American Airlines

Rhett Workman

Managing Director,

Government & Airport Affairs

April 5, 2017

Industry Overview

The U.S. Airline Industry: Fundamental Change

Airlines have been

a death trap for

investors.

May 2013

November 2016: Warren’s investment firm Berkshire Hathaway

amassed a $1 billion investment in American Airlines

If a farsighted capitalist

had been present at Kitty

Hawk, he would have done his

successors a large favor

by shooting Orville down.

February 2008

Airlines Are Closing the Gap to U.S. Corporate Profitability

Source: ATA Annual Reports (1970-1976), A4A Passenger Airline Cost Index (1977-present); Bureau of Economic Analysis NIPA Table

1.14

(25)

(20)

(15)

(10)

(5)

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YT

D16

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U.S. Recession

Pre-Tax Profit Margin (%) AVERAGE

Reinvestment in Customer Experience

1.29 1.15

0.64

0.47 0.43 0.55

0.82

1.04 1.16

1.41 1.43

2000 2001 2002 2003-09 2010 2011 2012 2013 2014 2015 YTD162016

* SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and Virgin America

U.S. Passenger Airline* Capital Expenditures ($ Billions per Month)

U.S. Airlines are Putting Their Profits Back Into the Business

airlines.org

Renewing fleets, improving the product at all stages of travel

Adding capacity

Adding staff

Improving airports

Reducing debt

Returning cash to shareholders

Buying back stock

Issuing dividends

Increasing job security

Restoring/increasing employee wages and benefits

Shoring up pensions/retirement accounts

North American Airline Satisfaction Climbs to 10-Year High

692 687

668

658

673

683 681

695

712 717

726

650

670

690

710

730

750

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Up 68 points from 2009-2016

Source: J.D. Power 2016 North America Airline Satisfaction Study (http://www.jdpower.com/press-releases/2016-north-america-airline-satisfaction-study)

“The airlines are clearly listening to their passengers and are taking action. As a result, we see satisfaction

rising across all touch points of the passenger experience. Airlines are making positive strides by adding

value to its products and services with newer and cleaner planes, better in-flight services, improving on-time

arrivals and bumping fewer passengers from their flights.” -- Rick Garlick, J.D. Power (May 11, 2016)

Note: Scale = 0 to 1000

Air Travel is Still a Great Bargain!

Source: A4A, BTS Data Bank 1B, Federal Reserve Bank of St. Louis, National Association of Theatre Owners, Team Marketing Report

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Airfare* Food Transit Baseball (MLB) Movie* Domestic round-trip average, including bag and change fees

Price

In

de

x: 1

99

0 =

100

% Change

Baseball Game +232

Movie Ticket 100

Public Transit 88

Food 87

Airfare* 34

American Airlines Update

American Airlines 2017 Airline of The Year

$5.3

$2.2 $2.0

$6.2

$3.2

$2.7

$5.7

$3.4 $3.2

$5.5

$3.5

$4.3

Total Capital Expenditures 2014 - 2017

Non-Aircraft Aircraft

Unprecedented Investment in Product

2014 2015 2016 2017E

$22.7 Billion

Source: SEC filings and other company guidance

Investments in Our Fleet

14.0 yrs

9.8 yrs

16.8 yrs 16.6 yrs

13.3 yrs

14.4 yrs

10.4 yrs 10.4 yrs

8

13

18

2012 2013 2014 2015 2016 2017E

Years

Average Fleet Age

By the end of 2017, we will have inducted 395 new airplanes into the fleet

since the merger, while retiring 391 older aircraft – giving us the youngest

fleet of the major airlines . . . one new plane every five days.

Source: Company filings and Ascend data

Enhanced Customer Notifications

Deliver customers the right information, at the right time, through the right channel

Dynamic Reaccom Proactive Baggage Notification

Mobile Boarding Text Updates

Enhancing our Product: Airports

LGA Terminal Rebuild

DCA Express Terminal

New lounges; refreshed airport experience

PHL OTG Boarding Gates

Planned

Completion

Lie-flat seats 2017

Lounge renovation 2018

Premium Economy 2020

Power outlets 2021

Wi-Fi 2018

Investing in the Future: Product Investments

15

Investing in Our Team

10,000 additional team members

38% average pay rate increase per team member

Implementation of profit sharing ($314M for 2016)

Elevate the Experience customer service training

Two positive space tickets for ATW Airline of the Year

Best-in-class maternity and adoption assistance program

Trust

The PHL Story

Existing PHL

UPS

Facility

Tinicum

Township

18

Runway 9R–27L

Runway 9L–27R

Runway 8–26

Terminal Complex

Delaware River

I-95

I-95

PHL – Capacity Expansion Program (CEP)

19

In 2010, the FAA approved a $7.8 billion CEP that included a new river runway

and a new terminal complex and new cargo areas

The FAA approved at $467.5 million LOI toward airfield development

PHL EIS Alternatives

Alternative B:

Parallel Runway 8-26 West

Alternative C:

Midfield Terminal

Alternative A:

Parallel Runway 8-26 East

The PHL CEP Was Based on Outdated Data Forecast

2002 (actual) 2005 2010 2015 2020

Enplaned Passengers

Air Carrier 10,986,782 11,200,000 13,350,000 15,850,000 18,650,000

Commuter 1,429,801 2,350,000 2,790,000 3,310,000 3,900,000

Total Enplaned Passengers

12,416,583 13,550,000 16,140,000 19,160,000 22,550,000

Aircraft Operations

Passenger Airlines-- Air Carrier 242,702 238,400 270,400 306,400 342,400

Passenger Airlines-- Commuter 132,586 180,000 188,000 202,000 226,000

Cargo and Air Taxi 19,732 28,600 36,600 40,600 47,600

General Aviation 67,499 60,000 63,000 66,000 69,000

Military 648 1,000 1,000 1,000 1,000

Total Aircraft Operations

463,167 508,000 559,000 616,000 686,000

Air Cargo (tons) 596,394 620,000 780,000 980,000 1,200,000

Average Aircraft Size

Air carrier 139 138 142 147 153

Commuter 38 43 48 52 54

Average Load Factor

Air carrier 65% 68% 69% 70% 71%

Commuter 57% 61% 62% 63% 64%

2016 Actual

394,022

15,059,111

CEP Passenger Forecast

Forecast

2002

(actual) 2005 2010 2020

Enplaned Passengers

Base 12,416,583 13,550,000 16,140,000 22,550,000

Low 12,416,583 12,500,000 14,000,000 19,500,000

High 12,416,583 15,270,000 18,750,000 26,400,000

Historical Forecast

Forecast Range

0

6

12

18

24

30

36

1980 1985 1990 1995 2000 2005 2010 2015 2020

Calendar Year

En

pla

ned

Pas

sen

ger

s

(milli

ons)

Base Forecast

Summary of Passenger Forecast Range

Actual Enplaned Passengers

CEP - Operations Forecast

Forecast

2002

(actual) 2005 2010 2020

Aircraft Operations

Base 463,167 508,000 559,000 686,000

Low 463,167 429,000 447,000 549,000

High 463,167 582,000 657,000 811,000

Historical Forecast

Forecast Range

0

200

400

600

800

1000

1980 1985 1990 1995 2000 2005 2010 2015 2020

Calendar Year

Airc

raft

Ope

ratio

ns

(thou

sand

s)

Base Forecast

Historical Forecast

Forecast Range

0

200

400

600

800

1000

1980 1985 1990 1995 2000 2005 2010 2015 2020

Calendar Year

Airc

raft

Ope

ratio

ns

(thou

sand

s)

Base Forecast

Summary of Operations Forecast Range

Actual Operations

FAA vs. Actual Forecasts Trending Lower

PHL Aircraft Operations which drive airfield delay are down significantly

24 March 28, 2017

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2004 2009 2014 2019 2024 2029 2034 2039 2044

Actual Operations vs. Forecasts

FINAL EIS

2010 TAF

2012 TAF

2016 TAF

Linear Trend on Actuals

Actual Operations

2014 TAF

2011 TAF 2013 TAF

The PHL Story – Operational Changes

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380

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

To

tal Tak

eo

ffs

& L

an

din

gs

(Th

ou

san

ds

)

To

tal

Pa

ss

en

ge

rs (

Mil

lio

ns

)

Total Operations vs. Passengers (all PHL airlines)

PHL Airspace Linked to other NE Airports

27

New Runway Won’t Ease Congestion – 2008 Slide

Runway to Nowhere?

Record of Decision & Written Re-Evaluation of the NY/NJ/PHL Metropolitan Area

Airspace Redesign Final Environmental Impact Statement July 31, 2008

NY/NJ/PHL Airspace Redesign Record of Decision (ROD)

“A Capacity Enhancement Program (CEP) is on-going at PHL. As noted

in the ROD, the CEP has the potential for cumulative impacts with the

Airspace Redesign. However at the time the ROD was signed, there

was insufficient information about this evolving proposal to include it

within the study of cumulative impacts in the Airspace Redesign EIS.

The ROD for CEP is expected to be published in September 2009, and

if approved, construction would not be completed until 2020, well

beyond the 2011 full implementation date for the Airspace Redesign

CEP alternatives retain the runway geometry, and the Airspace

Redesign procedures are incorporated into the CEP analysis. Thus

potential cumulative impacts from the projects will be captured in the

environmental analysis for that proposed project.”

The PHL CEP ROD did not include the cumulative impacts raised in the

NY/NJ/PHL ROD:

“The cumulative effects of the Airspace Redesign project on PHL were

taken into consideration for the CEP EIS analysis. The CEP EIS analysis

assumed full implementation of the Airspace Redesign project because,

based on Airspace Redesign project phasing plans, changes to the

airspace around PHL will be in place by the time CEP construction is

complete.”

PHL CEP ROD – Incomplete

So What Happened?

30

Fundamental and structural changes in the Industry

Consolidation in the industry through multiple mergers

Load factors increased due to fuel crisis and recession

Aircraft up-gaging

Fleet changes due to AA and US merger

Significant decline in operations

Improvements in airspace

Airport economics

Lessons Learned

31

Airport masterplans are good: All airports should develop a masterplan to

guide future infrastructure and facility development programs in a logical,

sustainable and cost efficient manner

The masterplan is prepared by independent consultants with global expertise,

delivering plans that enable all stakeholders to expand their operations and

undertake profitable business

Airlines must be fully involved in the creation, development and review of the

masterplan

The masterplan should allow for incremental expansion of all facilities until the

ultimate capacity of the site is reached; capacity enhancement is tied to the

masterplan

No development should proceed until there is a masterplan in place

What’s Next?

32

Reassess plan for airfield and terminal development

Base new plan on realistic forecasts with meaningful triggers

Work with FAA on a plan on how the handle currently approved CEP

Figure out what to do with LOI?

Proceed with capital development at PHL that makes sense

Long Term Planning is Underway

33

Parking Garage

Connector

Support Facilities /

RON Apron / Gate V01

Duration: 4 Years

FAA Control Tower

Duration: 6 Years

CBIS Replacement

Duration: 5 Years

Headhouse

Duration: 4 Years

Terminal Garage Connector

Duration: 3.5 Years

BHS Connection to Concourse F

Duration: 3 Years

New AA & BB

Concourses

Duration: 7 Years

APM – Headhouse to

Concourse AA

Duration: 3 Years

APM – Headhouse to Concourse F

OR

Enhanced Bussing

Duration: 6 Years

Thank You