II International Transport and Logistics Business Forum «Kazakhstan New Silk Way »

1. II International Transport and Logistics Business Forum «Kazakhstan New Silk Way» Session 2: Kazakhstan – Regional Air Hub November 07, 2013 Moderated by: Thomas J. Niehaus Associate Partner & Manager for the CIS region

2. The scheduled airline network currently connects Kazakhstan heavily to Russia, but also Europe, Asia and Middle East Scheduled flights to/from Kazakhstan, all carriers, summer 2013 • Aviation environment currently undergoes a dramatic development in Kazakhstan • ICAO team working on implementing international quality and safety standards (incl. some airlines having their AOC revoked) • aim to remove the EU blacklisting of airlines in Kazakhstan • Airport development in Kazakhstan aiming at new levels of service and infrastructure • Airlines growing network and hence passenger and cargo business Source: AirportIS II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

3. Within 5 years overall air traffic on markets to and from Kazakhstan is expected to grow 14% Expected growth of the O&D traffic to and from Kazakhstan by 2018 Europe Russia ~15% ~10% +13% +11% Domestic KZ ~ 43% +13% ~9% ~6% +15% +14% Turkey Asia Pacific ~ 4% CIS ~7% China ~5% +13% <1% +16% +14% Middle East +13% America Key … Regional distribution of traffic 2018 … CAGR 2014–2018 growth Note: CAGR = Compound annual growth rate, O&D = origin and destination:Source: Lufthansa Consulting, AirportIS, IMF GDP forecast II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

4. Almaty is the biggest cargo airport in Kazakhstan and CIS, but like other Russian & CIS airports is dominated by international inbound cargo Air-Cargo (incl. mail) tons in 2012 – selected airports • In 2012 approx. 100 thousand tons or air cargo have been transported at airports in Kazakhstan • Due to the structure of the economy air cargo mainly are international inbound goods for consumption or materials for productive usage • Even all three Moscow airports ‘only’ handled 540 thousand tons of air cargo • Larger cargo volumes at other airports are driven by • a passenger airline actively developing the business within their passenger aircraft bellys and/or • a full freighter airline • In Kazakhstan the local passenger airlines only play a minor role in the cargo business so far Note: ALA figure is for 2011 (latest available year); MOW figure is the sum of volumes of SVO, DME, VKO Sources: Albatross Database, ACI, Lufthansa Consulting Analysis II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

5. The main targeted lever of growth in air cargo therefore lies in participating in the international transfer cargo market Kazakhstan as intermodal transfer hub for cargo • By 2020 the Government strategy is to increase total international transfer cargo flows via Kazakhstan by 81% • in 2010 Kazakhstan handled 18 million tons of cargo • in 2020 the objective is to handle 32 million tons • Currently the share of international transfer air cargo of total international transfer cargo is < 0,1% • Part of the Government strategy is to create an intermodal transfer hub • which mainly focuses on cargo flows from East to West (e.g. CN  EU & RU), but also • acts as a distribution center within Kazakhstan and • connects rail, road and air transport Source: KTZ Express, Lufthansa Consulting analysis II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

6. Projections of future transfer cargo flows directions indicate where air freight as part of the intermodal chain should focus on International transfer cargo flows via Kazakhstan – historic and projected volumes • Major growth is targeted within the China trade flows (mainly east-west) to/from • EU • Russia • Uzbekistan • Iran • Next to China also cargo flows to / from Russia are expected to grow significantly (north-south-north) • Within an intermodal transfer hub the strategy needs to take into account the specifics of airfreight, but also needs to connect the main streams to an airport Source: KTZ Express, Lufthansa Consulting Analysis II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

7. The Logistics Performance Index measures the logistics environment of most of the countries worldwide, highlighting the needs for improvement Global comparison of LPI* • Criteria measured by LPI: Efficiency of the customs clearance process, quality of trade and transport infrastructure, ease of arranging competitively priced shipments, competence and quality of logistics services, ability to track and trace consignments, timeliness of shipments in reaching destination within scheduled delivery time • Kazakhstan is ranked 86th:1. Singapore 4,132. Hong Kong 4,12...27. Turkey 3,51...77. Georgia 2,77...85. Dominican Republic 2,7086. Kazakhstan 2,6987. Niger 2.69...91. Belarus 2,61...95. Russian Federation 2,58 • The country is currently targeting to be within the top 40 positions by 2020 Legend1: lowest score; 5: highest score UK = 3,90 Kazakhstan: 2,69 China = 3,52 Canada = 3,85 USA = 3,93 Turkey: 3,51 Germany = 4,03 UAE: 3,78 Countries with LPI from 3.5 to 5 * Logistics Performance Index; Sources: World Bank, Logistics Performance Index (LPI) 2012, Lufthansa Consulting Analysis II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

8. In the Logistics Performance Index Kazakhstan ranks 86th, with substantial upgrades needed to improve its transport environment Kazakhstan and regional competitors - LPI* comparison • Kazakhstan shows substantial improvement potential especially in regards to • general logistics infrastructure, • customs procedures, and • service quality • but also timeliness of shipments in reaching the designed destination • The country is currently targeting to be within the top 40 positions by 2020 *Logistics Performance Index; Sources: KTZh, World Bank, Logistics Performance Index (LPI) 2012, Lufthansa Consulting Analysis II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

9. Contact Thomas NiehausAssociate PartnerManager for the CIS region Lufthansa Consulting GmbH Von-Gablenz-Straße 250679 CologneGermany Mob: +49 151 589 405 11 e-mail:Thomas.Niehaus@LHConsulting.com www.LHConsulting.com II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

10. Aviation is our business – Lufthansa Consulting provides state-of-the-art aviation and logistics know-how Lufthansa Airline Academic Network Our Client Lufthansa Technik Partner- ships Lufthansa Consulting Lufthansa Cargo Institutions Lufthansa Systems Agencies II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

11. CIS and Russia are among the most important markets of Lufthansa Consulting's business with each a dedicated regional manager Lufthansa Consulting markets areas of expertise Lufthansa Group Europe Mediterr. Region Russia CIS Africa North Africa South Middle East Americas Airline Strategy & Network Airline Restructuring & Commercial Airline Operations Air Cargo Airports Strategy Restructuring Operations Infrastructure and Logistics Development Economics Network Management Commercial Maintenance &Engineering Air Cargo Management Market & Services Combination of relevant expertsfor each project II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»

12. Contact Thomas NiehausAssociate PartnerManager for the CIS region Lufthansa Consulting GmbH Von-Gablenz-Straße 250679 CologneGermany Mob: +49 151 589 405 11 e-mail:Thomas.Niehaus@LHConsulting.com www.LHConsulting.com II International Transport and Logistics Business Forum «Kazakhstan New Silk Way»