Industry Overview

8. INDUSTRY OVERVIEW 8. INDUSTRY OVERVIEW .:tltThe 81AIP Group:’s..~·,· Strategic Airport Planning Asia-Pacific: 55 Soi Langsuan, Suite 1902 Ploenchit Road Bangkok, Thailand 10330 +66 (86) 060-4626 (office)
+ I 978246-6031 (fax) Please use San Francisco addressJor correspondence. Summary Report of Findings Americas: 1342 Jones Street Suite 6 San Francisco, California 94109 USA +1415577-2127 (office) + I 978 246-6031 (fax) inquiry@thesapgroup.com
Independent Report of the Aviation Consultant AirAsia X Berhad prepared for AirAsia X Berhad Kuala Lumpur prepared by The S-A-P Group Bangkok and San Francisco 133 8. INDUSTRY OVERVIEW (cont’d) .:tlY.§~ Independent Report of the Aviation Consultant: AirAsia X Berhad “‘~\\\”\. ~ S ~ The S-A-P Group (Strategic Airport Planning Ltd) was asked by AirAsia X Berhad (AirAsia X) to prepare this Report of the Aviation Consultant on AirAsia X and air travel in Southeast Asia. This independent expert report was prepared to be included in documentation (including, but not limited to any prospectus or offering circular) to support the Initial Public Offering of AirAsia X. The S-A-P Group (S-A-P) is an aviation consulting firm that specializes in the preparation of aviation activity forecasts and strategic business plans. Over the past 16 years, staff of The S-A-P Group have prepared forecasts of aviation activity in Australia (Sydney, Perth, Adelaide, Darwin), Indonesia (Jakarta), Malaysia, New Zealand (Auckland and Wellington), South Korea (Seoul), Thailand (Bangkok, Phuket, Chiang Mai, Chiang Rai, and Had Yai) and the United States (numerous). In addition, 5-A-P reports have supported the initial public offering circulars of several Southeast Asia-based carriers, including AirAsia Berhad, Thai AirAsia, Garuda Indonesia Airlines, and Tiger Airways. This report includes forecasts and other forward-looking estimates. These forward-looking statements are necessarily based on various assumptions and estimates that are inherently subject to various risks and uncertainties relating to possible invalidity of the underlying assumptions and estimates and possible changes or development of social, economic, business, industry, market, legal, government, and regulatory circumstances and conditions and actions taken or omitted to be taken by others. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic and competitive market conditions and future government and business decisions, all of which are difficult or impossible to predict accurately. This report contains information supplied by and analysis based on public and private sources. To the extent such sources have been cited herein, we hereby confirm that the S-A-P Group is allowed to reference such sources. While we believe that the information is correct, we cannot guarantee its validity. Some amountsin this report are rounded. Financial and operating data for some air carrier groups may include cargo and other activities. We acknowledge that this report will be included in the Prospectus and we further confirm that we are aware of our responsibilities under Section 215 of the Capital Markets and Services Act 2007 of Malaysia. We further acknowledge that if we are aware of any significant changes to the adequacy of the information in this report between the date of this report and the issue date of the Prospectus, or after the issue of the Prospectus and before the issue of the securities, we have an on~going obligation to either cause this report to be updated so as to correct any inaccuracies, and, where applicable, cause AirAsia X to issue a supplementary prospectus, or, should they fail to do so, withdraw our consent to the inclusion of this report in the Prospectus.” STRATEGIC AIRPORT PLANNING LTD Date of report: 22 MAY 2013

8. INDUSTRY OVERVIEW (cont’d) …,,~ Independent Report of the Aviation Consultant: AirAsia X Berhad ~~~ QAt”,”’:’.,.t.. ~ INDEPENDENT REPORT OF THE AVIATION CONSULTANT AirAsia X Berhad 1 OVERVIEW AND OUTLOOK OF GLOBAL AVIATION TRENDS 1.1 Historical Activity Historically, air travel activity has shown a strong statistical relationship with overall economic activity, as measured by gross domestic product (GDP). From 1971 to 2012, world GDP grew at a CAGR of 3.0%, while world airline RPKs grew at twice the rate, at a CAGR of 6.0%. Aviation activity in the Asia-Pacific region has grown rapidly since 1998,as shown below. From 1998 to 2012, RPKs in the Asia-Pacific region grew 137% while during the same period RPKs grew 45% in North America and 94% in Europe. Asia-Pacific region air passenger traffic, as measured in RPKs, is nearly that of North America. 1,600 REVENUE PASSENGER KILOMETERS (RPKs; billions) Asia Pacific, North America, and Europe
1998-2012
1,400  1,200  1,000  800  600  400
200  1998  1999  2000 2001  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  …..-Asia Pacific  559  585  637 I 639  683  643  780  839  912  993  1,011  1,007  1.122  1,230  1,321  _North.America ~Europe  1,011 718  1,105 765  1,20511,138 798 I n7  1,091 n3  1,090 830  1,251 926  1,339 1,010  1,364 1,094  1,419 1,186  1,390 1,245  1,335 1,203  1,395 1,267  1,445 1,340  1,470 1,393
Unit: RPK billions. Source: Eurornonitor International from International Civil Aviation Organization (ICAO), United Nations, World Bank, national statistics, and lATA Air Transport Market Analysis, March 2013.

 

8. INDUSTRY OVERVIEW (cont’d) ~~f Independent Report of the Aviation Consultant: AirAsia X Berhad 1.2 Asia Pacific Aviation Demand Forecasts FORECAST AVERAGE ANNUAL PASSENGER GROWTH RATES Activity On RPKs) Between Regions of the World 2011-2031  Region Asia Pacific Norlh Arrerica Europe Middle East Latin Arrerica Africa  Africa 7.4% 6.0% 4.8% 6.9% 8.3% 6.2%  Latin Arrerica 5.4% 5.1% 4.6% n.a. 6.5%  ForecastCAGR Middle East Europe 7.2% 5.7% 6.4% 3.8% 5.1% 3.5% 5.1%  Norlh Arrerica 4.8% 2.2%  Asia-Pacific 6.7%  Total global/regional  5.6%  6.6%  6.4%  4.1%  2.8%  6.4%  Source: The Boeing Corrpany, Current Market OuUook 2012, September 2012.
Strategic Airport Planning Ltd. (The S-A-P Group) 8. INDUSTRY OVERVIEW (cont’d) ..t”t Independent Report of the Aviation Consultant: AirAsia X Berhad ~.~~; :\”‘~~ .$ , HISTORICAL AND FORECAST ANNUAL PASSENGER GROWTH RATES Activity On RPKs) Within and Between Southeast Asia and Other Regions of the World 1985 to 2031
CAGR  Historical  Forecast  1985-1990 1990-1995 1995-2000  2000-2005 2005-2010 1985–2011  2011–2031  Wthin Southeast Asia  11.1%  12.5%  -0.1%  12.2%  6.2%  8.4%  7.6%  Between Southeast Asia and:  China  12.4%  9.7%  5.0%  13.8%  3.6%  9.0%  7.7%  Oceania  14.7%  6.4%  6.9%  4.2%  2.0%  6.8%  5.1%  Middle East  -6.2%  13.4%  3.1%  4.2%  13.8%  5.5%  6.4%  North America  13.8%  11.1%  4.4%  1.9%  -2.7%  5.4%  5.8%  Northeast Asia  15.2%  6.4%  1.8%  7.9%  1.2%  6.7%  5.4%  Europe  11.8%  7.3%  7.8%  0.9%  -0.1%  5.4%  5.0%  South Asia  0.5%  6.9%  6.2%  18.1%  14.5%  9.4%  9.5%
Source: The Boeing Company, Current MarketOufiook repor5, 2001 through September 2012. NortheastAsia: Japan, North Korea and South Korea South Asia: India, Pakistan, and Aghanistan Southeast Asia: Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vie1nam 1.3 Aviation Supply Forecast Considerations Aircraft manufacturers such as Boeing and Airbus forecast continued growth in demand for new aircraft and continue to make investments to meet this demand. Airbus forecasts 28,200 new aircraft will be needed for the 20-year period from 2012 to 2031.’ Boeing forecasts a demand for 34,000 new aircraft for the same period.2 The primary difference between the two forecasts is different opinions about average aircraft size. Aircraft supply and demand in the airline industry can be balanced with fleet adjustments by airlines and production shifts by manufacturers. Therefore, although supply and demand may not balance in the short term, in the medium to long term, aircraft capacity is managed throl,.lgh aircraft retirements, sales, returns to lessors, and other fleet management actions, and aircraft and production shifts by manufacturers as long-term orders change. 1 Airbus Global Market Forecast, 2012. 2 Boeing Current Market Outlook, 2012. 8. INDUSTRY OVERVIEW (cont’d) ~.X~t: Independent Report of the Aviation Consultant: AirAsia X Berhad +’~l’\,~· ~,$..: S\ 1.4 Fuel Prices Fuel price changes have affected aviation traffic as airline cost structures are sensitive to changes in aircraft fuel. Political turmoil, terrorism, war and other events affecting major suppliers of oil have led to large fluctuations in fuel prices since 1980, ranging from 60% increases to 47% decreases in inflation-adjusted costs per barrel year over year. 3 The impact of recent fuel price increases on resulting airline cost structures has been changes in airline service, fares, and traffic. Fares typically increase after fuel prices increase. To the extent that airlines are unable to pass through fuel cost increases to customers in the form of higher fares or surcharges, airline profits typically decrease. The figure below illustrates how crude oil prices have increased from 1947 to 2012. ANNUAL AVERAGE DOMESTIC CRUDE OIL PRICES US Average; Inflation-Adjusted US$ per bbl.) 1947-2012 .’ r-LO 0) (V) r-~ LO 0) (V) r-LO 0) (V) r-~ ~ U; LO LOcoco r-r-r-eoeoa; 0) 0 00) c;0)0)0)0)0)0)0)0)0)0)0)0)0)0) 0 0 ~~~~ ~ ~ …… …… …… …… ~~ ……N N N Based on dala from 10GA. hllp://inflationdala.com’inflation/inflation_Rale/Historical_Oil_Prices_Table.asp, March 2013.
3 Based on historical data provided by 10GA and WTRG Economics, http://inflationdata.com/inflation/inflation Rate/Historical Oil Prices Table.asp 8. INDUSTRY OVERVIEW (cont’d)
Independent Report of the Aviation Consultant: AirAsia X Berhad 1.5 Aviation in Southeast Asia The Asia-Pacific region’s passenger growth rates in RPK are forecasted to remain robust, at a CAGR of 6.7% from 2011 to 2031, surpassing North America as the world’s largest aviation market.4 Within Asia Pacific, the Southeast Asia region is expected to be one of the strongest regions for traffic growth measured in RPK, with the CAGR forecasted at 7.6% over the same time period. These high growth rates are the result of several factors, including: • Market liberalization efforts, including open skies agreements between ASEAN nations which have allowed for increased competition and facilitated the development of LCCs, leading to reduced airfares and the introduction of new services and markets. Discussion of market liberalization in the region is provided in Section 3.2.
• Strong economic growth in most countries, leading to increased demand for domestic and international passenger services and for inbound transportation of goods.
• Continued long-term economic growth across Asia in general and other parts of the world, leading to strong demand for international passenger and cargo services.

4 Airbus Global Market Forecast, 2012,
8. INDUSTRY OVERVIEW (cont’d)
Independent Report of the Aviation Consultant: AirAsia X Berhad The propensity to travel in Malaysia relative to the country’s per capita income levels is high relative to other countries at similar levels of GDP per capita. This is attributable, in part, to the country’s well developed airline industry and high market share of LCCs. RELATIONSHIPS BElWEEN PER CAPITA GROSS DOMESTIC PRODUCT (GOP) AND AIR TRAVEL Countries in the Asia-Pacific Region and the US
2011 Per capita 100,000 Dorrestic and GDP Dorrestic inti RPKs (in current and inti Counlry (millions) US$) RPKs 10,000Auslralia 103,345 65,477 4,547 Bangladesh 5,195 678 31 ~ c; C’oI Brunei 4,492 36,548 10,569 >­2­Cambodia 18,000 852 1,192 Jg c.China 451,162 5,414 335 ttl 1,000India 108,922 1,389 90 (.) ffi c.Indonesia 77,224 3,509 320 ~ Japan 121,754 45,920 953 0.. 0::: Lao PDR 3,000 1,204 458 16 <5Malaysia 67,773 9,700 2,359 t­100 New Zealand 22,983 36,651 5,204 Philippines 30,714 2,223 320 Singapore 108,048 49,270 20,487 Soulh Korea 93,858 22,778 1,915 Thailand 65,783 5,394 1,027 10 Vietnam 24,791 1,374 278 y =0.4501x1l·8682 R2= 0.6656
+ Singapore + Brunei + tiet’..~amrw”,,,,,’~’. Australia ~­6’~;outh Korea hailand +Japan LaoPDR China Indonesia Philippines Vietnam India
0 20,000 40,000 60,000 80,000US 1,310,556 48,387 4,201 GDP per capKa (CY2011, in US$) Sources: The S-A-P Group reference files, including ICAO, 2011 Annual Report and IMF estimaiJd 2011 GDP and Population figures. Note: Amounls include dorrestic and international air lravello/from reporting airporls in lhe counlries shown and may include sorre Iransfer passengers. Strategic Airport Planning Ltd. (The S-A-P Group) 140
8. INDUSTRY OVERVIEW (cont’d) .:r.”.l\’~’}’tt Independent Report of the Aviation Consultant: AirAsia X Berhad ~”,~ .•s. \} 1.5.1 Population and Urbanization The population of Southeast Asia is estimated by the IMF to grow at a CAGR of 1.5% from 2012 to 2017, which compares to a CAGR estimate of 1.2% for the world during the same period. Malaysia’s population is forecast by the IMF to grow at a CAGR of 1.8% from 2012 to 2017. POPULATION INDICATORS Countries in the Asia-Pacific Region
Multiple Years CAGR Actual Population  Estima1ed Population  Hisbrical  Projec1ed  Country  2000  2005  2010  2012  2017  2000-2012  2012-2017  Indonesia  206,265,000  221,398,000  237,641,000  244,468,000  262,404,000  1.4%  1.4%  Philippines  76,790,000  85,260,000  94,010,000  97,737,000  107,871,000  2.0%  2.0%  Vielnam  77,635,000  83,106,000  88,257,000  90,388,000  95,943,000  1.3%  1.2%  Thailand  61,879,000  62,418,000  63,878,000  64,460,000  66,418,000  0.3%  0.6%  Myanmar  50,130,000  55,392,000  61,187,000  63,672,000  70,334,000  2.0%  2.0%  Malaysia  23,495,000  26,477,000  28,251,000  29,038,000  31,789,000  1.8%  1.8%  Cambodia  12,680,000  13,828,000  14,953,000  15,254,000  16,032,000  1.6%  1.0%  Laos  5,317,000  5,753,000  6,201,000  6,376,000  7,320,000  1.5%  2.8%  Singapore  4,138,000  4,401,000  5,184,000  5,366,000  5,849,000  2.2%  1.7%  East Timor  818,000  946,000  1,067,000  1,119,000  1,254,000  2.6%  2.3%  Brunei  325,000  370,000  414,000  434,000  484,000  2.4%  2.2%  Coun1ries shown above 519,472,000  559,349,000  601,043,000  618,312,000  665,698,000  1.5%  1.5%  China  1,267,430,000  1,307,560,000  1,340,910,000  1,353,821,000  1,389,073,000  0.6%  0.5%  India  1,024,250,000  1,110,000,000  1,190,524,000  1,223,170,000  1,305,774,000  1.5%  1.3%  Japan  126,829,000  127,775,000  128,048,000  127,611,000  124,543,000  0.1%  -0.5%  South Korea  47,008,000  48,138,000  49,410,000  50,010,000  49,791,000  0.5%  -0.1%  Australia  19,273,000  20,544,000  22,183,000  22,683,000  24,488,000  1.4%  1.5%  New Zealand  3,863,000  4,142,000  4,369,000  4,463,000  4,692,000  1.2%  1.0%  World Total  5,956,162,000  6,393,765,000  6,807,200,000  6,937,895,000  7,362,940,000  1.3%  1.2%
Source: IMF World Econonic Outiook Database, Ocbber 2012. Note: Some amounts are estima1ed. 8. INDUSTRY OVERVIEW (cont’d) … ,f/.~” Independent Report of the Aviation Consultant: AirAsia X Berhad 8 “.~…. ¥-~1:~~ -;.’ Increased urbanization is likely to drive increases in air travel as larger portions of a region’s population become concentrated in the vicinity of airports, allowing residents easier access to air travel. Additionally, income levels of people typically increase after they move to urban areas, often leading to increased propensities to travel. 1.5.2 Tourism and Air Travel in Southeast Asia Increased intra-regional business and reduced trade barriers between countries generate cross-border travel demand. High levels of trade and other commercial activities lead to increased demand for travel, which includes air travel for business and tourism. Global trade is expected to continue growing at 4.5% in 2013.5 Most countries in Asia have been moving toward increased business relationships, reduced trade barriers, increased trade and tourism, and increased air travel levels. HISTORICAL AND FORECAST ANNUAL PASSENGER GROwrH RATES Activity On RPKs) Within Regions of the World 1985 to 2031
CAGR  Historical  Forecast  1985-1990 1990-1995 1995-2000  2000-2005 2005-2010 1985-2011  2011-2031  Global  6.8%  3.3%  5.6%  3.6%  3.9%  4.7%  5.0%  Within regions  within China  16.7%  25.4%  4.7%  18.2%  15.4%  15.8%  6.9%  within Europe  8.7%  3.5%  7.5%  5.0%  2.6%  5.4%  3.5%  within Middle East  1.9%  1.3%  6.1%  11.8%  9.8%  6.1%  5.1%  within North America  4.6%  2.6%  5.1%  2.5%  -1.0%  2.8%  2.2%  within NortheastAsia  9.2%  6.1%  3.1%  -2.3%  0.9%  3.1%  3.0%  within Oceania  7.1%  10.2%  2.9%  5.8%  3.7%  6.0%  4.4%  within South America  2.8%  3.2%  5.1 %  4.7%  12.6%  6.0%  6.9%  within South Asia  2.1%  5.6%  1.0%  9.5%  14.5%  6.8%  9.5%  within Southeast Asia  11.1%  12.5%  -0.1%  12.2%  6.2%  8.4%  7.6%
Source: The Boeing Company, Current MarketOutiook reporls, 2001 through September 2012. Northeast Asia: Japan, North Korea and South Korea South Asia: India, Pakistan, and Aghanistan Southeast Asia: Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam Oceania: Australia, New Zealand, Melanesia, Micronesia and Polynesia 5 World Trade Organization, 21 September 2012, http://rt.com/business/wto-economic-growth-forecast2012-655/

8. INDUSTRY OVERVIEW (cont’d) .:tlt; Independent Report of the Aviation Consultant: AirAsia X Berhad ~:>~ .. \\~. 1.6 Aviation in Malaysia 1.6.1 Economic Growth in Malaysia and the Surrounding Region GDP in Malaysia grew 16.7%6 from 2010 to 2011, far outperforming most other countries in the world. Growth rates in China and other countries in Asia are expected to have been lower in 2012, but Malaysia has continued growing through previous economic slowdowns, experiencing a 10.4% CAGR in GDP (in current prices, US dollars) from 2000 to 2012. Southeast Asia’s GDP (in current prices, US dollars) grew at a CAGR of 11.8% during the same period.7 Based on the growth that has occurred during the global economic slowdown and other crises during the last decade, S-A-P expects that the region will continue experiencing economic growth in the future. Malaysia-and foreign-based airlines have the opportunity to benefit from the air travel demand spurred by regional economic growth. S-A-P anticipates that as the economy develops and the middle class grows and becomes a larger share of the population, air travel demand will increase. S-A-P also anticipates that as the middle class grows in Malaysia’s secondary cities, demand for service from these cities to new domestic and international destinations will increase. This service can be supported by the increased use of small, regional jets. Additionally, as LCC development continues in Malaysia and throughout the region, it is expected that lower average fares will result in increased demand for air travel. Population growth and urbanization are expected to result in further aviation growth in Malaysia. As urbanization and population growth combine with continued economic growth, income per capita is expected to increase, resulting in growth in the middle class in Malaysia. 6 GDP growth in Malaysia from 2010 to 2011 was 11.3% in national currency, current prices and 5.1 % in national currency, constant prices. Source: IMF World Economic Outlook Database, October 2012. 7 Source: IMF World Economic Outlook Database, October 2012. Amounts are in current prices, US dollars. 8. INDUS”rRY OVERVIEW (cont’d)
Independent Report of the Aviation Consultant: AirAsia X Berhad 1.6.2 Tourism in Malaysia As shown below, tourist arrivals to Malaysia have grown at a CAGR of 6.3% from 2001 to 2012, despite several disruptions to travel in the region caused by economic downturns and natural disasters. INTERNA”nONAL TOURIST ARRIVALS IN MALAYSIA FROM THE 10 LEADING COUNTRIES OF ORIGIN Malaysia
2001-2012 Tourist Arrivals in Malaysi~ Country Singapore Indonesia China Thailand Brunei India Philippines Australia Japan United Kingdom Other Total Arrivals 2001 2012 6,951,594 777,449 597,857 1,018,797 309,529 143,513 122,428 222,340 397,639 262,423 1,971,504 12,775,073 13,014,268 2,382,606 1,558,785 1,263,024 1,258,070 691,271 508,744 507,948 470,008 402,207 2,975,777 25,032,708 CAGR 2001-2012 5.9% 10.7% 9.1% 2.0% 13.6% 15.4% 13.8% 7.8% 1.5% 4.0% 3.8% 6.3% Source: Tourism Malaysia and the Malaysian Irrrrigration Department March 2013. htlp://corporate.tourism.gov.my/irnageslresearch/pdf/2012/TourislArrivals_JanDec_2012.pdf 8. INDUSTRY OVERVIEW (cont’d)
Independent Report of the Aviation Consultant: AirAsia X Berhad As shown below, Malaysia was one of only two Asian countries included in the world’s top 10 countries for international tourist arrivals in 2011. INTERNATIONAL TOURIST ARRIVALS IN THE 10 LEADING COUNTRIES OF DESTINATION World
2010-2011 Tourist Arrivals (nillions) Arrivals  CAGR  Rank  2010  2011  2010-2011  1  77.1  79.5  3.0%  2  59.8  62.3  4.2%  3  55.7  57.6  3.4%  4  52.7  56.7  7.6%  5  43.6  46.1  5.7%  6  27.0  29.3  8.7%  7  28.3  29.2  3.2%  8  26.9  28.4  5.5%  9  24.6  24.7  0.6%  10  23.3  23.4  0.6%  Source: IAbrld Tourism Organization (UNWfO), 2012.
1.6.3 Service Levels at Major International Airports According to Malaysia Airports Holdings Berhad (MAHB), the manager of 39 airports in Malaysia, growth during 2011 was primarily due to new routes and frequencies added by airlines, particularly Firefly, AirAsia Berhad, and Malaysia Airlines. MAHB also reported that growth resulted from competitive price offerings, which have enabled more people to afford travel by air than fares previously allowed.s Growth slowed in 2012 due to significant reductions in capacity and the termination of some services by local carriers.9 Scheduled departing weekly flights and destinations served from mqjor international airports in Asia are shown below. Activity is shown for flights with scheduled durations of four hours or less and for flights of more than four hours. In general, narrow body aircraft have a flying range of four hours and these routes would be considered short haul. Widebody aircraft have a flying range beyond four hours and these routes would be considered long haul. 8 Malaysia Airports Holdings Berhad Annual Report, 2011. 9 Malaysia Airports Holdings Berhad Annual Report, 2012.

 

8. INDUSTRY OVERVIEW (cent’d) Independent Report of the Aviation Consultant: AirAsia X Berhad
SCHEDULED DEPARTING FLIGHTS AND DESTINATIONS SERVED, BY FLIGHT SCHEDULE DURATION Major International Airports in Asia Week of 4-10 March 2013  City-Airport Bangkok Bangkok-Suvarnabhumi Infl Airport (BKK) Bangkok-Don Mueang Infl Airport (DMK) Subtotal .Iakarla-Soekarno Hatla Infl Airport (CGK) Hong Kong Infl Airport (HKG) Kuala Lurrpur Infl Airport (KUL) Singapore-Changi Airport (SIN)  Weekly flighls 240 rrinutes 241 minutes or less or greater 1,621 912 1,139 28 2,760 940 3,451 235 2,136 657 2,334 512 1,913 1,096  Total 2,533 1,167 3,700 . 3,686 2,793 2,846 3,009  Destinations served 240 minutes 241 rrin utes or less or grea1er 61 66 41 4 102 70 42 34 74 58 64 50 58 70  Total 127 45 172 76 132 114 128  Average for the five cities shown  2,519  688  3,207  68  56  124  City-Airport Bangkok Bangkok-Suvarnabhurri Infl Airport (BKK) Bangkok-Don Mueang Infl Airport (DMK) Subtotal. .Iakarla-Soekarno Hatla Infl Airport (CGK) Hong Kong Infl Airport (HKG) Kuala Lurrpur Infl Airport (KUL) Singapore-Changi Airport (SIN)  Weekly flighls 240 rrinutes 241 minutes or less or greater -35.6% 32.6% -54.8% -95.9% 9.6% 36.6% 37.0% -65.8% -15.2% -4.5% -7.3% -25.6% -24.1% 59.3%  % difference fi”om average Destinations served 240 minutes 241 rrinutes Total or less or grea1er -21.0% -10.3% 17.0% -63.6% -39.7% -92.9% 15.4% 50.0% 24.1% 14.9% -38.2% -39.7% -12.9% 8.8% 2.8% -11.3% -5.9% -11.3% -6.2% -14.7% 24.1 %  Total 2.1% -63.8% 38.3% -38.9% 6.1% -8.4% 2.9%  Source: The S-A-P Group analysis, based on OAG data, March 2013.

8. INDUSTRY OVERVIEW (cont’d) ~§”. Independent Report of the Aviation Consultant: AirAsia X Berhad 13 ..~~'” “\~::\., 1.6.4 Passenger Activity Levels at KLlA, by Airline As shown below, the largest share of passenger traffic at KLiA is operated by AirAsia. The next three largest carriers in terms of market share at KLiA are Malaysia Airlines, AirAsia X, and Indonesia AirAsia, with AirAsia X accounting for an 8.9% share of the international market, representing the third largest market share of international passenger movements at KLiA. Low-cost carrier operations in Malaysia have created significant changes to the market since commencement of operations in 2002, resulting in changes including reduced airfares and increased affordability of air travel in the country. During the week of 4-10 March 2013, the LCCT at KLiA served 1A01 scheduled commercial passenger flights to 73 destinations. During the same period, KLiA (inclusive of both the LCCT and the main passenger terminal complex) served 2,846 scheduled commercial passenger flights to 114 destinations. 10 PASSENGER ACTIVITY LEVELS AT KLIA (MAIN PASSENGER TERMINAL COMPLEX AND LCCT) International and Domestic Passenger Movements, by Airline
2010-2012 2010  2011  2012  Total  Total  Market  Market  Total  Market  Airline  passengers  passengers  Dom  Share  Inri  Share  passengers  Share — AirAsia  11,898,089  13,064,014  7,349,616  61.8%  7,218,032  25.8%  14,567,648  36.5%  Malaysia Airlines  12,146,702  12,391,538  4,551,652  38.2%  8,181,432  29.2%  12,733,084  31.9%  AirAsia X  1,821,207  2,388,702  2,482,380  8.9%  2,482,380  6.2%  Indonesia AirAsia  961,665  1,213,421  1,258,293  4.5%  1,258,293  3.2%  Emirates  648,244  725,500  814,939  2.9%  814,939  2.0%  Calhay Pacific Airways  671,127  678,633  711,922  2.5%  711,922  1.8%  Qatar Airways  n.a.  n.a.  457,898  1.6%  457,898  1.1%  KLM-Royal Dutch Airlines  n.a.  443,291  443,915  1.6%  443,915  1.1%  SilkAir  422,082  426,882  409,434  1.5%  409,434 .  1.0%  Thai Airways International  387,960  370,782  399,741  1.4%  399,741  1.0%  Other  5,130,560  6,001,747  190  0.0%  5,608,422  20.0%  5,608,612  14.1%  Total  34,087,636  37,704,510  11,901,458  100.0%  27,986,408  100.0%  39,887,866  100.0%
Source: Malaysia Airpor1s Holdings Berhad Annual Report 2012. Indudes data for airlines with 1.0% or greater international passenger market share in 2012. Note: Some amounts, due to rounding, may not sum to 100.0%. 10 Source: The S-A-P Group analysis, based on GAG data, March 2013. 8. INDUSTRY OVERVIEW (cont’d) .~2\: Independent Report of the Aviation Consultant: AirAsia X Berhad ~/( \,~…~~ . •$ ” PASSENGER ACTIVITY LEVELS AT KLIA (MAIN PASSENGER TERMINAL COMPLEX AND LCCl) International and Domestic Movements, by Route
2007-2012 Passenger Moverrenls tl/from KLIA  KLiA Roues served by AirAsia X  Growlh  CAGR  From Year  From Year  Year of  8eIJre  8eIJre  Rank  CAGR  Roue  Launch tl  Launch tl  2012  OriginlOesiinafon  2007  2008  2009  2010  2011  2012  2007-2012 Launch 2012 2012 –­-­—­—­ 1  Singapore  1,699,108  1,905,855  2,485,090  2,734,086  2,944,187  3,110,166  12.9%  2  Jakarta  1,106,329  1,119,113  1,214,040  1,336,466  1,551,994  1,843,397  10.8%  3  Bangkok  1,345,690  1,268,598  1,258,960  1,360,626  1,470,878  1,454,245  1.6%  4  Hong Kong  895,639  926,656  955,453  1,237,450  1,302,657  1,309,000  7.9%  5  Denpasar  471,794  549,065  670,976  712,505  794,578  782,861  10.7%  6  Ho Chi Minh City  262,533  311,487  397,705  566,869  655,095  733,523  22.8%  7  Taipei (a)  360,161  350,154  430,905  661,863  654,559  695,284  14.1%  2009  98.6%  18.7%  8  Melbourne (a)  362,446  358,080  504,552  709,209  688,081  635,105  11.9%  2008  75.2%  11.9%  9  Dubai  358,240  403,773  481,783  568,238  615,Q68  631,210  12.0%  10  Guangzhou  235,348  318,188  412,297  461,347  596,188  608,533  20.9%  11  Medan  348,121  348,226  396,554  455,726  530,700  585,430  11.0%  12  Phukel  292,450  304,441  348,285  428,305  519,781  574,935  14.5%  13  Seoul (a)  251,708  265,122  229,369  339,921  519,065  565,936  17.6%  2010  146.7%  35.1%  14  London–Total (b)  428,908  400,564  525,077  598,152  590,252  525,559  4.1%  2009  31.2%  7.0%  15  Surabaya  399,757  426,637  456,726  509,960  551,219  521,061  5.4%  Olher Roues; Served by AirAsia X(a)  Sydney  373,083  322,769  259,626  301,417  381,442  506,610  6.3%  2012  32.8%  32.8%  Pem  223,129  224,566  371,955  424,796  449,848  466,457  15.9%  2008  109.1%  15.9%  Beijing  240,923  203,481  203,145  236,689  246,473  389,567  10.1%  2012  58.1%  58.1%  Shanghai  355,968  287,873  267,667  382,502  378,116  381,174  1.4%  2013  Tokyo.-Total (c)  383,104  345,631  312,329  366,340  370,426  494,214  5.2%  2010  58.2%  16.5%  Jeddah  165,864  181,297  185,317  202,049  279,496  311,508  13.4%  2013  Osaka  143,155  148,985  124,877  129,699  123,549  230,883  10.0%  2011  78.0%  33.4%  Hangzhou  1,308  101,948  154,009  205,913  200,856  217,951  178.2%  2008  16562.9%  178.2%  Gold Coas~-Updaed (d)  125,014  193,424  191,178  284,654  303,686  272,161  16.8%  2007  112.6%  13.4%  Kalhmandu  50,733  85,949  60,488  71,257  79,530  157,141  25.4%  2012  97.6%  97.6%  Chengdu  2,150  460  24,334  142,730  135,995  134,500  128.7%  2009  29139.1%  313.5%  Olher Roues; No Longer Served by AirAsia X  Paris–Total (e)  159,943  146,346  124,689  155,432  255,405  196,848  4.2%  2011  26.6%  12.5%  Christ:hurch  87,881  48,701  2011  Delhi  225,939  212,870  169,286  265,453  408,479  285,683  4.8%  2010  68.8%  19.1%  BorTtJay  180,750  156,197  146,538  204,901  256,943  198,135  1.9%  2010  35.2%  10.6%  Tehran  72,474  21,806  150,169  227,728  206,552  23.3%  2010  Tian]in  70,960  119,649  133,117  72,972  2009  OIher  5,443,527  5,947,106  5,967,502  7,078,054  7,612,451  8,839,106  10.2%  Inernalional  16,965,296  17,836,667  19,401,672  23,402,427  25,915,723  27,986,408  10.5%
Dorreslic 9,488,083 9,692,688 10,280,421 10,685,209 11,788,787 11,901,458 4.6% Total moverrenls 26,453,379 27,529,355 29,682,093 34,087,636 37,704,510 39,887,866 8.6%
Source: Malaysia Airports Holdings 8erhad Annual Reports, 2008-2012 (a) Roues served by AirAsia Xduring !he week of4-10 March 2013.
(b) Stansed Airportand, iaer, GalNick Airport, which were served by AirASia Xuntil March 2012, and Healhrow Airport The Ihree airports serve l1e sarre cathrrenlarea.
(c) Tokyo-Haneda Airport, which is served by AirASia X. and Tokyo.Nariia Inernalional Airport The two airports serve l1e sarre cathrrentarea.
(d) Gold CoastAirport, which is served by AirAsia X, and Brisbane Airport The two airports serve Ihe sarre cathrrenlarea.
(e) Paris-Orly Airport, which was served by AirASia X. and Paris Charles de Gaulle Airport The two airports serve Ihe sarre cat:hrrentarea.

8. INDUSTRY OVERVIEW (cont’d) .:{l~ Independent Report of the Aviation Consultant: AirAsia X Berhad •__t ..-liio~ 1.6.5 Future Activities at KLiA MAHB is in the process of developing a second terminal, KLlA2, which may become operational in late 2013 and is proposed to be the largest terminal in the world dedicated to low cost carriers. The terminal building is designed for the purpose of facilitating travel between low cost carriers and full service carriers.11 2 EVOLUTION OF THE LOW COST CARRIER BUSINESS MODEL 2.1 Introduction Over the past four decades, and particularly during the last 10 years, the low cost carrier (LCe) model has grown rapidly to become a dominant model in the industry. Southwest Airlines in the United States, which began service in 1971, is widely considered the pioneer of the LCC model. In Asia Pacific, LCCs operated 24.1% oftotaI seat capacity. 12 LCC SHARE OF TOTAL PASSENGER SEAT CAPACllY Asia-Pacific Region
2001-2012 40.0% 30.0% 24.1% 20.0% 10.0% 1.1% 0.0% -‘-‘~-~”‘——­2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2.2 The LCC Business Model LCCs are defined by their ability to achieve drastically reduced unit operating costs. As a result, the average airfares they offer can be substantially lower than those of other carriers. In their pursuit of keeping costs low, LCCs typically have most, but not necessarily all, of the following operating and financial characteristics: 11 Malaysia Airports Holdings Berhad Annual Report, 2011 ” CAPA (Centre for Aviation), based on OAG data, 2013. 8. INDUSTRY OVERVIEW (cont’d) ;~~~ Independent Report of the Aviation Consultant: AirAsia X Berhad 2.2.1 Operating Characteristics • Primarily point-to-point services. Limited number of stops or transfers, avoiding costs associated with passenger transfers
• Use of secondary airports, which are often less congested than primary airports, leading to higher levels of dispatch reliability and lower costs of delays and rescheduling of flights
• Fast aircraft turnaround times, to maximize aircraft utilization and employee efficiency
• Flight lengths of 600 km to 2,500 km (under four hours), operating ranges that are particularly efficient for short-haul LCC
• Single fleet types, which reduce maintenance and training costs
• Young fleets, leading to reduced aircraft maintenance costs when compared to fleets of older aircraft.
• Medium capacity, jet aircraft (approximately 100 to 180 seats)
• Single-class service, with higher seat densities than most similarly sized economy class cabins, resulting in the spreading of costs across a greater number of available seats to be sold, lowering overall average costs per passenger
• Limited complimentary offerings. Catering (food/beverages) and checked baggage may be available only on a paid basis.
• Limited cargo services, as they can add time to aircraft turnaround times
• Flexible, entrepreneurial corporate cultures that may not exist at larger, entrenched carriers, that can result in more efficient operations and lower employee costs

2.2.2 Financial Characteristics • Lower-than-average airport costs. Secondary airport charges in many countries are often lower than those of larger, primary or hub airports. In addition, minimal congestion at secondary airports optimizes aircraft turnaround times.
• Lower-than-average airfares. Average airfares are usually lower at LCCs than at full-service carriers, enabled by their lower cost structures. Low passenger airfares at LCCs are also partially offset by their higher-than-average aircraft occupancy levels. Some LCC tickets are fully non-refundable and non-rebookable if the passenger cannot travel as originally planned.
• Ancillary revenues. LCCs usually charge for drinks and meals and some have only limited free checked baggage allowances. Some LCCs add surcharges to their airfares for items that would normally be covered as a normal operating expense (such as ticketing and administration fees). LCCs are often aggressive in the sale of ancillary travel products.

8. INDUSTRY OVERVIEW (cont’d) , Independent Report of the Aviation Consultant: AirAsia X Berhad ;’;’s ;J”’Js.’ • Lower-than-average salary and benefits costs. New and fast-growing LCCs will have a high share of new employees, while long-standing carriers will have a high share of senior employees and associated salaries and benefits. Additionally, LCCs have shown higher productivity rates and therefore lower employee cost structures overall..
• Low cost ticket distribution methods. A reliance on internal reservations systems, electronic tickets, and the Internet, instead of privately owned reservations systems, paper tickets and travel agents or city ticket offices, significantly lowers LCC ticket sales costs.

2.3 LCC Development in Southeast Asia The development of the LCC model in Asia first started in Southeast Asia. As a result of the liberalized aviation policies, LCC operators began to develop, with LCC bases being established in other Southeast Asia countries, such aslndonesia, Singapore, and Thailand. 2.4 “rhe Long-Haul Lce Model In recent years, the LCC model has started to find traction in the long-haul market with the launch of several long-haul, low cost carriers (long-haul LCe). The low cost model can be challenging to apply to the long-haul market, but recently carriers have found ways to overcome many of the challenges. Long-haul flying is generally considered flights over four hours and typically involves an international flight and a wide-body aircraft. The long-haul market has several operating characteristics that are different than short-haul flying and contribute to the challenges of operating in that market with a low cost model. Some of these challenges are outlined below: 2.4.1 Transfer Feed Typically, long-haul routes depend on transfer feeds to/from other flights, typically through the use of a hub and spoke operation. For example, Malaysia Airlines operates a hub-and-spoke operation. Flights from various origins (ie, spokes) converge at the carrier’s hub, KLlA, where passengers transfer to flights bound to various destinations (ie, spokes). Recently launched long­haul LCCs have succeeded in part due to their affiliations with parent companies and partners that provide such a feed. 2.4.2 Supply/Demand Balance Many long-haul routes between major capitals are dominated by full-service carriers serving business and other travellers who may be less sensitive to price. However, there are many long­haul niche markets where price sensitivity can result in strong demand with the entrance of a low cost carrier. 2.4.3 Cost/Revenue Balance Technological changes in entertainment software and hardware result in many customers on airplanes carrying their music, movies, and other entertainment options on phones or other similar devices. As a result, long-haul LCCs have been able to attract customers with lower fares,

8. INDUSTRY OVERVIEW (cont’d) ;~”~l¥:’~ Independent Report of the Aviation Consultant: AirAsia X Berhad ~.~~, while charging for ancillary services such as food and entertainment. Long-haul LCCs have achieved implementation and growth in ancillary revenue above and beyond basic ticketing revenue to achieve profitable yields despite lower fares. 2.4.4 Sales and Marketing Costs Airline spending on these activities typically comprise approximately 3%-5% of operating revenues.
2.4.5 Airport and Ground Handling Costs High-density seating configurations and strong load factors (the share of available seats occupied by passengers) enable LCCs to spread fixed costs, such as certain airport and ground handling costs, across a greater number of passengers. In addition, LCCs and other carriers often benefit from short-term airport incentive programs as well as often operating from no-frills airport facilities that offer low terminal building charges to carriers.
2.4.6 Capital Airline operations have high fixed costs and highly fluctuating revenues and costs. Due to pressures to keep fares low, airlines must have sufficient working capital and capital backing to be successful. Long-haul LCCs that have entered and have made plans to enter the market recently are tied to successful airlines that have shown their ability to achieve sustained profitability and raise capital from investors.
2.4.7 Competition Competition from full-service carriers on the long-haul routes has been a challenge to overcome. However, significant liberalization of the airline industry, particularly in ASEAN nations, has led to the ability of LCCs to enter long-haul routes more selectively, with a stronger position relative to established carriers. 2.5 Long-Haul LCC Operations Although several airlines such as Ryanair in Europe have been rumoured to have plans for long­haul service, only four airlines are currently operating, or have announced firm plans to operate, true low cost, long-haul operations. Long-haul services on wide-body aircraft to/from destinations in Southeast Asia are operated by the following carriers13: • AirAsia X, which operates wide-body Airbus A330-300 aircraft between Kuala Lumpur and destinations in Australia, China, Japan, Nepal, Saudi Arabia, South Korea, and Taiwan. 13 During the week of 4-10 March 2013. Source: The S-A-P Group, based on analysis of OAG data, March 2013.

8. INDUSTRY OVERVIEW (cont’d) .~ Independent Report of the Aviation Consultant: AirAsia X Berhad • Jetstar Airways, which operates wide-body Airbus A330-200 aircraft to destinations in Australia, China, Indonesia, Japan, New Zealand, Singapore, Thailand, and the United States.
• Scoot, which currently operates Boeing B777-200 aircraft between Singapore and destinations in Australia, China, Japan, Taiwan, Thailand, and, with effect from June 2013, South Korea.
• Cebu Pacific, which plans to begin offering long-haul LCC services on October 7th 2013 with flights to Dubai using Airbus A330-300 aircraft.

 

8. INDUSTRY OVERVIEW (cont’d) i.*’ Independent Report of the Aviation Consultant: AirAsia X Berhad .~ .;~’J. :\~’~:~ .. All four of these airlines are based in Asia and each currently employ or plan to employ wide­body aircraft for their operations. LONG-HAUL LCC OPERATIONS Key Characteristics Long-Haul Low-Cost Carriers Jetstar  AirAsia X  Scoot  Cebu Pacific  (long-haul  (planned)  operations)
Start of operations  2006  2007  2012  2013 (planned)  Primary  Qantas  Aero VenturesSdn  Singapore  JG Summit Holdings  shareholder(s)  Airways  Bhd and AirAsia  Airlines  Berhad  Aircraft types  Airbus A330-200  Airbus A330-300  Boeing B777-200  Airbus A330-300  Boeing B787  Airbus A340-300  Boeing 787  (ordered)  (ordered)  Airbus A350-900  (ordered)  (ordered)
——————————————————————————————–~———————_. Current fleet size 11 aircraft 13 aircraft (a) 4 aircraft none Seats per 303-310 seats 327-377 seats 402 seats 436 seats aircraft (planned) —————————————————————————————-~—————————. Seats in fleet 3,380 4,801 1,608 . 872 (b) (estimated) (current) (current) (a) (current) (planned for 2013) ———————————————————_.~——————————————————–­Fleet orders! 14 aircraft 32 aircraft 21 aircraft 8 aircraft (b) planned deliveries (a) (planned) Main base of Australia Malaysia Singapore Philippines operations (planned) Route focus Australia, China, Australia, China, Australia, China, Australia, (current) Indonesia, Japan, Japan, Nepal, Saudi Japan, Taiwan, Middle East and New Zealand, Arabia, South Korea, and Thailand possibly the US Singapore, Thailand, and Taiwan and Europe and the US (planned) Source: Various sources, including airline websites. (a) As of the date of the report. Seats in fleet assume 377 seats on all A330 aircraft, including ones that are delivered in April and May 2013.
(b) Operation of two aircraft-providing combined capacity of 872 seats-are planned for 2013. Atotal of eight aircraft-for a projected total of 3,488 seats-are planned to be in operation by 2016.

8. INDUSTRY OVERVIEW (cont’d) “ff’~’ Independent Report of the Aviation Consultant: AirAsia X Berhad 21 ~~; ~/’.”\i ~~ 2.6 Long-Haul LCC Market Potential Based on the rapid growth in the market for short-haul LCCs in Asia and other regions, the potential size of the long-haul LCC market could allow for significant growth According to Airbus, long-haul markets (full-service carrier and LCe) are growing faster than short-haul markets, with a CAGR of 3.4% from 2000 to 2010 for long-haul RPK compared to a CAGR of 2.5% during the same period for short-haul RPK. 14 90% of long-haul traffic includes one of 39 mega-cities (defined by Airbus as cities with over 10,000 daily long-haul passengers in 2010).15 The number of long-haul trunk routes is expected to triple over the two decades.’6 As a result, hundreds of secondary city-pairs that have demand for origin-destination services are instead served by connections through another city’s hub airport. This situation points to significant long-term potential demand for increased long-haul service as demand between these secondary cities grows and as socio-economic changes will enable more people in these secondary cities to fly. S-A-P projects that the long-haul LCC market will continue to grow. Europe’s Ryanair made plans in the past to initiate long-haul services but has put those plans on hold until the carrier believes it can be done profitably and preferably using Airbus A350 or Boeing B787 aircraft.’7 Virgin Australia has operated low-cost international operations in the past but has since moved to a hybrid/full-service model that offers more amenities to passengers, but that also generates increased operating costs. LCC operations have grown in most short-haul markets. Airbus Industries projects that LCC traffic will represent 20% of total global traffic by 2031’8, with domestic ASEAN traffic potentially having over 60% of the short haul market comprised of LCC traffic. 19 According to Airbus, the higher relative share of domestic traffic in the Asia-Pacific LCC market in 2011 contrasts with the relative predominance of intra-regional traffic in the European LCC market and suggests that if Europe can be the benchmark of a liberalised LCC market, there is large potential for increasing intra-regional integration in Asia-Pacific.20 14 Airbus Global Market Forecast 2011, p.23 15 Airbus Global Market Forecast 2011, p.24 ‘6 Airbus Global Market Forecast 2012, pAO 17 Irish Examiner, February 8, 2010 18 Airbus Global Market Forecast, 2012, p.59 ‘9 Airbus Global Market Forecast, 2011, p.53 20 Airbus Global Market Forecast, 2012, p.76 8. INDUSTRY OVERVIEW (cont’d) i..§’ Independent Report of the Aviation Consultant: AirAsia X Berhad 22 ~~-… ~{:’$~.:’~~:~ 2.7 Long-Haul LCC Strategic Factors 2.7.1 Competition/Substitution Effects Long-haul LCC routes offer fewer alternatives in terms of mode of transportation. Because distances are great, and often include large stretches over water, travel alternatives on long-haul LCC routes potentially involve multiple and slower modes of transportation. Therefore, other full-service carriers are the primary competition for long-haul LCCs, even though the two models offer different types of products on multiple levels and have very different fare structures. 2.7.2 Non-Fuel Costs (CASK Excluding Fuel) Where available, the CASKs (excluding fuel) of Asia-Pacific full-service carriers and LCCs that report this da1a are shown below. CASK (EXCLUDING FUEL) Asia-Pacific LCCs and Other Carriers That Report This Data US Cents; FY ending in 2011 and 2012 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Skymark Ar’nes .ii.iiilii.ii.~7~.6–‘—-‘—“‘——‘ spiceJet Tiger Airways ThaiAirAsia Cebu PacfficAir Indonesia AirAsia AirAsia AirAsia X Average (Asia-Pacific LCes shown above) •••• 3.3
ANA Group

7.3  6.1  5.9  5.9 5.7
15.1 Japan Ai~ines Group 12.3 Korean Air China Eastern Air’nes AirChina Singapore Airlines Group Cathay Pacife Group
5.6 China Southern Airlines Group ~:::::~~. Thai Airways International 5.3 Average (forthe 9 Asia-Pacific Full-Service Carriers shown above thalreport) 7.7 Source: The 8-A·P Group, based on industry sources, Apri 2013, and AirAsia Group. Note: For soma carriers, Ihe inancial amounls represent group level dafa Ihat may include inancial amounls ofac!vilies Ihatare unrelated tl airline operali:>ns and Ihese may be signiicanl CASK were cak:ulated as operating expenses divided by ASK
8. INDUSTRY OVERVIEW (cont’d) ,~;t~ Independent Report of the Aviation Consultant: AirAsia X Berhad ~:.::~~..l~’.”‘· 2.7.3 ASK per Employee Where available, the ASK per employee of carriers that report this data are shown below. ASK PER EMPLOYEE Global LCCs and Asia-Pacific Full-8ervice Carriers That Report This Data FY ending in 2011 and 2012
ASK  ASK (rrillions)  Global low-Cost Carriers  (rrillions)  Errployees  per Errployee  Sou1hwestAirlines Co.  206,173  45,861  4.5  Ryanair Holdings pic  114,464  8,438  13.6  easyJet pic  72,182  8,206  8.8  JetBlue Airways Corporation  64,481  12,070  5.3  GOl Linhas Mreas Inteligentes SA  50,275  20,525  2.4  Virgin Australia Holdings Lirriild  39,800  8,367  4.8  Jetlar! Jetlar Asia (Australia, Singapore)  35,746  4,813  7.4  AirAsia Berhad  26,074  5,137  5.1  SpirilAirlines  18,254  3,033  6.0  SpiceJet lid.  13,702  4,684  2.9  Air Arabia PJSC  13,000  n.a.  n.a.  Cebu Air, Inc.  12,369  n.a.  n.a.  Tiger Airways Holdings Lirrited  10,447  n.a.  n.a.  Thai AirAsia (Thailand)  9,199  2,026  4.5  Indonesia AirAsia (Indonesia)  8,667  n.a.  n.a.  Skymark Airlines Inc  7,734  n.a.  n.a.  Average (for the reporting carriers above)  5.9
Asia-Pacific Full-Service Carriers Air China Linited  151,590  24,474  6.2  China Southern Airlines Co. lid.  151,064  71,696  2.1  China Eastern Airlines Corp. ltJ.  127,891  59,872  2.1  Cathay Pacific Airways ltd.  126,340  29,000  4.4  Singapore Airlines ltd. (Group)  119,315  22,514  5.3  Oanlas Airways Lirrited (Excl. Jetlar)  97,535  26,936  3.6  All Nippon Airways Co. ltJ. (Group)  86,564  32,731  2.6  Korean Air Lines Co. lid. (Slandalone)  84,285  n.a.  n.a.  Thai Airways Inilrnational Public Corrpany Lirrited  78,533  n.a.  n.a.  Malaysian Airline System Bhd (Group)  55,874  20,000  2.8  China Airlines, lid.  40,773  10,520  3.9  Asiana Airlines, Inc. (Group)  39,745  n.a.  n.a.  Eva Airways Corp.  30,800  5,807  5.3  Average (for the reporting carriers above)  3.8  Ai rAs ia X  16,231  1,300  12.5  Premium over Global Low Cost Carriers  2.1x  Premium over Asia-Pacific Full Service Carriers  3.3x
Source: The S-A-P Group, based on industry sources, March 2013. 8. INDUSTRY OVERVIEW (cont’d) :t.l\~’;¥:: Independent Report of the Aviation Consultant: AirAsia X Berhad ~~,~~,.~ .,~.. ·.4 2.8 Comparison of Key Performance Data for Full-Service and Low-Cost Carriers Key operating and performance indicators are presented below for LCC and full-service carriers that report this data for FY ending in 2011 and 2012. KEY FINANCIAL AND OPERATING PERFORMANCE FuU-Bervice and Low-COst Carriers That Report This Data FY ending in 2011 and 2012 US$ rrillions % us cents Passenger Operalons US$ rrillions RASK-Operating Operating Operating Operating CASK RPKs ASKs Passenger Passengers Aircraft Revenues FY .=Lo::.w’-‘CO=stc::C.::ar”‘rie::.rs=–________ Revenue ~ Margin RASK CASK Spread (rrillions) (rrillions) load floor (rrillions) in Fleet per Aircraft ending Asia-Pac:ifc 1  Jetslar/Jels1ar Asia  $ 3,008  $ 209  7.0’10  7.37  6.85  0.51  32,353  40,830  79.2%  18.7  90  $ 33.4  Jun-12  2  AirAsia  $ 1,623  $ 376  23.2’10  5.72  4.39  1.32  22,731  28,379  80.1%  19.7  64  $ 25.4  Dec-12  3  Skymark Airlines  $ 1,018  $ 236  23.2%  13.16  10.11  3.05  6,139  7,734  79.4%  6.3  26  $ 39.2  Mar-12  4  spreJet  $ 836  $  (110)  -13.1%  6.69  7.57  (0.88)  9,816  12,500  78.5%  9.0  40  $ 20.9  Mar-12  5  Cebu Pacific Air  $ 785  $ 82  10.4’10  6.35  5.68  0.66  10,531  12,369  85.1%  11.9  40  $ 19.6  Dec-ll  6  AirAsia X  $ 637  $ 16  2.5’10  3.88  3.74  0.14  13,601  16,231  83.8%  2.6  11  $ 57.9  Dec-12  7  Thai AirAsia  $ 624  $ 65  10.4’10  5.94  5.33  0.62  8,618  10,499  82.1’10  8.3  27  $ 23.1  Dec-12  8  Air Do  $ 547  $ 45  8.2’10  n.a.  n.a.  n.a.  n.a.  n.a.  n.a.  n.a.  n.a.  n.a.  Mar-12  9  Tiger Airways  $ 495  $  (67)  -13.5%  4.73  5.37  (0.64)  8,494  10,447  81.3%  5.5  34  $ 14.5  Mar-12  10  Indonesia AirAsia  $ 465  $ 38  8.1 %  5.08  4.67  0.41  7,012  9,152  76.6’10  5.8  22  $ 21.1  Dec-12  Average (Asia-Pacific Top 10 Reporting)  $ 1,004  $ 89  6.6%  6.55  5B7  0.58  13,255  16,460  80.7%  9.8  39  $ 28.3  Average (&lrope Top 10) (a)  $ 2,865  $ 176  5.2%  8.11  8.01  0.38  32,184  38,210  83.0%  23.6  94  $ 32.5  Average (North AmerIca Top 6)  $ 4,794  $ 253  7.2%  7.83  7:JJj  0.57  47,986  58,729  83.4%  29.7  187 $ 25.7  FuU-Servre Carriers  Asia-Pacific  1  ANA Group  $17,897  $ 1,230  6.9’10  20.67  19.25  1.42  58,413  86,564  67.5’10  44.9  187 $ 95.7  Mar-12  2  Air China  $ 15,260  $ 971  6.4%  10.07  9.43  0.64  123,499  151,590  81.5’10  48.7  271 $ 56.3  Dec-ll  3  Japan Airlines Group  $15,191  $ 2,584  17.0’10  19.34  16.05  3.29  52,578  78,560  66.9%  35.8  215 $ 70.7  Mar-12  4  China Soulhern Airlines Group  $14,017  $ 675  4.8’10  9.28  8.83  0.45  122,344  151,064  81.0%  63.7  361 $ 38.8  Dec-ll  5  China Easern Airlines  $ 12,943  $ 647  5.0’10  10.14  9.63  0.51  100,744  127,700  78.9%  68.7  248 $ 52.2  Dec-ll  6  Calhay Pacific Group  $ 12,766  $ 230  1.8’10  9.85  9.67  0.18  103,806  129,595  80.1%  29.0  176 $ 72.5  Dee-12  7  Singapore Airlines Group  $11,896  $ 229  1.9’10  9.97  9.78  0.19  92,293  119,315  77.4%  17.2  100 $ 119.0  Mar-12  8  Qanlas Group (exel. Jelslar)  $11,024  $  (22)  -0.2’10  11.18  11.20  (0.02)  79,339  98,593  80.5%  28.0  218 $ 50.6  Jun-12  9  Korean Air  $ 10,676  $ 356  3.3%  12.67  12.24  0.42  64,857  84,285  76.9%  23.3  147 $ 72.6  Dec-ll  10  Thai Airways Inilrnalonal  $ 6,361  $  (80)  -1.3%  8.10  8.20  (0.10)  55,267  78,533  70.4%  18.4  86  $ 74.0  Dec-ll  Average (Asia-Pacific Top 10 Reporting) $12,803  $ 682  4.6%  12.13  11.43  0.70  85,314  110,580  76.1%  37.8  201 $ 70.2  Average (Europe Top 10)  $12,472  $ 97  1.11%  lOSS  10.86  0.09  83,068  104,282  78.0%  33.4  220 $ 57.8  Average (North AmerIca Top 8)  $ 16,728  $ 552  5.2%  9.30  8.83  0.47  143,584  172,815  83.2%  71.9  610 $ 28.0
Source: The S-A-P Group, based on induslry sources, April 2013, and AirAsia Group. Carrier rankings (eg, ‘Top 10′) based on operating revenues. Noil: For SOTre carriers, Ihe financial arrounts represent group level dala Ihat may include financial aroounts of activilies Ihat are unrelaed b airline operations and Ihese may be significant RASK were calculated as operating revenue divided by ASK. CASK were calculaild as operating expenses divided by ASK.
(a) Excludesoperating profit, operating margin, CASK, and RASK-CASK spread lJr WiZZ Air. Europe LCCs include: Ryanair, Air Berlin, EasyJe\ Thomson Airways, Norwegian, Aer Lingus, Vueling Airlines, Will Air, Icelandair Group, and Je12. Norlh ATrerica LCCs include: SoulhwestAirlines, JetBlue Airways, WlsLJetAirlines, Spir~Airlines, Virgin Arrerica, and AllegiantAir. Europe Full-Service Carriers Include: Luflhansa Group, Air France-KLM Group, International Airlines Group, Scandinavian Airlines (SAS), Aeroflot Russian Airlines,
Alilalia, Virgin Alantic Airways, TAP Por1ugal, Transaero Airlines, and Finnair. Norlh Arrerica Full-Service Carriers include: United Continenlal Holdings, Della Nr Lines, Arrerican Airlines, US Airways, Air Canada, Alaska Air Group, RepUblic Airways Holdings, and Hawaiian Airlines.
8. INDUSTRY OVERVIEW (cant’d) .:(.!¢t; Independent Report of the Aviation Consultant: AirAsia X Berhad “::J..’~””’ AVERAGE AGE OF W1DEBODY FLEET AND  NUMBER OF A-330s AND SEAT CAPACITIES OF AIRBUS A330-300  Asia-Pacific Carriers  A330-300 Seats  Wdebody  Number of  Premium  fleet age  Airbus  Economy  (average  A330s  First  Business  and  Asia-Pacific Carriers  years)  in Fleet  Class  Class  Economy  Total  AirAsia X(Malaysia) (a)  4.9  9  377  377  China Eastern Airline.s (China)  5.1  28  38  260  298  Jetstar Airways (Australia)  5.8  11  38  265  303  China Southern Airlines (China)  6.3  24  4  48  208  260  Singapore Airlines (Singapore)  7.2  19  30  255  285  Air China (China)  8.6  34  36  275  311  EVA Air (Taiwan)  8.8  14  30  279  309  China Airlines (Taiwan)  9.0  21  35  276  311  Malaysia Airlines (Malaysia)  9.5  22  36  247  283  Japan Airlines (Japan)  9.6  Cathay Pacific (SAR China)  10.0  36  42  239  281  Korean Air (South Korea)  10.6  23  6  22  252  280  ANA Group (Japan)  10.9  Asiana (South Korea)  11.0  12  30  260  290  Thai Airways Inri (Thailand)  11.7  25  36  263  299  Qantas (Australia)  12.2  19  30  267  297  Average for carriers shown above (a)  8.8  21  13  35  266  299  Average for carriers shown above (exel. AirAsia X)  9.1  22  13  35  251  293  Source for age and fleet size: Airfleets.net database, as of March 2013.  Source for seat capacities: Various sources, based on S-A-P analysis. March 2013.  Note: Averages exdude aircraft and cabin seat capacities not operated by the carriers.  (a) Does not include A340 aircraft.
8. INDUSTRY OVERVIEW (cont’d) ;:t’~h Independent Report of the Aviation Consultant: AirAsia X Berhad ~~,~~~ .;e.. ‘­AVERAGE ON-TIME PERFORMANCE Asia-Pacific Carriers 12-Month Periods Noted  Asia-Pacific Low-Cost Carriers  On-Tirre Perbrmance: 12 rronth period  Period: 12 rronths ending
1  Je1star/Je1star Asia  76.6%  Jun-12  2  AirAsia  88.0%  Dec-11  3  Skymark Airlines  n.a.  Mar-12  4  spiceJet  n.a.  Mar-12  5  Cebu Pacific Air  76.7%  Dec-11  6  AirAsiaX  85.0%  Dec-12  7  Thai AirAsia  84.0%  Dec-11  8  Air Do  n.a.  Mar-12  9  Tiger Airways (Singapore operations only)  78.2%  Mar-12  10  Indonesia AirAsia  n.a.  Dec-11  Average (Asia-Pacific Top 10 Reporting)  81.4%  Full-Service Carriers
1  ANA Group  90.7%  Mar-12  2  Air China  n.a.  Dec-11  3  Japan Airlines Group  n.a.  Mar-12  4  China Southern Airlines Group  n.a.  Dec-11  5  China Eastern Airlines  n.a.  Dec-11  6  Cathay Pacific Group  77.4%  Dec-12  7  Qantas Group (excl. Je1star and Qantas Link)  84.4%  Jun-12  8  Singapore Airlines Group  n.a.  Mar-12  9  Korean Air  n.a.  Dec-11  10  Thai Airways International  n.a.  Dec-11  Average (Asia-Pacific Top 10 Reporting)  84.2%  Source: Annual repor1s for the carriers shown.  Carrier rankings (eg, “Top 10”) based on operating revenues br carriers that report

 

8. INDUSTRY OVERVIEW (cont’d) .il’£: Independent Report of the Aviation Consultant: AirAsia X Berhad -,$’1 2.8.1 Aircraft Utilization Aircraft utilization is a major driver of unit costs that differs structurally between short-haul and long-haul operations. AVERAGE AIRCRAFT UTILIZATION (HOURS PER DAY) Asia-Pacific Carriers That Report This Data
FY2011 and FY2012  AirAsia X  2.0 4.0 6.0 ~iiIii ~  8.0  10.0  12.0 14.0 16.0 18.0IJiiiiii_—‘—-‘16.2  CebuPacificAir  AirAsia  Thai AirAsia  Tiger Airways  ••••••••••  9.0  Average (for the LCCs shown above)  12.6  KoreanAir  ••••••••••••••  12.3  Cathay Pacific Group  ••••••••••••••  12.0  Thai Airways Intemational  ••••••••••••••  11.9  China Southern Airlines Group  •••••••••••  9.8  China Eastem A~lines  •••••••••••  9.8  AirChina  •••••••••••  9.6  Average (forthe Full-Service Carners shown above that report)  10.9
Source: The S-A-P Group, based on indush”y sources, March 2013, and AirAsia Group. Carriers shown reflect availablily of data.

2.8.2 Baggage Mishandling Rates In 2007, the number of mishandled bags per 1,000 passengers was 18.88. In 2012, the rate was 218.83 bags per 1,000 passengers. According to lATA, the cost to an airline for each mishandled bag is approximately US$l 00. 21 Source: Baggage Report 2013, SITA. 8. INDUSTRY OVERVIEW (cant’d) ;~l:t; Independent Report of the Aviation Consultant: AirAsia X Berhad •.:-$-, 2.8.3 Skytrax Ratings Skytrax compiles survey ratings and assigns “star” levels to carriers around the world. SKYTRAX STAR RATING, AVERAGE CUSTOMER REVIEW RATING, AND NUMBER OF REVIEWS RECEIVED Skytrax Skytrax Average Skytrax star customer Full-service carriers rating review rating Surveys Singapore Airlines (Singapore) Asiana (South Korea) ANA Group (Japan) Qantas (Australia) Cathay Pacific (SAR China) Malaysia Airlines (Malaysia) Japan Airlines (Japan) Thai Airways Inri (Thailand) EVA Air (Taiwan) China Airlines (Taiwan) Korean Air (South Korea) Air China (China) China Southern Airlines (China) China Eastern Airlines (China)
Average (for the carriers shown above) Low-cost carriers 5-Star 8.7 1,288 5-Star 8.7 488 4-Star 8.0 237 4-Star 7.8 1,437 5-Star 7.8 1,110 5-Star 7.8 868 4-Star 7.0 282 4-Star 6.9 920 4-Star 6.8 448 4-Star 6.8 285 4-Star 6.0 380 4-Star 5.0 357 4-Star 5.0 348 3-Star 5.0 330 4-Star 7.0 627 Skymark Airlines (Japan) n.a. 8.0 10 IndiGo (India) n.a. 7.9 58 AirAsia X 3-Star 7.6 189 Thai AirAsia (Thailand) 3-Star 7.6 70 AirAsia (Malaysia) 3-Star 6.8 534 SpiceJet (I ndia) n.a. 6.1 36 Jelstar/Jetstar Asia (Australia, Singapore) 3-Star 5.5 72 Lion Air n.a. 5.2 48 Cebu Pacific Air (Philippines) 3-Star 5.0 121 Spring Airlines (China) 3-Star 5.0 21 Tiger Airways (Singapore, Australia) 3-Star 3.7 501 151Average (for the carriers shown above) 3-Star 6.2 Source: Skytrax, March 2013.

8. INDUSTRY OVERVIEW (cont’d) ~;lf Independent Report of the Aviation Consultant: AirAsia X Berhad • .$ ~ 2.9 Ancillary Revenues The financial reports of 108 airlines were reviewed and 50 of these carriers reported their ancillary revenue performance. S-A-P estimates that passengers on long-haul flights generally purchase a greater number of ancillary products than do passengers on short-haul flights. ANCILLARY REVENUES AS A SHARE OF TOTAL REVENUES AND PER PASSENGER (IN US$) Top 10 Airlines Reporting (LCC and Full-Service Carriers)
2010 and 2011 Ancillary Revenues as a % ofTotal 2010  2010  2011  2011  Rank  Airline (Primary Base)  Results  Rank  Airline (Primary Base)  Results  1  Allegiant Air (USA)  29.2%  1  Spir~Airlines (USA)  33.2%  2  Spirit Airlines (USA)  22.6%  2  Je12.com (U K)  27.1%  3  Ryanair (Ireland)  22.1%  3  Allegiant Air (USA)  27.0%  4  Je12.com (UK)  21.0%  4  easyJet (UK)  20.8%  5  Tiger Airways (Singapore)  20.5%  5  Ryanair (Ireland)  20.5%  6  easyJet(UK)  19.2%  6  Tiger Airways (Singapore)  19.1%  7  AirAsia (Malaysia)  18.7%  7  AirAsia Group (a)  17.8%  8  AirAsia X(Malaysia)  18.4%  8  Flybe (UK)  17.0%  9  Flybe (UK)  15.7%  9  AirAsia X(Malaysia)  16.5%  10  Un~ed Continental (USA)  14.7%  10  Jetstar (Australia)  15.3%
Ancillary Revenues per Passenger (US$) 2010  2010  2011  2011  Rank  Airline (Primary Base)  Revenues  Rank  Airline (Primary Base)  Revenues  1  AirAsia X(Malaysia)  $ 38.92  1  Qantas Airways (Australia)  $ 50.82  2  Qantas Group (Australia) (b)  $ 37.00  2  Spirit Airlines (USA)  $ 41.75  3  Uniled Continental (USA)  $ 34.32  3  Je12.com (UK)  $ 41.37  4  Je12.com (UK)  $ 34.24  4  AirAsia X(Malaysia)  $ 40.09  5  AliegiantAir (USA)  $ 32.86  5  Un~d Continental (USA)  $ 36.47  6  Spirit Airlines (USA)  $ 25.16  6  Allegiant Air (USA)  $ 34.00  7  Aer Lingus (Ireland)  $ 24.91  7  Alaska Airlines (USA)  $ 24.61  8  Alaska Airlines (USA)  $ 23.68  8  Jetstar (Australia)  $ 23.35  9  Delta Air Lines (USA)  $ 22.75  9  Aer Lingus (I reland)  $ 22.02  10  Flybe (UK)  $ 20.99  10  Flybe (UK)  $ 21.92
Source: Yearbook of Andllary Revenue Results, The Ideaworks Company, 2012, and AirAsia Group. (a) Ideaworks Company does not disclose if1he AirAsia Group amount incorporales AirAsia X performance.
(b) Includes Jetstar.

8. INDUSTRY OVERVIEW (cont’d)
Independent Report of the Aviation Consultant: AirAsia X Berhad 3 REGULATORY ENVIRONMENT 3.1 Airline Regulation Structure in Malaysia Aviation in Malaysia is regulated by the Civil Aviation Act of 1969 and Civil Aviation Regulations of 1996, which govern the registering and marketing of aircraft, the licensing and issuance of certificates of operation for air service, and the operation of airlines and aircraft. The Department of Civil Aviation in Malaysia (DCA) was established as an agency under the Ministry of Transport (MOT) Malaysia to provide safe, efficient, and orderly flow of air transportation, and to regulate aviation activities in Malaysia. The DCA in turn ensures compliance to standards and recommended practices of the International Civil Aviation Organization (ICAO). 3.2 Liberalization of the Aviation Industry Studies have shown that the liberalization of air services can lead to new and better air services, thereby increasing trade in airlines services, gains in consumer welfare and economic growth. Liberal aviation agreements allow for increased competition on routes and lower airfares, thereby stimulating additional activity. Traffic growth subsequent to liberalization of air services agreements between countries typically averaged between 12% and 35%, significantly greater than during years preceding liberalization. In a number of situations, growth exceeded 50%, and in some cases reached almost 100% of the pre-liberalization rates. The creation of the Single European Aviation Market in 1993 led to an average annual growth rate in traffic between 1995 and 2004 that was almost double the rate of growth in the years 1990 to 1994. Countries across the Asia Pacific region and in particular, Southeast Asia, are liberalizing broadly the international bilateral agreements that can, in their extreme, regulate items such as the precise number and type of carriers that can operate, the number of total seats that can be provided, and the levels of airfares that can be charged. The December 2008 lifting of restrictions on the Kuala Lumpur-Singapore route offers a good example of the impact that the easing of aviation market restrictions can have~Capacity (as measured by weekly flight frequencies, according to OAG) on this route for the month of September 2009 increased 72.5% as compared to September 2008 levels. 3.3 ASEAN Member States and Open Skies The trend of deregulation and liberalization in Asia is expected to continue, particularly amongst countries that are part of ASEAN. ASEAN was established in 1967 with initially five member countries: Indonesia, Malaysia, Philippines, Singapore, and Thailand. Its membership increased over time with Brunei joining in 1984, followed by Vietnam in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. ASEAN was formed to promote regional peace, prosperity, and stability.
8. INDUSTRY OVERVIEW (cont’d) ~,l\, Independent Report of the Aviation Consultant: AirAsia X Berhad ~~~., .~.”. {o=’1~~: -,\~ ..~. 3.3. 1 Within ASEAN Subsequent to an aviation liberalization road map adopted by ASEAN member states in 2004, in November 2010, the member states reaffirmed their collective commitment to building an ASEAN Single Aviation Market by 2015. The November 2010 ASEAN Multilateral Agreement on the Full Liberalisation of Passenger Air Services (IV1AFLPAS) and its two Protocols provides for further expansion of the scope of the ASEAN Multilateral Agreement on Air Services (MAAS) to include other ASEAN cities. The agreement and its protocols provides for designated airlines of a Member State to provide air services from any city with international airports in its territory to any city with international airports in the territory of the other Member States and vice-versa with full third, fourth, and fifth freedom traffic rights. 3.4 Open Skies Agreements with Malaysia Malaysia has open skies agreements for passenger services with several countries, including Australia, Austria, China, Japan, Lebanon, Morocco, New Zealand, Philippines, Qatar, South Korea, Sri Lanka, Taiwan, Thailand, and the United States.22 3.5 Environmental Regulations The European Union (EU) Emissions Trading System was launched in 2005 and was created to control greenhouse-gas emissions in an effort to combat climate change. In January 2012, the EU decided to make all airline flights into the EU subject to the trading scheme. As such, airlines flying into the EU are required to buy tradable carbon credits. The airline industry and some countries have resisted the new scheme as the carbon credits must be purchased for an entire flight, rather than just the portion in EU skies. The EU, however, argues that in the absence of a global agreement on airline emissions, it was forced to go ahead with its own scheme, which includes an exemption clause for countries with “equivalent measures”. Other countries around the world may adopt similar environmental regulations, which could increase airline operating costs. 22 Source: The S-A-P Group, from various references. Specific destinations in a country may be precluded from the open skies arrangements.

 

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