Global Airlines - Credit Suisse

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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24 February 2015

Global

Equity Research

Global Airlines Connections Series

More food for thought on Gulf carrier threat

■ Long term theme of Gulf price competition requires bold action: AF

KLM (UP, TP €6.50) management hosted a sell-side analyst dinner last night

where intense competition from Gulf carriers proved a key theme. With

APAC unit revenue declining yoy for six of the past eight quarters, AF

increasingly feels it needs the support of multiple partners to achieve

acceptable returns in the fragmented market. This also emphasises the

challenges faced by LHA (UP, TP €12.30). Conversely, Transatlantic market

conditions seem stronger than 2014 with mgt confident, which we expect to

help IAG (OP, TP 678p, CS Focus List), despite persistent LatAm softness.

■ Race to partner up – potentially plentiful appetite for Singapore's hand:

Beyond current JV partners China Southern/China Eastern, necessary as

Gulf carriers increasingly soften China pricing, AF said that it seeks to agree

a JV with Etihad, and supplement this with another JV with a Southeast

Asian carrier like Singapore Airlines (N, TP S$12.20), Garuda (UP, TP

Rp485) or Malaysia. Garuda seems most plausible in our view as a

SkyTeam partner. We re-iterate that we see deepening IAG-Qatar Airways,

AF-Etihad partnerships potentially compelling LHA to do a JV with STAR

alliance partners SQ or Turkish (OP, TP TL8.00).

Figure 1: Continued aggressive Gulf carrier capacity growth to 2020 – more

credible defensive strategies essential

0%

4%

8%

12%

16%

20%

Emirates Etihad Qatar

Implied 6-year fleet CAGR Likely annual seat growth

Source: Company data, Credit Suisse estimates

■ Relative valuations in Europe continue to suggest IAG re-rating: We

continue to see AF/LHA challenges as framing IAG's relative strength. While

AF/LHA strive to repair/protect balance sheets, IAG's imminent double-digit

FCF yields illustrate its superior position. Despite this, IAG currently trades

on a 2015E EV/EBITDAR multiple of 5.9x with AF and LHA at 5.5x.

The Credit Suisse Connections Series

leverages our exceptional breadth of

macro and micro research to deliver

incisive cross-sector and cross-border

thematic insights for our clients.

Research Analysts

Neil Glynn, CFA

44 20 7883 6929

[email protected]

Timothy Ross

65 6212 3337

[email protected]

Onur Muminoglu

90 212 349 0454

[email protected]

Hugo Turner

44 20 7883 9797

[email protected]

Julia Pennington

44 20 7888 0157

[email protected]

24 February 2015

Global Airlines 2

Ramping intensity requires structural solution

Figure 2: Gulf carriers' annual seat growth into Europe,

APAC 2005-14

Figure 3: Gulf carriers' share of EU-ME/Asia seats 2004-14

0%

5%

10%

15%

20%

25%

30%

35%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Growth into Europe Growth into APAC

0%

5%

10%

15%

20%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Diio Mi data, Credit Suisse research Source: Diio Mi data, Credit Suisse research

Figure 4: We expect continued aggressive Gulf carrier

capacity growth to 2020

Figure 5: With Europe and APAC seeing heavy levels of

new aircraft deployment

0%

4%

8%

12%

16%

20%

Emirates Etihad Qatar

Implied 6-year fleet CAGR Likely annual seat growth

-

20

40

60

80

100

120

Europe APAC NorthAmerica

SouthAmerica

Africa MiddleEast

EK QR EY

Source: Company data, Credit Suisse estimates Source: Credit Suisse estimates

Figure 6: AF and LHA most vulnerable in Europe Figure 7: Europe-APAC point-to-point market

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

IAG LHA AF

Middle East SE Asia Africa ex-North

IAG8%

AF14%

LHA16%

Singapore7%

Thai6%

Cathay5%

Finnair4%

Other40%

Source: Diio Mi 2014 data, Credit Suisse research Source: Diio Mi 2014 data, Credit Suisse research

24 February 2015

Global Airlines 3

AF ambitions – quality versus quantity question

While we expect to see Air France KLM to continue to develop its JV partnerships with

China Southern and China Eastern, its options elsewhere in the ME/APAC region are less

clear:

Despite commencing co-operation with Etihad (EY) in 2012, it has since been

unable to agree a joint venture due to the imbalance between potential EY

contributions to AF KL and AF KL benefits for EY. In the meantime, EY has

invested in Alitalia and has prompted an Alitalia strategy review focussed on

feeding Abu Dhabi.

Garuda seems the most likely SE Asia partner given Malaysia Airlines is now part

of oneworld (and clearly highly challenged) while Singapore Airlines (the only

viable airline in the region) is part of STAR alliance with strong relationships with

Lufthansa and Turkish Airlines. Garuda has a limited presence in Europe which

would provide complementarity to AF, while GA also have a tie-up with EY

potentially facilitating a clearly more powerful tri-partite approach to serving SEA

and with less overlap than bilateral, route-specific deals with SQ where AF may

run the risk of settling for second place relative to LH over the long term.

Jet in India, also part of the Etihad equity alliance (EY holds 24%), may well help

AF in India.

We consider it natural that AF would look to supplement existing JVs with Delta on the

transatlantic, a building Gol relationship following a 2014 strategic agreement with the

Brazilian carrier, and China Southern-China Eastern JVs. However, while building 3-4 JVs

to serve a fragmented APAC market is logical, it also carries branding risk should AF

partner up with lower quality carriers. We also consider it a possibility that AF can look to

tap Air Berlin (another EY equity alliance member) feed for its Transatlantic, LatAm and

West Africa routes.

Local problems may become pan-European problems

On European short haul, AF plans to revive its parked Transavia Europe project - we

retain the view that a low level of market acceptance for Transavia outside its home

markets (where it is loss making) would make it difficult to compete with Ryanair and

easyJet as well as local carriers as it ramps up from a nil base, funded by a parent with a

strong balance sheet. Growth ambitions also run the risk of distracting management from

the central challenge to stop medium haul losses and we think both AF and LHA need to

follow Iberia's lead in achieving structural cost base change at their hubs, rather than

primarily focussing on enhancing peripheral short haul businesses.

Lufthansa looking increasingly strategically

vulnerable

In our view, IAG and QR developing a more integrated partnership, alongside Air France

KLM and Etihad co-operation, presents a significant risk to Lufthansa. We highlighted on

20 January that Alitalia's new strategy under Etihad stewardship presents more challenges

("LHA: Alitalia's strategy an incremental threat") as EY seeks to divert more and more

traffic away from Lufthansa hubs and via Abu Dhabi, and a further strengthening of

competitors on eastern routes would clearly strip revenue more away from Lufthansa.

Intensifying competitive threats likely to prove costly

Lufthansa 2014E ME-APAC-Africa revenue likely reached €5bn, compared to the c€2bn

we assume for IAG – losing just 1% of this would have a €50m impact on LHA. Losing

24 February 2015

Global Airlines 4

€200m over time, equivalent to our scenario where IAG gains a further 1% share in these

markets, would represent a loss of 12% of LHA's 2015E underlying operating result on our

numbers. At a time when Ryanair is planning on quadrupling its German market share,

continued intensification of competitive threats are a real worry for LHA – particularly if fuel

price benefits are competed away and restructuring progress slows due to a perceived fuel

price reprieve.

WINGS only a small step forward

Lufthansa expects to launch its new long haul low cost venture WINGS, with SunExpress

Deutschland (a LHA-Turkish Airlines JV), by end-2015. Initial destinations will include

Florida, Southern Africa and the Indian Ocean. However, we consider its plan to operate

seven aircraft sub-scale (three initially) and the announcement of this move in mid-2014

plainly provides competitors with a large window to consider appropriate responses.

LHA may be compelled to turn to Singapore and/or Turkish

It operates JVs with ANA and Air China focused on markets that are arguably less

susceptible to Gulf carrier competitive threat because of route right limitations or the

geographic unfeasibility of viable sixth freedom packages over the Gulf States. We think

LHA is being left behind somewhat on eastern routes ex-North Asia, and may be

compelled to agree a broader partnership with Turkish Airlines (having ended codeshares

in 2013 due to TK encroachment in Germany) or Singapore Airlines (SQ) or both parties.

Both TK and SQ are Star Alliance members, like LHA.

The airline most under threat and yet the best positioned is SQ, in our view. SQ is the

most levered to EU markets of our entire APAC universe and has consistently lost share to

the Gulf carriers over the past five years. At the same time, its financial resources and

superior branding (relative, say, to a Thai Airways or Malaysian Airlines that are similarly

impacted) make it the most likely to mount a competitive response. SQ has a history of

bilateral alliances with LHA, including its WoW cargo JV, which would make any

conversations between the two easier to turn into actions than with other parties in the

APAC region. Given LHA's JVs with other Asian carriers further North, a deeper alliance

with SQ seems a natural development, in our view.

Emirates launched a JV with Qantas in 2013 but we do not expect partnership appetite

from LHA.

24 February 2015

Global Airlines 5

Air France-KLM AIRF.PA Price (23 Feb 15): Eu7.19, Rating: UNDERPERFORM, Target Price: Eu6.50

Income statement (Eu m) 12/13A 12/14E 12/15E 12/16E

Revenue (Eu m) 25,532 24,930 25,762 25,866 EBITDA 1,698 1,460 2,094 2,690 Depr. & amort. (1,566) (1,589) (1,615) (1,670) EBIT (Eu) 132 (129) 479 1,020 Net interest exp. (404) (370) (360) (360) Associates — — — — Other adj, (254) 562 — — PBT (Eu) (526) 63 119 660 Income taxes (957) (209) 34 (128) Profit after tax (1,483) (146) 153 532 Minorities (9) (9) (4) (4) Preferred dividends — — — — Associates & other (83) (659) — — Net profit (1,575) (814) 149 528 Other NPAT adjustments (250) 616 — — Reported net income (1,825) (198) 149 528

Cash flow (Eu) 12/13A 12/14E 12/15E 12/16E

EBIT 132 (129) 479 1,020 Net interest (404) (370) (360) (360) Cash taxes paid (41) (37) (37) (37) Change in working capital 370 133 238 238 Other cash & non-cash items 1,412 1,415 1,255 1,310 Cash flow from operations 1,469 1,012 1,575 2,172 CAPEX (929) (831) (1,600) (1,900) Free cashflow adj. — — — — Free cash flow to the firm 540 181 (25) 272 Acquisitions — — — — Divestments — — — — Other investment/(outflows) — — — — Cash flow from investments (929) (831) (1,600) (1,900) Net share issue/(repurchase) 2 (8) (4) (4) Dividends paid — (3) — — Issuance (retirement) of debt — — — — Other 76 (229) — — Cash flow from financing activities

78 (240) (4) (4) Effect of exchange rates — — — — Changes in Net Cash/Debt 618 (59) (29) 268 . Net debt at start 5,966 5,348 5,407 5,436 Change in net debt (618) 59 29 (268) Net debt at end 5,348 5,407 5,436 5,168

Balance sheet (Eu m) 12/13A 12/14E 12/15E 12/16E

Assets Cash and cash equivalents 3,684 3,159 3,130 3,398 Accounts receivable 1,775 1,728 1,728 1,728 Inventory 511 538 538 538 Other current assets 1,967 1,751 1,751 1,751 Total current assets 7,937 7,176 7,147 7,415 Total fixed assets 11,210 10,478 10,545 10,861 Intangible assets and goodwill 1,133 1,252 1,169 1,084 Investment securities — — — — Other assets 5,143 4,324 4,324 4,324 Total assets 25,423 23,230 23,186 23,683 Liabilities Accounts payable 4,701 5,774 5,612 5,450 Short-term debt 166 249 249 249 Other short term liabilities 5,993 5,804 5,844 5,884 Total current liabilities 10,860 11,827 11,705 11,583 Long-term debt 8,596 7,994 7,994 7,994 Other liabilities 3,677 4,041 4,116 4,207 Total liabilities 23,133 23,862 23,814 23,784 Shareholders' equity 2,242 (671) (668) (139) Minority interest 48 39 39 39 Total equity & liabilities 25,423 23,230 23,186 23,683 Net debt (Eu m) 5,348 5,407 5,436 5,168

Per share data 12/13A 12/14E 12/15E 12/16E

No. of shares (wtd avg) 296 428 428 428 CS adj. EPS (Eu) (5.32) (1.90) 0.35 1.23 Prev. EPS (Eu) — — — — Dividend (Eu) — — — 0.71 Div yield — — — 9.92 Dividend payout ratio — — — 57.84 Free cash flow per share (Eu)

1.82 0.42 (0.06) 0.63

Key ratios and valuation

12/13A 12/14E 12/15E 12/16E

Growth (%) Sales (0.5) (2.4) 3.3 0.4 EBIT (137.4) (197.7) (471.4) 112.9 Net profit 87.6 (48.3) (118.4) 253.6 EPS (87.5) 64.3 118.4 253.6 Margins (%) EBITDA margin 6.7 5.9 8.1 10.4 EBIT margin 0.5 (0.5) 1.9 3.9 Pretax margin (2.1) 0.3 0.5 2.6 Net margin (6.2) (3.3) 0.6 2.0 Valuation metrics (x) EV/sales 0.29 0.30 0.29 0.28 EV/EBITDA 4.4 5.2 3.6 2.7 EV/EBIT 56.9 (58.7) 15.9 7.2 P/E (1.4) (3.8) 20.6 5.8 P/B 0.9 (3.2) (3.2) (15.3) Asset turnover 1.0 1.1 1.1 1.1 ROE analysis (%) ROE stated-return on equity

(50.9) (25.2) (22.3) (130.9) ROIC 4.9 6.3 12.8 16.2 Interest burden (4.0) (0.5) 0.2 0.6 Tax rate (181.9) 331.7 (28.7) 19.4 Financial leverage 4.8 (14.9) (15.0) (71.8) Credit ratios (%) Net debt/equity 233.5 (855.5) (864.8) (5,149.9) Net debt/EBITDA 3.1 3.7 2.6 1.9 Interest coverage ratio 0.3 (0.3) 1.3 2.8

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities

(EUROPE) LTD. Estimates.

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Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14

Price Price relative

The price relative chart measures performance against the CAC 40 INDEX which

closed at 4862.3 on 23/02/15

On 23/02/15 the spot exchange rate was €1./Eu 1. - Eu .88/US$1

24 February 2015

Global Airlines 6

International Airlines Group ICAG.L Price (23 Feb 15): 562.00p, Rating: OUTPERFORM, Target Price: 678.00p


Revenue (Eu m) 18,675 19,995 21,724 22,167 EBITDA 1,776 2,560 3,351 4,183 Depr. & amort. (1,006) (1,171) (1,307) (1,371) EBIT (Eu) 770 1,389 2,044 2,812 Net interest exp. (270) (208) (208) (208) Associates (8) 85 55 55 Other adj, (22) (56) (3) (3) PBT (Eu) 470 1,210 1,888 2,656 Income taxes (76) (248) (472) (664) Profit after tax 394 962 1,416 1,992 Minorities (25) (20) (20) (20) Preferred dividends — — — — Associates & other 61 — — — Net profit 430 942 1,396 1,972 Other NPAT adjustments (308) — — — Reported net income 122 942 1,396 1,972

Cash flow (Eu) 12/13A 12/14E 12/15E 12/16E

EBIT 770 1,389 2,044 2,812 Net interest (136) (112) (112) (112) Cash taxes paid (34) — (4) (6) Change in working capital 320 300 217 222 Other cash & non-cash items 325 784 901 945 Cash flow from operations 1,245 2,360 3,046 3,861 CAPEX (2,196) (2,300) (1,800) (2,500) Free cashflow adj. 528 249 — — Free cash flow to the firm (423) 309 1,246 1,361 Acquisitions — — — — Divestments 525 233 — — Other investment/(outflows) 296 594 — — Cash flow from investments (1,375) (1,473) (1,800) (2,500) Net share issue/(repurchase) (14) (43) (20) (20) Dividends paid — — — (343) Issuance (retirement) of debt — — — — Other — — — — Cash flow from financing activities

(14) (43) (20) (363) Effect of exchange rates 544 (207) — — Changes in Net Cash/Debt 400 637 1,226 998 . Net debt at start 1,889 1,489 852 (375) Change in net debt (400) (637) (1,226) (998) Net debt at end 1,489 852 (375) (1,372)


Assets Cash and cash equivalents 3,633 4,821 6,048 7,045 Accounts receivable 1,196 1,581 1,581 1,581 Inventory 411 400 400 400 Other current assets 778 844 844 844 Total current assets 6,018 7,646 8,873 9,870 Total fixed assets 10,228 11,602 12,187 13,412 Intangible assets and goodwill 2,196 2,234 2,143 2,047 Investment securities — — — — Other assets 2,335 1,349 1,401 1,453 Total assets 20,777 22,831 24,603 26,782 Liabilities Accounts payable 6,793 7,757 7,985 8,219 Short-term debt 587 601 601 601 Other short term liabilities 937 614 1,214 1,800 Total current liabilities 8,317 8,971 9,800 10,620 Long-term debt 4,535 5,072 5,072 5,072 Other liabilities 3,709 3,839 3,839 3,839 Total liabilities 16,561 17,882 18,711 19,531 Shareholders' equity 3,909 4,642 5,584 6,944 Minority interest 307 307 307 307 Total equity & liabilities 20,777 22,831 24,603 26,782 Net debt (Eu m) 1,489 852 (375) (1,372)


No. of shares (wtd avg) 2,199 2,068 2,068 2,068 CS adj. EPS (Eu) 0.20 0.46 0.68 0.95 Prev. EPS (Eu) — — — — Dividend (Eu) — — 16.88 23.84 Div yield — — 2.21 3.11 Dividend payout ratio — — 25.00 25.00 Free cash flow per share (Eu)

(0.19) 0.15 0.60 0.66


12/13A 12/14E 12/15E 12/16E

Growth (%) Sales 3.1 7.1 8.6 2.0 EBIT (3,447.8) 80.4 47.2 37.6 Net profit (245.8) 119.1 48.2 41.2 EPS 270.2 123.6 46.5 39.9 Margins (%) EBITDA margin 9.5 12.8 15.4 18.9 EBIT margin 4.1 6.9 9.4 12.7 Pretax margin 2.5 6.1 8.7 12.0 Net margin 2.3 4.7 6.4 8.9 Valuation metrics (x) EV/sales 1.0 0.9 0.8 0.7 EV/EBITDA 10.7 7.2 5.1 3.8 EV/EBIT 24.6 13.2 8.4 5.7 P/E 39.1 16.8 11.3 8.0 P/B 3.8 3.4 2.8 2.2 Asset turnover 0.90 0.88 0.88 0.83 ROE analysis (%) ROE stated-return on equity

2.8 22.0 27.3 31.5 ROIC 9.0 19.0 27.8 35.9 Interest burden 0.61 0.87 0.92 0.94 Tax rate 33.5 20.5 25.0 25.0 Financial leverage 1.3 1.2 1.0 0.8 Credit ratios (%) Net debt/equity 35.3 17.2 (6.4) (18.9) Net debt/EBITDA 0.84 0.33 (0.11) (0.33) Interest coverage ratio 2.9 6.7 9.8 13.5



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434

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The price relative chart measures performance against the FTSE ALL SHARE

INDEX which closed at 3724.85 on 23/02/15

On 23/02/15 the spot exchange rate was £.73/Eu 1. - Eu .88/US$1

24 February 2015

Global Airlines 7

Deutsche Lufthansa LHAG.DE Price (23 Feb 15): Eu13.40, Rating: UNDERPERFORM, Target Price: Eu12.30


Revenue (Eu m) 30,028 29,872 30,883 31,362 EBITDA 2,861 2,371 3,322 3,530 Depr. & amort. (1,766) (1,436) (1,491) (1,529) EBIT (Eu) 1,042 1,189 1,713 1,875 Net interest exp. (346) (276) (248) (248) Associates 126 118 118 118 Other adj, (83) (379) — — PBT (Eu) 738 651 1,583 1,745 Income taxes (219) (93) (371) (444) Profit after tax 519 558 1,212 1,301 Minorities (13) (18) (18) (18) Preferred dividends — — — — Associates & other (48) (48) (25) — Net profit 458 493 1,169 1,283 Other NPAT adjustments (144) (142) (75) — Reported net income 313 350 1,094 1,283

Cash flow (Eu) 12/13A 12/14E 12/15E 12/16E

EBIT 1,042 1,189 1,713 1,875 Net interest (196) (200) (352) (352) Cash taxes paid (92) (230) (340) (385) Change in working capital 809 185 357 363 Other cash & non-cash items 1,531 1,214 1,341 1,479 Cash flow from operations 3,094 2,158 2,719 2,981 CAPEX (2,509) (2,800) (2,700) (2,700) Free cashflow adj. 323 247 — — Free cash flow to the firm 908 (395) 19 281 Acquisitions — — — — Divestments 233 153 — — Other investment/(outflows) 66 128 — — Cash flow from investments (2,210) (2,519) (2,700) (2,700) Net share issue/(repurchase) (14) (18) (18) (18) Dividends paid — (219) — (173) Issuance (retirement) of debt — — — — Other (730) (300) (600) (600) Cash flow from financing activities

(744) (537) (618) (791) Effect of exchange rates 116 (272) — — Changes in Net Cash/Debt 256 (1,170) (599) (510) . Net debt at start 1,953 1,697 2,867 3,466 Change in net debt (256) 1,170 599 510 Net debt at end 1,697 2,867 3,466 3,976


Assets Cash and cash equivalents 4,696 3,040 2,441 1,931 Accounts receivable 3,577 4,570 4,570 4,570 Inventory 641 668 668 668 Other current assets 749 702 702 702 Total current assets 9,663 8,980 8,381 7,871 Total fixed assets 15,371 16,553 17,912 19,235 Intangible assets and goodwill 1,569 1,557 1,408 1,255 Investment securities — — — — Other assets 2,481 3,197 3,314 3,432 Total assets 29,084 30,287 31,015 31,793 Liabilities Accounts payable 4,546 5,027 5,280 5,539 Short-term debt 1,514 666 666 666 Other short term liabilities 4,887 5,278 5,401 5,377 Total current liabilities 10,947 10,971 11,347 11,582 Long-term debt 4,823 5,192 5,192 5,192 Other liabilities 7,206 9,536 8,967 8,426 Total liabilities 22,976 25,699 25,506 25,200 Shareholders' equity 6,056 4,527 5,449 6,533 Minority interest 52 60 60 60 Total equity & liabilities 29,084 30,287 31,015 31,793 Net debt (Eu m) 1,697 2,867 3,466 3,976


No. of shares (wtd avg) 458 458 458 458 CS adj. EPS (Eu) 1.00 1.08 2.55 2.80 Prev. EPS (Eu) — — — — Dividend (Eu) 0.45 — 0.38 0.44 Div yield 3.36 — 2.82 3.25 Dividend payout ratio 45.06 — 14.81 15.54 Free cash flow per share (Eu)

1.98 (0.86) 0.04 0.61


12/13A 12/14E 12/15E 12/16E

Growth (%) Sales (0.4) (0.5) 3.4 1.6 EBIT 61.9 14.1 44.1 9.5 Net profit (24.4) 7.7 137.2 9.7 EPS (20.9) 3.4 120.3 9.3 Margins (%) EBITDA margin 9.5 7.9 10.8 11.3 EBIT margin 3.5 4.0 5.5 6.0 Pretax margin 2.5 2.2 5.1 5.6 Net margin 1.5 1.7 3.8 4.1 Valuation metrics (x) EV/sales 0.26 0.30 0.31 0.32 EV/EBITDA 2.8 3.8 2.9 2.9 EV/EBIT 7.6 7.6 5.6 5.4 P/E 13.4 12.5 5.3 4.8 P/B 1.0 1.4 1.1 0.9 Asset turnover 1.0 1.0 1.0 1.0 ROE analysis (%) ROE stated-return on equity

4.4 6.6 21.9 21.4 ROIC 9.4 13.7 14.6 13.2 Interest burden 0.71 0.55 0.92 0.93 Tax rate 40.2 20.1 25.0 25.4 Financial leverage 1.0 1.3 1.1 0.9 Credit ratios (%) Net debt/equity 27.8 62.5 62.9 60.3 Net debt/EBITDA 0.6 1.2 1.0 1.1 Interest coverage ratio 3.0 4.3 6.9 7.6



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The price relative chart measures performance against the DEUTSCHE BORSE

DAX INDEX which closed at 11130.92 on 23/02/15

On 23/02/15 the spot exchange rate was €1./Eu 1. - Eu .88/US$1

24 February 2015

Global Airlines 8

PT Garuda Indonesia Tbk GIAA.JK / GIAA IJ Price (23 Feb 15): Rp545.00, Rating:: UNDERPERFORM, Target Price: Rp485.00, Analyst: Timothy Ross

Target price scenario

Scenario TP %Up/Dwn Assumptions

Upside 1,400.0

0 160.83 8.0x adv EV/EBITDAR mutiple

Central Case 485.00 (11.01) Downside 620.00 15.51 6.0x adv EV/EBITDAR mutiple

Key earnings drivers 12/13A 12/14E 12/15E 12/16E

Rpk mn 31,950 35,534 40,608 45,733 Ftk mn 630.6 712.6 819.5 917.9 — — — — — — — — — — — —

Income statement (US$ mn) 12/13A 12/14E 12/15E 12/16E

Sales revenue 3,716 3,920 4,465 4,954 Cost of goods sold 2,960 3,235 3,280 3,590 SG&A — — — — Other operating exp./(inc.) 592.3 752.3 862.3 907.3 EBITDA 163.5 (67.3) 322.2 456.2 Depreciation & amortisation 155.0 170.0 187.8 213.3 EBIT 8.5 (237.3) 134.4 242.8 Net interest expense/(inc.) 49.8 79.1 90.7 94.2 Non-operating inc./(exp.) (6.6) 5.0 8.0 9.0 Associates/JV 1.9 7.0 10.0 15.0 Recurring PBT (46.1) (304.4) 61.7 172.6 Exceptionals/extraordinaries 55.2 6.6 — — Taxes (2.4) (81.0) 12.9 39.4 Profit after tax 11.6 (216.8) 48.8 133.2 Other after tax income — — — — Minority interests 0.36 0.36 0.36 0.36 Preferred dividends — — — — Reported net profit 11.2 (217.2) 48.4 132.9 Analyst adjustments (55.2) (6.6) — — Net profit (Credit Suisse) (44.0) (223.8) 48.4 132.9

Cash flow (US$ mn) 12/13A 12/14E 12/15E 12/16E

EBIT 8.5 (237.3) 134.4 242.8 Net interest — — — — Tax paid — — — — Working capital (26.5) — — — Other cash & non-cash items 157.0 170.1 82.9 84.4 Operating cash flow 139.0 (67.2) 217.3 327.2 Capex (58.4) (220.0) (200.0) (400.0) Free cash flow to the firm 80.6 (287.2) 17.3 (72.8) Disposals of fixed assets — — — — Acquisitions (54.1) — — — Divestments 10.3 30.0 — — Associate investments — — — — Other investment/(outflows) (280.7) (20.0) (19.0) (19.0) Investing cash flow (382.8) (210.0) (219.0) (419.0) Equity raised — — — — Dividends paid — — — — Net borrowings 442.4 277.2 1.7 91.8 Other financing cash flow (10.2) — — — Financing cash flow 432.3 277.2 1.7 91.8 Total cash flow 188.5 — — — Adjustments — — — — Net change in cash 188.5 — — —

Balance sheet (US$ mn) 12/13A 12/14E 12/15E 12/16E

Cash & cash equivalents 475.3 475.3 475.3 475.3 Current receivables 103.2 103.2 103.2 103.2 Inventories 154.7 154.7 154.7 154.7 Other current assets 86.0 86.0 86.0 86.0 Current assets 819.1 819.1 819.1 819.1 Property, plant & equip. 863 913 925 1,112 Investments 17.5 24.5 34.5 49.5 Intangibles 7.0 7.0 7.0 7.0 Other non-current assets 1,247 1,247 1,247 1,247 Total assets 2,954 3,011 3,033 3,235 Accounts payable 413.6 413.6 413.6 413.6 Short-term debt 393.0 393.0 393.0 393.0 Current provisions — — — — Other current liabilities 177.3 177.3 177.3 177.3 Current liabilities 983.9 983.9 983.9 983.9 Long-term debt 681 958 960 1,052 Non-current provisions — — — — Other non-current liab. 171.7 168.7 140.7 151.0 Total liabilities 1,837 2,111 2,085 2,187 Shareholders' equity 1,116 898 947 1,047 Minority interests 1.5 1.5 1.5 1.5 Total liabilities & equity 2,954 3,011 3,033 3,235


Shares (wtd avg.) (mn) 22,641 25,869 25,869 25,869 EPS (Credit Suisse) (US$)

(0.000) (0.010) 0.000 0.010 DPS (US$) — — — 0.000 BVPS (US$) 0.05 0.03 0.04 0.04 Operating CFPS (US$) 0.01 (0.00) 0.01 0.01


12/13A 12/14E 12/15E 12/16E

Growth(%) Sales revenue 7.0 5.5 13.9 11.0 EBIT (95) (2,886) 157 81 Net profit (140) (408) 122 174 EPS (140) (345) 122 174 Margins (%) EBITDA 4.4 (1.7) 7.2 9.2 EBIT 0.23 (6.05) 3.01 4.90 Pre-tax profit (1.24) (7.77) 1.38 3.48 Net profit (1.19) (5.71) 1.08 2.68 Valuation metrics (x) P/E (21.8) (4.9) 22.6 8.2 P/B 0.86 1.22 1.16 1.05 Dividend yield (%) — — — 3.03 P/CF 6.9 (16.3) 5.0 3.3 EV/sales 1.65 1.94 1.89 1.79 EV/EBITDA 38 (113) 26 19 EV/EBIT 720 (32) 63 37 ROE analysis (%) ROE (4.0) (22.2) 5.2 13.3 ROIC 0.7 (9.9) 5.9 9.8 Asset turnover (x) 1.26 1.30 1.47 1.53 Interest burden (x) (5.41) 1.28 0.46 0.71 Tax burden (x) 1.26 0.73 0.79 0.77 Financial leverage (x) 2.64 3.35 3.20 3.09 Credit ratios Net debt/equity (%) 53.6 97.3 92.5 92.5 Net debt/EBITDA (x) 3.7 (13.0) 2.7 2.1 Interest cover (x) 0.17 (3.00) 1.48 2.58

Source: Company data, Thomson Reuters, Credit Suisse estimates.

0

2

4

6

8

10

12

14

16

18

20

2006 2007 2008 2009 2010 2011

12MF P/E multiple

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2006 2007 2008 2009 2010 2011

12MF P/B multiple

Source: IBES

24 February 2015

Global Airlines 9

Singapore Airlines SIAL.SI / SIA SP Price (23 Feb 15): S$12.00, Rating:: NEUTRAL, Target Price: S$12.20, Analyst: Timothy Ross

Target price scenario

Scenario TP %Up/Dwn Assumptions Upside 20.00 66.67 8.0x Adj EV/EBITDAR in early 2011 Central Case 12.20 1.67 Downside 10.30 (14.17) 4.0x Adj EV/EBITDAR in late 2009

Key earnings drivers 3/14A 3/15E 3/16E 3/17E

Passenger traffic (RPKs) YoY % chg.

0.02 (0.00) 0.03 0.03 Passenger yield YoY % chg.

— — — — Unit cost (C/ATK) YoY % chg.

(0.02) 0.00 (0.02) 0.00 0.04 (0.01) (0.02) 0.03 — — — —

Income statement (S$ mn) 3/14A 3/15E 3/16E 3/17E

Sales revenue 15,244 15,549 15,959 16,525 Cost of goods sold 12,914 12,479 12,505 13,086 SG&A — — — — Other operating exp./(inc.) 649.5 800.0 875.0 925.0 EBITDA 1,680 2,270 2,579 2,514 Depreciation & amortisation 1,598 1,512 1,683 1,863 EBIT 81.6 757.3 895.6 650.6 Net interest expense/(inc.) (28.2) (20.0) — 17.0 Non-operating inc./(exp.) 210.7 (170.0) 5.0 48.0 Associates/JV 48.8 (80.0) 30.0 50.0 Recurring PBT 369.3 527.3 930.6 731.6 Exceptionals/extraordinaries 63.5 33.3 — — Taxes (56.5) 30.4 108.1 81.8 Profit after tax 489.3 530.2 822.5 649.8 Other after tax income — — — — Minority interests 64.9 75.0 80.0 85.0 Preferred dividends — — — — Reported net profit 424.4 455.2 742.5 564.8 Analyst adjustments (63.5) (33.3) — — Net profit (Credit Suisse) 360.9 421.9 742.5 564.8

Cash flow (S$ mn) 3/14A 3/15E 3/16E 3/17E

EBIT 81.6 757.3 895.6 650.6 Net interest — — — — Tax paid — — — — Working capital (191.7) — — — Other cash & non-cash items 2,208 1,183 1,500 1,744 Operating cash flow 2,098 1,940 2,396 2,395 Capex (2,575) (2,300) (2,950) (3,100) Free cash flow to the firm (476.5) (359.5) (554.0) (705.0) Disposals of fixed assets — — — — Acquisitions — (140.0) — — Divestments 808.7 900.0 722.4 500.0 Associate investments — — — — Other investment/(outflows) (56.8) — — — Investing cash flow (1,823) (1,540) (2,228) (2,600) Equity raised 43.4 — — — Dividends paid (247.0) (318.6) (519.8) (395.4) Net borrowings (51.6) 946.9 351.4 600.4 Other financing cash flow (180.6) — — — Financing cash flow (435.8) 628.2 (168.4) 205.0 Total cash flow (160) 1,029 — — Adjustments — — — — Net change in cash (160) 1,029 — —

Balance sheet (S$ mn) 3/14A 3/15E 3/16E 3/17E

Cash & cash equivalents 5,171 6,200 6,200 6,200 Current receivables 641.8 641.8 641.8 641.8 Inventories 962.7 962.7 962.7 962.7 Other current assets 534.8 534.8 534.8 534.8 Current assets 7,311 8,339 8,339 8,339 Property, plant & equip. 13,027 13,841 15,138 16,408 Investments 855.9 915.9 945.9 995.9 Intangibles 219.0 219.0 219.0 219.0 Other non-current assets 1,230 1,230 1,230 1,230 Total assets 22,642 24,546 25,872 27,192 Accounts payable 3,731 3,731 3,731 3,731 Short-term debt 60.7 60.7 60.7 60.7 Current provisions — — — — Other current liabilities 1,599 1,599 1,599 1,599 Current liabilities 5,391 5,391 5,391 5,391 Long-term debt 904 1,851 2,203 2,803 Non-current provisions — — — — Other non-current liab. 2,772 3,592 4,345 4,895 Total liabilities 9,068 10,835 11,939 13,089 Shareholders' equity 13,237 13,374 13,597 13,766 Minority interests 337.4 337.4 337.4 337.4 Total liabilities & equity 22,642 24,546 25,872 27,192


Shares (wtd avg.) (mn) 1,206 1,200 1,200 1,200 EPS (Credit Suisse) (S$) 0.30 0.35 0.62 0.47 DPS (S$) 0.46 0.27 0.43 0.33 BVPS (S$) 11.0 11.1 11.3 11.5 Operating CFPS (S$) 1.74 1.62 2.00 2.00


3/14A 3/15E 3/16E 3/17E

Growth(%) Sales revenue 0.97 2.00 2.64 3.55 EBIT (69) 828 18 (27) Net profit (26.5) 16.9 76.0 (23.9) EPS (27.6) 17.5 76.0 (23.9) Margins (%) EBITDA 11.0 14.6 16.2 15.2 EBIT 0.54 4.87 5.61 3.94 Pre-tax profit 2.42 3.39 5.83 4.43 Net profit 2.37 2.71 4.65 3.42 Valuation metrics (x) P/E 40.1 34.1 19.4 25.5 P/B 1.09 1.08 1.06 1.05 Dividend yield (%) 3.83 2.21 3.61 2.75 P/CF 6.90 7.42 6.01 6.01 EV/sales 0.94 0.99 1.02 1.05 EV/EBITDA 8.56 6.80 6.34 6.89 EV/EBIT 176 20 18 27 ROE analysis (%) ROE 2.74 3.17 5.51 4.13 ROIC 1.00 7.62 8.15 5.57 Asset turnover (x) 0.67 0.63 0.62 0.61 Interest burden (x) 4.53 0.70 1.04 1.12 Tax burden (x) 1.13 0.95 0.88 0.89 Financial leverage (x) 1.67 1.79 1.86 1.93 Credit ratios Net debt/equity (%) (31.0) (31.3) (28.3) (23.7) Net debt/EBITDA (x) (2.50) (1.89) (1.53) (1.33) Interest cover (x) (2.9) (37.9) — 38.3


0

2

4

6

8

10

12

14

16

18

20

2006 2007 2008 2009 2010 2011

12MF P/E multiple

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2006 2007 2008 2009 2010 2011

12MF P/B multiple

Source: IBES

24 February 2015

Global Airlines 10

Turkish Airlines THYAO.IS Price (23 Feb 15): TRY9.45, Rating: OUTPERFORM, Target Price: TRY8.00

Income statement (TRY m) 12/13A 12/14E 12/15E 12/16E

Revenue (TRY m) 18,777 24,366 28,907 34,378 EBITDA 2,330 2,871 3,884 4,931 Depr. & amort. (1,241) (1,747) (2,244) (2,900) EBIT (TRY) 1,090 1,125 1,639 2,031 Net interest exp. (197) (298) (411) (537) Associates 109 156 139 155 Other adj, (36) 140 179 131 PBT (TRY) 965 1,123 1,546 1,780 Income taxes (283) (194) (309) (356) Profit after tax 683 929 1,237 1,424 Minorities — — — — Preferred dividends — — — — Associates & other 265 14 8 60 Net profit 948 944 1,245 1,484 Other NPAT adjustments (265) (14) (8) (60) Reported net income 683 929 1,237 1,424

Cash flow (TRY) 12/13A 12/14E 12/15E 12/16E

EBIT 1,090 1,125 1,639 2,031 Net interest (197) (298) (411) (537) Cash taxes paid — — — — Change in working capital 551 857 (385) (339) Other cash & non-cash items 1,397 1,481 2,253 2,829 Cash flow from operations 2,841 3,165 3,096 3,985 CAPEX (2,221) (2,387) (7,097) (13,343) Free cashflow adj. — — — — Free cash flow to the firm 620 778 (4,001) (9,359) Acquisitions — — — — Divestments 38 89 — — Other investment/(outflows) 524 (2,202) — — Cash flow from investments (1,659) (4,500) (7,097) (13,343) Net share issue/(repurchase) — — — — Dividends paid (173) — (93) (247) Issuance (retirement) of debt — 1,714 4,258 9,340 Other (3,752) (3,658) (4,258) (9,340) Cash flow from financing activities

(3,925) (1,944) (93) (247) Effect of exchange rates — — — — Changes in Net Cash/Debt (2,743) (3,279) (4,094) (9,606) . Net debt at start 7,504 10,247 13,526 17,620 Change in net debt 2,743 3,279 4,094 9,606 Net debt at end 10,247 13,526 17,620 27,226

Balance sheet (TRY m) 12/13A 12/14E 12/15E 12/16E

Assets Cash and cash equivalents 1,339 1,283 1,447 1,182 Accounts receivable 1,148 1,284 1,592 1,893 Inventory 342 428 515 612 Other current assets 1,706 4,230 4,612 4,985 Total current assets 4,536 7,225 8,166 8,672 Total fixed assets 17,162 19,558 24,421 34,874 Intangible assets and goodwill 140 156 146 136 Investment securities 79 78 78 78 Other assets 3,483 3,016 3,016 3,016 Total assets 25,399 30,033 35,827 46,777 Liabilities Accounts payable 1,451 1,846 2,080 2,348 Short-term debt 1,222 1,800 2,652 4,520 Other short term liabilities 3,980 4,062 4,219 4,384 Total current liabilities 6,653 7,708 8,951 11,252 Long-term debt 10,364 13,009 16,415 23,888 Other liabilities 1,420 1,404 1,404 1,404 Total liabilities 18,437 22,120 26,769 36,543 Shareholders' equity 6,962 7,913 9,057 10,233 Minority interest — — — — Total equity & liabilities 25,399 30,033 35,827 46,777 Net debt (TRY m) 10,247 13,526 17,620 27,226


No. of shares (wtd avg) 1,380 1,380 1,380 1,380 CS adj. EPS (TRY) 0.69 0.68 0.90 1.08 Prev. EPS (TRY) — — — — Dividend (TRY) — 0.07 0.18 0.21 Div yield — 0.71 1.90 2.18 Dividend payout ratio — 9.85 19.87 19.19 Free cash flow per share (TRY)

0.45 0.56 (2.90) (6.78)


12/13A 12/14E 12/15E 12/16E

Growth (%) Sales 25.9 29.8 18.6 18.9 EBIT 4.0 3.2 45.7 23.9 Net profit 3.0 (0.4) 32.0 19.1 EPS 3.0 (0.4) 32.0 19.1 Margins (%) EBITDA margin 12.4 11.8 13.4 14.3 EBIT margin 5.8 4.6 5.7 5.9 Pretax margin 5.1 4.6 5.3 5.2 Net margin 5.0 3.9 4.3 4.3 Valuation metrics (x) EV/sales 1.5 1.3 1.3 1.4 EV/EBITDA 11.9 11.4 9.7 9.7 EV/EBIT 25.4 29.1 22.9 23.5 P/E 13.8 13.8 10.5 8.8 P/B 1.9 1.6 1.4 1.3 Asset turnover 0.74 0.81 0.81 0.73 ROE analysis (%) ROE stated-return on equity

11.0 12.5 14.6 14.8 ROIC 4.5 4.3 4.9 4.3 Interest burden 0.89 1.00 0.94 0.88 Tax rate 29.3 17.2 20.0 20.0 Financial leverage 1.7 1.9 2.1 2.8 Credit ratios (%) Net debt/equity 147.2 170.9 194.5 266.0 Net debt/EBITDA 4.4 4.7 4.5 5.5 Interest coverage ratio 5.5 3.8 4.0 3.8


5

7

9



The price relative chart measures performance against the BIST 100 IDX which

closed at 86433.01 on 23/02/15

On 23/02/15 the spot exchange rate was TL2.8/Eu 1. - Eu .88/US$1

24 February 2015

Global Airlines 11

Companies Mentioned (Price as of 23-Feb-2015)

Air France-KLM (AIRF.PA, €7.19) Delta Air Lines, Inc. (DAL.N, $47.19) Deutsche Lufthansa (LHAG.DE, €13.4) EasyJet (EZJ.L, 1798.0p) Gol Linhas Aerea (GOLL4.SA, R$10.51) International Airlines Group (ICAG.L, 562.0p) PT Garuda Indonesia Tbk (GIAA.JK, Rp545) Ryanair (RYA.I, €10.19) Singapore Airlines (SIAL.SI, S$12.0) Thai Airways International (THAI.BK, Bt14.2) Turkish Airlines (THYAO.IS, TL9.45)

Disclosure Appendix

Important Global Disclosures

The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investmen t opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average to tal return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10 -15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

24 February 2015

Global Airlines 12

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 45% (54% banking clients)

Neutral/Hold* 38% (49% banking clients)

Underperform/Sell* 15% (44% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security shou ld be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

See the Companies Mentioned section for full company names

The subject company (THAI.BK, DAL.N, GOLL4.SA, AIRF.PA, GIAA.JK, LHAG.DE, SIAL.SI, THYAO.IS) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (AIRF.PA, GIAA.JK) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (DAL.N) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (GIAA.JK) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (AIRF.PA, GIAA.JK) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (THAI.BK, GOLL4.SA, AIRF.PA, GIAA.JK, LHAG.DE, SIAL.SI, THYAO.IS) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (DAL.N) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (DAL.N).

Credit Suisse may have interest in (GIAA.JK)

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (RYA.I, ICAG.L, LHAG.DE).

Credit Suisse has a material conflict of interest with the subject company (GOLL4.SA) . Credit Suisse has a material conflict of interest with the subject company (GOLL3.SA). Credit Suisse are advising Gol Linhas Aereas Inteligentes SA on a potential corporate restructuring.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (RYA.I, EZJ.L, THAI.BK, DAL.N, GOLL4.SA, AIRF.PA, GIAA.JK, ICAG.L, LHAG.DE, SIAL.SI, THYAO.IS) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (EZJ.L).

The following disclosed European company/ies have estimates that comply with IFRS: (RYA.I, EZJ.L, AIRF.PA, LHAG.DE).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (DAL.N, GOLL4.SA, GIAA.JK, SIAL.SI) within the past 3 years.

24 February 2015

Global Airlines 13

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

For Thai listed companies mentioned in this report, the independent 2014 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: Thai Airways International (Very Good)

Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse AG, Singapore Branch .................................................................................................................................................. Timothy Ross

Credit Suisse Securities (Europe) Limited .................................................... Neil Glynn, CFA ; Julia Pennington ; Onur Muminoglu ; Hugo Turner

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

24 February 2015

Global Airlines 14

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Global Airlines - More food for thought on Gulf carrier threat -

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