Annual report 2008 - Advanced Inflight Alliance AG

The customers of the Group include airlines all over the world. Airlines generally choose their inflight entertainment
suppliers through invitations to tender, and they then contractually bind themselves to a more
or less exclusive relationship for an average of two to three years. Content services providers normally
purchase the content available to carriers – i.e. Hollywood movies, as well as news, sports and music programs
– for licensing periods of a few months and on a nonexclusive basis, i.e. competitors can purchase
the same film rights for their customers during the same period.
The IFE-Alliance
While the subsidiary groups active in our core business – Atlas Air, IFP, DTI and Fairdeal – continue to operate
separately and approach airlines using their own brand names, their affiliation is expressed through their
membership in the IFE Alliance. This structure allows other market participants to join the IFE Alliance while
retaining their established brand names. The name of the alliance followed the example on three airline
associations: Star Alliance (Air Canada, Air China, All Nippon Airways, Deutsche Lufthansa, Singapore Airlines,
United, etc.), Skyteam (Air France/KLM, Continental, Delta, Northwest, etc.) and Oneworld (American
Airlines, British Airways, Cathay Pacific, Qantas, etc.).
The IFE Alliance supplies an extensive range of inflight entertainment content consisting largely of audio and
video programs (feature films, TV programs, news, sports). Its services also include GUI (graphical user interface)
design for Internet applications, database management for managing the entire inflight entertainment
process, and the technical integration of the respective systems on board.
Our shared economic success in financial year 2008 demonstrates the benefits of retaining the brand names
of our subsidiaries in the inflight entertainment market. Our priority is to maintain continuity in the business
relationships between our operational subsidiaries and our airline customers.
Film licensing
As in the previous years, the traditional business of licensing international film rights for TV and DVD, mainly
for German-speaking territories, was of secondary importance in 2008. The film assets are exploited by
IFEL.
4. Overall economic situation
4.1 Global economic growth
The global economy expanded at a much slower rate in 2008. At 3.4%, GDP growth was below average.
The serious crisis in the international financial markets, which was triggered by the collapse of the US subprime
mortgage market in 2007, has by now affected all areas of the economy. There has been a dramatic
deterioration in the ability of companies and private households alike to obtain financing.
This time, the cooling of the global economy affected not just the major economic regions — North America,
Western Europe, and Asia — but also Central and Eastern Europe, Russia, and Latin America. Overall, global
GDP will rise by 0.5% in 2009 and by 1.4% in 2010. All in all, this constellation points to a global recession
in 2009 (source: Ifo Institute‘s Economic Forecast for 2009).
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