CAPITAL MARKETS DAY HALLDÓR BENJAMÍN ÞORBERGSSON | SENIOR VICE PRESIDENT | ICELANDAIR GROUP

2

NUMBER OF TOURISTS ~ 800 K

Ι Is there a call for concerns regarding number of tourists in Iceland?

190 201 202232

263

303 296278

320

360 374

422

485502 494 487

566

672

781

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3

NUMBER OF TOURISTS PER YEAR

Ι Around 800 thousand total tourists arrivals last year.

800,000 PER YEAR

= 1,000 visitors

4

# TOURISTS IN ICELAND PER SUMMER DAY

Ι On average there were around 45K tourists in Iceland

on any given summer day 2013.

45,000 EACH

SUMMER

DAY

= 1,000 visitors

5

# TOURISTS IN ICELAND PER WINTER DAY

Ι On average there were around 10K tourists in Iceland

on any given winter day in 2013.

10,000 EACH WINTER DAY

= 1,000 visitors

THE BIGGER PICTURE

0

5

10

15

20

25

30

35

40

45

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Summer (Jun-Aug) Winter (Sep-May)

Ι Average number of tourists on any given day in Iceland

Our own calculations

In thousands

HEAD COUNT IN ICELAND IN THE SUMMER TIME

0

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ι Average number of persons in Iceland in the summer time

Tourists

Icelanders

∆ 30,000

∆ 36,000

325k

45k

THE NET EFFECT IS EVEN SMALLER

Ι Luckily, Icelanders travel abroad in the summer time.

Ι On average, there are ~20 thousand Icelanders abroad on any given day in the summer.

Ι Therefore, the net effect is much smaller

Ι Best estimate

+25K to total population

Ι 325 + 25 = 350 K as total headcount

7% EFFECT ON DOMESTIC HEADCOUNT AT PEAK

13.222 19.203 24.343

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

2012 2013 2014

Marginal addition of tourists net of Icelanders abroad Iceland population

TOURISTS PER NATIVE?

Ι Is that a helpful measure?

Ι At best Iceland is placed at the middle of the league of nations with population < 5 million.

0

5

10

15

20

25

30

Andorra

Monaco

IcelandSan Marino

Croatia

Source: World Bank

103,000 KM2

TOURISTS PER SQUARE KILOMETRE

0

50

100

150

200

250

300

350

400

Luxembourg Netherlands Cyprus Switzerland Denmark Croatia France Sweden Iceland Honduras

Source: World Bank

10,300 km2

LET‘S BE MORE FAIR IN OUR APPROACH

Ι Let’s exclude 90% of the land mass due to dense population and rough terrain

LET‘S BE MORE FAIR IN OUR APPROACH

Ι Let’s exclude 90% of the land mass due to dense population and rough terrain

0

50

100

150

200

250

300

350

400

Luxembourg Netherlands Cyprus Switzerland Denmark Croatia France Iceland,90% exluded

Sweden Iceland Honduras

81

Source: World Bank

3,000 km2

… OR TAKE IT TO THE EXTREMES

Ι Let’s exclude 97% of the land mass due to dense population and rough terrain

… OR TAKE IT TO THE EXTREMES

Ι Let’s exclude 97% of the land mass due to dense population and rough terrain

0

50

100

150

200

250

300

350

400

Luxembourg Netherlands Iceland,97%

excluded

Cyprus Switzerland Denmark Croatia France Iceland,90% exluded

Sweden Iceland Honduras

268

Source: World Bank

PREVALENT WORDS ABOUT ICELAND ARE POSITIVE

Ι The overall conversation is positive. We do not see terms like sold out, congestion, spoiled, or expensive.

Ι Iceland has mainly positive mentions

Ι Tourists are simply not talking about congestion in Iceland or at Iceland’s top tourist sites

Source: Ubervu

WE CAN ALWAYS DO BETTER

Ι Golden Circle with thousands of guests per day.

Ι Need to manage traffic better at top sites – number of tourists is not the problem – lack of management and infrastructure

Ι Urge use of market mechanisms with price as the incentive for changed behaviour key to success.

Ι Number of tourists should ideally continue to increase.

WELCOME MORE GUESTS:

ECONOMICALLY BENEFICIAL FOR US ALL

HE PROFITS FROM IT …

… SO DOES SHE

TOURISM & AVIATION LOCOMOTIVE OF GROWTH

-45%

-29%

-14%

-6%

-4%

-3%

0%

1%

-50% -40% -30% -20% -10% 0% 10%

Construction

Finance

Retail and wholesale

Other

Tourism and transportation

IT and telecommunications

Fisheries

Metal production

60%

11%

11%

10%

10%

9%

-2%

-8%

-20% -10% 0% 10% 20% 30% 40% 50% 60% 70%

Tourism and transportation

Other

Fisheries

Construction

Retail and wholesale

IT and telecommunications

Metal production

Finance

Ι Contribution to economic downturn 2008-2010 Ι Contribution to economic growth 2010-2013

TOURISM IS THE SOURCE OF GROWTH

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010 2011 2012 2013

Economic growth excluding tourism Economic growth with tourism

Ι Limited economic recovery if we exclude tourism

7% GDP ADDITION SINCE 2010

90

92

94

96

98

100

102

104

2009 2010 2011 2012 2013

GDP with tourism GDP excluding tourism

WHAT DOES THIS ALL MEAN?

Ι Iceland is not sold out – we are far from reaching our upper limit

Ι The upper limit is not static – it is dynamic and evolves and expands over time

Ι However, we can smooth the transition by focusing on managing peek sites better

Ι Tourism is the locomotive of the Icelandic economy