Updated March 15, 2018

U.S. Airline Industry Review: Allocating Capital to Benefit Customers, Employees and Investors

Commercial Aviation Supports 5% of U.S. GDP and More Than 10M U.S. JobsFor Every 100 Airline Jobs, Approximately 300 Jobs Are Supported Outside the Industry

airlines.org2

Source: FAA, The Economic Impact of Civil Aviation on the U.S. Economy (Nov. 2016)

» In 2014, economic activity (output) in the United States attributed to commercial aviation-related goods and services totaled $1.54 trillion, generating 10.2 million jobs with $427 billion in earnings.

» Commercial aviation contributed $846 billion (4.9 percent) to U.S. GDP, the value-added measure of overall U.S. economic activity.

Terms

• Commercial aviation – airlines, air couriers, airports, airframe/engine/parts/avionics manufacturers, visitor expenditures, R&D, travel arrangements.

• Output – the total economic value of goods and services produced.

• Earnings – wages/salaries/other labor income, benefits, and proprietors’ income paid to all employed persons who deliver final demand output and services.

• Jobs – the number of people employed in the industry that provide civil-aviation services, manufacture aircraft and aircraft engines, or work in other industries that are indirectly affected by activity in the civil air transportation sector.

U.S. Airlines Help Grow U.S. Exports, Reduce Trade Deficit, Boost GDPTravel/Tourism Exports Were $246B in 2016 – One-Third of All Services Exports

Source: Bureau of Economic Analysis

3 airlines.org

39.1

206.

833

%

0%

10%

20%

30%

40%

50%

$0

$50

$100

$150

$200

$250

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Passenger Air Transport Other Travel & Tourism* Travel Share of Services

Trav

el/T

ouris

m E

xpor

ts (B

illio

ns) Share of Total Services Exports

* Food, lodging, recreation, gifts, entertainment, local transportation in the USA, and other items incidental to foreign travel

U.S. Economy and Employment Growing; Household Net Worth at All-Time High

airlines.org

2.6 2.9

1.5

2.3 2.7

3.0

2014 2015 2016 2017 2018F 2019F

Real GDP Growth Rate (% CAGR)

4

2017-2018 Employment Growth (000)

259

200

73

175

155

239

190 22

1

14

271

216

175

239

313

J F M A M J J A S O N D J F

Sources: U.S. GDP real annual average growth rate (Bureau of Economic Analysis); U.S. nonfarm payroll employment growth (month-over-month, in 000s, seasonally adjusted) from BLS; median personal and household pre-tax income (Census); U.S. household net worth in current dollars, not seasonally adjusted (Federal Reserve)

29.2 30.6 31.1

54.4 57.2 59.0

2014 2015 2016Personal Household

Real Median Income ($2016, in 000s) Household Net Worth ($ Trillion, NSA)

83.3 86.391.6

98.7

2014 2015 2016 2017

IHS

Fore

cast

IHS

Fore

cast

As Real Airfares Have Plunged, Growth in Flyers = 4.5x Growth in U.S. PopulationAncillary Services Included, 2017 Domestic Air Travel Was ~42% Cheaper Than in 1980

airlines.org5

Source: Bureau of Economic Analysis, Bureau of Labor Statistics and Bureau of Transportation Statistics (Data Bank 1B via Airline Data Inc. and T1 for U.S. airlines)

$300

$400

$500

$600

$700

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Fare Fare + Ancillary

Domestic R/T Airfare (in CY2017 Dollars)

0.00.51.01.52.02.53.0

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Fare Fare + Ancillary

Domestic R/T Airfare (% of Disposable Personal Income)

849

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

100

200

300

400

500

600

700

800

900

1,000

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Per Capita (O

range)

Mill

ions

(Gra

y)

Passengers Enplaned (Scheduled Service)

Passengers tripled (up 209%)Population up 46%

Pax per capita doubled (up 111%)

As Commercial Air Travel Has Become Safer and More Accessible, More Americans Are Taking to the Skies: Almost 90% in Their Lifetimes, Almost 50% in Past Year

airlines.org

25 3039

4863

7281

88

0102030405060708090

100

1977 1987 1997 2017

Past 12 Months In Lifetime

% of U.S. Adult Population That Flew…

6

Sources: Gallup and Ipsos Public Affairs; NBC News (Dec. 20, 2017)

“The hub-and-spoke network has really been a wonderful thing for mobility of Americans.”Rick Geddes, Director of the Cornell Program in Infrastructure Policy (Dec. 20, 2017)

Average Domestic Ticket Price Fell From 2014-2016 and Again in 2017*Airfare Consistently Constituting ~94 Percent of Total Ticket Price

airlines.org7

Source: A4A analysis of data from DOT Data Bank 1B (all cabins and fare basis codes) and DOT Form 41 via Airline Data Inc.

Round-Trip Excluding Taxes (Current $)

355 363 376 363344 341

22 22 23 2323 23

377 385 399 386367 364

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2012 2013 2014 2015 2016 2017*

Airfare Ancillaries

* 4Q16 through 3Q17

Round-Trip Excluding Taxes (2017 $)

379 382 390 376352 341

24 24 24 2423 23

402 405 413 399375 364

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2012 2013 2014 2015 2016 2017*

Airfare Ancillaries

Within the Travel & Tourism Sector, Airfare Remains One of the Better BargainsIn Contrast to Air Travel, the Price of a Day at Disney Rose 33-Fold From 1971 to 2017

airlines.org8

Sources: A4A Passenger Airline Cost Index (using DOT Form 41 passenger yield), allears.net, “How theme parks like Disney World left the middle class behind” (Drew Harwell, The Washington Post, June 12, 2015) and “Disney Introduces Demand-Based Pricing at Theme Parks” (Brooks Barnes, The New York Times, Feb. 27, 2016)

$3.50

$115

$0

$20

$40

$60

$80

$100

$120

$140

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

Magic Kingdom® ($/day)

0

500

1000

1500

2000

2500

3000

3500

4000

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

U.S. CPIDisneyAirfare

Price Index (1971 = 100)

32.9X

2.4X

6.1X

5.54

13.53

0

2

4

6

8

10

12

14

16

18

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

U.S. Carrier Airfare (¢/mile)

1971-1978: 5.7% CAGR1978-2017: 1.3% CAGR

Product (Unit) 2000 2016 % ∆Public College Tuition & Fees (4-Year, In-State, Net) $1,234 $3,770 205.5Walt Disney World® (One-Day Pass, Adult, Regular Season) $46 $110 139.1National Football League Game (Nonpremium Ticket) $43.70 $92.98 112.8Major League Baseball Game (Nonpremium Ticket) $16.22 $31.00 91.1Jet Fuel (Gallon, Price Paid by U.S. Airlines) $0.807 $1.447 79.3Prescription Drugs (BLS Index) 285.425 502.549 76.1Disposable Personal Income per Capita (Annual) $26,206 $43,194 64.8Gasoline (Gallon, Unleaded Regular, Retail Including Taxes) $1.510 $2.142 62.1Movie Ticket (One Adult) $5.39 $8.65 60.5Single-Family Home (Existing) $147,300 $235,500 59.9Food (BLS Index) 167.817 247.928 47.7U.S. Consumer Price Index (CPI-U)1 172.200 240.007 39.4Vehicle (New, Retail) $24,900 $34,449 38.3Public Transit 209.492 265.389 26.7Air Travel (R/T Domestic Fare + Ancillary)2 $317.13 $366.92 15.7Air Travel (R/T Domestic Fare Only)2 $314.64 $344.22 9.4Apparel: Clothing/Shoes/Jewelry (BLS Index) 129.583 126.045 (2.7)Television (BLS Index) 49.925 2.727 (94.5)

Relative to Most Consumer Goods and Services, Air Travel Is a BargainThis Century, U.S. Inflation and U.S. Personal Incomes Have Outpaced Domestic Airfare

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 BTS via Airline Data Inc. – excludes taxes; “ancillary” includes revenue from reservation changes/cancellations and baggage

airlines.org9

Out

pace

dIn

flatio

nLa

gged

Infla

tion

For U.S. Airlines, 2017 Traffic Growth (3.3%) Outpaced Capacity Growth (3.2%)Systemwide Average Load Factor Rose 0.1 Points to 83.5 Percent

airlines.org10

60

65

70

75

80

85

90

600

700

800

900

1000

1100

120020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Load Factor (%)

Bill

ions

Load Factor (%) RPMs ASMs

Source: U.S. Bureau of Transportation Statistics T1, systemwide scheduled service on U.S. airlines – revenue passenger miles (RPMs) and available seat miles (ASMs)

+3.2%

+3.3%

U.S. Airline Traffic Flown and Capacity Operated Reached All-Time Highs in 2017Systemwide Operations; Enplanements Up 3.1% YOY

airlines.org11

762.7 798.2 824.1 849.3

862.5 902.2 933.5 964.3 1,034.4 1,076.9 1,119.1 1,154.9

0

200

400

600

800

1000

1200

1400

2014 2015 2016 2017Passengers (Mils) RPMs (Bils) ASMs (Bils)

Source: DOT T100, systemwide scheduled service on U.S. airlines – revenue passengers enplaned, revenue passenger miles (RPMs) and available seat miles (ASMs)

Full

Year

U.S. Airlines Transported Significantly More Cargo in 2017Expanding World Economy and Surging E-Commerce Fueling Growth in Air Shipments

airlines.org12

0

10

20

30

40

50

60

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018

Rev

enue

Ton

Mile

s (B

illion

s)R

evenue Tons Enplaned per Day (000)

Source: U.S. Bureau of Transportation Statistics T1 and T100, systemwide, all services on U.S. passenger and cargo airlines, carriage of freight and mail

Billion RTMs per Year (Left Axis)

000 Tons per Day (Right Axis)

In 2015-2016, U.S. Flights Needed to Fill 2 of Every 3 Seats to Avoid Losing MoneyBreakeven Load Factor Requirement Rose in 2016 on Lower Yield, Higher Unit Cost

airlines.org

Source: A4A Passenger Airline Cost Index (http://airlines.org/dataset/a4a-quarterly-passenger-airline-cost-index-u-s-passenger-airlines/)

56.7

62.6 66.2

81.3 81.0 80.9 77.5 75.6

66.8 68.2

83.4 83.8 82.9

50

55

60

65

70

75

80

85

9019

71-1

980

1981

-199

0

1991

-200

0

2001

-201

0

2011

2012

2013

2014

2015

2016

Breakeven Actual

Load

Fac

tor (

%)

13

In the Deregulated Period, U.S. Airline “Earnings” Have Been Cyclical and VolatileCumulative Net Income = $21.9 Billion (0.6% of Revenues, $0.99 per Enplaned Passenger)

airlines.org

Source: A4A Passenger Airline Cost Index

1.8

(11.4)

20.6

(65.0)

75.9

(100)(80)(60)(40)(20)

020406080

100

1979-1989 1990-1994 1995-2000 2001-2009 2010-2017P

Net

Inco

me

($ B

illio

ns)

14

0.4%Net Margin: (3.3%) 3.8% (6.3%) 5.9%

Even in Best Years, Profitability of U.S. Airlines Lags U.S. Corporate AveragePre-Tax Profit Margin (%) Gap Widened in 2016 and 2017

airlines.org

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

11.0

15.8

(25)

(20)

(15)

(10)

(5)

0

5

10

15

2019

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

U.S. Recession

U.S. Passenger Airlines

All U.S. Corporations

15

Note: Recessions highlighted in gray

Airlines Continue to Strive for Solid Profitability Across the Business CycleIn Current U.S. Business Cycle, Airline Margins Are About One-Third the U.S. Average

airlines.org

30.1 29.3

25.1

16.7 15.9

6.5

0

5

10

15

20

25

30

35

AAPL MCD DIS All USA SBUX Airlines

16

Sources: U.S. Bureau of Economic Analysis, A4A Passenger Airline Cost Index and company SEC filings

Appl

e

McD

onal

d’s

All U

S C

orps

.

Star

buck

s

Pre-Tax Profit Margin (%) for 2010-2017

Dis

ney

airlines.org17

90

100

110

120

130

140

150

160

170Ja

n-10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Composite*Canadian Dollar (CAD)Mexican Peso (MXN)British Pound (GBP)

Source: Federal Reserve Board of Governors

Strong U.S. Dollar Headwind Easing for U.S. Carrier International RevenuesPressure on Foreign Point-of-Sale and Passenger Yield (Revenue per Mile Flown)

U.S

. Dol

lar I

ndex

: Jan

. 201

0=10

0*

* Weighted average of foreign exchange value of USD against currencies of broad group of major U.S. trading partners

Jet-Fuel Prices Creeping Up AgainEvery Penny per Gallon per Year Equates to ~$200M in U.S. Airline Industry Fuel Expenses

EIA Spot Price* of Crude Oil/Barrel (Brent)

airlines.org18

0.85

1.52

1.25

1.56

1.89

$0.00$0.20$0.40$0.60$0.80$1.00$1.20$1.40$1.60$1.80$2.00

2000

2015

2016

2017

2018

EIA Spot Price* of Jet Fuel/Gallon (U.S. Gulf)

29

5244

54

67

$0

$10

$20

$30

$40

$50

$60

$70

$80

2000

2015

2016

2017

2018

Source: A4A and Energy Information Administration (http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm) * 2018 reflects year-to-date average

2017 Revenues Rose 4.5%, But All Major Expenses Rose Faster – Up 8.3%Yields Lagged U.S. Inflation; Profitability (Average Pre-Tax Profit Margin) Fell to 11%

airlines.org19

Year-over-Year Change (%) in Operating Revenues and Expenses

3.0 0.9

13.0

7.8

4.5 7.1

17.9

6.0 4.8

7.5

4.7

8.3

14.1

11.0

Pax

Tra

ffic

Pax

Yie

ld (1

)

Car

go R

ev

Oth

er R

ev (2

)

Tota

l OpR

ev

Labo

r

Fuel

Mai

nten

ance

Airp

orts

Airc

raft

Oth

er (3

)

Tota

l OpE

xp

2016

2017

Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United

1. Yield = passenger revenue per passenger-mile flown (cents per RPM)2. Sale of frequent flyer award miles to airline business partners, pet transportation, in-sourced aircraft and engine repair, flight simulator rentals, inflight sales, etc.3. Professional fees, food/beverage, insurance, commissions, GDS fees, communications, advertising, utilities, office supplies, crew hotels, nonfuel payments to regionals

Pre-Tax Profitsand Margin (%)

$17.

6B

$21.

4B

U.S. inflation up 2.1%

In 2017, U.S. Passenger Airline* Profitability Respectable But Below AveragePre-Tax Profit Margin (% of Operating Revenues)

airlines.org

37.6 35.9

28.0 27.5 27.1 25.0

19.3 17.0

13.2 12.4 11.0 10.8

6.2 5.2

McD

onal

d´s

Uni

on P

acifi

c

Appl

e

CS

X

Com

cast

Dis

ney

Star

buck

s

Hon

eyw

ell

Cat

erpi

llar

Mar

riott

Airli

nes*

Boei

ng

Chi

potle

Ford

20

* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United Source: Company SEC filings

InvestmentGrade1

Source: Standard and Poor’s; “Guide to Credit Rating Essentials: What are credit ratings and how do they work?”

airlines.org21

Speculative2

Grade

1 Describes issuers with relatively high levels of creditworthiness and credit quality2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk

Airline Creditworthiness Has Improved But Continues to Lag Many Fortune 500sPer S&P, Only Two U.S. Passenger Airlines Have Investment-Grade Credit

“Standard & Poor’s ratings express the agency’s opinion about the ability and willingness of an issuer…to meet its financial obligations in full and on time.”

Johnson & Johnson, Microsoft AAAAlphabet (Google), ExxonMobil, USA AA+Wal-Mart AAGE, Toyota AA-PepsiCo, UPS A+Target AAmtrak, BP, Starbucks A-Ryanair, Southwest, eBay, McDonald’s BBB+FedEx, Ford, Marriott BBBDelta, Lufthansa, Qantas, WestJet BBB-Alaska, British Airways BB+Avis, JetBlue BBAir Canada, American, Hawaiian, LATAM, Spirit, United, Sabre BB-Virgin Australia, Hertz, SAS B+Gol Linhas Aereas (GOL) B-

Like Other Responsible Businesses, Airlines Are Focused on Balanced Allocation of Capital to Benefit All Stakeholders: Customers, Employees and Investors

airlines.org22

Renewing fleets, improving the product at all stages of travel Boosting operational reliability, advancing environmental objectives

Restoring/increasing air service levels (capacity)

Adding staff

De-risking (reducing debt)

Returning cash to shareholders Buying back stock Issuing dividends

Increasing job security

Restoring/increasing employee wages and benefits

Shoring up pensions (or comparable retirement accounts)

Improving Finances Enabling Significant Reinvestment in Customer ExperienceIn 2017 Alone, Airlines Directly Invested ~$20B in Flight/Ground Equipment, Facilities, IT

airlines.org23

15.513.8

7.76.6 5.8 5.2

6.6

9.8

12.513.9

17.0 17.5

19.9

2000 2001 2002 2003-08 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and merged/acquired predecessors

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

Incl

udes

> 4

50 a

ircra

ft

* Includes payments made for aircraft and other flight equipment, ground and other property and equipment, airport and other facility construction and information technology

airlines.org24

Following 2001-2009 Financial Crisis, U.S. Airlines Have Retired ~$69B in Debt and Returned ~$39B to Shareholders to Lure and Retain New Equity Investors

Source: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors

9.1

11.2

7.5 7.9

10.5

8.0 8.5

6.1

2010

2011

2012

2013

2014

2015

2016

2017

Retirement of Debt ($ Billions) Returns to Shareholders ($ Billions)

0.1 0.3 0.61.2

4.6

10.5

13.1

8.8

2010

2011

2012

2013

2014

2015

2016

2017

DividendsStock Repurchase

* Payments on long-term debt and capital lease obligations

From 2010-2017, Capital Expenditures ($102B) Equaled 75% of Operating Cash FlowU.S. Airlines Also Retired Expensive Tranches of Debt and Returned Cash to Shareholders

airlines.org25

* SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and merged/acquired predecessors

Pay Down Debt 54.3 8.5 6.1 68.9Enhance the Product 64.9 17.5 19.9 102.4Reward Shareholders 17.4 13.1 8.8 39.4

$ Billions 2010-15 2016 2017 TotalNet Cash from Operations 86.7 27.7 21.4 135.7

-+-

airlines.org26

As U.S. Airlines Generate Sufficient Cash from Operations, They Are Better Positioned to Fund Capital Improvements and to Enhance Shareholder Value

Cas

h Fl

ow (B

illio

ns)

4.5 3.0

(0.0)

0.6 2.5

11.1 10.2

1.5

21.4

-$5

$0

$5

$10

$15

$20

$25

$30

2010 2011 2012 2013 2014 2015 2016 2017

Free* (FCF) Operating

* Operating cash flow minus capital expendituresSource: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors

Airline-Airport Collaboration Has Paved Way for Widespread Infrastructure InvestmentCapital Projects Have Grown 86% Since 2015 at the 30 Largest U.S. Airports

airlines.org27

o Multiple new runways at Chicago O’Hare and new runways at Fort Lauderdale, Washington Dulles, Seattle and Charlotte

o New/expanded/modernized terminal facilities at New York, Miami, Las Vegas, Orlando, Honolulu, Houston, Denver, Seattle, Salt Lake City and San Francisco as well as international facilities at Atlanta, Boston and Los Angeles

» Development is also robust at smaller airports, including:o Runway projects at Columbus, Des Moines, Erie, Nashville,

Providence and Sioux Fallso Terminal projects at New Orleans, Eugene, Grand Rapids,

Greenville-Spartanburg, Oakland, Dallas Love Field, San Luis Obispo, Portland (Maine), Pasco, Reno-Tahoe and Wichita

» Investment is also occurring in cargo facilities and related infrastructure at Louisville, Newark, Lafayette (Louisiana), Indianapolis, Rockford, Memphis and elsewhere

$70

$100

$130

2015 2017 2018Approved Completed/Underway

» $130B of capital projects have been completed, are underway or approved at the 30 largest U.S. airports since 2008, including, for example:

Investment at Largest Airports($ Billions)

J.D. Power: North American Airport Satisfaction Climbs to Record High

airlines.org

689

675 69

0

725 73

1

749

650

675

700

725

750

2007 2008 2010 2015 2016 2017

Source: J.D. Power 2017 North America Airport Satisfaction Study (http://www.jdpower.com/press-releases/jd-power-2017-north-america-airport-satisfaction-study)

“Overall passenger satisfaction with North American airports has reached an all-time high, as airports of every size have found creative ways to address the challenges of constant construction projects and increased passenger capacity demand… [M]ajor city airports that are in the thick of massive construction efforts—notably Newark Liberty, LaGuardia, Los Angeles International and Chicago O’Hare—are still fighting the headwinds of traveler disruption and access challenges that are handicapping their overall satisfaction scores.” (Sept. 21, 2017)

Notes: Scale = 0-1000; study not conducted in 2009/2011-2014

28

Six factors (in order of importance): Terminal Facilities* (24%)Airport Accessibility (19%)

Security Check (16%)Baggage Claim (15%)

Check-In/ Baggage Check (14%)Food / Beverage / Retail (13%)

Notes: The study, fielded Jan-Aug 2017, is based on responses from 34,695 North American travelers who traveled through at least one domestic airport with both departure and arrival experiences (including connecting airports) during the past three months. Travelers evaluated either a departing or arriving airport from their round-trip experience.

* Concourses, lounges, signage, restrooms, gate areas

ATL BOS CLT HAS (HOU/IAH) LAS LAX MCO MSP MWAA (DCA/IAD) OMA PANYNJ (ACY/EWR/JFK/LGA/SWF) PDX PHX RDU SEA SNA TPA

ALB ABQ AIAS (ANC/FAI) AUS BDL BHM BNA BOI BUR BWI CHS CLE CMH CVG DAL DAY DEN DFW DSM DTW ELP FLL GEG GSO GSP HSAS (HNL/ITO/KOA/LIH/OGG) HSV IND JAX LGB LIT MCI MDW MEM MFR MIA MKE MSY MYR OAK OKC

ONT ORD ORF PBI PHL PIT PSC RIC RSW SAN SAT SDF SFO SJC SLC SMF STL TUS TYS

AGS BIL BTV COS CRP FAT FNT GRR GUM JAN MDT MFR MHT MOB PNS PVD

PWM RAP RDM TUL VPSDelta, Southwest

Alaska Allegiant American Hawaiian JetBlue Spirit

United

None

AA ±Aa (1-3)

A ±A (1-3)

BBB ±Baa (1-3)

BB ±Ba (1-3)

B ±B (1-3)

Strong Credit Allows U.S. Airports to Access Capital Markets at Preferred Rates

29

Sources: Standard and Poor’s and Moody’s

Investment Grade1

Speculative Grade2

Legend:AIAS = Alaska International Airport SystemHAS = Houston Airport System; also includes EFDHSAS = Hawaii’s Statewide Airports System; also includes HDH/HNM/JHM/JRF/LNY/LUP/MKK/MUE/PAK/UPPMWAA = Metropolitan Washington Airports AuthorityPANYNJ = Port Authority of New York and New Jersey; also includes TEB1 Describes issuers with relatively high levels of creditworthiness and credit quality2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk

Improving Airline Finances Translating to Customer Benefits

airlines.org30

“The recent wave of consolidation has meant higher profits and more stability…, which has led airlines to invest in technology, new airplanes and better customer service… ‘A healthy airline industry means a better flying experience overall.’”

-- “Rick Seaney, FareCompare.com, in “AMR Stands to Gain Vast Route Network,”Wall Street Journal, Feb. 7, 2013

“What we’re seeing in airlines is what we’ve seen in railroads, telecom, and trucking... You’ll have fewer crises, fewer bankruptcies, more predictability, more stability.”

-- Clifford Winston, Senior Fellow, Brookings Institution,Christian Science Monitor, Feb. 14, 2013

Improving Finances Enabling Significant Reinvestment in Customer Experience

airlines.org31

» New or refurbished aircraft, larger overhead bins for luggage

» Availability of lie-flat seating with AC power and USB, proliferation of Wi-Fi and inflight entertainment

» Expanded route networks (scope and frequency) and schedules (seat growth)

» Improved airport check-in areas, lounges, gate amenities, baggage systems, ground equipment

» Investments in new automated security screening lanes (including automatic bin returns)

» Continued development and roll-out of mobile technology and website/kiosk functionality

» Increasing operational reliability (controlled for weather conditions)

» Enhanced tools (computers, tablets, software) and training for customer-contact employees

2,546 2,451 2,292 2,285 2,294 2,259 2,274 2,289 2,366 2,454 2,542 2,626

288 292 275 282 292 299 310 330 351 368 389 405

2,834 2,743 2,567 2,567 2,586 2,558 2,584 2,620 2,717 2,823 2,931 3,031

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Domestic International

Customers Are Seeing All-Time High of 3M+ Daily Seats Departing U.S. AirportsDaily Seats (000) Departing U.S. Airports in Scheduled Service: Up 18% Since 2010

airlines.org32

Source: Innovata (via Diio Mi) published schedules as of Mar. 9, 2018, for all airlines providing scheduled passenger service from U.S. airports to all destinations

2017: DOM +3.6%, INT +5.8%, SYSTEM +3.9%2018: DOM +3.3, INT +3.9%, SYSTEM +3.4%

2018: Small U.S. Communities Seeing Most Flights in 5 Years, Most Seats in 10Average Daily Flights and Seats Departing Small U.S. Commercial Airports*

airlines.org33

Source: Innovata (via Diio Mi) published schedules as of Mar. 9, 2018, for all airlines providing scheduled passenger service from U.S. airports to all destinations* Per https://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/categories/, U.S. airports with less than 0.25% of annual passenger boardings

Average Daily Flights

6,05

0

5,77

1

5,34

0

5,33

4

5,14

1

4,88

5

4,74

9

4,52

9

4,37

6

4,36

7

4,40

2

4,57

0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

396,

602

384,

126

355,

254

354,

988

345,

912

333,

754

328,

998

323,

632

322,

223

333,

315

352,

172

367,

775

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Average Daily Seats

Notes: Great Recession (Dec-2007–Jun-2009); FAA pilot qualification (1,500-hour) rule effective Jul-2013; pilot flight/duty/rest rule effective Jan-2014

2008-09 Great Recession2011-14 crude oil @ $99-1122013 1,500-hour rule (pilots)2014 flight/duty time (pilots)

In Addition to Expanding Schedules, Airlines Are Deploying Larger AircraftReplacement of 50-Seaters With Larger Regional Jets Is Primary Driver

airlines.org34

% of Domestic U.S. Departures by Aircraft Size

Source: Innovata (via Diio Mi) published schedules as of Dec. 29, 2017

Factors include availability of pilots, fuel efficiency, congested airspace/airfields, improving economics of large regional jets, lack of new-generation in-production small aircraft

45 38 27 22

8 1520 22

47 48 53 56

2005 2010 2015 2018

≤ 50 Seats 51-100 Seats > 100 Seats

Use of Larger RJs and Mainline Aircraft Boosting Seats on Many U.S. RoutesNet Number of Seats Often Grows Without Reduction in Daily Departures

airlines.org35

Source: Innovata (via Diio Mi) published schedules as of May 26, 2017, comparing 3/6/2017 to 3/9/2015

Airline Hub Spoke Mar-2015 Mar-2017Alaska Seattle Omaha RJ-70, 1x B737, 1xAmerican Dallas/Ft. Worth Greensboro RJ-50, 2x RJ-76, 2x

Dallas/Ft. Worth Madison RJ-50, 4x RJ-76, 3xDallas/Ft. Worth Mobile RJ-50, 3x RJ-76, 3xDallas/Ft. Worth Tallahassee RJ-50, 2x RJ-76, 2xLos Angeles Albuquerque RJ-50, 2x RJ-76, 2xLos Angeles El Paso RJ-50, 1x RJ-76, 2xLos Angeles Phoenix RJ-76, 3x A321/B757, 7x

Delta Atlanta Scranton RJ-76, 1x B717, 1xCincinnati Hartford RJ-50, 2x RJ-76, 1xCincinnati Raleigh-Durham RJ-50, 3x RJ-76, 2x

United Chicago Rochester RJ-50/A319, 2x/1x RJ-50/A319, 1x/2xDenver Des Moines RJ-50/70/A320, 4x A319/B737, 4xNewark Cincinnati RJ-50, 5x RJ-70/76, 6xNewark Jacksonville RJ-50, 5x RJ-50/A320, 3xSan Francisco Eugene RJ-50, 5x A319/A320, 3xSan Francisco Reno RJ-50/70, 6x RJ/B737, 4xWash. Dulles New York LGA RJ-50, 4x RJ-70, 2xWash. Dulles Philadelphia RJ-50, 4x RJ-70, 4x

The Number of Carriers Serving an Airport Is Directly Related to the Level of Traffic*Smaller Airports Tend to Have Fewer Carriers Due to Low Demand

airlines.org

78

137

893

1,110

2,258

3,998

18,277

1

2

3

4

5

6

7+

36

* Domestic only

Average Daily Domestic Passengers Each Way, 2016

Source: Compass Lexecon analysis of data from OAG and DOT Data Bank 1B

# of

Car

riers

Ser

ving

Airp

ort

airlines.org37

Among 11 U.S. Airline Brands, Smaller Carriers Have Been Growing the FastestDifferent Types of Carriers Market Their Prices and Services Differently

(50)

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

% C

hang

e in

Cap

acity

* S

ince

200

7

Spirit

Sun Country

HawaiianAlaska

JetBlue

SouthwestAAL/DAL/UAL

Source: Innovata (via Diio Mi) schedules as of Feb. 9, 2018, for selected marketing airlines including predecessors

Allegiant

Frontier

* Systemwide scheduled available seat miles

airlines.org38

Smaller U.S. Carriers Are Serving More and More MarketsCompetitive Presence of Low-Cost and Ultra Low-Cost Carriers Continues to Expand

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Num

ber o

f Airp

orts

Ser

ved*

Spirit

Alaska

JetBlue

Source: Innovata (via Diio Mi) schedules as of Feb. 16, 2018, for selected marketing airlines including predecessors

Allegiant

Frontier

* Systemwide in July of each year

Hawaiian

From 2000-2017, Global Network Carrier Domestic Share Fell From 73% to Just 54%Share (%) of U.S. Domestic Origin-and-Destination Passengers by Airline Business Model

airlines.org

Source: DOT Data Bank 1B (each airline shown on a marketing-carrier basis and tracked with its respective merged/acquired predecessors [e.g., UA/CO]; 2017 is YTD 3Q

39

73 71 69 68 67 67 65 62 60 59 58 57 57 57 56 55 54 53.5

18 19 20 21 21 21 22 23 24 25 25 25 25 24 24 24 24 23.7

9 10 10 11 12 13 13 15 16 16 17 18 19 19 20 21 22 22.8

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Global Network Southwest Other

Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares“Southwest Effect” Remains in Force – Brueckner/Lee/Singer

airlines.org40

Source: Jan K. Brueckner, Darin Lee and Ethan S. Singer, “Airline competition and domestic US airfares: A comprehensive reappraisal,” Economics of Transportation, 2013

A December 2016 update of the frequently cited Brueckner/Lee/Singer study demonstrated that the “Southwest Effect” remains in force:o In the period 3Q 2015 through 2Q 2016, Southwest’s

presence on a route lowered fares 21.2 percento In addition, the update found that many smaller but rapidly

expanding carriers put substantial downward pressure on global network carrier domestic air fares, e.g.:o Alaska ↓ 24.0 percento JetBlue ↓ 25.4 percento Spirit ↓ 18.5 percent

Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares“Southwest Effect” Remains in Force – Beckenstein/Campbell

airlines.org41

Alan R. Beckenstein, Ph.D., Professor of Business Administration at the Darden School of Business, University of Virginia; and Brian M. Campbell, Ph.D., Principal, the Campbell-Hill Aviation Group, LLC, “Public Benefits and Private

Success: The Southwest Effect Revisited,” Darden Business School Working Paper Number 206 (August 2017)

“The presence and magnitude of the Southwest Effect has endured through time. Even today, when new markets have frequently been affected already by Southwest’s fares on connecting services, the Southwest Effect still shows, on average, an additional market fare reduction of 15% and corresponding traffic increase of 28% to 30%, from the introduction of nonstop service by Southwest.”

“The Southwest Effect is alive and well. We find no evidence that the Southwest Effect has been eroded or overtaken in significance or magnitude by other airlines… Our study finds that Southwest produces $9.1 billion annually in domestic consumer fare savings. One-way average market fares are $45 lower when Southwest serves a market nonstop than when it does not. If Southwest provides only connecting service in a city-pair market, average market fares are $17 lower (one-way) than when there is no competitive effect from Southwest.”

The Four Largest U.S. Carriers Have Grown Aggressively at Each Other’s HubsGrowth (%) in Daily Domestic ASMs* at Competitors’ Hubs & Focus Cities: 2010 to 2017

airlines.org42

Source: Compass Lexecon analysis of OAG schedule data * Scheduled available seat miles by marketing carrier (and merged/acquired partners)

15.6 20.8 24.0 26.3

35.2 40.5

117.6

US GDP (Real)Houston

San FranciscoDenver

CharlotteDallas/Ft.Worth

Seattle

15.6 20.9

27.7 31.5 32.9 35.1

85.7

US GDP (Real)HoustonDenverSeattle

Minneapolis/St. PaulAtlanta

Salt Lake City

15.6

43.7

49.3

51.2

81.7

US GDP (Real)

Minneapolis/St. Paul

Salt Lake City

Miami

Atlanta

15.6 18.9 21.4 22.5

33.5 37.4

143.3 200.9

215.5

US GDP (Real)San Francisco

MiamiLos Angeles

HoustonMinneapolis/St. Paul

Dallas/Ft.WorthCharlotteNew York

Meanwhile, Smaller Carriers Have Been Expanding Rapidly at Large-Carrier HubsGrowth (#) in Daily Domestic Seats* at Competitors’ Hubs & Focus Cities: 2010 to 2017

airlines.org43

Source: Compass Lexecon analysis of OAG schedule data * Scheduled seats by marketing carrier (and merged/acquired partners)

1,733 2,108

2,424 2,572 2,586

3,083

New YorkMinneapolis/St. Paul

DetroitWashington

AtlantaHouston

143

216

478

829

869

1,431

Houston

Atlanta

Dallas/Ft.Worth

Washington

New York

San Francisco

381

935

1,704

2,721

Washington

Dallas/Ft.Worth

New York

Los Angeles

528

991

2,012

2,578

3,316

Salt Lake City

San Francisco

Washington

Los Angeles

New York

LCCs/Others* Now Carry a Significant Share of Passengers in Large-Carrier Hub CitiesShare (Percent) of Domestic O&D Passengers [in Ascending Order by 2016 Share]

airlines.org44

Hub City Airport(s) 2000 2007 2016Charlotte, NC CLT 2.6 10.2 8.9Philadelphia, PA PHL 8.2 29.0 25.5New York, NY-NJ EWR/JFK/LGA 9.6 26.6 29.3Atlanta, GA ATL 15.2 29.0 29.6Detroit, MI DTW 15.3 25.0 30.4Minneapolis/St. Paul, MN MSP 13.2 16.4 30.8Salt Lake City, UT SLC 23.8 35.4 33.2Dallas/Fort Worth, TX DAL/DFW 27.9 27.3 38.5Chicago, IL MDW/ORD 26.1 31.2 39.2Miami, FL FLL/MIA 20.0 36.2 43.1Houston, TX HOU/IAH 34.3 33.2 44.7Washington, DC BWI/DCA/IAD 18.3 36.6 45.6Phoenix, AZ PHX 39.6 47.4 50.1Los Angeles, CA BUR/LAX/LGB 35.8 44.4 50.4San Francisco, CA OAK/SFO 33.7 45.8 53.0Denver, CO DEN 15.2 39.5 56.7

Source: Compass Lexecon analysis of DOT Origin-Destination Survey (Data Bank 1B) * Airlines other than American, Delta, United and their predecessors

Competitive Choices for Domestic Flyers Have Continued to IncreaseContrary to Some Assertions, Traffic Analysis Shows More Competitors on U.S. City Pairs

airlines.org

3.33

3.41

3.53

2000

2007

2017

45

* Carrying at least 5 percent of O&D passengers in the city pair; average number of competitors is passenger-weighted across city pairs

Average Number of Competitors* on All Reported Domestic U.S. Itineraries

Source: Compass Lexecon analysis of DOT Origin-Destination Survey (Data Bank 1B)

Competitive Choices for Domestic Flyers Have Increased (Cont’d) Analysis of O&D Passenger Traffic in 25 Sample Domestic City Pairs: 2016 vs. 2007

* Defined as carrying at least 5 percent of O&D passengers in the city pairSource: Compass Lexecon analysis of data from DOT Data Bank 1B

Sample O&D Market PDEW Competitors* in 2007 – Share of O&D Passengers Competitors* in 2016 – Share of O&D Passengers

Dallas-NYC 2,956 American 69% Continental 16% American 48% Southwest 13% United 12% Delta 11% Virgin 11%Boston-San Francisco 1,717 United 47% American 23% JetBlue 22% United 45% JetBlue 22% Virgin 18% American 6% Delta 5%Atlanta-Los Angeles 1,570 Delta 63% AirTran 24% Delta 43% American 24% Southwest 19% Spirit 7% Denver-Seattle 1,089 United 34% Alaska 29% Frontier 25% Alaska 31% Southwest 28% United 16% Delta 15% Frontier 9%Detroit-Washington, DC 1,048 Northwest 72% Southwest 19% Delta 56% Southwest 20% Spirit 8% American 8% United 7%Austin-Los Angeles 845 American 57% Southwest 28% US Airways 6% American 36% Southwest 26% JetBlue 15% Delta 12% United 10%Orlando-Pittsburgh 686 Southwest 37% US Airways 31% AirTran 25% Southwest 72% Frontier 8% American 7% Allegiant 6% Delta 6%Charleston, SC-NYC 669 Delta 45% US Airways 36% Continental 12% JetBlue 36% Delta 35% United 24% American 5%Chicago-Portland, OR 661 United 48% Southwest 23% American 18% United 26% Southwest 24% American 17% Alaska 16% Spirit 11%Hartford-Washington, DC 609 Southwest 64% US Airways 26% United 10% Southwest 32% American 32% JetBlue 24% United 12%Cleveland-Miami/FLL 563 Continental 57% AirTran 12% US Airways 12% Delta 8% Spirit 25% AA 21% JBLU 20% UA 12% DL 11% SWA 6% ALGT 5%Orlando-Raleigh/Durham 507 Southwest 76% Delta 15% Southwest 46% Delta 31% Frontier 10% Allegiant 8%Boston-Cleveland 402 Continental 63% AirTran 30% JetBlue 41% United 31% Spirit 14% American 7%Cleveland-Fort Myers 363 Continental 44% USA 3000 29% AirTran 17% Frontier 39% Southwest 18% Spirit 18% United 12% Delta 8%Dallas-Indianapolis 338 American 86% American 64% Southwest 27% Delta 7%Charlotte-Denver 319 US Airways 53% United 31% American 6% American 53% United 16% Delta 16% Frontier 10% Southwest 6%Nashville-Raleigh/Durham 247 Southwest 92% Southwest 85% Delta 9%Birmingham-Dallas 209 American 57% Southwest 39% Southwest 48% American 44% Delta 7%Chicago-Norfolk 197 United 47% Southwest 33% American 9% Southwest 37% United 32% American 23% Delta 8%Boise-Las Vegas 174 Southwest 88% Southwest 62% Allegiant 20% Delta 10%Columbus, OH-Houston 155 Continental 66% Southwest 22% United 42% Southwest 34% Delta 13% American 11%Nashville-San Antonio 155 Southwest 79% American 11% Southwest 80% American 9% Delta 6% United 5%Miami/FLL-Syracuse 140 JetBlue 38% US Airways 35% Delta 16% Allegiant 30% JetBlue 29% Delta 21% American 17%Houston-Lubbock 124 Southwest 84% Continental 14% Southwest 53% United 41% American 6%Miami/FLL-Rochester, NY 120 AirTran 34% US Airways 24% Delta 18% JetBlue 15% Allegiant 28% Delta 26% Southwest 19% American 16% JBLU 6%

airlines.org46

Several Secondary U.S. Cities Now Enjoy Nonstop Transoceanic ServiceNonstop Services Are Provided by a Mix of Traditional and Low-Cost Carriers

Airport Destination Airport (Marketing Airline)ANC/FAI Frankfurt (Condor), Reykjavik (Icelandair, from ANC)

AUS Frankfurt (Condor), London LGW (NAS), London LHR (BA)BDL Dublin (Aer Lingus), Edinburgh (NAI)CVG Paris (Delta)

JAX/PBI Bimini/Marsh Harbour/Nassau: Bahamas (Bahamasair, Silver)

KOA Tokyo Haneda (Hawaiian), Tokyo Narita (JAL)MSY Frankfurt (Condor), London LHR (BA), Panama City (Copa)OAK Barcelona (Iberia/NAS), London LGW (BA/NAS), Copenhagen/Rome/Oslo/Stockholm (NAS)

PIT Frankfurt (Condor), Paris (Delta), Reykjavik (WOW)

PVD Belfast/Bergen/Cork/Dublin/Edinburgh/Shannon (NAI), Azores (SATA), Cape Verde (TACV)

RDU London LHR (American), Paris (Delta)

RSW Düsseldorf (airberlin), Nassau (Silver)

SJC Beijing (Hainan), Frankfurt (Condor), London LHR (BA), Shanghai (Air China), Tokyo NRT (ANA)

airlines.org47

* Slated to commence Mar. 27, 2018

Severe Hurricanes Disrupted August-September 2017 Airline Flight Operations~33,000 Nationwide U.S. Domestic Flight Cancellations: August 18-September 24

airlines.org48

979

159

137 29

5 501

195

111

174

1,01

3 1,68

31,

622

1,48

81,

550

1,42

11,

213

617

439 60

9 915

367

391

1,03

31,

991

2,87

24,

567

1,94

993

066

343

429

731

829

3 441

410

293

305

236

194

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000Fr

i 8/1

8Sa

t 8/1

9Su

n 8/

20M

on 8

/21

Tue

8/22

Wed

8/2

3Th

u 8/

24Fr

i 8/2

5Sa

t 8/2

6Su

n 8/

27M

on 8

/28

Tue

8/29

Wed

8/3

0Th

u 8/

31Fr

i 9/1

Sat 9

/2Su

n 9/

3M

on 9

/4Tu

e 9/

5W

ed 9

/6Th

u 9/

7Fr

i 9/8

Sat 9

/9Su

n 9/

10M

on 9

/11

Tue

9/12

Wed

9/1

3Th

u 9/

14Fr

i 9/1

5Sa

t 9/1

6Su

n 9/

17M

on 9

/18

Tue

9/19

Wed

9/2

0Th

u 9/

21Fr

i 9/2

2Sa

t 9/2

3Su

n 9/

24

Source: masFlight

8/25: Harvey landfall in Texas (PM)9/10: Irma landfall in Florida Keys (AM)9/20: Maria landfall in Puerto Rico (AM)

Sources: BTS and DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports)

airlines.org49

2017 U.S. Airline Flight Ops Impacted by Hurricanes, Airport and CBP Power OutagesBest Ever Recorded Performance for Baggage Handling and Involuntary Denied Boardings

97.8298.46

98.8398.54

2014

2015

2016

2017

Flight Completion Factor (%)

99.64 99.68

99.73 99.75

2014

2015

2016

2017

Properly Handled Bag Rate (%)

On-Time Arrival Rate (%)

76.2579.92

81.4280.18

2014

2015

2016

2017

Best ever Best ever

9.2 7.6

6.2 3.4

2014

2015

2016

2017

Involuntary Denied Boardings per 100K Psgrs.

{By quarter: 6.2, 4.4, 1.5, 1.8}

1.42

1.13

1.38

1.90

1.52 1.35

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2012 2013 2014 2015 2016 2017

Sources: DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports)

airlines.org50

In 2017, Customer Complaints Fell Again, Reaching Lowest Rate Since 2013Customer Complaints to DOT per 100,000 Passengers

How’s the Weather Affecting U.S. Airport Operations?http://airlines.org/dataset/current-operation-status-for-us-airports

Heard on the Street…

airlines.org52

“With airlines in the U.S. now generating acceptable returns, their ability to reinvest in their products has been greatly enhanced. Today’s traveler is likely to check in via smart phone, monitor the upgrade list in real time, board and enjoy a sufficiently sized overhead, and pass the time en route surfing the Internet. There is no way any of this would have been possible had the industry not found its way to firmer financial footing. For those in premium cabins, long gone are the EZ-boy recliners requiring a ‘double excuse me’ in order to get to the aisle. Today’s business traveler is likely to enjoy direct aisle access and a lie-flat seat suitable for sleeping, even on transcon flights. Absent the industry’s financial turnaround, these benefits simply would not be available.”

-- Jamie Baker, Managing Director, Global Equity Research, J.P. Morgan, Feb. 28, 2014

Jamie Baker is a Research Analyst at J.P. Morgan. His views may not be representative of others at the Company. For disclosures related to companies that Mr. Baker covers, please see https://jpmm.com/research/disclosures

U.S. Airline Industry Headcount at Highest Level Since 2000Year-End Full-Time + Part-Time Employees at U.S. Passenger and Cargo Airlines (000s)

airlines.org53

Source: Bureau of Transportation Statistics

753.

6

666.

8

649.

2

612.

0

624.

8

611.

0

602.

8

621.

2

587.

3

563.

7

568.

1

583.

4

582.

7

583.

9

594.

3

614.

8 686.

0

704.

9

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Note: 2016 includes FedEx acquisition of TNT on May 25, 2016, which increased headcount by approximately 55,000

U.S. Passenger Airline Jobs Averaging Highest Level Since 2004December 2017 Represented the 50th Consecutive Month of YOY Gains

airlines.org54

Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines

520.

0

378.

6

411.

1 426.

1

375

400

425

450

475

500

525

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s)

2000-2010-141,367 (27%)

2010-2017+47,500 (12.5%)

Since April 2015, U.S. Airline Job Growth Has Exceeded Overall U.S. Job GrowthAirline Employment Growing at More Than Double the Rate of Overall U.S. Jobs

airlines.org

Source: Bureau of Labor Statistics (U.S. nonfarm employment, CES0000000001) and Bureau of Transportation Statistics (U.S. scheduled passenger airline FTEs)

(2)

(1)

0

1

2

3

4

5Ja

n-13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

Apr

-14

Jul-1

4

Oct

-14

Jan-

15

Apr

-15

Jul-1

5

Oct

-15

Jan-

16

Apr

-16

Jul-1

6

Oct

-16

Jan-

17

Apr

-17

Jul-1

7

Oct

-17

Jan-

18

Apr

-18

Jul-1

8

Oct

-18

Year

-Ove

r-Ye

ar C

hang

e (%

)

U.S. Airlines Overall USA

55

U.S. Airlines* Spent $47B on Wages & Benefits in 2017 ($295B in 2010-2017)Average Compensation per Employee Rose Approximately $34,000 – Up 39% From 2010

airlines.org56

30.6 31.3 32.8 33.1 35.8

40.2 43.9

47.2

85.3 86.4

92.4 94.0

99.5

107.8

113.6

119.0

2010 2011 2012 2013 2014 2015 2016 2017

Total ($Mils)Per FTE ($000)

* SEC filings of Alaska/Allegiant/American/Delta/Hawaiian/JetBlue/Southwest/Spirit/United and A4A Cost Index

Employee Wages and Benefits*

U.S. Passenger Airline Wages Averaged 44% More Than U.S. Private Sector in 2016From 2010 to 2016, Airline Wages Rose 37% (More Than Double 15% for Overall USA*)

airlines.org57

Sources: BEA NIPA Table 6.6D and A4A Passenger Airline Cost Index

$38.9

$51.9$59.5

$50.3$62.6

$85.8

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Wages and Salaries (000) per Full-Time Equivalent Employee (FTE)

+44% differentialU.S. Passenger Airlines

U.S. Private Sector

airlines.org

50

55

60

65

70

75

80

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Up 13 points from 2008-2017

Note: ACSI and its logo are Registered Marks of the University of Michigan; see http://www.theacsi.org/the-american-customer-satisfaction-index

Scale = 0-100; ACSI for airlines commenced in 1994

58

“[T]here is a notable improvement this year in customer satisfaction for several airlines… Much of the increase…appears to be driven by price… In addition, airlines have made strides to improve on-time arrivals and in-flight meals, plus lost baggage is down… [E]very aspect of flying is better than it was a year ago.”

ACSI Airline Customer Satisfaction Index Up Again in 2017ACSI Travel Report 2017 (April 25, 2017)

82

82

81

81

81

80

79

78

77

76

74

71

81

80

79

79

79

77

78

75

75

73

71

67

Ease of check-in process

Ease of making a reservation

Courtesy of flight crew

Timeliness of arrival

Website satisfication

Baggage handling

Boarding experience

Call center satisfaction

Range of flight schedules

Loyalty program

Quality of inflight services

Seat comfort

2017 2016

J.D. Power: North American Airline Satisfaction Climbs to Record High

airlines.org

658

726

756

650

670

690

710

730

750

770

2006 2008 2010 2012 2014 2016 2018

Up 98 points from 2009-2017

Source: J.D. Power 2017 North America Airline Satisfaction Study (http://www.jdpower.com/press-releases/jd-power-2017-north-america-airline-satisfaction-study)

“Lower fares, better on-time performance, fewer lost bags and the lowest bump rate ever recorded have contributed to steady improvement in customer satisfaction with North American airlines. According to the J.D. Power 2017 North America Airline Satisfaction Study,SM released today, overall customer satisfaction with airlines has reached its highest level ever, continuing a trend that now stretches five consecutive years.” (May 10, 2017)

Note: Scale = 0 to 1000

59

Seven factors (in order of importance):Cost & fees

In-flight servicesAircraft

Boarding/deplaning/baggageFlight crewCheck-in

Reservation

“Scores are higher this year than one year ago in all of the study factors that measure customer satisfaction.”

Notes: The study is based on responses from 11,015 passengers who flew on a major North American airline between March 2016 and March 2017.

51% of 2017 U.S. Flight Delays Were Attributable to National Airspace System (NAS)An Additional 5 Percent Were a Function of Extreme Weather or Security Issues

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Source: A4A analysis of data from the Bureau of Transportation Statistics

Air Carrier, 44.1%

Extreme Weather,

4.4%

National Airspace System, 51.2%

Security, 0.3%

DOT Categories for Causes of Delay

National Airspace SystemNon-extreme weather conditions, airport ops, heavy traffic volume, air traffic control, etc.

SecurityCaused by evacuation of a terminal or concourse, re-boarding of aircraft because of security breach, inoperative screening equipment and/or long lines in excess of 29 minutes at screening areas.

Extreme WeatherSignificant meteorological conditions (actual or forecasted) that, in the judgment of the carrier, delays or prevents the operation of a flight such as tornado, blizzard or hurricane.

Air CarrierCircumstances within the airline’s control (e.g., maintenance/crew problems, aircraft cleaning, baggage loading, fueling).

According to FAA, Flight Delays Cost the USA an Estimated $26.6B in 2017More Than Half of Delay Costs Attributed to Passenger Value of Time

Source: FAA Air Traffic Organization update to “Total Delay Impact Study: A Comprehensive Assessment of the Costs and Impacts of Flight Delay in the United States”

$6.4

$14.8$2.0

$3.4 $26.62017 Flight Delay Costs($Billions)

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1. Increased expenses for crew, fuel, maintenance, etc.2. Time lost due to schedule buffer, delayed flights, flight cancellations, missed connections3. Estimated welfare loss incurred by passengers who avoid air travel as the result of delays4. Increased cost of doing business for other sectors, making associated business less productive

2017 Operational and Financial Recap: U.S. Passenger Airlines

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» U.S. airlines carried record number of passengers in 2017 on steadily improving economy and continued air-travel affordability

» Profitability fell, as surging expenses outpaced modest growth in revenues, placing the industry’s margin behind McDonald’s, Apple, Disney, Starbucks and Comcast

» Airlines continue to increase supply at airports, with domestic levels at their highest level in a decade and international levels at an all-time high

» The number of workers employed by U.S. passenger airlines stands at its highest level since 2005 and is growing at twice the rate of overall U.S. employment

» Airlines spent 54% more on wages and benefits than at the beginning of the decade

» Broadly, a combination of data from DOT and independent entities shows a decline in customer complaints and an increase in customer satisfaction