 10,226.3 10,467.1 10,899.8 11,148.7
Employees 35,520 34,832 35,236 35,334 33,030

Source: company filings DATAMONITOR

Table 15: Qantas Airways Limited: key financials (A$)

A$ million 2005 2006 2007 2008 2009


Revenues 12,648.8 13,646.7 15,165.7 16,191.9 14,552.0
Net income (loss) 763.6 479.5 719.6 969.0 123.0
Total assets 18,134.4 19,183.3 19,605.7 19,700.1 20,049.0
Total liabilities 11,707.5 13,102.2 13,410.7 13,965.2 14,284.0

Source: company filings DATAMONITOR

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LEADING COMPANIES

Table 16: Qantas Airways Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009


Profit margin 6.0% 3.5% 4.7% 6.0% 0.8%
Revenue growth 11.4% 7.9% 11.1% 6.8% (10.1%)
Asset growth 3.2% 5.8% 2.2% 0.5% 1.8%
Liabilities growth (0.2%) 11.9% 2.4% 4.1% 2.3%
Debt/asset ratio 64.6% 68.3% 68.4% 70.9% 71.2%
Return on assets 4.3% 2.6% 3.7% 4.9% 0.6%
Revenue per employee $277,939 $305,789 $335,930 $357,666 $343,864
Profit per employee $16,779 $10,744 $15,940 $21,404 $2,906

Source: company filings DATAMONITOR

Figure 9: Qantas Airways Limited: revenues & profitability

Source: company filings DATAMONITOR

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LEADING COMPANIES

Figure 10: Qantas Airways Limited: assets & liabilities

Source: company filings DATAMONITOR

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LEADING COMPANIES

Singapore Airlines Limited

Table 17: Singapore Airlines Limited: key facts

Head office: Airline House, 25 Airline Road, Singapore City 819829, SGP
Telephone: 65 654 15880
Fax: 65 654 29605
Website: www.singaporeair.com
Financial year-end: March
Ticker: SIAL
Stock exchange: Singapore

Source: company website DATAMONITOR

Singapore Airlines, along with its subsidiaries, is engaged in airline operations, airport terminal services,
engineering services, and other related activities. The group operates in East Asia, South West Pacific,
Europe, the Americas, West Asia, and Africa.

Singapore Airlines divides its business into three segments: airline operations; airport terminal services;
and engineering services.

The airline operations of the group include passenger and cargo air transportation. Singapore Airlines and
its wholly-owned subsidiary Silk Air operate in the passenger air transportation business. As of March
2009, the group's operating fleet consisted of 131 aircraft, including 119 passenger aircraft and 12
freighters. Out of these, Singapore Airlines operated 103 passenger aircraft and Silk Air operated 16
aircraft. In FY2009, Singapore Airlines carried a total of 18.3 million passengers. The group carries out its
cargo air transportation through SIA Cargo with 12 B747 400 freighters. SIA cargo operates in around 70
cities across the world.

The group's airport terminal services include the following: airline catering services; passenger, baggage,
cargo, and ramp handling; aircraft interior cleaning; aircraft security; and aircraft linen laundry. The group
carries these services through Singapore Airport Terminal Services (SATS).

SIA Engineering Company (SIAEC), together with its joint ventures across seven countries, forms the
SIAEC Group. The SIAEC Group provides maintenance, repair, and overhaul (MRO) of aircraft to more
than 85 international airlines worldwide. The group maintains six hangars and 22 in-house workshops in
Singapore to provide complete MRO services in airframe, component, engine, aircraft conversions, and
modifications to major airlines from four continents.

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LEADING COMPANIES

Tradewinds Tours & Travel Private, a wholly-owned subsidiary of Silk Air, is licensed as a tour operator. It
provides inbound and outbound package tours, hotel accommodation, and organizes conventions.

The group's other wholly-owned subsidiaries include: Singapore Aviation and General Insurance
Company, Singapore Flying College, SIA (Mauritius), and Sing-Bi Funds. Some of SIA's associate
companies include: Abacus Travel Systems (in which the company owns a 61% stake), Virgin Atlantic
(49%), and RCMS Properties (20%). The Singapore Government owns 54.6% of the group through
Temasek Holdings. Singapore Airlines is a member of Star Alliance, an international airline alliance
comprising 27 international carriers.

More recent developments saw the company announce on February 16, 2009, a cut of 17 aircraft from its
operating fleet between April 2009 and March 2010 as part of a cost-saving initiative to help counter
falling passenger and cargo demand. This followed an initial decision to phase out only four aircraft. The
airline stated that it could not rule out delaying deliveries on aircraft already ordered.

Key Metrics

The company recorded revenues of $10,988 million in the fiscal year ending March 2009, an increase of
0.1% compared to fiscal 2008. Its net income was $788 million in fiscal 2009, compared to a net income
of $1,468 million in the preceding year.

Table 18: Singapore Airlines Limited: key financials ($)

$ million 2005 2006 2007 2008 2009


Revenues 8,251.9 9,164.2 9,956.4 10,971.8 10,988.1
Net income (loss) 929.0 852.3 1,462.3 1,467.9 787.8
Total assets 14,936.8 16,052.9 17,854.3 18,213.7 17,048.2
Total liabilities 4,282.9 4,579.6 4,852.5 4,944.8 7,094.5
Employees 13,572 13,729 13,847 14,071 14,343

Source: company filings DATAMONITOR

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LEADING COMPANIES

Table 19: Singapore Airlines Limited: key financials (Si$)

Si$ million 2005 2006 2007 2008 2009


Revenues 12,012.9 13,341.1 14,494.4 15,972.5 15,996.3
Net income (loss) 1,352.4 1,240.7 2,128.8 2,136.9 1,146.8
Total assets 21,744.7 23,369.5 25,992.0 26,515.2 24,818.5
Total liabilities 6,234.9 6,666.9 7,064.2 7,198.6 10,328.1

Source: company filings DATAMONITOR

Table 20: Singapore Airlines Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009


Profit margin 11.3% 9.3% 14.7% 13.4% 7.2%
Revenue growth 23.1% 11.1% 8.6% 10.2% 0.1%
Asset growth 9.3% 7.5% 11.2% 2.0% (6.4%)
Liabilities growth 11.2% 6.9% 6.0% 1.9% 43.5%
Debt/asset ratio 28.7% 28.5% 27.2% 27.1% 41.6%
Return on assets 6.5% 5.5% 8.6% 8.1% 4.5%
Revenue per employee $608,007 $667,509 $719,033 $779,744 $766,097
Profit per employee $68,449 $62,077 $105,605 $104,319 $54,923

Source: company filings DATAMONITOR

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LEADING COMPANIES

Figure 11: Singapore Airlines Limited: revenues & profitability

Source: company filings DATAMONITOR

Figure 12: Singapore Airlines Limited: assets & liabilities

Source: company filings DATAMONITOR

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MARKET FORECASTS

MARKET FORECASTS
Market value forecast
In 2014, the Asia-Pacific airlines industry is forecast to have a value of $143.3 billion, an increase of
75.9% since 2009.
The compound annual growth rate of the industry in the period 2009–14 is predicted to be 12%.

Table 21: Asia-Pacific airlines industry value forecast: $ billion, 2009–14

Year $ billion € billion % Growth


2009 81.5 58.6 (17.6%)
2010 93.8 67.4 15.1%
2011 107.7 77.5 14.9%
2012 119.0 85.6 10.4%
2013 130.9 94.1 10.0%
2014 143.3 103.1 9.5%

CAGR: 2009–14 12.0%

Source: Datamonitor DATAMONITOR

Figure 13: Asia-Pacific airlines industry value forecast: $ billion, 2009–14

Source: Datamonitor DATAMONITOR

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MARKET FORECASTS

Market volume forecast


In 2014, the Asia-Pacific airlines industry is forecast to have a volume of 805.1 million passengers, an
increase of 54.1% since 2009.
The compound annual growth rate of the industry in the period 2009–14 is predicted to be 9%.

Table 22: Asia–Pacific airlines industry volume forecast: million passengers, 2009–14

Year million passengers % Growth


2009 522.3 9.9%
2010 574.3 10.0%
2011 622.3 8.4%
2012 677.7 8.9%
2013 737.5 8.8%
2014 805.1 9.2%

CAGR: 2009–14 9.0%

Source: Datamonitor DATAMONITOR

Figure 14: Asia–Pacific airlines industry volume forecast: million passengers, 2009–14

Source: Datamonitor DATAMONITOR

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APPENDIX

APPENDIX
Methodology
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated,
analyzed, cross-checked and presented in a consistent and accessible style.
Review of in-house databases – Created using 250,000+ industry interviews and consumer surveys
and supported by analysis from industry experts using highly complex modeling & forecasting tools,
Datamonitor’s in-house databases provide the foundation for all related industry profiles
Preparatory research – We also maintain extensive in-house databases of news, analyst
commentary, company profiles and macroeconomic & demographic information, which enable our
researchers to build an accurate market overview
Definitions – Market definitions are standardized to allow comparison from country to country. The
parameters of each definition are carefully reviewed at the start of the research process to ensure they
match the requirements of both the market and our clients
Extensive secondary research activities ensure we are always fully up-to-date with the latest
industry events and trends
Datamonitor aggregates and analyzes a number of secondary information sources, including:
- National/Governmental statistics
- International data (official international sources)
- National and International trade associations
- Broker and analyst reports
- Company Annual Reports
- Business information libraries and databases
Modeling & forecasting tools – Datamonitor has developed powerful tools that allow quantitative
and qualitative data to be combined with related macroeconomic and demographic drivers to create
market models and forecasts, which can then be refined according to specific competitive, regulatory
and demand-related factors
Continuous quality control ensures that our processes and profiles remain focused, accurate and
up-to-date

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APPENDIX

Industry associations
International Air Transport Association (IATA)
Travel Industry Designator Service, 800 Place Victoria, P.O. Box 113, Montreal, Quebec, H4Z 1M1,
Canada
Tel.: 1 514 874 0202
Fax: 1 514 874 1753
www.iata.org

International Air Carriers Association


Rue Montoyer, 23, BE-1000 Brussels, Belgium
Tel.: 32 2 546 1060
Fax: 32 2 546 1070
www.iaca.be

Association of Asia-Pacific Airlines


9th Floor, Kompleks Antarabangsa, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia
Tel.: 60 3 2145 5600
Fax: 60 3 2145 7500
www.aapairlines.org

Related Datamonitor research

Industry Profile

Airlines in South Africa

Global Airlines

Airlines in the United States

Airlines in Canada

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APPENDIX

Disclaimer
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form
by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
permission of the publisher, Datamonitor plc.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.
Please note that the findings, conclusions and recommendations that Datamonitor delivers will be
based on information gathered in good faith from both primary and secondary sources, whose
accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability
whatever for actions taken based on any information that may subsequently prove to be incorrect.

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