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1. Independent Analysis ofIn-Flight Portable Media PlayersWalé Adepoju – CEOThursday 24th May 2007 www.imdc.net www.imdc.net

2. Contents Overview of Portable IFE Market Trends in consumer portable media players Outlook for portable media players in IFE 1 2 3

3. Our Perspective on IFE Portable Media Players Passenger Research Technology Trend Analysis Airline assistance with IFE\PMP strategy & purchase Airline Research 360˚ Independent Perspective Ancillary revenue analysis for airlines Corporate Finance

4. Overview of portable IFE market 1

5. Aircraft market in terms of IFE Mass inter-continental Eg. 747-400, A380 777 500 500 Twin-aisle 400 400 Ultra-long & Thin routes e.g. A340-500 ‘ULTRA Mid range Twin-aisle e.g. A330, 767 LONG & - RANGE WIDE THIN’ Aircraft size - Weight constraints Weight constraints MID BODY e.g. 767, e.g. A340 - 300 300 Twin 600 A330 29% (seats) (seats) RANGE RANGE BODY 200 200 BODY - - - - MID MID SHORT SHORT NARROW NARROW e.g. 757 A321 e.g. 757 A321 HAUL HAUL A320 & A320 & 737 737 FEEDER FEEDER & & 100 100 Single HOPPER HOPPER 71% e.g. e.g. CRJ,EMB CRJ,EMB CORPORATE CORPORATE 0 0 2 2 4 4 6 6 8 8 10 10 12 12 14 14 16 16 Length of flight (hours) Length of flight (hours) Logistics and passenger needs change Logistics and passenger needs change Market Overview • IFE systems have been traditionally designed for twin-aisle, intercontinental market • Today’s IFE systems fail to reach an audience 3 times bigger than the current market • Portable Media Players can be an innovative solution on twin aisle aircraft Global commercial fleet

6. Portable Media Players (PMP) Technology profile • Technically quite robust • Delivered high percentage of initial promise • Inflight portables can match the IFE experience provided by full interactive systems • Content security • 2 hardware approaches by vendors • Customised units • Consumer Off The Shelf (COTS) technology

7. The peak : goal is set very high from demands of airlines…or promises from suppliers, or... “I gotta have it” phase”Airlines scramble to get one & drive high requirements The “die trying” phase Some suppliers never make it and die trying The “I got it too” phase - suppliers all claim to have the new product…or one better The idea phase - An idea is born from innovation, new technology, or... Portable Media Players (PMP) Technology profile The plateau - The final result is a relaxation of the requirements... and a settling down to reality REED Theory Dan Reed

8. Inflight portable device market • Inflight portables are currently a very small market • Less than 2% IFE expenditure in 2006 (excluding DVD players) • Market is characterized by relatively low cost of entry • Resulting in a high number of start-ups Embedded IFE Established Inflight PMPs Developing Mezzo 65% combined market share Panasonic Thales Airvod Phantom Media IMS e.Digital DigEcor Panasonic Rockwell Collins LiveTV

9. Main portable IFE suppliers

10. Trends in portable media 2

11. Passenger expectations Differentiate airline product Inflight PMPs Single aisle aircraft IFE & backlog of twins Provides alternative to embedded IFE Drivers of inflight PMP Consumer power Technology advances Airline product Natural constraints of embedded IFE

12. Consumer portable devices • Prevalence • Quality • Importance As a result passengers expect more from IFE, but can provide their own content if enabled Consumer portables are increasing their: • Sales up 70% from Q3 2006 to Q1 2007 • Becoming thinner, more stylish and have more compelling features Smartphones • iPod sales up 24% to 10.5 million in Q1 2007 iPod

13. Consumer portable devices • $10 billion industry in 2007 • Nintendo DS at 40 million units worldwide • Sony PSP at 20 million units worldwide Portable gaming devices • Potential to add benefits of a PC to inflight PMP • Bleeding edge / Immature technology • Some inflight PMP suppliers are using UMPCs in a COTS approach to product development Ultra Mobile Personal Computers UMPCs

14. Outlook for portable media players in IFE 3

15. Market trends • Increasing demand for aircraft • Need to extend life of older aircraft • Increasing competition among airlines • Declining yields • Need for shorter product life cycle Increase in demand for more portable IFE devices Increase in demand for plug & play with passenger’s own device RISKS & ISSUES Safety issues relating to batteries onboard Perceived security risks to content are higher Full seat-back installation of PMPs incurs hidden costs that wipe out some of the advantage over existing embedded IFE systems. Cost per unit will continue to fall rapidly

16. Solution Process Technology Software Getting the max return on PMP investment • Providing a total solution, more than just a great product, is the key to success as a vendor • Content supply chain solutions • Unit distribution and maintenance logistics Business problem Business opportunity

17. Getting the max return on PMP investment • PMPs ‘fit’ as a business model in a number of markets • Recently profitable US carriers looking to improve their product on an aging fleet • European carriers seeking to differentiate themselves and gain ancillary revenues • Premium only start-up carriers such as Silverjet and Eos Portable media has the potential to deliver a higher proportion of media revenues

18. If we see Portable media players as hardware – it will struggle to provide sufficient value. However, if it is seen as a tool in the media content value chain, then it provides us with opportunities that we did not have before.Thank you Walé Adepoju www.imdc.net www.imdc.net