ATLANTIS RESEARCH A SERVICE OF ATLANTIS INVESTMENT CO., INC. Mihir Dharia (973)

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1 A SERVICE OF ATLANTIS INVESTMENT CO., INC. Mihir Dharia (973) AirTran Holdings (AAI) BUY Update 05/14/2009 Rank: 2. Valuation At a Glance Price $7 EPS 12/31/2009 $0.90 EPS 12/31/2010 $0.40 P/E Calendar 2009 EPS 17.0X Mkt Cap($MM) $936 Mkt Cap/Ann Rev 0.4X Investors were relieved by profitable results for AirTran Holdings for 1Q 2009, helped by lower oil prices. Revenues for 1Q 2009 decreased (9%), with RPM (revenue per passenger miles, a measure of traffic) down (6.0%). Capacity decreased (7%) for 1Q 2009, enabling load factor to increase. Load factor for 1Q 2009 was 76.3%, up 1.0% from the previous year. EPS for 1Q 2009 was $0.21 per share. CASM (cost per available seat mile) for 1Q 2009 decreased (16%) to $ AirTran s realized fuel price was $1.59 per gallon for 1Q 2009, a decrease of (51%) from the previous year. Total fuel expense for 1Q 2009 was $133 million, down from $268 million for 1Q AirTran is targeting (3%)-(4%) capacity reduction for 2009, although new flights added to the schedule for certain markets will increase AirTran's presence. AirTran increased flights in Milwaukee by more than 50% and added new flights to Orlando. AirTran began service between Columbus and Fort Lauderdale during 1Q AirTran also announced service to commence in 5 new cities, including Atlantic City, Allentown, Charleston, Ashville and Knoxville. AirTran also added service to Cancun, Mexico beginning February, Change in representation for AirTran's pilot organization triggers a challenging new cost factor for AirTrain. Pilots at AirTran voted during April, 2009 to become a part of the Air Line Pilots Association, the largest pilot labor union, with 89% of AirTran pilots voting in favor of the change. Contract negotiations are already scheduled, with news to be expected during 2Q We revised our estimate for pro forma EPS for 2009 from $0.40 per share to a profit of $0.90 per share, in response to operating expense savings from lower oil prices. We maintain our BUY rank on AirTran Holdings stock. Capacity reductions should enable better margins, while lower fuel cost provides opportunity to return to sustained profitability. Update comments present the analyst's thoughts on current events and recent reports affecting the stock price. Full analysis of the company's prospects for growth, including positive and negative factors, investment rationale, competitors, suppliers, customers, and key variables for investor consideration are presented in Summary Focus Reports, attached. Estimates are based on guidance as provided by AirTran Holdings' management and reflect pro forma EPS. Pro forma EPS excludes stock based compensation expense and non cash accounting adjustments, including unrealized losses on fuel-related hedge contracts. Pro forma EPS for 1Q 2009 was a profit of $0.20 per share. Pro forma EPS for 2008 was a loss of ($1.42) per share. GAAP EPS for 1Q 2009 was a profit of $0.21 per share. GAAP EPS for 2008 was a loss of ($2.51) per share. Note: This report is for information only. It is not a solicitation or an offer to buy or sell securities of any company mentioned herein. Atlantis Investment Co., Inc. does not make markets in the securities mentioned herein and does not have investment banking relationships with any company mentioned herein. The views expressed are those of the authors, and are based on a diligent review of available information. The report is based on information which is believed to be accurate, but we do not guarantee its accuracy or completeness. Atlantis Investment Co., Inc., its officers, employees and stockholders (and members of their families) and its customers may have long/short positions or holdings in the securities mentioned, and they may at any time hold, increase or decrease these positions. Neither the authors of this report nor any related household members are officers, directors, or advisory board members of any company mentioned herein. Atlantis Investment Co., Inc. or any of its employees do not own shares equal to 1% or more of any company mentioned herein. Copyright 2009 Atlantis Investment Co., Inc.

2 SERVICE A Service of Atlantis Investment Co., Inc. Mihir Dharia (973) /17/2008 Airline Industry AirTran Holdings AAI $4 BUY Ranking: 2 Price $4 EPS 12/31/2008 ($1.23) EPS 12/31/2009 $0.40 P/E Cal 2009 EPS 9.7X Mkt Cap ($MM) $454 Annualized Revenue $2,693 Mkt Cap/Ann Rev 0.2X Current Quarter Estimate Company Contacts FY ending 12/31/2007 Phone Number (407) Next Quarterly Report 12/31/2008 Location Orlando, FL Expected Report Date 01/20/2009 CEO Robert L. Fornaro Revenue Estimate $598 vs $584 CFO Arne G. Haak EPS Estimate ($0.07) vs ($0.02) IR Jason Bewley Previous Quarter EPS ($0.53) Website airtran.com Comments: Lower fuel prices offset slowing demand. Capacity reductions limit growth in operating expenses. Economic recession increases risk of guidance adjustments. Valuation appears low. Valuation Comments AirTran is valued at only 9.7X estimated 2009 pro forma EPS of $0.40 per share, near the middle of the range of 6.1X-16.0X for publicly traded airlines companies, as shown in the table on top of page 3 of this report. On the basis of enterprise value (EV) relative to annualized revenues, AirTran Holdings appears reasonably valued, with an enterprise value of $1.2 billion, 0.5X annualized revenues of $2.7 billion, in the middle of the range of 0.2X-1.1X for airlines. AirTran cannot be valued on the basis of enterprise value relative to annualized EBITDA as annualized EBITDA is a loss of ($284) million. Given AirTran's low-cost status, brand, capital intensive nature, commodity-like product, high leverage, and increasingly competitive routes, we maintain a cautious outlook for the stock. However, the stock is down (60%) for the 12 month period from November, 2007 to November, 2008, mainly due to impact of high fuel prices and a slowing economy. Oil prices have dropped to $44 a barrel from the peak of $147 per barrel. If oil prices retreat further or if AirTran attracts a merger partner, stock price offers an upside potential. We have upgraded the stock to BUY rank. Estimates are based on guidance as provided by AirTran Holdings' management and reflect pro forma EPS. Pro forma EPS excludes stock based compensation expense and non cash accounting adjustments, including unrealized losses on fuel-related hedge contracts. Pro forma EPS for 3Q 2008 was a loss of ($0.53) per share. Pro forma EPS for the first 9 months of 2008 was 2007 was a loss of ($1.16) per share. GAAP EPS for 3Q 2008 was a loss of ($0.91) per share. GAAP EPS for the first 9 months of 2008 was ($2.57) per share. Atlantis Research Service, "Growth Stocks, LONG and SHORT", is a product of Atlantis Investment Co., Inc., founded in Research involves analysis of fundamental issues and discussion of critical variables that will determine stock price performance. Particular attention is paid to potential negative trends in business or in a company's accounting practices. BUY, SELL, and HOLD recommendations are provided with a ranking system of 1 to 5. Assignment of a 1 rank indicates expected stock price appreciation of 50% within 18 months, a 2 indicates expected stock price appreciation of more than 25%, a 3 indicates stock price performance in line with the market, a 4 indicates an expected stock price decline of more than 15%, and a 5 indicates expected stock price decline of more than 25%. Note: This report is for information only. It is not a solicitation or an offer to buy or sell securities of any company mentioned herein. Atlantis Investment Co., Inc. does not make markets in the securities mentioned herein and does not have investment banking relationships with any company mentioned herein. The views expressed are those of the authors, and are based on a diligent review of available information. The report is based on information which is believed to be accurate, but we do not guarantee its accuracy or completeness. The Atlantis Investment Co., Inc., its officers, employees, and stockholders (and members of their families) and its customers may have long/short positions or holdings in the securities mentioned, and they may at any time hold, increase or decrease these positions. Neither the authors of this report nor any related household members are officers, directors, or advisory board members of any company mentioned herein. Atlantis Investment Co., Inc. or any of its employees do not own shares equal to 1% or more of any company mentioned herein. Copyright 2008 Atlantis Investment Co., Inc.

3 AAI - Page 2 Investment Rationale Positives AirTran Holdings is a low cost, low fare airline, with a significant presence in short haul markets of the eastern US. AirTran Holdings operates a fleet of 86 Boeing and 53 Boeing aircraft offering 700 daily flights to 57 locations in the US. From its Atlanta hub (where AirTran Holdings is the second largest carrier behind Delta Air Lines). Markets served include Baltimore-Washington, Florida, Boston, Newark, Philadelphia, Rochester, and Milwaukee. Destinations include St. Louis, San Diego, Charleston, Portland, San Juan, Puerto Rico, Daytona Beach, Newburgh, Phoenix, Columbus, Harrisburg, Burlington and San Antonio. AirTran announced plans to expand Caribbean services with new flights to Cancun, Mexico effective February 25, AirTran will offer roundtrip nostop flights between Cancun International Airport and both Hartsfield-Jackson Atlanta International Airport and Baltimore/Washington International Thurgood International Airport. Expansion into northeastern and midwestern markets presents additional growth opportunity. AirTran reduced capacity by (10%) in September, 2008 and plans to reduce capacity by an additional (6%)-(7%) during 4Q AirTran is planning a (3%)-(7%) capacity reduction for Aircraft originally scheduled for delivery during the second half of 2008 and first half of 2009 are now scheduled for delivery during AirTran sold 5 aircraft through September, 2008 and completed agreements to sell 5 additional Boeing aircraft during 3Q In response to rising fuel prices, AirTran delayed delivery on 18 Boeing aircraft for 4 years, now scheduled for delivery in 2013 and AirTran recently reached an agreement with Boeing to defer 4 additional deliveries of aircraft from 2009 to AirTran added 4 new Boeing aircraft during 1Q 2008, increasing the 737 fleet to 54 aircraft and the total fleet to 141 aircraft. AirTran sold 2 new aircraft and has written agreements to sell 5 additional aircraft in Strong traffic growth of 9% for 3Q 2008 indicates AirTran Holdings retains passenger loyalty. AirTran Holdings' ASMs (available seat miles) for 3Q 2008 increased 4% and RPMs (revenue passenger miles) increased 9%, resulting in a load factor of 84.6%. Revenues of $673 million for 3Q 2008 increased 11%, with pro forma EPS loss of ($0.53) per share, deteriorated from a profit of $0.18 per share for the previous year. AirTran Holdings' CASM (cost per available seat mile) is at the lower end of the range for US airlines, at $ for 3Q 2008, compared to $ for Southwest, $ for US Airways Group, and $ for JetBlue Airways. AirTran Holdings kept stage lengths low for higher yields and was still able to maintain lower costs than airlines with longer stage lengths. Despite low fares, short stage lengths made AirTran Holdings' yield for 3Q 2008 (revenue per mile flown) high for an LCC at $0.1208, compared to $ for Southwest Airlines, $ for US Airways Group, and $ for JetBlue Airways. Typically, shorter stage lengths create higher yields, RASM (revenue per available seat mile) and CASM (cost per available seat mile). While AirTran Holdings enjoys higher than average yields and RASM, CASM (excluding fuel) was still well below industry averages. CASM including fuel costs increased 22% from the previous year for 3Q Wages as a percentage of revenues at 18% were at the low end of the range of 17%-30% for airlines, as shown in the table of fundamental comparisons on page 4 of this report. AirTran Holdings operates a relatively young fleet, with an average aircraft age of 4.8 years as of September, We expect operations and maintenance costs to average less than industry norms for the next few years. AirTran announced a partnership with e-rewards, the nation's largest online market research panel during 4Q This partnership will enable members to earn reward travel faster. AirTran renewed its exclusive partnership with The Hertz Corporation during 3Q The 3-year agreement calls for Hertz to be the exclusive car rental company for AirTran Airways website, call centers, in-flight magazines, and onboard seatbacks. The agreement allows members of AirTran Airways frequent flier program, A+ rewards, to earn credits for travel when renting from Hertz. In addition, AirTran extended a marketing partnership with Barclay's Bank Delaware Inc., a subsidiary of Barclay's Plc, during 3Q Management changes provide opportunity for strategy shifts. AirTran appointed Steven Rossum EVP of Corporate Development during 3Q Bob Fornaro, President and CEO was appointed Chairman of the Board, replacing Joe Leonard, who retired in May, Stan Dadek, SVP and CFO, departed AirTran in April, 2008, after serving as CFO for 8 years. AirTran's Board of Directors appointed Arne G. Haak to SVP Finance, Treasurer and CFO. Negatives Lower fuel prices should improve operating margins in the coming quarters. AirTran Holdings' operating margin for 3Q 2008 was (6.8%), compared to operating margin profit of 2.4% for JetBlue Airways, 3.0% for Southwest Airlines, and a loss of (21.1%) for US Airways Group. Pending merger of Delta and Northwest may heighten competition on key routes. The LCC (low cost carrier) space is getting more crowded, while competition from major airlines is increasing, as they defend their routes with discount pricing. AirTran Holdings, JetBlue Airways and Southwest Airlines gained market share from major carriers. These LCCs now encroach on each other's routes, creating additional competition. Market share battles are shaping up in certain cities. AirTran Holdings faces increasing competition from Southwest Airlines, the LCC leader, and from JetBlue Airways, the LCC with the most aggressive expansion plans (although JetBlue Airways limited capacity growth for 2008 due to negative operating trends). Southwest Airlines competes with AirTran Holdings in Philadelphia and Pittsburgh, both strong markets for AirTran Holdings. AirTran Holdings has shorter stage lengths, presenting a management challenge to fill planes, although load factor for 3Q 2008 of 85% was higher than other airlines. Reflecting this mix of short haul routes, fuel cost as a percentage of revenues at 54% is higher for AirTran Holdings than JetBlue at 44%, Southwest Airlines at 35%, US Airways Group at 34%. AirTran Holdings' union labor force may be subject to strikes, an unpredictable factor that could increase costs significantly. AirTran Holdings unsuccessfully attempted to acquire Midwest Air Group [ticker:meh], indicating that AirTran Holdings is hampered by a stock price that suffered from competitive threats over the last 12 months. Midwest Air Group merged with TPG Capital for $393 million ($17 per share in cash) in January, High leverage limits flexibility. AirTran has cash of $438 million and $1.2 billion in debt as of September, 2008, raising concerns of liquidity should oil prices rally. During 2Q 2008, AirTran raised capital of $147 million through offerings of common equity and convertible notes. During 2Q 2008, AirTran issued 22.3 million shares of common stock at $3.20 per share and sold $65 million of 5.5% convertible senior notes due AirTran expects to use proceeds from financings to buy government securities and for general corporate purposes. AirTran Holding's debt at 99% of enterprise value is in the middle of the range for airlines. AirTran Holdings stock showed disastrous performance, down (60%) for the 12 month period from November, 2007 to November, 2008, as shown in the relative price performance table and chart on page 4 of this report. are officers, directors, or advisory board members of any company mentioned herein. Atlantis Investment Co., Inc. or any of its employees do not own shares equal to 1% or more of any company mentioned herein.

4 AAI - Page 3 Airline Industry Valuation Airline Industry Key Variables Changing Industry Landscape. Current challenges faced by the US airlines continue, including high fuel prices and renewed competition, signaling a difficult operating environment. Changes over the previous decade permanently altered the landscape of the US domestic airline industry. Major carriers and LCCs (low cost carriers) are still locked in a market-by-market, route-by-route battle that has significantly decreased pricing in certain markets, especially on transcontinental routes. In addition to brutal competition, the Internet, with its transparent pricing, contributed to today's low fare environment. Investors should proceed with caution. The cyclical, high fixed cost airline industry is not known for creating long term shareholder value. The September 11th attacks, LCCs, and the Internet dramatically altered the airline industry, and major carriers can no longer depend upon profits made during economic prosperity to carry them through economic downturns. Major Carriers Adjusting Strategies and Tactics. After trailing the LCCs in the battle to reshape domestic industry dynamics, major carriers are fighting back with pricing and capacity adjustments at hubs. Implementation of strategy changes among major carriers will increase competition as well as create opportunities to increase market share in certain markets. Major carriers have also shifted capacity to more profitable international routes. Maintenance Disruptions. Maintenance regulatory issues resulted in thousands of stranded passengers and millions of dollars in losses during April, American Airlines canceled more than 3,000 flights, grounding its MD-80 fleet when FAA said wiring in the planes' wheels was not bundled properly. American Airlines received notice from FAA in September, 2006 to check electrical wirings on its MD-80 jets. Alaska Airlines, Midwest Airlines and Delta Airlines also followed suit, each canceling a small number of flights on MD-80 aircraft. Southwest Airlines canceled 171 of 2,200 daily flights with Boeing MD-80 aircraft, temporarily grounding the majority of its 300-plane MD-80 fleet. Southwest Airlines was ordered by FAA to inspect Boeing 737 airplanes for possible fuel leaks. Southwest's entire 515-plane fleet is made up of Boeing 737s. This inspection order also impacts US Airways, with 86 Boeing 737 planes in its 358-plane fleet. United Airlines temporarily canceled 41 Boeing 777 flights and delayed dozens of others to work on long haul jets, as a review showed that fire suppression system tests had not been performed. Demand Recovery. According to the IATA (International Air Transport Association), air traffic in September, 2008, decreased (2.9%) from September 2007, with traffic in North America decreasing (0.9%). According to IATA's Director General and CEO, such a decline in traffic has not been seen since the SARS crisis in ASMs (available seat miles) year to date for 2008 increased 4.8% for international markets and increased 5.7% for North America. ASM for September, 2008 increased 1.1% for international markets and increased 0.6% for North America. By 2020, US commercial air carriers are projected to fly 1.8 trillion ASMs, and transport 1.2 billion passengers. International load factor was a record 77.0% for 2007, while North American load factor was 79% for September, Average load factor hit a record 81.0% for July, 2007, up 0.3% from the previous year. (July is normally a seasonal peak for load factor due to vacation travel.) Supply. Capacity is expected to increase 2.8% for US carriers, as major carrier domestic market capacity stabilizes and LCCs continue to add capacity. Mainline carrier capacity is expected to increase 2.8%, and regional capacity is expected to increase 3.0%. Over the next 18 months, 1,800 new aircraft will be delivered, representing 10% of existing fleet. Improving Domestic Yield. Yield increased more than 5% for major US carriers for 3Q 2008, while yields were variable for LCCs, flat for AirTran Holdings, up 17% for Southwest Airlines, up 4% for US Airways and up 13% for JetBlue Airways. Fare increases are driven by falling demand and volatile oil prices. Hedges are a key factor determining profitability in this volatile environment. Staying Power Determined by Cost Structure. Lower operating cost, as measured by CASM, is the competitive advantage of low fare, low cost carriers. Major carriers strive to lower operating costs in order to maintain market share. The table presenting fundamental statistics at the top of page 4 demonstrates the uncompetitive cost structure of major carriers. Fluctuating Jet Fuel Prices. Fuel is the second largest expense for airlines after labor. Break in fuel prices since July, 2008 provides an opportunity for carriers to repair margins, but this margin benefit may be lost in discounting to stimulate traffic during the recession. According to the Air Transport Association (ATA), US airlines consume 19 billion gallons of jet fuel per year. If unhedged, every $1.00 increase in the price of a gallon of jet fuel drives an additional $19 billion in annual fuel costs for US airlines. Fortunately, fuel hedges are a commonly used management tool. Mergers and Bankruptcies. Pending merger of Delta and Northwest values Northwest at $3.6 billion, with FAA approval received in October, In 2007, both Delta Air Lines and Northwest emerged from bankruptcy. Bankruptcy protection provides companies with the ability to restructure their debt and lower labor and other operating costs, enabling more aggressive competition. Rising fuel prices drove 4 low cost US airlines to file for bankruptcy during April, 2008, including Aloha Airlines, ATA Airlines (based in Indianapolis), Skybus (a private airline based in Columbus), and Frontier Airlines (serving 70 destinations from Denver). Midwest Air Group merged with TPG Capital for $393 million ($17 per share in cash) in January, 2008, in a deal backed by Northwest as a passive investor, disappointing unsuccessful bidder AirTran Holdings. US Airways and America West merged in 2005, following US Airways' emergence from bankruptcy. In January, 2006, Independence Air ceased operations after filing for bankruptcy in November, are officers, directors, or advisory board members of any companiy mentioned herein. Atlantis Investment Co., Inc. or any of its employees do not own shares equal to 1% or more of any company mentioned herein.

5 AAI - Page 4 Airline Industry Fundamentals AirTran Holdings Quarterly Trends Customers Business travelers account for 40% of AirTran's total revenues and leisure fares 60%. Atlanta represents 68% of its network. Notable markets served in the remaining 32% of the network include Baltimore (AirTran's next largest market after Atlanta), Florida, Freeport, Boston, Rochester, Dayton, Milwaukee, and Dallas. Competitors Delta and US Airways Group are AirTran's #1 and #2 competitors. AirTran has a 28% cost advantage over US Airways Group but only 4% cost advantage over Delta, as measured by CASM (as of 3Q 2008). AirTran competes with Southwest Airlines in Baltimore. Southwest Airlines' flights from Philadelphia are a negative for AirTran as the largest low fare carrier in that market. AirTran is well established with flights from Philadelphia to Atlanta, Florida, and Boston and can compete effectively with Southwest on price. AirTran has a slight advantage over Southwest with its product offering since it offers seat assignments. US Airways stands to lose the most market share in Philadelphia. Beyond Philadelphia, Southwest has stated that it sees opportunity to develop markets on the East Coast and the Southeast. JetBlue has been rolling out smaller planes with shorter ranges, increasing probability it may enter AirTran's markets. are officers, directors, or advisory board members of any companiy mentioned herein. Atlantis Investment Co., Inc. or any of its employees do not own shares equal to 1% or more of any company mentioned herein.