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

U.S. Airline Industry Review: Allocating Capital to Benefit Customers, Employees and Investors http:///dataset/a4a-presentation-industry-review-and-outlook/ http:///blog/the-nature-and-status-of-u-s-airline-competition-beyond-the-80-percent-rhetoric/ Updated Mar. 8, 2019

Contents» Economic Impact» Historical Air Transport Demand, Pricing and Financial Performance» 2018 Operations, Finances and Summer Air Travel Forecast» Eye on Supply» Affordability, Competition and Access to Air Travel» Reinvestment in People and Product» Customer Satisfaction 2

ECONOMIC IMPACT 3

Making the movement of people and goods easier, and stimulating economies The combination of creative freedom and new-generation aircraft has led to another hugely significant development in recent years: the hundreds of new city pairs that airlines have launched and continue to add to their networks. These directly link communities by air as they ve never before been connected, making the movement of people and goods easier, and stimulating economies. -- Karen Walker, Editor-in-Chief, Air Transport World (April 2018) Source: Celebrating an industry, Air Transport World (April 2018) 4

The 729,000+ Employees* of U.S. Passenger and Cargo Airlines Offer an Extensive Worldwide Network Facilitating the Safe and Rapid Movement of People and Goods 27,000 daily flights to/from 800+ airports in nearly 80 countries ~2.4 million passengers per day ~58,000 tons of cargo per day Source: A4A and Bureau of Transportation Statistics for U.S. passenger and cargo airlines * Headcount as of December 2018 5

Commercial Aviation Supports 5% of U.S. GDP and More Than 10M U.S. Jobs For Every 100 Airline Jobs, Approximately 300 Jobs Are Supported Outside the Industry» 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. Source: FAA, The Economic Impact of Civil Aviation on the U.S. Economy (Nov. 2016) 6

Airlines Helped the U.S. Generate an All-Time High 211B in Visitor Spending in 2017 Travel/Tourism Exports Were $251B in 2017 32 Percent of U.S. Services Exports The United States welcomed nearly 77 million international visitors into the country, who collectively spent a record-setting $251.4 billion experiencing the United States in 2017, a two percent increase when compared to 2016 International travelers continue to set spending records visiting the United States The American tourism industry continues to help drive our economy to new heights. Sec. of Commerce Wilbur Ross (Sept. 12, 2018) $300 $250 $200 $150 $100 $50 $0 U.S. Travel/Tourism Exports (Billions) 236 249 246 251 218 188 201 207 192 207 211 168 177 162 151 120 122 137 100 101 20 21 31 37 39 41 44 42 39 41 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017 Passenger Air Transport Other Travel & Tourism* Source: Bureau of Economic Analysis * Food, lodging, recreation, gifts, entertainment, local transportation in the USA, and other items incidental to foreign travel 7

HISTORICAL AIR TRANSPORT DEMAND, PRICING AND FINANCIAL PERFORMANCE 8

By Almost Every Measure, the Golden Age of Air Travel Wasn t Then It Is Now Pre-Deregulation (Before 1979) Today (2017-2018) Safety Feared by many; fatality risk = 1 in 1M Safest travel mode; fatality risk = 1 in 29M Competition CAB allowed just 1 or 2 airlines per route CAB set fares, disallowed price competition No limit on number of carriers per route Vigorous price competition Affordability Avg. domestic R/T > $600 incl. fees ($2017) Average domestic R/T ~ $363 incl. fees Accessibility Accessible to affluent 63% had flown Luxury good; predominantly high-income Accessible to all 88% have flown Common form of intercity transportation Small-market service Often propeller aircraft, suboptimal times Widespread jets, market-driven flight times International service Flights, carriers, cities, sales limited by law Plentiful, cheaper due to Open Skies Routings & frequency Often multiple stops, few flights/day/week Plentiful nonstop/1-stop, multiple flights/day Shopping Phone calls, ticket offices, travel agents A few clicks online Ticket delivery By mail only Universally electronic, retrievable Checking in Lined up at the ticket counter Online, kiosk, mobile Inflight entertainment Occasional movie, far-away shared screen Unlimited options, streaming to PED Bag tracking No tools at customers disposal Mobile tools becoming universal Environmental impact Not very fuel efficient; more CO 2 per flight ~120% more efficient; avoidance of CO 2 Source: A4A and Patrick Smith, There Was No Golden Age of Air Travel, New York Times (May 27, 2017) 9

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 100 90 80 70 60 50 40 30 20 10 0 % of U.S. Adult Population That Flew 87 81 73 63 49 47 39 29 25 21 1971 1977 1988 1997 2018 Past 12 Months In Lifetime Sources: Gallup and Ipsos Public Affairs; NBC News (Dec. 20, 2017) 10

Within the Travel & Tourism Sector, Airfare Remains One of the Better Bargains In Contrast to Air Travel, the Price of a Day at Disney Rose 33-Fold From 1971 to 2017 18 U.S. Carrier Airfare ( /mile) $140 Magic Kingdom ($/day) 4000 Price Index (1971 = 100) 16 14 12 10 8 6 4 2 0 5.54 13.54 1971-1978: 5.7% CAGR 1978-2017: 1.3% CAGR $120 $100 $80 $60 $40 $20 $0 $3.50 $115 3500 3000 2500 2000 1500 1000 500 0 U.S. CPI Disney Airfare 32.9X 6.1X 2.4X 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 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) 11

As Real Airfares Have Plunged, Growth in Flyers = 4.7x Growth in U.S. Population Ancillary Services Included, 2017 Domestic Air Travel Was ~42% Cheaper Than in 1980 $700 $600 Domestic US R/T Price (in CY2017 Dollars) Fare Fare + Ancillary 1,000 900 Passengers per Capita Have Doubled (+120%) 889 3.0 2.8 $500 800 U.S. Airline Passengers +223% 2.6 $400 700 2.4 $300 3.0 2.5 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 Domestic US R/T Price (% of Disposable Personal Inc.) Fare Fare+Anc Millions 600 500 400 300 U.S. Population +47% 2.2 2.0 1.8 1.6 Per Capita 2.0 1.5 200 1.4 1.0 0.5 100 1.2 0.0 0 1.0 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 Source: Bureau of Economic Analysis, Bureau of Labor Statistics and Bureau of Transportation Statistics (DB1B via Airline Data Inc. and T1 sched. service for U.S. airlines) 12

Diminished Airline Pricing Power Has Led to Diminishing Take of U.S. Economy Systemwide Passenger and Ancillary Revenues as Share of U.S. Gross Domestic Product 1.0% 0.9% 1980-2000 average= 0.93% 0.8% 0.7% Pax Rev Pax Rev + Ancillary Rev ($51B) 0.6% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: A4A Passenger Airline Cost Index 13

For U.S. Airlines, 2017 Traffic Growth (3.3%) Outpaced Capacity Growth (3.2%) Systemwide Average Load Factor Rose a Tenth of a Point to 83.5 Percent 1200 +3.2% 85 1100 84 Billions 1000 900 800 82.1 82.0 82.8 83.1 83.4 83.8 83.4 83.5 +3.3% 83 82 81 Load Factor (%) 700 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 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) 14

U.S. Airlines Are Moving More People and More Goods Over Longer Distances Significant Growth of Demand for Air Transportation Services in the Deregulated Era 1,000 Passenger Traffic Up 4.1x Revenue Passenger Miles (Billions) 100 45 Cargo Traffic Up 5.6x Revenue Ton Miles (Billions) 100 900 90 40 90 800 80 35 80 700 600 500 400 70 60 50 40 30 25 20 70 60 50 40 300 30 15 30 200 20 10 20 100 10 5 10 0 00 0 00 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 Source: U.S. Bureau of Transportation Statistics (T1 systemwide for U.S. airlines) Note: Recessions highlighted in gray 15

In 2017, U.S. Airlines Needed to Fill 71 Percent of Seats to Avoid Losing Money Breakeven Load Factor Requirement Rose on Higher Unit Cost 90 85 Breakeven Actual 83.5 Load Factor (%) 80 75 70 65 60 62.6 66.2 81.3 81.0 80.9 77.5 75.6 66.8 68.2 71.1 55 50 56.7 1971-1980 1981-1990 1991-2000 2001-2010 2011 2012 2013 2014 2015 2016 2017 Source: A4A Passenger Airline Cost Index (http:///dataset/a4a-quarterly-passenger-airline-cost-index-u-s-passenger-airlines/) 16

In the Deregulated Period, U.S. Airline Earnings Have Been Cyclical and Volatile Cumulative Net Income = $23 Billion (0.6% of Revenues, $1.04 per Enplaned Passenger) Net Income ($ Billions) 100 80 60 40 20 0 (20) (40) (60) (80) (100) 77.2 20.6 1.8 (11.4) (65.0) 1979-1989 1990-1994 1995-2000 2001-2009 2010-2017 Net Margin: 0.4% (3.3%) 3.8% (6.3%) 6.0% Source: A4A Passenger Airline Cost Index 17

Even in Best Years, Profitability of U.S. Airlines Lags U.S. Corporate Average Pre-Tax Profit Margin (%) Gap Widened in 2016 and 2017, Widening Further in 2018 20 15 10 5 15.2 8.2 0 (5) (10) (15) (20) U.S. Recession U.S. Passenger Airlines All U.S. Corporations (25) 1970 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 2024 Source: ATA Annual Reports (1970-1976), A4A Passenger Airline Cost Index (1977-present); Bureau of Economic Analysis Note: Recessions highlighted in gray 18

Airlines Continue to Strive for Solid Profitability Across the Business Cycle In Current U.S. Business Cycle, Airline Margins Are Less Than Half the U.S. Average 35 30 25 20 30.0 29.7 25.1 Pre-Tax Profit Margin (%) for 2010-2018 17.1 16.4 15 10 5 0 McDonald s Apple Disney Starbucks All US Corps. MCD AAPL DIS SBUX All USA Airlines 6.7 Sources: U.S. Bureau of Economic Analysis, A4A Passenger Airline Cost Index and company SEC filings 19

2018 OPERATIONS AND FINANCES 20

Flight Completion Factor Continues to Exceed 98 Percent Amid Difficult Weather On-Time Arrival Rate Hovering Just Below 80 Percent; Should Improve in 2019 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72 70 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019 2020 98.3 79.3 On-Time Arrival (A14) Rate (%) Flight Completion Factor (%) Source: Bureau of Transportation Statistics -- for U.S. airlines * Jan-Oct 21

2018 Posed Some Significant Operating Challenges Power Outages/Airport Equipment: Jan 1 CBP nationwide outage; Jan 7 (JFK T4 water main break) Aug 16 DCA loses power for more than 1 hour, affecting about two dozen flights Sep 16 PHX T4 multi-hour closure due to suspicious abandoned rental car Oct 9 law enforcement asked Frontier 1612 passengers to exit plane to handle emotional support squirrel Airport Construction: ATL/CHI/DCA/DFW/HNL/HOU/LAX/MCO/MIA/NYC/PHL/PHX/SAN/TPA Major Weather Jan 3-5 ( bomb cyclone ), 7-8, 12, 16-18, 21-22 Feb 4-5, 7, 9, 11, 15, 20 Mar 2 (Winter Storm Riley) 7 (Quinn) 13 (Skylar) 20-22 (Toby) Apr 4 (Mid-Atlantic/Northeast), 14-16 (MSP/ORD/CLT/NE), 25 (NE) May 3 (CHI/DAL t-storms), 14-16 (CHI/mid-Atlantic/NE t-storms), 31 (SE/mid-Atlantic t-storms) Jun 18-20 (rainstorms and low visibility in Chicago/mid-Atlantic), 26 (CHI t-storms) Jul 1 (CHI storms), 15 (NYC/PHL storms), 17 (NE/mid-Atlantic), 22 (MCO), 23 (DEN), 27 (NE/mid-Atlantic) Aug 2-3, 7-8 (t-storms in mid-atlantic/ne/chi), 11 (NYC/PHL), 13-14 (mid-atlantic/ne/dal), 17 (NE) Sep 3 flooding caused massive delays at ORD; 11-17 Hurricane Florence (Carolinas) Oct 10 Hurricane Michael battered Florida panhandle, forcing the cancellation of several hundred flights Nov 15-16 snow/ice affected airports from Mid-Atlantic to NE; 25-26 snowstorm hit Chicago and Plains Dec 9-10 winter storm hit North Carolina; 26028 thunderstorms hit Dallas and Houston Air Traffic Control: Understaffing at many major facilities; critically low staffing at New York TRACON* * Staffing is routinely cited as the basis for many traffic management initiatives (ground delay programs, ground stops, airspace flow programs, miles-in-trail) across the NAS Source: A4A research, FAA Air Traffic Organization and masflight (subsidiary of Global Eagle) 22

U.S. Airlines Continue to Reduce the Rate of Involuntary Denied Boardings 2018 = Best-Ever Recorded by DOT, Approaching Just 1 per 100,000 Passengers 1.25 Involuntary Denied Boardings per 10,000 Passengers 1.00 0.75 1.09 0.82 0.99 0.92 0.92 0.76 0.50 0.62 0.25 0.00 0.34 0.13 2010 2011 2012 2013 2014 2015 2016 2017 2018* Sources: DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports) * Jan-Sep 23

Baggage-Handling Much Improved Over Past Few Years Rate of Mishandling Remains Low Despite More Frequent/Severe Storms 4.00 Reports of Mishandled (Lost/Delayed/Damaged/Pilfered) Bags per 1,000 Passengers 3.50 3.00 2.50 2.00 3.57 3.39 3.09 3.22 3.62 3.24 2.70 2.46 2.85 1.50 1.00 0.50 0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018* Sources: DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports) * Jan-Sep 24

The Rate of Customer Complaints Fell for the Third Straight Year in 2018 Low Fares, Improved Communications, Online IROPS Resolution, Fewer Involuntary DBs 2.00 1.75 Customer Complaints to DOT re: U.S. Airlines per 100,000 Passengers 1.90 1.50 1.25 1.00 0.75 1.20 1.18 1.42 1.13 1.38 1.52 1.35 1.00 0.50 0.25 0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018* Sources: DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports) * Jan-Nov 25

U.S. Airline Passenger and Cargo Volumes Reached All-Time Highs in 2018 900 875 Passengers Enplaned (in Millions) 889 22.0 21.5 21.0 Cargo Enplaned (Million Tons) 21.3 850 20.5 20.0 825 19.5 800 19.0 18.5 775 2015 2016 2017 2018E 18.0 2015 2016 2017 2018E Source: Bureau of Transportation Statistics T1 for scheduled service-passengers and T100 for all services (scheduled and nonscheduled) cargo (freight and mail) 26

Jet-Fuel Prices Creeping Up Again A Penny per Gallon per Year Equates to ~$200M in U.S. Airline Industry Fuel Expenses $3.50 Systemwide Average Paid Price of Jet Fuel per Gallon $3.00 $2.50 3.05 3.15 3.01 2.86 $2.00 $1.50 $1.00 1.66 2.27 1.86 1.46 1.70 2.16 $0.50 0.81 $0.00 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: A4A and Bureau of Transportation Statistics (all U.S. carriers, scheduled an nonscheduled services) 27

2018 Expenses Rose Faster Than Revenues, Reducing Profitability Yet Again Carriers Faced Cost Pressure in Every Major Category, Driving Margins Lower in 2018 Change (%) in Operating Revenues and Expenses 2018 vs. 2017 31.2 Pre-Tax Profit Margin (%) 6.8 12.7 9.2 7.0 6.0 $2.23/gal vs. $1.76 2.1 6.6 5.4 6.3 11.0 11.1 8.2 Pax Rev (1) Cargo Rev Other Rev (2) Total OpRev Labor Fuel Maintenance Airports Aircraft Other (3) Total OpExp 2017 2018 1. Traffic (revenue passenger miles) up 4.7 percent; yield (revenue per passenger-mile flown) up 1.9 percent; U.S. CPI up 2.4 percent 2. Sale of frequent flyer award miles to airline business partners, transportation of pets, in-sourced aircraft and engine repair, flight simulator rentals, inflight sales, etc. 3. Aircraft rents, professional fees, food/beverage, insurance, commissions, GDS fees, communications, advertising, utilities, office supplies, crew hotels, payments to regionals Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United 28

In 2018, U.S. Airline* Profitability Was a Little Over Half the U.S. Average Pre-Tax Profit Margin (% of Operating Revenues) 33.3 37.2 23.4 24.8 27.4 2.7 3.5 5.1 8.2 10.4 11.3 14.3 15.2 16.1 17.9 Ford Chipotle Nordstrom Airlines (1) Boeing Marriott Caterpillar All U.S. Corps Comcast Honeywell Starbucks Disney Apple Railroads (2) McDonald s 1 Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United 2 CSX, Norfolk Southern and Union Pacific Source: Company SEC filings 29

Airlines Recovered $0.73 in Revenue for Every $1.00 Increase in Operating Costs Fuel Alone Accounted for 58 Percent of the Year-Over-Year Increase in Costs Change ($ Millions) in Revenues and Expenses 2018 vs. 2017 $11,571 Other Passenger $15,869 Other Labor Cargo Fuel 1 2 1 ~71% traffic-driven 2 ~89% price-driven Deprec/Amort Airports Maintenance $452 ~ $70M/Day ($4,298) ($3,846) Op Revenues Op Expenses Op Profits NonOp PreTax Profits Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United 30

Airlines Utilize a Wide Array of Tools to Improve Profitability Amid Rising Costs Increase fuel efficiency (reduce consumption per unit of flying) o Continue to replace older (often smaller) aircraft with typically larger, next-generation or re-engined aircraft o Deploy state-of-the-art flight planning/navigation software to optimize airborne movement of aircraft o Utilize taxi-management technologies and single-engine taxi to minimize ground-based fuel burn o Consistently employ ground power while parked at gate instead of aircraft auxiliary power unit (APU) o Reduce onboard weight (e.g., lighter materials/structures, inflight entertainment systems, excess fuel) 31

Airlines Utilize a Wide Array of Tools to Improve Profitability (Cont d) Reduce or contain non-fuel costs o Deploy customer-preferred technologies (e.g., airport kiosks for self-tagging of luggage, airline apps for passenger modification of itinerary in lieu of agents) o Use virtual medicine (e.g., Doctor on Demand) for health care cost-efficient and highly popular with workforce o Achieve single pilot/fa contracts reduce delays/cancels, enable efficient use of aircraft/crews, avoids over-hiring o Employ new software/methods to improve hotel procurement and manage employee travel bookings o Drive more bookings to lower-cost direct distribution channels (e.g., website, app) o Trim management/nonunion headcount via attrition, buy-outs; freeze open positions o Retire debt to lower interest expense o Insource engine/ground-handling/other work to be performed better/more efficiently (where practicable) o Negotiate preferred-pricing maintenance contracts enabled by improved scale/credit, recover warranties on aircraft parts, leverage data streams from new aircraft/engines to increase reliability and lower repair/inspection costs 32

Airlines Utilize a Wide Array of Tools to Improve Profitability (Cont d) Generate more revenue o Carry more passenger traffic or better mix of traffic (corporate/premium), optimize fare/fee structure o Boost availability/desirability of ancillary products (fleet-wide/faster WiFi, live TV int l, refurbished clubs) o Increase credit card sales attracting new accounts due to larger networks and customer-preferred timings o Intensify cargo sales efforts and leverage increased belly capacity (and temp controls) offered by new aircraft 33

Airlines Utilize a Wide Array of Tools to Improve Profitability (Cont d) Hybrid revenue/cost improvements o Re-optimize route networks trim unprofitable capacity, defer deliveries, add routes enabled by new aircraft o Increase utilization of aircraft, ground equipment and gates at hubs and take advantage of new gates coming online at key locations in 2018-2020 o Reduce fleet/subfleet types to lower hiring, training and maintenance costs while increasing both aircraft substitutability and product consistency (for travelers) 34

Airline Creditworthiness Has Improved But Continues to Lag Many Fortune 500s Per 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 AAA Alphabet (Google), ExxonMobil, USA AA+ Wal-Mart AA Toyota AA- PepsiCo, UPS A+ Etihad,* GE, Target A Amtrak, BP A- Ryanair, Southwest, ebay, McDonald s, Starbucks BBB+ FedEx, Ford, Marriott, Wizz Air* BBB British Airways, Delta, Lufthansa, Qantas, WestJet BBB- Alaska BB+ Avis, Air Canada, JetBlue, United, Sabre BB Aeroflot, American, Hawaiian, LATAM, Spirit, Turkish BB- Virgin Australia, Hertz, SAS B+ Gol Linhas Aereas (GOL) B- Investment Grade 1 Speculative 2 Grade 1 Describes issuers with relatively high levels of creditworthiness and credit quality 2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk Source: Standard and Poor s; Guide to Credit Rating Essentials: What are credit ratings and how do they work? * Rated by Fitch (not currently rated by S&P) 35

Strong Credit Allows U.S. Airports to Access Capital Markets at Preferred Rates AA ± Aa (1-3) ATL BOS CLT HAS (HOU/IAH) LAS LAX MCO MSP MWAA (DCA/IAD) OMA PANYNJ (EWR/JFK/LGA/SWF) PDX PHX RDU SEA SNA TPA A ± A (1-3) 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 BBB ± Baa (1-3) BB ± Ba (1-3) AGS BIL BTV COS CRP FAT FNT GRR GUM JAN MDT MFR MHT MOB PNS PVD PWM RAP RDM TUL VPS Delta, Southwest Alaska Allegiant American Hawaiian JetBlue Spirit United Investment Grade 1 Speculative Grade 2 B ± B (1-3) None Legend: AIAS = Alaska International Airport System HAS = Houston Airport System; also includes EFD HSAS = Hawaii s Statewide Airports System; also includes HDH/HNM/JHM/JRF/LNY/LUP/MKK/MUE/PAK/UPP MWAA = Metropolitan Washington Airports Authority PANYNJ = Port Authority of New York and New Jersey; also includes TEB 1 Describes issuers with relatively high levels of creditworthiness and credit quality 2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk Sources: Standard and Poor s and Moody s 36

Many Long-Term Investors Remain Wary of the Airline Industry We actually are the largest holder of the four largest airlines It s a fiercely competitive industry, the question is whether it s a suicidally competitive industry I mean, when you get virtually every one of the major carriers and dozens and dozens and dozens of minor carriers going bankrupt, there ought to come a point you find that maybe you re in the wrong industry -- Warren Buffet, Berkshire Hathaway annual meeting (May 6, 2017) Source: 9 Best Warren Buffett Quotes From the Berkshire Hathaway Annual Meeting (May 8, 2017) 37

Crude-Oil Prices Surged Jan. 2016-Oct. 2018, Plunged at End of 2018 Spot Price* of Brent Crude Oil ($ per Barrel) $120 $100 $80 $60 $40 $20 $0 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Source: A4A and Energy Information Administration (http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm) 38

U.S. Economy, Jobs Growing; Household Net Worth Continues to Set New Records U.S. Real GDP Growth (% CAGR) U.S. Employment Growth (000s per Month) 2.9 1.6 2.2 2.9 2.4 227 193 179 223 166 2015 2016 2017 2018E 2019F Consumer Sentiment (UMich Index 1Q66=100) 2015 2016 2017 2018 2019 U.S. Household Net Worth (Trillions) 91.5 92.4 90.3 93.2 97.2 96.4 95.1 98.4 98.9 98.3 98.1 98.2 $90 $95 $103 $104 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 2015 2016 2017 2018 Sources: U.S. GDP (Bureau of Economic Analysis actuals and IHS Markit forecast); U.S. nonfarm payroll employment growth (month-over-month, seasonally adjusted) from BLS; consumer sentiment (University of Michigan, Index 1Q 1966=100); U.S. household net worth in current dollars, not seasonally adjusted (Federal Reserve) 39

EYE ON SUPPLY 40

In 2014-2018, Domestic Airline Capacity Grew at Twice the Rate of the U.S. Economy Throughout the Business Cycle, Capacity Has Fluctuated With the Price of Crude Oil* 6 (Airlines 4.8%, Economy 2.3%) 2015-2018 Crude = $56/bbl 5 4 3 2 1 0 2.6 1.6 (Airlines 1.3%, Economy 2.0%) 2011-2014 Crude = $108/bbl 2.2 1.8 1.6 1.6 1.1 0.2 2.5 2.3 5.1 2.9 4.9 1.6 4.0 2.2 5.4 5.2 2.9 2.4 2010 ($80) 2011 ($111) 2012 ($112) 2013 ($109) 2014 ($99) 2015 ($52) 2016 ($44) 2017 ($54) 2018 ($72) 2019F ($65) Domestic Airline Capacity (ASMs) Source: Bureau of Economic Analysis and published airline schedules via Diio Mi Real US GDP * Brent crude oil in dollars per barrel, shown next to each year 41

Airlines Offering a Record 3.2M Daily Seats From U.S. Airports in 2019 Up 4.2% Year-Over-Year in 2018 and 4.6% in the First Nine Months of 2019 3,500 3,000 2,500 2,000 Daily Scheduled Seats (000) Departing U.S. Airports for All Destinations 3,056 3,068 2,584 2,620 2,717 2,823 2,932 310 330 351 368 390 405 410 2,274 2,289 2,366 2,454 2,542 2,651 2,657 3,208 427 2,781 1,500 1,000 500 0 2013 2014 2015 2016 2017 2018 1-3Q18 1-3Q19 Domestic International Source: Innovata (via Diio Mi) published schedules as of Mar. 1, 2019, for all airlines 42

Almost Every Major* U.S. Airport Saw Supply of Seats Rise From 2013-2018 % Change in Scheduled-Service Seats Available: 2018 vs. 2013 80 70 70 60 50 40 30 20 10 0 (10) 57 56 51 45 44 43 35 35 35 33 33 32 32 31 30 30 29 26 25 24 24 24 24 22 22 22 21 20 20 19 19 18 17 16 16 15 15 14 14 12 11 10 9 9 9 9 9 8 7 7 5 5 5 3 2 1 1 (2) (3) (4) DAL AUS SJC FLL SEA CVG BNA MCO RDU MSY PDX BOS SMF SAN OAK SFO IND LAX EWR RSW OMA SLC CMH BUR BDL TPA OGG JFK ORD PBI DEN JAX ONT PIT HOU LAS BWI SAT MCI STL ANC ATL SNA IAH DFW DTW MSP DCA MIA PHX CLT IAD LGA HNL PHL MDW MKE CLE BUF ABQ SJU Source: Innovata (via Diio Mi) published schedules as of Jan. 4, 2019, for all airlines providing scheduled service * FAA large and medium hub airports 43

Post-Recession, Scheduled Service in Small Communities* Rising Again in 2019 Small U.S. Airports Seeing Most Flights Since 2011, Most Seats Ever 6,000 600,000 Avg. Daily Flights (Scheduled) 5,000 4,000 Flights (Left Axis) Seats (Right Axis) 500,000 400,000 Avg. Daily Seats (Scheduled) 3,000 300,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Notes: Recession (Dec-2007 Jun-2009); FAA pilot qualification (1,500-hour) rule effective Jul-2013; pilot flight/duty/rest rule effective Jan-2014; 2019 is Jan-Sep * Per https://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/categories/, U.S. airports with less than 0.25% of annual passenger boardings Source: Innovata (via Diio Mi) published schedules as of Mar. 1, 2019, for all airlines providing scheduled passenger service from U.S. airports to all destinations 44

Airlines Are Deploying Larger Aircraft, and Mainline-Only Carriers Are Growing Regionals Now Just 43% of Domestic Departures; Over Half of Those are Large RJs Quest for optimal use of pilots, fuel and congested airspace/airfields Improving economics of large RJs and lack of new-generation in-production small aircraft Rapid growth of carriers with predominantly (or entirely) large aircraft in their fleets % of Domestic U.S. Departures by Aircraft Size* 52.5% 11 11 37 36 8 15 45 38 25 34 27 23 20 23 27 21 43.3% 2005 2010 2015 1H19 50 51-100 101-150 151+ Source: Innovata (via Diio Mi) published schedules as of Dec. 14, 2018 * Numbers may not add to 100 due to rounding 45

AFFORDABILITY, COMPETITION AND ACCESS TO AIR TRAVEL 46

When Choosing an Airline, Leisure Travelers Value Affordability Above All Else 2018 Rankings Identical to 2017 (Schedule Solidly Second, Followed by Reliability) When traveling for personal reasons, how would you rank the following in terms of choosing which airline to fly, with 1 being your first priority and 9 being your last priority? (Base = all 2018 flyers with at least 1 leisure trip) Criteria 2018 (2017) Score Affordability (airfare / ancillaries / taxes) 1 (1) 2.87 (2.50) Flight schedule (routes / timings) 2 (2) 3.40 (3.12) Operational reliability (e.g., on-time performance) 3 (3) 4.33 (4.22) Airline seat comfort 4 (4) 4.63 (4.54) Customer service (reservationists / gate agents / flight attendants) 5 (5) 5.21 (4.82) Airline frequent flyer program (earn / redeem / upgrade / status) 6 (6) 5.19 (5.19) Quality of inflight amenities (e.g., food / entertainment) 7 (7) 5.32 (5.32) Environmental responsibility (fuel efficiency / recycling / sustainability) 8 (8) 6.28 (6.28) WiFi (availability / speed / reliability) 9 (n/a) 6.79 (n/a) Source: Ipsos survey of American adults (January 2019) 47

Relative to Most Consumer Goods and Services, Air Travel Is a Bargain U.S. Inflation and Personal Incomes Have Sharply Outpaced Price of Domestic Air Travel Real Increase Real Decrease Product (Unit) 2000 2017 % Public College Tuition & Fees (4-Year, In-State, Net) $1,208 $4,140 242.7 Disney World Magic Kingdom (1-Day, Adult, Regular Season) $46 $115 150.0 Jet Fuel (Gallon, Price Paid by U.S. Airlines) $0.81 $1.70 109.9 National Football League Game (Nonpremium Ticket) $43.70 $TBD TBD Major League Baseball Game (Nonpremium Ticket) $16.67 $32.44 94.6 Prescription Drugs (BLS Index) 285.425 519.634 82.1 Disposable Personal Income per Capita (Annual) $26,262 $45,390 72.8 Single-Family Home (Existing) $147,300 $248,800 68.9 Movie Ticket (One Adult) $5.39 $8.97 66.4 Gasoline (Gallon, Unleaded Regular, Retail Including Taxes) $1.510 $2.408 59.5 Food (BLS Index) 167.817 250.066 49.0 U.S. Consumer Price Index (CPI-U) 1 172.200 245.120 42.3 Vehicle (New, Retail) $24,900 $34,670 39.2 Public Transit 209.492 263.195 25.6 Indoor Plants and Flowers 116.513 133.919 14.9 Air Travel (R/T Domestic Fare + Ancillary) 2 $317.84 $362.61 14.1 Apparel: Clothing/Shoes/Jewelry (BLS Index) 129.583 125.612 (3.1) Television (BLS Index) 49.925 2.357 (95.3) 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 48

Inflation-Adjusted Fares Continue to Fall in 2018, Averaging Less Than in 2010 Real Price* of Domestic Air Travel Down 5.3% YOY (-5.2% Fares, -7.2% Fees) Round-Trip Ticket Price ($1H 2018)* $440 $420 $400 $380 $360 $340 $320 423 406 412 415 24 408 387 24 24 24 24 382 380 25 370 24 24 360 382 387 391 398 23 384 22 362 359 356 347 338 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H17 1H18 Fare Ancillary Fees (Bags + Reservation Changes) Source: A4A analysis of DOT Data Bank 1B (all cabins and fare basis codes) and DOT Form 41 via Airline Data Inc. (airlinedata.com) * Excl. taxes; CPI up 2.5% YOY 49

3Q 2018 Inflation-Adjusted Fares Were Lowest 3Q Ever Recorded by DOT Fares Down 12 Percent From 2010, 30% From 2000 $500 Average 3Q Domestic Airfare Including Taxes and Estimated Ancillaries, in 2018 Dollars* $475 $450 $425 $400 $375 $350 $325 $300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3Q Fare and Taxes Total Incl. Ancillaries Source: A4A (ancillaries) and Bureau of Transportation Statistics (fares and taxes) * Adjusted for inflation; round trips, but includes one-ways if no return purchased 50

Among 11 U.S. Airline Brands, Smaller Carriers Have Been Growing the Fastest Different Types of Carriers Market Their Prices and Services Differently % Change in Capacity* Since 2007 400 350 300 250 200 150 100 50 0 Company 2019 Guide (%) Spirit 15 Allegiant 7-9 JetBlue 4.5-6.5 Delta 5 United 4-6 Southwest 5 American 3 Hawaiian 1.5-4.5 Alaska 2 Note: Guides as of 3/6/2019 Spirit Allegiant Alaska JetBlue Sun Ctry AA/DL/UA Hawaiian Frontier (50) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Southwest Source: Innovata (via Diio Mi) schedules as of Oct. 5, 2018, for selected marketing airlines including predecessors * Systemwide scheduled available seat miles 51

Smaller U.S. Carriers Are Serving More and More Domestic Markets Competitive Presence of Low-Cost and Ultra Low-Cost Carriers Continues to Expand Number of U.S. Airports Served* 120 99 101 2007 2019 74 67 54 50 48 48 15 22 18 Alaska Allegiant Frontier Hawaiian JetBlue Spirit Source: Innovata (via Diio Mi) schedules as of Feb. 8, 2019, for selected marketing airlines including predecessors * July 15-21 of each year 52

From 2000-2017, Global Network Carrier Domestic Share Fell From 73% to Just 53% Share (%) of U.S. Domestic Origin-and-Destination Passengers by Airline Business Model 9 10 10 11 12 13 13 15 16 16 17 18 19 19 20 21 22 23 24 18 19 20 21 21 21 22 23 24 25 25 25 25 24 24 24 24 24 23 73 71 69 68 67 67 65 62 60 59 58 57 57 57 56 55 54 53 53 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18 Global Network (AA, DL, UA) Southwest Other 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] 53

Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares Southwest Effect Remains in Force Brueckner/Lee/Singer A December 2016 update of the frequently cited Brueckner/Lee/Singer study demonstrated that the Southwest Effect remains in force: o o In the period 3Q 2015 through 2Q 2016, Southwest s presence on a route lowered fares 21.2 percent 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 o o Alaska 24.0 percent JetBlue 25.4 percent Spirit 18.5 percent Source: Jan K. Brueckner, Darin Lee and Ethan S. Singer, Airline competition and domestic US airfares: A comprehensive reappraisal, Economics of Transportation, 2013 54

Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares Southwest Effect Remains in Force Beckenstein/Campbell 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. 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) 55

The Largest U.S. Carriers Have Grown Aggressively at Each Other s Hubs Growth (%) in Capacity* at Competitors Hubs & Focus Cities: 2010 to 2018 Southwest at NYC Southwest at Charlotte Southwest at Dallas Delta at Seattle American at SLC United at Atlanta Southwest at Denver United at SLC Southwest at Houston Delta at Dallas Southwest at MSP Southwest at MIA/FLL Delta at Charlotte Southwest at Los Angeles Delta at Denver American at Seattle United at Detroit American at Atlanta Southwest at Detroit United at Miami Delta at SFO United at Dallas American at Houston Delta at Houston American at Denver Real GDP 58 55 53 44 41 40 38 36 36 32 30 29 29 27 26 24 23 19 19 76 75 97 148 228 277 268 Source: A4A analysis of schedule data * Scheduled domestic available seat miles by marketing carrier (and merged/acquired partners) 56

Meanwhile, Smaller Carriers Have Been Expanding Rapidly at Large-Carrier Hubs Growth (#) in Daily Domestic Flights* at Competitors Hubs & Focus Cities: 2010 to 2018 Alaska at San Fran JetBlue at MIA/FLL Spirit at Dallas Spirit at L.A. Spirit at Chicago Spirit at WAS Spirit at Atlanta Spirit at Houston JetBlue at WAS JetBlue at NYC Alaska at NYC Alaska at L.A. Alaska at Dallas Spirit at Detroit JetBlue at L.A. Alaska at WAS Spirit at MSP Alaska at SLC Frontier at PHL Spirit at NYC Spirit at Denver JetBlue at Atlanta JetBlue at PHL Frontier at Chicago JetBlue at San Fran Frontier at Atlanta Alaska at Chicago JetBlue at Detroit Frontier at Charlotte Frontier at Miami Alaska at MSP Alaska at Detroit 2 3 4 4 4 5 6 6 7 7 11 11 11 10 9 9 13 13 15 18 18 18 18 18 17 21 21 20 20 24 34 40 Source: A4A analysis of schedule data * Scheduled departures by marketing carrier (and merged/acquired partners) 57

LCCs/Others* Now Carry Significant Share of Passengers in Large-Carrier Hub Cities Percentage of Domestic Origin-Destination (O&D) Passengers [Sorted by 2017 Share] Hub City Airport(s) 2000 2007 2017 Charlotte, NC CLT 2.0 12.2 8.8 Philadelphia, PA PHL 8.4 30.4 27.2 Atlanta, GA ATL 15.4 29.0 28.8 Detroit, MI DTW 14.9 29.5 29.8 Minneapolis/St. Paul, MN MSP 12.5 18.6 30.1 New York, NY-NJ EWR/JFK/LGA 10.1 30.1 30.8 Salt Lake City, UT SLC 26.0 33.6 31.1 Dallas/Fort Worth, TX DAL/DFW 26.6 26.8 37.1 Chicago, IL MDW/ORD 26.9 31.2 37.6 Houston, TX HOU/IAH 33.5 39.9 44.0 Miami, FL FLL/MIA 20.6 37.5 45.1 Washington, DC BWI/DCA/IAD 20.3 38.3 47.0 Phoenix, AZ PHX 40.6 46.3 49.9 Los Angeles, CA BUR/LAX/LGB 36.0 44.5 52.4 San Francisco, CA OAK/SFO 34.1 45.6 54.4 Denver, CO DEN 15.5 39.5 57.2 Source: A4A analysis of DOT Origin-Destination Survey (Data Bank 1B) via airlinedata.com * Airlines other than American, Delta, United and their predecessors 58

Competitive Choices for Domestic Flyers Have Continued to Increase Contrary to Some Assertions, Traffic Analysis Shows More Competitors on U.S. City Pairs Average Number of Competitors* on All Reported Domestic U.S. Itineraries 1995 2000 2005 2010 2015 2017 3.21 3.33 3.41 3.39 3.49 3.54 * Carrying at least 5 percent of O&D passengers in the city pair; average number of competitors is passenger-weighted across city pairs Source: Compass Lexecon analysis of DOT Origin-Destination Survey (Data Bank 1B) 59

Los Angeles-Seattle Is Among Countless Domestic City Pairs on Which Competition* Has Increased Since 2007 (Real Fares Down 20%, Passengers Up 78%) 2007 O&D Passenger Share 1Q-3Q18 O&D Passenger Share 64% 17% 8% 7% 56% 20% 7% 6% 6% Source: DOT Data Bank 1B and Innovata published schedules via Diio Mi * Defined as carrying at least 5 percent of O&D passengers between BUR/LAX/LGB and SEA 60

Boston-Akron/Cleveland Is Among Countless Domestic City Pairs on Which Competition* Has Increased Since 2007 (Real Fares Down 20%, Passengers Up 23%) 2007 O&D Passenger Share 1Q-3Q18 O&D Passenger Share 48% 63% 30% 25% 15% 5% 5% Source: DOT Data Bank 1B and Innovata published schedules via Diio Mi * Defined as carrying at least 5 percent of O&D passengers between BOS and CAK/CLE 61

Air Travel Between the U.S. and Foreign Countries* Reached All-Time High in 2018 Foreign Flag Airlines Carried 53 Percent of Passengers, Up From 45 Percent in 2011 300 250 200 150 100 50 0 International Air Passengers* (Millions) to/from the United States 197.3 177.6 185.4 166.3 246.1 233.6 221.6 209.1 75.0 82.2 86.9 95.2 104.5 114.4 121.7 130.1 91.3 95.3 98.4 102.1 104.6 107.2 111.9 115.9 2011 2012 2013 2014 2015 2016 2017 2018 U.S. Flag Foreign Flag Source: U.S. Department of Commerce National Travel and Tourism Office *Years preceding 2011 do not include traffic between the United States and Canada 62

REINVESTMENT IN PEOPLE AND PRODUCT 63

Heard on the Street 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 64

U.S. Airline Industry Employment at Highest Level Since 2000 Year-End Full-Time + Part-Time Employees at U.S. Passenger and Cargo Airlines (000s) 800 700 600 500 754 667 649 612 625 611 603 621 587 564 568 583 583 584 594 615 686 705 729 730 400 300 200 100 0 2000 2001 2002 2003 2004 January 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bureau of Transportation Statistics Note: 2016 includes FedEx acquisition of TNT on May 25, 2016, which increased headcount by approximately 55,000 65

U.S. Passenger Airline Jobs Averaging Highest Level Since 2004 December 2018 Represented the 62 nd Consecutive Month of YOY Gains 525 500 475 U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s) 520.0 2010-2018 +59,330 (15.7%) 450 425 2000-2010 -141,367 (27%) 411.1 426.1 437.9 400 378.6 375 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines 66

U.S. Airline Job Growth Continues to Outpace Overall U.S. Job Growth 5 4 Year-Over-Year Change (%) 3 2 1 0 (1) U.S. Airlines Overall USA (2) (3) Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Source: Bureau of Labor Statistics (U.S. nonfarm employment, CES0000000001) and Bureau of Transportation Statistics (U.S. scheduled passenger airline FTEs) 67

U.S. Airlines* on Track to Spend $52B on Wages & Benefits in 2018 Average Compensation per Employee Up Approximately $35K (41%) Since 2010 Employee Wages and Benefits* Total ($Bils) Per FTE ($000) 32.3 33.3 35.6 35.8 38.3 42.6 107.8 46.7 113.6 50.3 118.1 52.0 120.0 99.5 92.4 94.0 85.3 86.4 2010 2011 2012 2013 2014 2015 2016 2017 2018E * A4A Passenger Airline Cost Index 68

U.S. Airline Wages Averaged 47% More Than U.S. Private Sector in 2017 From 2010 to 2017, Airline Wages Rose 43% (More Than Double 18% for Overall USA*) $120 Wages and Salaries (000) per Full-Time Equivalent Employee (FTE) $100 $80 $60 $40 $50.3 U.S. Passenger Airlines $62.6 $51.9 $89.8 $61.3 $20 $38.9 U.S. Private Sector $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sources: BEA NIPA Table 6.6D and A4A Passenger Airline Cost Index 69

From 2010-2018, U.S. Airlines* Plowed 75% of Operating Cash Flow Back Into the Product While Retiring $79B in Debt and Returning $48B in Cash to Shareholders 2010-2018 Total Per Psgr. % Ops CF Retire Debt $78.8B ~$12 49% Enhance the Product $120.9B ~$18 75% Reward Shareholders $47.5B ~$7 29% * SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and merged/acquired predecessors 70

Like Other Responsible Businesses, Airlines Are Focused on Balanced Allocation of Capital to Benefit All Stakeholders: Customers, Employees and Investors Increasing job security Renewing fleets, improving the product at all stages of travel Boosting operational reliability, advancing environmental objectives Restoring/increasing air service levels (capacity) Adding staff Restoring/increasing employee wages and benefits Shoring up pensions (or comparable retirement accounts) De-risking (reducing debt) Returning cash to shareholders Buying back stock Issuing dividends 71

Substantial U.S. Passenger Airline Capital Investment* Continued in 2018 Despite Waning Profits Bringing Total for This Business Cycle to $121 Billion U.S. Passenger Airline Capital Expenditures* $ Billions per Year 5.2 6.6 9.8 12.5 13.9 17.0 17.5 19.9 18.6» As of YE18, firm orders for 1,717 aircraft valued at $88B Expecting deliveries to average ~ one new aircraft per day in 2019» Additionally, several billion dollars in commitments for ground equipment, facilities and information technology 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Includes payments made for aircraft and other flight equipment, ground and other property and equipment, airport and other facility construction and information technology Source: SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and merged/acquired predecessors 72

Improving Finances Enabling Significant Reinvestment in Customer Experience» 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 73

Airline-Airport Collaboration Has Paved Way for Widespread Infrastructure Investment Capital Investment Has More Than Doubled Since 2015 at the 30 Largest U.S. Airports*» Nearly $165B of capital projects completed, underway or approved at the 30 largest U.S. airports since 2008, including, for example: o o New/expanded/modernized facilities at Atlanta, Boston, Chicago (ORD), Dallas (DFW), Denver, Honolulu, Houston (IAH), Las Vegas, Los Angeles, Miami, Newark, New York (JFK and LGA), Orlando, Phoenix, Portland, Salt Lake City, San Diego, San Francisco, Seattle and Washington (DCA) 27 airfield capacity projects at 23 major airports, including new runways at Chicago (ORD), Charlotte, Seattle and Washington (IAD)» Development is also robust at smaller airports, including: o o Airfield projects at Anchorage, Columbus, Des Moines, El Paso, Manchester, Providence and Sioux Falls Terminal projects at Bangor, Dallas (DAL), Eugene, Grand Rapids, Greenville-Spartanburg, Kansas City, Nashville, New Orleans, Oakland, Pasco, Reno, San Antonio, San Luis Obispo and Wichita» Investment is also occurring in cargo facilities and related infrastructure e.g., Fort Worth, Louisville, Lafayette, Indianapolis, Memphis, Miami, Newark, Ontario, Rockford Investment at Largest Airports* ($ Billions) $70 $100 $130 $165 2015 2017 2018 2019 Approved Completed/Underway * Capital projects completed, underway or approved at the 30 largest U.S. airports since 2008, per A4A research 74

E-Commerce and Rapid Fulfillment Redrawing the Map for Distribution of Air Cargo Cincinnati (CVG) and Tampa (TPA) Are Among the Biggest Winners % Change in Outbound Cargo Payload at Largest U.S. Cargo Airports, 2010-2018* CVG TPA BWI RFD ONT PHX CLT MCO SJU LAX DFW LCK PDX DTW HNL FLL SDF SEA ORD OAK SLC SFO ATL AFW MEM SAN LAS BOS PHL MSP IND BFI IAH SAT MIA DEN EWR ANC JFK IAD (0) (1) (4) (6) (6) (7) (17) (20) 62 43 41 39 37 36 35 33 25 24 24 20 20 19 19 19 17 16 16 15 14 14 11 10 5 2 2 1 96 88 123 251 Source: DOT T100 segment data * 12 months ended July 2018 75

Fitch Ratings: Skies Remain Friendly for U.S. Airports strong overall performance for U.S. airports should continue undeterred for the foreseeable future according to Fitch Ratings in its latest annual peer review for the sector Fitch-rated airports are still largely entrenched in A territory. Airports in general are showing a lot of resilience as the industry continues to evolve and event-driven challenges from the broader economy take shape, said Senior Director Seth Lehman. Over 90% of the airports Fitch rates currently have a Stable Rating Outlook, which signifies continued stability deep into next year. GDP growth and general airline health remain the most important revenue gauges for airports, though rising rates could make borrowing debt more expensive for airports with a substantial pipeline of investments on the horizon. -- Fitch Ratings: Skies Remain Friendly for U.S. Airports (Oct. 29, 2018) Sources: https://www.fitchratings.com/site/pr/10049679 and Peer Review of U.S. Airports (Attribute Assessments, Metrics and Ratings), Oct. 29, 2018 76

Following 2001-2009 Financial Crisis, U.S. Airlines Have Retired ~$79B in Debt and Returned ~$48B to Shareholders to Lure and Retain New Equity Investors Retirement of Debt ($ Billions) Returns to Shareholders ($ Billions) 9.1 11.2 7.5 7.9 10.5 8.0 8.5 9.9 Dividends Stock Repurchase 10.5 13.1 8.8 8.2 6.1 4.6 0.1 0.3 0.6 1.2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors * Payments on long-term debt and capital lease obligations 77

As U.S. Airlines Generate Sufficient Cash from Operations, They Are Better Able to Fund Capital Improvements and Enhance Shareholder Value $30 $25 Free* (FCF) Operating 25.4 Cash Flow (Billions) $20 $15 $10 $5 $0 ($5) 11.1 10.5 6.8 4.5 3.0 2.5 0.6 1.3 (0.0) 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors * Operating cash flow minus capital expenditures 78

CUSTOMER SATISFACTION 79

Improving Airline Finances Translating to Customer Benefits 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 80

J.D. Power: North America Airport Satisfaction* Climbs to Record High North America airports have managed to shrug off the potentially disruptive effects of record passenger volumes and massive construction projects to achieve a record high in overall passenger satisfaction. (Sept. 19, 2018) 800 750 700 650 Note: Scale = 0-1000; study not conducted in 2009/2011-2014 689 675 690 725 731 749 761 Six factors: Terminal Facilities* (24%) Airport Accessibility (19%) Security Check (16%) Baggage Claim (15%) Check-In / Baggage Check (14%) Food / Beverage / Retail (13%) * Concourses, lounges, signage, restrooms, gate areas 600 2007 2008 2010 2015 2016 2017 2018 * The study is based on responses from 40,183 North America travelers who traveled through at least one domestic airport and covers 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. The study was fielded from September 2017 through September 2018. Source: J.D. Power 2018 North America Airport Satisfaction Study SM 81

ACSI 2018 Airline Customer Satisfaction Index: Second Best in 25-Year History Ease of Booking and Checking in for Flight Rank Highest 78 76 Scale = 0-100; ACSI for airlines commenced in 1994 Ease of check-in process Ease of making a reservation 82 81 74 Courtesy of flight crew 80 72 70 73 Timeliness of arrival Website satisfication Baggage handling 80 80 79 68 Boarding experience 78 66 Call center satisfaction 77 64 62 60 62 Range of flight schedules Loyalty program Quality of inflight services Seat comfort 69 76 75 73 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Note: ACSI and its logo are Registered Marks of the University of Michigan; see http://www.theacsi.org/the-american-customer-satisfaction-index Source: ACSI Travel Report 2018 (http://www.theacsi.org/news-and-resources/customer-satisfaction-reports/reports-2018/acsi-travel-report-2018) 82

J.D. Power: North America Airline Customer Satisfaction Climbs to Record High Airline investments in newer planes, improved customer satisfaction with overhead storage compartments and cheaper fares have driven a seventh straight year of improved customer satisfaction. Operationally, it s never been a better time to fly. Passengers perceive greater value in ticket prices, checking in has never been easier, passengers are more satisfied with the actual aircraft and airlines have improved their baggage-handling performance. Michael Taylor, Travel Practice Lead at J.D. Power (May 30, 2018) 800 775 750 725 700 675 Note: Scale = 0 to 1000 658 762 Seven factors (in order): Cost & fees In-flight services* Aircraft Boarding/deplaning/baggage Flight crew Check-in Reservation 650 * Food, beverage and entertainment 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Notes: The study is based on responses from 11,508 passengers who flew on a major North American airline between March 2017 and March 2018. Source: J.D. Power 2018 North America Airline Satisfaction Study SM 83