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Make the Best Use of Opportunities to Master the Trend31 Mar 2009

Macau International Airport Company Limited (CAM) held its Board Meeting and General Assembly on 30 March 2009. Resolutions regarding their 2008 Activity Report, Balance Sheet and Income Statement as well as Supervisory Committee Report have been approved at the General Assembly.

External Business Environment in 2008 and the Performance of Macau International Airport

In 2008, Macau and the global civil aviation industry experienced an extraordinary year. Until January 2009, International Air Transport Organization (IATA) announced the overall demand for international passenger market has already recorded a consecutive 5-month decline, and recorded drop in freight for a successive eight months. From the dramatic changes in the external business environment to large fluctuations in fuel costs and other factors is causing the industry to keep close watch to examine and adjust the business strategy.

Macau International Airport responded much earlier in 2003 to the trend, adjusting in the deployment of strategies, in order to better serve the growing local market, as well as to increase the Pearl River Delta regional economic and trade activities. Macau International Airport launched the planning and implementation of a multi-functional ground services and systems, and has been actively exploring the aviation market which includes traditional airlines, low-cost airlines, charter flights, business jets, as well as diversifying the type of visitors outside the Greater China region, in order to enhance its ability to resist risks.

In 2008, Macau International Airport introduced 3 new airlines, adding to a total of 18 airlines offering 33 passenger and cargo routes. In the situation of a severe external business environment, Macau International Airport recorded O/D (origin and destination) passenger traffic of 3,781,826 passengers, a 12.9 percent up comparing to same period of 2007. But the decrease of transit passengers, affected the global figures for the whole year of 2008, resulting in a total of 5,097,802 passengers handled, a drop of 7.3 percent. The freight volume of 2008 was 100,767 tons, down 44.3% year-on-year while movements at Macau International Airport dropped 6.8% to 49,764 compared to year 2007. After the three links in cross-strait realization, there is a growth of passengers travelled from Mainland China to Taiwan using Macau International Airport. This shows that the cross-strait direct flights bring also new opportunities for the market development.

Due to the 2008drop in airport traffic, the company total revenue was MOP601.9 million, a decrease of 2.7 % whereas operating profit (EBITDA) amounted to MOP202.1 million, a decrease of 18.1% compared to 2007. While incorporating the financing expenses, and the higher depreciation expenses from more infrastructure input and acquisition of government projects, our net loss enlarged to MOP80.2 million, representing 81.6% more than that of 2007.

On the other hand, the gross sales revenue of all main airport operators in MIA rose from MOP2.67 billion in 2007 to MOP 2.97 billion in 2008, with the fuel, business aviation, shops and restaurants being the activities showing significant sales increase in 2008 and compensating the reduction of activity of all other operators such as ground handling and catering.

2008 and 2009 Development Strategy, Positioning and Implementation

“Safety, Efficiency and Effectiveness” are the company’s core values and goals since the opening of Macau International Airport, which has been operating for over thirteen years. To guarantee a safe, efficient, effective and quality service and comfort environment provided to passengers and clients, CAM continuously invested capital to upgrade and improve airport infrastructures and facilities. In 2008, the airport has completed innovation and improvement works such as air conditioning system, washrooms retrofitting, lighting, flight information display systems, airport rescue and fire fighting equipments, replacement and upgrade of the communication, navigation and surveillance system (CNS), etc. In terms of extending airport capacity, we had completed the acquisition of the new cargo facilities and south apron extension projects from the Macau Government. To ensure the professional management standards of MIA, experts were invited to work out “MIA Operation Management Review Report” and to conduct a “MIA Safety & Security Management Operational Readiness Assessment”.

In the face of the downturn of the global civil aviation industry in 2008, Macau International Airport Company Limited strived to promote the Macau growing tourism market and fulfilling our social responsibility to foster local economic development for being a sector of the provider of public transportation service.

Macau International Airport Company Limited has launched its incentive program since 2005 to cope with airlines route development and in 2008, based on the foundation of this incentive policy, we successfully introduced further a series of new and more favorable policies and incentives effective Jan 2009.

Last year during the Sichuan Earthquake Relief Operation, the airport has actively called on and organized the industry for donation, to ensure Red Cross Disaster Relief Flights to arrive Sichuan safely and timely and waived all airport related charges. To welcome the Olympic 2008 torch relay in Macau, we coordinated with the Macau Sports Development Board to jointly organize the "Let’s Dance Together" activity, attracting more than 800 employees and their family members to take part and successfully rounding up the entire torch relay activities.

2009 Trend Development Orientation and Evaluation

International Monetary Fund (IMF) report published earlier this year that the prediction of global economic performance in 2009 will be the most unsatisfactory year in the last 60 years, anticipating a negative growth of 0.5 percent.

In the first two months of 2009, Macau International Airport passenger traffic accumulated to a total of 640,078 passengers decreased by 21.2% compared to 2008. Cargo volume and aircraft movements accumulated respectively to 5,522 tons and 6,835 movements, representing a drop of 67.6% and 13%. In the face of the worst global economic recession of the last 60 years and the assessment of the significant impact from the development of cross strait links, fast eroding the transit business, it is anticipated that in 2009 Macau International Airport passenger traffic will be adjusted to 4,500,000 passengers and the cargo volume to 50,000 tons, both transported in 42,100 aircraft movements.

As the economy of various regions were caught in the shadow of the financial tsunami, the mainland market was in the contrary in the launch of a series of economy stimulating policy; the overall economic growth forecast for the year can still be maintained at around an 8 percent level. Plus, Macau SAR close link and further cooperation with the Pearl River Delta Region, which has an area of 41,700 square kilometer and a population of 47,249,600, generating a global GDP that is 20 times the GDP of Macau, will serve as a solid foundation to the breakthrough of Macau aviation industry ‘s bottleneck development.

Grasping the future development trend of global civil aviation industry, taking advantage of Macau being a main Gateway of Southern China we would therefore systematically try to extend Macau International Airport’s business to the huge Pearl River Delta market to cope with the “Pearl River Delta Region Reform Development Program” policy and combining it with the rapid development of our tourism and entertainment industry as well as the huge demand within the Pearl River Delta region in recent years.

Accordingly, the Macau International Airport Company Limited in 2009 has launched a new round of "Five-year Strategic Development Plan", through "virtual airport" and "Cross Border Multi-modal Transport System" strategy, it will help to further consolidate Macau International Airport as a multi-functional status of small and medium-sized international airport. We believe that the Cross Strait "three links" will eventually create a win-win situation to the Greater China region including Macau civil aviation industry. In order to create a better foundation and conditions for better cooperation, Macau International Airport signed with the other four airports at the PRD region on a meeting held on 2009 March 7 the "Greater PRD Region Airports to Implement the Outline of the Plan for Greater PRD Reform and Development ", reaching consensus for six aspects including the development of airports positioning and exploring better the air space of the Pearl River Delta.

Airport and airlines are mutually dependent partners; Macau International Airport Company Limited will commit to cope with airlines operating from here for sustainable growth. With Macau SAR Government's approval, to relief the present difficulties since January 2009, we introduced a new set of relief measures and preferential incentives for the industry. In addition, we also actively open up new sources of non-aeronautical revenue. The renovation design work at retail area of departure hall was submitted for Government’s approval, other non-aviation revenue driven business would be in progress, such as the outdoor advertisement of the airport. In terms of cargo development, new cargo handling facilities will be developed as an “Airport Logistic Business Center.”

The Government’s vision to the industrial policy, the continuous open up of new routes by airlines, as well as the airport’s multi-function and comprehensiveness of ground services are indispensable factors for the development of Macau Civil Aviation industry. In addition, Macau aviation business in successfully transforming from "transfer airport serving the strait" to "Servicing local and regional economy” required concern and immense support from the various sectors of local community. As the important infrastructure as well as the external gateway beyond for the regional economy development, Macau International Airport will continue to try its best to develop a diversified economy and maintain social stability.