1. John P. Heimlich
Vice President and Chief Economist
Airlines for America
Media Briefing
February 28, 2012

2. The Bottom Line
The Word on the Street
“While earnings declined in 2011, we continue to believe current valuations are well
below what industry improvement and performance would justify. Perhaps the best
illustration of this improvement was the dramatic difference in fundamental
performance between 2008 and 2011… We believe this comparison highlights the
transformation the industry has undergone. We believe the business is better
and more adaptable as a result of this transformation. We believe that current
market conditions provide an attractive entry point for airline equities, especially given
the 2012 outlook we expect to materialize.”
Gary Chase, Barclays Capital equity research, “U.S. Airlines: 4Q Earnings Should Highlight 2012 Potential,” Jan. 17, 2012
3 airlines.org

3. 2011 U.S. Airline* Earnings Fell Sharply, Resulting in a 0.3 Percent Net Profit Margin
Despite 12.6 Percent Stronger Revenue, Profits Shrank on 15.5 Percent Higher Costs
2011 Better/(Worse) Than 2010 for Reporting Carriers* Net Profit Margin (%)
$ Millions Percent 2.2
Operating Revenues 15,717 12.6
Operating Expenses (18,277) (15.5)
Nonoperating Expenses 76 1.8
0.3
Income Taxes 144 29.3
Net Income (2,341) (85.7) 2010 2011
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, SkyWest, Southwest, Spirit, United and US Airways
4 airlines.org

4. Airline Energy Costs on the Rise Yet Again
Using Less but Paying More Translates to Rising Expenses – More than $50B in 2011
Using Less Fuel Paying More per Gallon Spending More Annually
Million Gallons per Day Jet-Fuel Price (U.S. Gulf Coast) Billions of Dollars Spent on Fuel
$57.8
$3.13
54.7
54.5
$3.00
54.0
$50.5
51.5
$2.17
$41.9
48.3
$1.02
$38.8
$38.8
47.4
46.6
$0.58
$0.54
$33.2
$32.3
2007
2005
2006
2008
2009
2010
2011
1991-1995
1996-2000
2001-2005
2006-2010
2011
YTD 2012
2005
2006
2007
2008
2009
2010
2011
Source: BTS for U.S. airlines Source: Energy Information Administration Source: BTS for U.S. airlines
5 airlines.org

5. With Few Exceptions, U.S. Airline Stocks Plummeted in 2011
Change (%) in Closing Price from 31-Dec-2010 to 31-Dec-2011
32.5 35.1
8.3
(0.003)
(26.0) (21.3) (20.8)
(35.8) (33.9)
(49.4)
(95.5)
Source: Yahoo Finance
6 airlines.org

6. U.S. Airline Industry Continues to Post ~80 Percent On-Time Arrival Performance
Also, 2011 Was Best Year Ever Recorded for Denied Boardings and Mishandled Bags
2007 2008 2009 2010 2011
Flight Cancellations
2.16 1.96 1.39 1.76 1.91
(as % of scheduled domestic departures)
On-Time Arrival Rate
73.4 76.0 79.5 79.8 79.6
(% of domestic flights within 00:15)
Involuntary Denied Boardings
1.12 1.11 1.19 1.09 0.81
(per 10,000 passengers)
Mishandled Bags
7.05 5.26 3.91 3.57 3.39
(per 1,000 domestic passengers)
Customer Complaints
1.38 1.13 0.97 1.20 1.18
(per 100,000 systemwide passengers)
Sources: Bureau of Transportation Statistics and DOT Air Travel Consumer Report (http://airconsumer.dot.gov/reports/index.htm)
8 airlines.org

7. Conditions for Travel Demand: A Tale of Two Customer Segments (Part 1)
Overall U.S. Economic Growth and Corporate Profits Supporting Business Travel
U.S. Gross Domestic Product U.S. Corporate Profits
Trillions of Chained 2005 Dollars, SAAR Trillions of Current Dollars, SAAR
$13.5 $2.1
$13.4
$1.9
$13.3
$13.2 $1.7
$13.1
$1.5
$13.0
$12.9 $1.3
$12.8
$1.1
$12.7
$12.6 $0.9
1Q11
1Q08
1Q09
1Q10
1Q12
1Q08
1Q09
1Q10
1Q12
1Q11
Source: BEA (http://www.bea.gov/national/index.htm#gdp) Source: BEA National Income and Product Accounts, Table 1.12
9 airlines.org

8. Conditions for Travel Demand: A Tale of Two Customer Segments (Part 2)
Declining U.S. Personal Income and Household Worth Crimping Leisure Demand
U.S. Disposable Personal Income U.S. Household Net Worth
Trillions of Chained 2005 Dollars, SAAR Trillions of Current Dollars, NSA
$10.3 $64
$62
$10.2
$60
$10.1 $58
$10.0 $56
$54
$9.9
$52
$9.8 $50
1Q08
1Q09
1Q10
1Q12
1Q11
1Q10
1Q11
1Q08
1Q09
1Q12
Source: BEA National Income and Product Accounts, Table 2.1 Source: Federal Reserve Flow of Funds Account Z.1, B.100
10 airlines.org

9. Jet Fuel at Highest Level Since May 2011
High Crude-Oil Price Plus Refining Crack Spread*
$140
Jet Fuel
$135
Price per Barrel (5-Day Avg.)
$130
$125
Brent Crude
$120
$115
$110
$105 WTI Crude
$100
$95
$90
15-Dec-
25-Dec-
14-Jan-
24-Jan-
13-Feb-
23-Feb-
14-Mar-
24-Mar-
13-Apr-
23-Apr-
4-Jan-12
3-Feb-12
4-Mar-12
3-Apr-12
12
12
12
12
12
12
12
12
11
11
Source: A4A and EIA (for WTI and Brent crude oil and U.S. Gulf Coast jet fuel) * Refining margin (difference between jet-fuel and crude-oil price)
11 airlines.org

10. Rising Costs Forcing Airlines to Continue Capacity Reductions in 2012
Year-Over-Year Change (%) in Scheduled Domestic Available Seat Miles (ASMs)
2.5
2.3
1.1
(0.4)
(1.1)
(1.6)
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Source: Innovata (via Diio Mi) published schedules as of Feb. 24, 2012
12 airlines.org

11. ExxonMobil AAA
Microsoft AAA
GE AA+
Wal-Mart AA
Source: Standard and Poor’s
Toyota AA-
BP A
eBay A
Starbucks A-
QANTAS BBB
Lufthansa BBB-
Southwest BBB-
13
Alaska BB-
Allegiant BB-
British Air BB-
GOL BB-
TAM B+
Only One U.S. Passenger Airline Has Investment-Grade Credit
Delta B
United B
Air Canada B-
JetBlue B-
SAS B-
US Airways B-
< BBB- (speculative grade)
>= BBB- (investment grade)
American D
airlines.org

12. Improved Balance Sheets Allow Airlines to Preserve/Grow Jobs, Acquire New Aircraft
U.S. Passenger Airlines Beginning to Hire Workers and Purchase Planes
Airline Payrolls Stabilizing Aircraft Capital Spending on the Rise
Full-Time Equivalent Employees (Thousands) Average Annual Estimated Aircraft/Engine CapEx (Billions)
532
$16.9
475
471
$9.7
$9.2
439
430
419
$6.6
411
$5.8
$5.8
$5.7
404
$4.8
$4.2
392
389
$3.4
Nov… 379
Nov… 379
Nov…
Nov…
Nov…
Nov…
Nov…
Nov…
Nov…
Nov…
Nov…
Nov…
13F
12F
02
03
04
05
10
11
00-01
06-09
Source: BTS for U.S. scheduled passenger airlines Source: Bank of America Merrill Lynch airline equity research (Jan. 5, 2012)
14 airlines.org

13. U.S. Passenger Airlines: Economic Review
The Bottom Line in Early 2012
» Looking Back
• Net profit margin fell from 1.6 percent in 2010 to 0.3 percent (prelim. per 11 carriers) in 2011
o Second year of modest profitability after recording an average margin of -6.3 percent in 2001-2009
o All but three U.S. airline stocks took a beating in 2011, especially relative to S&P 500
o Spot price of U.S. jet fuel hit all-time high in 2011; thus far (through Feb. 22), running 16 percent higher in 2012
• 2011 was a stellar year on many operational fronts
o Second consecutive year of zero passenger fatalities
o Best year ever recorded for baggage handling and denied boardings; best 4Q ever recorded for on-time arrivals
o All-time high for U.S. exports of air-travel services ($36.7B) and for U.S. merchandise exported by air ($424.3B)
» Looking Ahead
• Fuel remains largest and most volatile cost – continuing threat to GDP and earnings
• Airlines reacting to increasing (and volatile) marginal costs and uncertain revenues with
conservative volumes, high utilization of existing assets, “variabilization” of cost
structure, avoidance of costs incurred without sufficient revenues generated, product
diversification
• Major focus on debt reduction, fleet renewal and product enhancement
• Improved financial wherewithal translating to uptick in employment and fleet upgrades
• Increasing governmental/regulatory costs creating potential barrier to entry for start-ups
15 airlines.org

14. www.airlines.org