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Press conference - Aerodrom Ljubljana after 11 September

A press conference was held by Aerodrom Ljubljana plc on Wednesday, 11 SEP 2002 at 11 AM.

CEO Mr. Vinko Može introduced the topics:

 

LJUBLJANA AIRPORT AFTER 11 SEPTEMBER

Last year was a turning point for all the world, as the period of new political tensions began with the terrorist attack on New York and Washington on 11 September, 2001. This event had an immediate negative impact on air carriers and airports. A downturn in traffic was evident not only in the USA but also in Europe (the throughput of some European airports dropped by more than one tenth and by as much as one third through the Brussels airport!) and unfortunately in Slovenia as well. Despite lower income, both air carriers and airports were forced to cover higher expenses due to safety requirements. In some countries (the USA) a significant part of financial aid came from the state in the form of grant assistance.

In most European countries, including Slovenia, expenses arising from stricter safety measures have to be covered by the airports themselves. Thus, in the last four years Aerodrom Ljubljana invested EUR 2.4 million of its own funds in safety.

Already back in 1992, Aerodrom Ljubljana adopted a safety strategy in line with ICAO (International Civil Aviation Organisation) Annex 17 and ECAC DOC30 (ECAC - European Civil Aviation Conference). The Ljubljana airport was among the first in Europe to build a new transport system with EDS devices (Explosive Detection System), providing a 100% safe baggage inspection service. A technical security system was set up to secure the most crucial facilities and the division line between land and air side, supervised from the new Security Operations Centre. Thanks to Aerodrom Ljubljana's efforts to ensure utmost safety, the airport today boasts a system superior to those used by other airports in the region and elsewhere in Europe, with the exception of Great Britain and few other European airports.

Thus, on 11 September, 2001, already in about three hours after the incident the Ljubljana airport was able to operate according to the plans designed for such emergencies. Based on ACI Europe data the Ljubljana airport was among the first to take measures.

The goal of Aerodrom Ljubljana is to ensure passengers to enter and leave Slovenia safely, comfortably and in time. In spite of strict safety measures, Aerodrom Ljubljana wishes its passengers would remember it as a pleasant stop during their travels around the globe, and not as a protected fortress. One of the methods gaining widespread acceptance at large international airports is biometric control aimed at facilitating and accelerating passengers' movement through airports (Amsterdam).

AIR TRAFFIC TURNOVER AT AERODROM LJUBLJANA FROM JANUARY TO AUGUST 2002

In the first eight months of 2002 air traffic turnover at the Ljubljana airport was somewhat lower than in the respective period last year. Fewer aircraft movements were recorded and the number and volume of transported passengers and cargo decreased.

In the January-August period there were 19,671 aircraft movements, which represents a fall of 2% compared to the same period last year and is below the planned level. The number of passengers put through was 590,979 or 5% less then in the respective period last year. Air cargo warehouses put through 7,729 tonnes of cargo or 8% less than in the first eight months of 2001.

Since the beginning of 2002, regular passenger flights have been operated by 5 airlines, with some additional air carriers performing unscheduled flights. The Slovene air carrier Adria Airways accounted for the bulk of all air transport. In the autumn of 2001 the Slovene carrier forged an alliance with the Austrian Airlines and took over the Ljubljana-Vienna line. Montenegro Airlines continued with two weekly lines to Podgorica with an additional line to Tivat in the summer. During the winter Crossair took over Ljubljana lines from Swissair, and since April 2002 the same number of movements has been registered by the newly founded company Swiss International Air Lines. In March 2002 it was one year since the Czech national air carrier Czech Airlines ČSA started flying. They now fly seven times a week between Ljubljana and Prague instead of five. Croatia Airlines had regular chartered flights to Brač in the summer.

In addition to the above some other foreign air carriers operated unscheduled flights. One of them is the Greek air carrier Aegean Airlines with a series of flights to Greece. During the spring Flash Airlines had more chartered flights and announced flights to Egypt also in the winter of 2002/2003. The Israeli air carrier Israir transports passengers from Tel Aviv to Slovenia by fully booked B757 aircraft.

OPERATIONS IN THE FIRST SIX MONTHS OF 2002

In the first half of 2002 Aerodrom Ljubljana d.d. generated revenues of SIT 2.2 billion, which is the same as last year in this period. Revenues from commercial services were higher, whilst those from airport services declined.

As in the respective period last year, operating expenses in the first eight months of 2002 totalled SIT 1.9 billion. Nevertheless, expenses remained below domestic inflation, despite significant fixed costs (which are not influenced by dropping traffic) and wage rises, thanks to cost-cutting started in 2001. Operating profit amounted to SIT 247 million. If financial and extraordinary revenues are added to operating profit and after financial and extraordinary expenses together with estimated corporate tax are deducted, net profit amounts to SIT 636 million.

Jan.-June 2002

Jan.-June 2001

Index

Jan.-June 2002

Jan.-June 2001

Number of passengers

380,002

400,613

95

Aircraft movements

13,737

13,911

99

Cargo

5,963

6,442

93

Operating revenues - in '000 of SIT

2,201,399

2,206,955

100

Profit before tax

815,507

407,324

200

Net profit

636,544

317,937

200


This year of crisis confirmed how rightly it was decided in previous years to develop more lucrative commercial activities in order to complement core business. Commercial activities contribute almost half of income and represent an indispensable source of funds for the further development of core business.

AERODROM LJUBLJANA'S MARKET POTENTIAL

Since the airport operator has nearly realised all its potential in the marketing of non-airport services, it cannot expect to generate any additional income other than from attracting new air carriers, passengers and cargo.

An in-depth analysis of Ljubljana airport's traffic throughput shows that in the last years the share of chartered flights in total traffic by the domestic carrier decreased (from 19% in 1995 to 14% in 2001). On the other hand, the number of passengers transported from nearby airports by foreign carriers rose. It is estimated that every year some 100,000 passengers fly from the airports in Venice, Trieste, Graz, Vienna, Zagreb, etc. which could potentially go through Ljubljana. According to Slovene tourist agencies this is due to a lack of lines and unattractive prices.

As regards covering of individual markets it was established that there could be more direct flights from Ljubljana to Amsterdam, Brussels and Copenhagen, since nearly half of all passengers going to these destinations from Ljubljana use other airports. The largest decrease was recorded among passengers travelling to London, as the carrier British Airways withdrew from the Ljubljana airport. Nevertheless, British Airways still successfully sells tickets in Slovenia, however, aircraft take off from the neighbouring airports. In addition, there are less passengers on the London line, due to attractive connections from Trieste and Klagenfurt provided by an undercutting air carrier Ryanair.

An analysis of the throughput of passengers regularly travelling to destinations to which there are as yet no direct lines from Ljubljana shows that lines to Budapest, Warsaw, Barcelona, Rome and Milan have potential.

Aerodrom Ljubljana already started negotiations with many foreign carriers, among which also the so called »low cost« airlines. In Europe these have made traditional carriers face a serious dilemma. But the fact that »low cost« airlines increase the number of tourists and interest for certain destinations is undoubtedly important for a region, town or country.

Slovenia has not yet been included in the common European civil air space, where for quite some time free commercial flying has no longer been regulated by the national authorities and national air carriers. Thus, the biggest problem with attracting new air carriers is licences issued by the Ministry of Transport. In the process of liberalising Slovene air space the domestic air carrier is often protected, although on the other hand it is free to fly in European air space.

FACTS ABOUT THE LJUBLJANA AIRPORT

In recent years the Ljubljana airport has been repeatedly accused of being one of the most costly airports in the world, which has supposedly also jeopardised the operations of the Slovene national air carrier. Passenger airport tax calls for some explanation. Namely, passenger airport tax charged by the Ljubljana Airport and paid together with the ticket includes "safety tax" in addition to "passenger tax". The table below, which includes only some airports connected to Slovenia, shows that SIT 3,400 in all cases represents only a small portion of total additional charges per ticket.

ANALYSIS OF PASSENGER TAX IN EUROPE as at 4 Sept., 2002

Abroad:

Ljubljana Airport:

Adria Airways:

Total:

Destination from

LJUBLJANA

Passenger airport tax

Safety tax

Other taxes

Total tax

Passenger and safety tax

Additional insurance

Total tax by ticket

LONDON

Gatwick

2,306

-

7,093

9,399

3,400

2,054

14,853

LONDON

Heathrow

3,673

2,979

14,186

20,838

3,400

5,993

1,885-LH

32,116

MUNICH

1,997

1,119

-

3,116

3,400

4,108

10,624

FRANKFURT

3,164

1,304

-

4,460

3,400

4,108

11,968

VIENNA

1,876

995

-

2,871

3,400

4,108

10,379

PARIS

1,521

818

2,268

4,607

3,400

2,056

10,063

SKOPJE

2,330

1,371

-

3,701

3,400

4,112

11,213


The above airport taxes have been taken from the booking system and are payable in full by a passenger upon booking a ticket or confirming the reservation. All taxes are in SIT.

The findings of a reference study by Cranfield College of Aeronautics have often been published recently. This study analyses in detail the prices of services charged by 36 airports all over the world, most of which much bigger than the airport of Ljubljana. When discussing the prices of airport services charged to air carriers, the Ljubljana airport should be compared to airports of similar size in the region. As a complex and expensive infrastructural facility airports have high fixed costs. These expenses must be covered by revenues from airport services, which are naturally smaller at small airports than at those with a greater volume of air transport. Such a comparison shows that the prices of Aerodrom Ljubljana are the same or lower than those of comparable airports, e.g. in Graz, Klagenfurt and Trieste. Importantly, it should be noted that the Slovene national air carrier has been enjoying extremely high discounts at the Ljubljana Airport ever since Slovenia became independent.

DEVELOPMENT OF THE LJUBLJANA AIRPORT IN THE 1991 - 2001 PERIOD

Over the last 10 years EUR 47.5 million was invested in the development and modernisation of the Ljubljana airport. The most important was the introduction of the CAT III B, enabling landings during minimal visibility. In manoeuvre areas the main taxiway was extended by 750 metres and a 180 metre-long minor taxiway was constructed, providing access to the Adria complex. During these 10 years the airport apron was expanded twice - by 40,000 m2 in total. A minor taxiway which will connect the main taxiway with the runway is under construction (worth SIT 340 million) and the equipment for preventing unrestricted access to the taxiway, worth SIT 50 million, will be installed.

With the accession to the EU, the status and operations of the Ljubljana airport will change. Instead of the current three passenger flows eight will be required. To this end a new passenger terminal, covering 5,500 m2 of technological and 2,000 of other areas, has to be constructed and connected to the existing terminal. In addition, the road system and the parking facilities will need to be reorganised. The estimated value of investment into terminals is EUR 21.5 million, whereas that of the reorganisation of the road system is approximately EUR 15 million. The Government of the Republic of Slovenia allocated SIT 18 billion to setting up road and railway border crossings under the Schengen Agreement and Aerodrom Ljubljana expects it will provide proportionate financial support for new airport crossing.