Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

Strategy
facilities and quality onboard services, have set a new benchmark for travel standards in the Northern
Baltic Sea region. The program is set to continue with the delivery of the New Cruise Ferry, scheduled
for the spring of 2006, and the introduction of the two recently ordered high-speed ro-pax ferries,
scheduled for delivery in 2007 and 2008. All of our passenger ferries are equipped with a car/cargo
deck, where cars, buses, trucks and trailers can be loaded while passengers are boarding. Combining
passenger traffic with cargo tonnage also allows for more frequent cargo departures and mitigates the
effect of the seasonality of passenger traffic.
• Broad product offering. We focus on offering our customers a wide range of transportation and leisure
products and services varying from a one-way high-speed ferry trip to complete mini-cruises combined
with overnight hotel and spa stays. A large proportion of our products are sold by means of various
product and travel packages. Travel packages may be tailored to suit customer preferences in each
market as to the type of vessel, length of trip, use of conference facilities and other services, hotel
accommodation in Tallinn and other features, such as various onshore leisure experiences.
• Strong brand. Our high market share, high-quality products and services and the regularity and
flexible offering of our vessel departures have supported the creation of a strong brand and a
competitive advantage. We are especially well-established and enjoy strong positive brand recognition
in Estonia and Finland, while in Sweden we continue to focus on increasing our positive brand
recognition. Our strong brand has helped us to create an increasingly loyal customer base. Our customer
base has been strengthened through our rapidly growing loyalty club program, which has increased the
number of repeat customers. We seek to reinforce customer loyalty and strengthen further our brand
recognition by approaching our customers in a manner tailored specifically to each of our geographic
markets through our wide sales network with dedicated marketing offices and agents in each market.
• Competitive cost base. We actively manage and monitor our costs. Through our investment and fleet
renewal program, we have introduced new vessels operating at a lower cost per passenger than our
previous vessels, thereby increasing the profitability of our fleet. As the majority of our onshore and
onboard employee and administrative costs derive from Estonia, we benefit from the generally lower
cost levels in Estonia compared to Finland or Sweden, where most of our key competitors are based. We
believe that we also have fewer onshore personnel than most of our competitors. In addition, due to the
ongoing transitional period following Estonia’s accession to the European Union, we currently benefit
from a corporate income tax regime under which income tax is not charged on profits when accrued but
deferred until profits are distributed to shareholders, third parties or otherwise.
• Experienced management team with a proven track record. We have a proven track record of
investment and innovation. Since the late 1990s, our current management has successfully changed our
operating model and launched and implemented our investment and growth plan to date. Our
management has been instrumental in our transformation into a leading operator of mini-cruise and
passenger transport and ro-ro cargo services in the Northern Baltic Sea region. We believe that our
growth strategy, and particularly our investment and fleet renewal program, demonstrates our
management’s understanding of the dynamics of our market and has resulted in considerable growth of
our business operations, market shares and profitability.
We aim to be the leading provider of high-quality mini-cruise and passenger transport services, as well as
the leading provider of ro-ro cargo services on selected routes, in the Northern Baltic Sea region. Even though
our business has grown rapidly for nearly ten years, we believe that there are additional growth opportunities in
the region over the coming years. The cornerstones of our operating strategy are described below:
• Continue to invest in our fleet. We believe that continued investment in new vessels and upgrades to
existing vessels are critical to our ability to maintain market leadership and further expand our business.
In addition to introducing the New Cruise Ferry in the spring of 2006, we plan to introduce next
generation high-speed ro-pax ferries on the Helsinki—Tallinn route in 2007 and 2008. Our newer
vessels are designed to increase our efficiency and profitability by increasing passenger traffic while
reducing operating costs per passenger. We believe that the introduction of additional modern vessels
equipped with improved onboard amenities will lead to increased per-passenger spend and will attract a
broader customer base. In addition, the higher comfort, safety and environmental standards of our newer
vessels will further strengthen the Tallink brand association with high-quality products and services.
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