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Infratil Airports Europe Monthly Overview June 2008

15 Jul 2008

The aviation market globally is experiencing significant strain with the combined impact of the large jump in fuel prices and weakening economic conditions.

The impact of these factors is masked to some degree at Wellington Airport due to the recent stimulation of competition. Also, in difficult times, the relative strengths of markets is important given absolute capacity reductions are difficult for airlines to sensibly implement in the short term. Wellington, with its strong Government and business presence and good passenger demographics, is a good option for airlines in tough times.

Infratil's European Airports all hold relatively small shares of the total traffic of the regions they serve. As a result, market share is as important as total region activity. Strength of key customers and maintaining an efficient operating and capital cost base are crucial in this environment. The Glasgow Prestwick passenger results are showing signs of these strengths against a shrinking Glasgow market. Freight, however, remains volatile.

Glasgow Prestwick Airport

The Airport's busiest ever day was Friday June 27 with 68 flights carrying well in excess of 10,000 passengers on the first day of the Scottish summer holidays. This was a milestone as it was the first time Glasgow Prestwick has handled more than 10,000 passengers in a single day.

In the full month of June Glasgow Prestwick handled 222,940 passengers, up 3% on the performance in June 2007. This was a strong result in the current aviation environment and demonstrates how individual airports and airlines can grow against an overall declining trend. The year-to-date passenger total of 643,269 shows a 1% improvement against the equivalent period last year.

Glasgow Abbotsinch, operated by BAA, was down 4.9% in June - a result consistent with its year to date drop of 4.8%. When the results of the two Glasgow airports are combined, the overall market contracted by around 37,000 passengers (3.4%) in June.

The major factor in the positive year-on-year variance is a 36% rise in the number of charter passengers using the airport - 19,348 in June against 14,224 in June 2007. Glasgow Prestwick's main charter operator, Seguro Holidays, has increased capacity this year by operating larger aircraft. This result is also counter-cyclical given a drop of 4.7% in European charter passengers across BAA's UK network.

Glasgow Prestwick handled 1,935 tonnes of freight in June - down 37% on June 2007. Year-to-date freight volume is down 12%.

Polar's decision to review their business model resulted in their scheduled freight services ceasing within the UK from early June. This has had a major impact on the Prestwick June result, compounded by the fact that Cargolux and Panalpina volumes were also down on last year.

Clearly there is now a void left by Polar that it is hoped other operators will step in to fill and IAEL's Business Development team continues their work in this area.

Kent International Airport

Kent International handled 864 tonnes of freight in June, up 15% on the performance in June 2007. June is a very weak month for the produce imports which remain the mainstay of the Kent business.

EgyptAir and Cargolux both improved on their prior year total, however the MK Airlines volume was zero. MK has resumed flying after securing new investment, however is flying into mainland European airports over the summer months in line with their activity during 2007.

The year-to-date freight volume of 5,231 tonnes is 7% behind the equivalent period in 2007 due to the poor May result.

Lübeck Airport

Lübeck Airport handled 47,746 passengers in June which is 10% down on the prior year. The year-to-date passenger total is 137,743 - down 16% on the same period in 2007.

There were strong loads on Ryanair's Barcelona and London services during June, although in the case of London this is against a large reduction in capacity against last year.

The Jet2.com service from Lübeck to Leeds Bradford, which launched in May, will be suspended from the end of August. This decision is disappointing, but symptomatic of some of the difficulties currently facing the aviation industry.

Ryanair's winter schedule is now on sale and in addition to last winter's programme includes additional London capacity, the new daily service to Frankfurt Hahn and retains the Dublin services which were hitherto seasonal. This represents a 33% increase over winter 07/08.

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