1Q 2012 Review and Summer 2012 Traffic Forecast

John P. Heimlich Vice President and Chief Economist May 9, 2012

A4A Projects 206 Million Passengers to Travel on U.S. Airlines in Summer 2012* Flat Volumes Overall: Record International; Domestic 7 Percent Below 2007 Peak

250

225 200 175

Millions* 150 125 100 75 50 25 0

217.6 25.1

210.2 25.7

200.3 24.1

203.1

206.1
26.3

206.2 26.8 International Domestic

25.8

192.4

184.5

176.2

177.3

179.8

179.4

2007A

2008A

2009A

2010A

* Summer constitutes the period June 1 through August 31; data reflects onboard passengers traveling in scheduled service per DOT T100 segment database

2011A

2012F

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Rising Costs Forcing U.S. Airlines to Continue Capacity Reductions in 2012 Domestic ASMs in 4Q Scheduled at 12 Percent Below Pre-Recession Levels

Scheduled Domestic (ASMs): Year-Over-Year Change (%) 0.7

Scheduled Domestic ASMs (Billions): Five-Year Comparison 186.2

(0.1) 164.1 (1.0) 1Q12 2Q12 3Q12 (0.9)

4Q12

4Q07

4Q12

Source: Innovata (via Diio Mi) published schedules as of May 4, 2012; an ASM is one seat flown one mile

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U.S. Airlines Adding Capacity to Most Continents in 2012 Notable Exceptions: Europe and the Middle East

Change (%) in Scheduled Available Seat Miles* (ASMs) from the USA: 4Q 2012 vs. 4Q 2011

84.8

72.9 51.5

13.1
(0.8)

19.5 7.0
(7.2)

* Scheduled U.S. airline flights departing U.S. airports for other continents; an ASM is one seat flown one mile Source: Innovata (via Diio Mi) published schedules as of May 4, 2012

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1Q 2012 U.S. Airline* Losses Worsened, Constituting 5.2 Percent of Revenues Despite 8.2 Percent Stronger Revenue, Profits Shrank on 10.3 Percent Higher Costs

1Q 2012 Better/(Worse) Than 1Q 2011* Year-Over-Year Change Operating Revenues Operating Expenses Fuel Wages and Benefits Other Other Income/(Expenses) Net Income Percent 8.2 (6.9) (19.1) (4.2) (0.4) (118.5) (73.6)

Net Profit Margin (%)

(3.2)

(5.2)
1Q 2011 1Q 2012

* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways

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1Q U.S. Airline* Losses Persist, Led by AMR Negative Profit Margin Prevails, in Stark Contrast to Other Fortune 500s

U.S. Airlines* Net Income ($ Millions)

1Q 2012 (1,731)

U.S. Airlines* ex. AMR Net Income ($ Millions)

1Q 2012 (55)

Net Margin (Percent)

(5.2)

Net Margin (Percent)

(0.2)

Ford Motor Company

Net Income ($ Millions) Net Margin (Percent)

1Q 2012
1,396 4.3

Apple Inc.
Net Income ($ Millions) Net Margin (Percent)

1Q 2012
11,622 29.7

* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest/AirTran, Spirit, United and US Airways

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Jet Fuel in 2012 Running 7 Percent Higher Than in Same Period of 2011 High Crude-Oil Price Plus Refining Crack Spread*

Price per Barrel (Five-Day Moving Average)

Price per Gallon (Gulf Coast Jet Fuel) $3.20

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2011

1991-1995

1996-2000

2001-2005

26-May-12

Source: A4A and EIA (for WTI and Brent crude oil and U.S. Gulf Coast jet fuel)

10-May-12

* Refining margin (difference between jet-fuel and crude-oil price)

2006-2010

19-Jan-12

11-Jun-12

20-Feb-12

23-Mar-12

27-Jun-12

YTD 2012

7-Mar-12

$145 $140 $135 $130 $125 $120 $115 $110 $105 $100 $95
3-Jan-12 4-Feb-12

Jet Fuel

Brent Crude

WTI Crude

24-Apr-12

8-Apr-12

$0.54

$0.58

$1.02

$2.17

$3.00

Unlike Many Goods/Services, Price of Air Travel Has Not Kept Pace with U.S. Inflation Adjusted for Inflation, Domestic Fares Have Fallen 16.4% (12.0% incl. Fees) Since 2000

Product (Unit) College Tuition: Public (Year) Gasoline (Gallon, Unleaded) Eggs (Dozen, Grade A, Large) College Tuition: Private (Year) Baseball Game (Nonpremium MLB Ticket) Movie Ticket Prescription Drugs (Index) Single-Family Home (New) U.S. CPI (All Urban Consumers)1 Vehicle (New) Air Travel (Round-Trip Domestic Fare + Fees)2 Air Travel (Round-Trip Domestic Fare Only)2 Apparel: Clothing/Footwear/Jewelry (Index) Television (Index)

2000 $3,508 $1.51 $0.91 $16,072 $16.22 $5.39 285.4 $169,000 172.2 $24,923 $317 $314 129.6 49.9

2011 $8,244 $3.53 $1.77 $28,500 $26.91 n/a 425.0 n/a 224.9 n/a $364 $343 122.1 6.6

% Change 135.0 133.8 94.5 77.3 65.9 n/a 48.9 n/a 30.6 n/a 15.0 9.2 (5.8) (86.8)

1. Bureau of Labor Statistics measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. 2. A4A analysis of data collected by the Bureau of Transportation Statistics excludes taxes; fees include reservation change fees and baggage fees

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U.S. Inflation Continues to Outpace the Price of Air Travel on U.S. Airlines Average Domestic Revenue* and Taxes Collected per Round-Trip Passenger

Actual (as collected)

U.S. CPI (1982-84 = 100)

If fares kept pace with inflation

1979 1990 2000 2011

$186

$202
$312 $356 $419 Taxes

72.6

$186

$202
$363 $478 $625 Taxes

$288 $314
$343 Airfare Fees

130.7

$335

172.2

$442 $577
Airfare Fees

224.9

* Airline revenue includes airfare, baggage fees and reservation change/cancellation fees as collected and reported per domestic round-trip origin-destination passenger Sources: DOT O&D Survey (Data Bank 1A) and Bureau of Labor Statistics for the Consumer Price Index (CPI)

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Revenue Gains from Ancillary Services Slowing But Continues to Help Defray a Portion of Rising Operating Costs

Systemwide Ancillary Revenue Collected per Passenger per Segment Flown

2008

$6.32 $8.60 $9.52 $9.68 $9.97

2009 2010 2011 YTD 2012

Sources: A4A analysis of data provided by Alaska, American, Delta, JetBlue, Southwest/AirTran, United and US Airways

10

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ExxonMobil Microsoft GE Wal-Mart

AAA AAA AA+

Source: Standard and Poors

AA
AA-

Toyota BP eBay

A
A

Starbucks

ABBB BBBBBB-

QANTAS Lufthansa Southwest

11

Alaska Allegiant

BBBB-

British Air GOL TAM Delta

United Air Canada JetBlue SAS US Airways American

BBB+ B+ B B BB-

Only One U.S. Passenger Airline Has Investment-Grade Credit

BBD
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< BBB- (speculative grade)

>= BBB- (investment grade)

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