Emerging US Airport Traffic Trends & Preview To The 2018

1 Research Summary Emerging US Airport Traffic Trends & Preview To The 2018 August 2018 Prepared & Researched By 78 Beaver Brook Canyon Road, Evergreen, Colorado USA 80439 (303) 674-2000 www.aviationplanning.com

2 Table of Contents Overview Key Metrics Q1 2018... 3 Capacity Projections Remainder of 2018... 4 Emerging Airport & Air Service Access Trends... 5 Fare Issues First Quarter 2018 Tables & Comparisons... 5 The Islip Dynamic Recognizing The ULCC Model... 12 A Hard Look At The Islip Dynamic... 13 Scheduled Flights Are Not Necessarily Air Service... 14 Anticipating ULCC Entry Points... 14 More Insight & Business Intelligence The IAFS... 15 Data & Insight Not At Any Other Event!... 15 Note: The analyses and projections herein are based on data and analyses deemed reliable, but due to the volatile nature of the subject matter, cannot be guaranteed. This document is Copyright 2018 by Boyd Group International. The data herein is not to be copied or reproduced without the express consent of Boyd Group International, Inc.

3 Overview Key Metrics Q1 2018 Indications: Strong enplanement growth quarter over quarter in excess of 4.3%... trending even stronger in the 2 nd quarter, based on latest Airports:USA reports. Base fares stabilized. The reports that fares are down are not particularly accurate. The net fare collected per passenger dropped a miniscule 73 cents. Developed By Aviation DataMiner The main message here is the growth rate of 4.3% Y-O-Y, which is consistent with the current Airports:USA 2018 2027 forecast estimate of 4.2%. However, when looking at YTD enplanements in 2018, Airports:USA data show the booming economy spiking traffic at a rate of over 5.1% - the highest in over ten years. What We ll Be Exploring At The IAFS Effects of fuel increases. The cost of jet-a is up over 60% in a little more than a year. No question that airlines will be responding. The unknown is that the increase comes at a time of robust traffic and a booming national economic picture. Unknowns to be explored: vulnerability of traffic growth to fare hikes. Capacity changes. Some financial analysts and commenters get confused regarding capacity. When an airline such as United adds seats due to market expansion, some on Wall Street confuse that as being the same as increasing capacity across a static route system. The question is how higher fuel costs will affect airline market decisions, particularly in smaller markets that are more vulnerable to cost pressures. Long-Haul International Pull-Backs. It is near-certain that continued higher fuel prices will dampen the enthusiasm in airline front offices for adding more super long-haul flying, such as SFO-SIN particularly at US carriers, which are at a disadvantage in regard to trans-pacific trip origination. Plan on discussions with key CEOs regarding these and other air service factors at the IAFS. No panels and no restrictions on the scope of the exploration.

4 Capacity Projections Remainder of 2018 Consistent with current demand trends, the nation will see 4.6% more capacity in the second half of 2018 compared to a year-earlier period. What We ll Be Exploring At The IAFS The second half of 2018 indicates growth will continue to track with the experience in the first quarter. Capacity Lags YTD 2018 Growth. Note that total capacity will be up 4.6% v Airports:USA data showing YTD enplanements at over 5.1%. Non-ULCC capacity expansion would indicate less of a need for capacity reduction than some in the financial world deem needed. ULCCs Increase in capacity share. The growth in ULCC capacity percentage wise is about three times that of non-ulccs. However the share of capacity will still be less than seven percent, and departures will be less than four percent of the national system. ULCC Share To Explode In Next 18 Months. Based on the Boyd Group International Global Fleet Trend & Demand Forecast, the ULCC share of capacity will exceed ten percent more than double that of today by 2020. This will result in very strong market volatility, with huge spikes in enplanements at some airports, followed by rapid deflation at some. This factor which we discuss below as the Islip Dynamic - is an integral part of the ULCC model, covered later in this document. 1 These trends will be a focus at the IAFS - and will be explored with the CEOs, and presidents and senior executives of Spirit, Frontier, Sun Country and Allegiant. 1 The BGI Fleet Forecast will be presented August 19 at the International Aviation Forecast Summit in Denver.

5 Emerging Airport & Air Service Access Trends In this document, review the traffic performance at the top 50 O&D passenger airports. These account for approximately 80% of all US passengers and are fully representative of total national trends. Fare Issues First Quarter 2018 Tables & Comparisons Using all airports, averaging ticket fares, there was almost no change from 1Q 2017. What are not reflected in any fare data are the ancillary revenues which are now an intrinsic part of the cost of a consumer air journey, such as baggage fees. This clouds the issue of true cost comparisons, as each airline is not only different in application of such fees, but also in the accounting for them. Media Reports Regarding Fares... Not Reliable. Nevertheless, there are a number of comparisons of fare levels found in various media sources listing disparities between airports. Most are not accurate. In almost all cases, the numbers are based on raw BTS data that most reporters don t understand. The major point is that the BTS data is ticket spend and not average fares or cost of travel. The BTS data is simply the sum of fares (in the sample collected) divided by passengers. This includes one-way, roundtrip and multi-stop itineraries. These factors vary materially, airport to airport, and are also affected by the geographic location of the airport, which has an effect on the length of haul among passengers to and from that destination. Therefore, media-reported comparisons of raw BTS fare data are certainly widespread and common, but are misleading and useless. Common Metric Baseline Fares Per Mile, Adjusted For Length of Passenger Haul (LOH). The main determinant is the cost that the customer experiences based on a common metric. The one closest to being uniform is the cost per mile paid by the consumer. This, however, is also affected by the length of passenger trip, which varies widely, due to a range of factors, including nature of the business base, geographic location and air service levels. In this research, the average total fare paid, expressed on a one-way basis, including federal fees and taxes, was computed based on nonstop yield. This in turn was converted to a distance adjusted yield, based on the national average passenger length of trip. This addresses the disparity in length of trip and gives a general comparison of the cost of air travel at each airport.

6 ADJ Consumer Cost Rank 1Q 2018 O&D Pax Rank Airport Reported O&D AVG Fare Incl Fed Taxes Avg Length of Pax O&D Trip (LOH) Pax Gross Per Mile, Incl Fed Taxes LOH Adjusted Cost 31 6 ATL 7,531,475 $202.91 895 22.68 17.26 15 30 AUS 2,838,658 $220.50 1,161 18.99 18.76 20 34 BNA 2,549,553 $217.41 916 23.75 18.50 32 10 BOS 5,829,734 $202.29 1,301 15.55 17.21 42 22 BWI 3,793,133 $186.21 1,131 16.46 15.84 39 46 CLE 1,793,311 $196.94 1,069 18.43 16.75 5 31 CLT 2,649,482 $249.82 881 28.36 21.25 14 50 CMH 1,523,247 $221.16 985 22.45 18.82 44 35 DAL 2,455,640 $177.85 869 20.47 15.13 16 19 DCA 4,079,718 $219.53 991 22.15 18.68 43 4 DEN 8,177,345 $180.78 1,068 16.93 15.38 12 12 DFW 5,765,037 $224.41 1,032 21.74 19.09 21 20 DTW 4,049,029 $216.90 1,047 20.73 18.45 6 13 EWR 5,418,494 $246.33 1,339 18.40 20.96 48 9 FLL 5,994,986 $173.00 1,212 14.28 14.72 1 32 HNL 2,635,524 $290.15 2,049 14.16 24.69 36 42 HOU 2,058,588 $197.49 915 21.57 16.80 2 47 IAD 1,778,549 $260.85 1,423 18.33 22.19 4 25 IAH 3,427,691 $251.19 1,106 22.70 21.37 27 44 IND 1,828,722 $207.81 1,041 19.96 17.68 3 18 JFK 4,544,555 $253.58 1,676 15.13 21.57 47 3 LAS 8,700,612 $174.34 1,228 14.20 14.83 18 1 LAX 10,355,543 $218.28 1,537 14.20 18.57 34 14 LGA 5,376,349 $198.08 963 20.56 16.85 25 40 MCI 2,180,001 $211.39 979 21.58 17.98 46 2 MCO 9,051,372 $175.76 1,136 15.48 14.95 49 28 MDW 2,948,880 $172.52 930 18.54 14.68 19 23 MIA 3,497,914 $218.07 1,277 17.08 18.55 40 49 MKE 1,536,277 $194.15 1,117 17.38 16.52 11 16 MSP 4,740,507 $225.74 1,155 19.54 19.21 33 29 MSY 2,842,079 $201.39 1,030 19.54 17.13 50 36 OAK 2,425,722 $161.37 891 18.11 13.73 30 5 ORD 7,622,243 $204.54 1,042 19.63 17.40 13 45 PBI 1,828,053 $222.61 1,126 19.77 18.94 38 26 PDX 3,204,785 $196.96 1,300 15.15 16.76 9 21 PHL 3,988,906 $231.13 1,187 19.47 19.66 26 7 PHX 7,211,777 $208.13 1,193 17.45 17.71 23 48 PIT 1,749,389 $211.63 1,041 20.33 18.00 24 41 RDU 2,158,665 $211.59 978 21.63 18.00 37 27 RSW 3,130,544 $197.38 1,187 16.63 16.79 28 17 SAN 4,661,685 $206.69 1,331 15.53 17.58 8 43 SAT 1,876,785 $234.37 1,116 21.01 19.94 29 11 SEA 5,793,830 $205.39 1,409 14.58 17.47 7 8 SFO 6,728,990 $237.47 1,513 15.69 20.20 45 33 SJC 2,570,779 $177.63 999 17.78 15.11 10 24 SLC 3,440,806 $230.03 1,158 19.87 19.57 35 39 SMF 2,267,441 $197.75 1,068 18.51 16.82 22 37 SNA 2,294,432 $212.90 1,051 20.25 18.11 17 38 STL 2,274,556 $219.49 966 22.72 18.67 41 15 TPA 4,751,912 $187.37 1,105 16.96 15.94 First Quarter Avg Adjusted Cost Per Mile - Alphabetic

7 First Quarter Avg Adjusted Cost Highest To Lowest of To 50

8 ADJ Consumer Cost Rank 1Q 2018 O&D Pax Rank Airport Reported O&D AVG Fare Incl Fed Taxes Avg Length of Pax O&D Trip (LOH) Pax Gross Per Mile, Incl Fed Taxes LOH Adjusted Cost 18 1 LAX 10,355,543 $218.28 1,537 14.20 18.57 46 2 MCO 9,051,372 $175.76 1,136 15.48 14.95 47 3 LAS 8,700,612 $174.34 1,228 14.20 14.83 43 4 DEN 8,177,345 $180.78 1,068 16.93 15.38 30 5 ORD 7,622,243 $204.54 1,042 19.63 17.40 31 6 ATL 7,531,475 $202.91 895 22.68 17.26 26 7 PHX 7,211,777 $208.13 1,193 17.45 17.71 7 8 SFO 6,728,990 $237.47 1,513 15.69 20.20 48 9 FLL 5,994,986 $173.00 1,212 14.28 14.72 32 10 BOS 5,829,734 $202.29 1,301 15.55 17.21 29 11 SEA 5,793,830 $205.39 1,409 14.58 17.47 12 12 DFW 5,765,037 $224.41 1,032 21.74 19.09 6 13 EWR 5,418,494 $246.33 1,339 18.40 20.96 34 14 LGA 5,376,349 $198.08 963 20.56 16.85 41 15 TPA 4,751,912 $187.37 1,105 16.96 15.94 11 16 MSP 4,740,507 $225.74 1,155 19.54 19.21 28 17 SAN 4,661,685 $206.69 1,331 15.53 17.58 3 18 JFK 4,544,555 $253.58 1,676 15.13 21.57 16 19 DCA 4,079,718 $219.53 991 22.15 18.68 21 20 DTW 4,049,029 $216.90 1,047 20.73 18.45 9 21 PHL 3,988,906 $231.13 1,187 19.47 19.66 42 22 BWI 3,793,133 $186.21 1,131 16.46 15.84 19 23 MIA 3,497,914 $218.07 1,277 17.08 18.55 10 24 SLC 3,440,806 $230.03 1,158 19.87 19.57 4 25 IAH 3,427,691 $251.19 1,106 22.70 21.37 38 26 PDX 3,204,785 $196.96 1,300 15.15 16.76 37 27 RSW 3,130,544 $197.38 1,187 16.63 16.79 49 28 MDW 2,948,880 $172.52 930 18.54 14.68 33 29 MSY 2,842,079 $201.39 1,030 19.54 17.13 15 30 AUS 2,838,658 $220.50 1,161 18.99 18.76 5 31 CLT 2,649,482 $249.82 881 28.36 21.25 1 32 HNL 2,635,524 $290.15 2,049 14.16 24.69 45 33 SJC 2,570,779 $177.63 999 17.78 15.11 20 34 BNA 2,549,553 $217.41 916 23.75 18.50 44 35 DAL 2,455,640 $177.85 869 20.47 15.13 50 36 OAK 2,425,722 $161.37 891 18.11 13.73 22 37 SNA 2,294,432 $212.90 1,051 20.25 18.11 17 38 STL 2,274,556 $219.49 966 22.72 18.67 35 39 SMF 2,267,441 $197.75 1,068 18.51 16.82 25 40 MCI 2,180,001 $211.39 979 21.58 17.98 24 41 RDU 2,158,665 $211.59 978 21.63 18.00 36 42 HOU 2,058,588 $197.49 915 21.57 16.80 8 43 SAT 1,876,785 $234.37 1,116 21.01 19.94 27 44 IND 1,828,722 $207.81 1,041 19.96 17.68 13 45 PBI 1,828,053 $222.61 1,126 19.77 18.94 39 46 CLE 1,793,311 $196.94 1,069 18.43 16.75 2 47 IAD 1,778,549 $260.85 1,423 18.33 22.19 23 48 PIT 1,749,389 $211.63 1,041 20.33 18.00 40 49 MKE 1,536,277 $194.15 1,117 17.38 16.52 14 50 CMH 1,523,247 $221.16 985 22.45 18.82 First Quarter Avg Adjusted Cost By Airport- Reported O&D

9 ADJ Consumer Cost Rank 1Q 2018 O&D Pax Rank Airport Reported O&D AVG Fare Incl Fed Taxes Avg Length of Pax O&D Trip (LOH) Pax Gross Per Mile, Incl Fed Taxes LOH Adjusted Cost 31 6 ATL 7,531,475 $202.91 895 22.68 17.26 15 30 AUS 2,838,658 $220.50 1,161 18.99 18.76 20 34 BNA 2,549,553 $217.41 916 23.75 18.50 32 10 BOS 5,829,734 $202.29 1,301 15.55 17.21 42 22 BWI 3,793,133 $186.21 1,131 16.46 15.84 39 46 CLE 1,793,311 $196.94 1,069 18.43 16.75 5 31 CLT 2,649,482 $249.82 881 28.36 21.25 14 50 CMH 1,523,247 $221.16 985 22.45 18.82 44 35 DAL 2,455,640 $177.85 869 20.47 15.13 16 19 DCA 4,079,718 $219.53 991 22.15 18.68 43 4 DEN 8,177,345 $180.78 1,068 16.93 15.38 12 12 DFW 5,765,037 $224.41 1,032 21.74 19.09 21 20 DTW 4,049,029 $216.90 1,047 20.73 18.45 6 13 EWR 5,418,494 $246.33 1,339 18.40 20.96 48 9 FLL 5,994,986 $173.00 1,212 14.28 14.72 1 32 HNL 2,635,524 $290.15 2,049 14.16 24.69 36 42 HOU 2,058,588 $197.49 915 21.57 16.80 2 47 IAD 1,778,549 $260.85 1,423 18.33 22.19 4 25 IAH 3,427,691 $251.19 1,106 22.70 21.37 27 44 IND 1,828,722 $207.81 1,041 19.96 17.68 3 18 JFK 4,544,555 $253.58 1,676 15.13 21.57 47 3 LAS 8,700,612 $174.34 1,228 14.20 14.83 18 1 LAX 10,355,543 $218.28 1,537 14.20 18.57 34 14 LGA 5,376,349 $198.08 963 20.56 16.85 25 40 MCI 2,180,001 $211.39 979 21.58 17.98 46 2 MCO 9,051,372 $175.76 1,136 15.48 14.95 49 28 MDW 2,948,880 $172.52 930 18.54 14.68 19 23 MIA 3,497,914 $218.07 1,277 17.08 18.55 40 49 MKE 1,536,277 $194.15 1,117 17.38 16.52 11 16 MSP 4,740,507 $225.74 1,155 19.54 19.21 33 29 MSY 2,842,079 $201.39 1,030 19.54 17.13 50 36 OAK 2,425,722 $161.37 891 18.11 13.73 30 5 ORD 7,622,243 $204.54 1,042 19.63 17.40 13 45 PBI 1,828,053 $222.61 1,126 19.77 18.94 38 26 PDX 3,204,785 $196.96 1,300 15.15 16.76 9 21 PHL 3,988,906 $231.13 1,187 19.47 19.66 26 7 PHX 7,211,777 $208.13 1,193 17.45 17.71 23 48 PIT 1,749,389 $211.63 1,041 20.33 18.00 24 41 RDU 2,158,665 $211.59 978 21.63 18.00 37 27 RSW 3,130,544 $197.38 1,187 16.63 16.79 28 17 SAN 4,661,685 $206.69 1,331 15.53 17.58 8 43 SAT 1,876,785 $234.37 1,116 21.01 19.94 29 11 SEA 5,793,830 $205.39 1,409 14.58 17.47 7 8 SFO 6,728,990 $237.47 1,513 15.69 20.20 45 33 SJC 2,570,779 $177.63 999 17.78 15.11 10 24 SLC 3,440,806 $230.03 1,158 19.87 19.57 35 39 SMF 2,267,441 $197.75 1,068 18.51 16.82 22 37 SNA 2,294,432 $212.90 1,051 20.25 18.11 17 38 STL 2,274,556 $219.49 966 22.72 18.67 41 15 TPA 4,751,912 $187.37 1,105 16.96 15.94 First Quarter Avg Adjusted Cost Per Mile - Alphabetic

10 First Quarter Avg Adjusted Cost Highest To Lowest of To 50

11 ADJ Consumer Cost Rank 1Q 2018 O&D Pax Rank Airport Reported O&D AVG Fare Incl Fed Taxes Avg Length of Pax O&D Trip (LOH) Pax Gross Per Mile, Incl Fed Taxes LOH Adjusted Cost 18 1 LAX 10,355,543 $218.28 1,537 14.20 18.57 46 2 MCO 9,051,372 $175.76 1,136 15.48 14.95 47 3 LAS 8,700,612 $174.34 1,228 14.20 14.83 43 4 DEN 8,177,345 $180.78 1,068 16.93 15.38 30 5 ORD 7,622,243 $204.54 1,042 19.63 17.40 31 6 ATL 7,531,475 $202.91 895 22.68 17.26 26 7 PHX 7,211,777 $208.13 1,193 17.45 17.71 7 8 SFO 6,728,990 $237.47 1,513 15.69 20.20 48 9 FLL 5,994,986 $173.00 1,212 14.28 14.72 32 10 BOS 5,829,734 $202.29 1,301 15.55 17.21 29 11 SEA 5,793,830 $205.39 1,409 14.58 17.47 12 12 DFW 5,765,037 $224.41 1,032 21.74 19.09 6 13 EWR 5,418,494 $246.33 1,339 18.40 20.96 34 14 LGA 5,376,349 $198.08 963 20.56 16.85 41 15 TPA 4,751,912 $187.37 1,105 16.96 15.94 11 16 MSP 4,740,507 $225.74 1,155 19.54 19.21 28 17 SAN 4,661,685 $206.69 1,331 15.53 17.58 3 18 JFK 4,544,555 $253.58 1,676 15.13 21.57 16 19 DCA 4,079,718 $219.53 991 22.15 18.68 21 20 DTW 4,049,029 $216.90 1,047 20.73 18.45 9 21 PHL 3,988,906 $231.13 1,187 19.47 19.66 42 22 BWI 3,793,133 $186.21 1,131 16.46 15.84 19 23 MIA 3,497,914 $218.07 1,277 17.08 18.55 10 24 SLC 3,440,806 $230.03 1,158 19.87 19.57 4 25 IAH 3,427,691 $251.19 1,106 22.70 21.37 38 26 PDX 3,204,785 $196.96 1,300 15.15 16.76 37 27 RSW 3,130,544 $197.38 1,187 16.63 16.79 49 28 MDW 2,948,880 $172.52 930 18.54 14.68 33 29 MSY 2,842,079 $201.39 1,030 19.54 17.13 15 30 AUS 2,838,658 $220.50 1,161 18.99 18.76 5 31 CLT 2,649,482 $249.82 881 28.36 21.25 1 32 HNL 2,635,524 $290.15 2,049 14.16 24.69 45 33 SJC 2,570,779 $177.63 999 17.78 15.11 20 34 BNA 2,549,553 $217.41 916 23.75 18.50 44 35 DAL 2,455,640 $177.85 869 20.47 15.13 50 36 OAK 2,425,722 $161.37 891 18.11 13.73 22 37 SNA 2,294,432 $212.90 1,051 20.25 18.11 17 38 STL 2,274,556 $219.49 966 22.72 18.67 35 39 SMF 2,267,441 $197.75 1,068 18.51 16.82 25 40 MCI 2,180,001 $211.39 979 21.58 17.98 24 41 RDU 2,158,665 $211.59 978 21.63 18.00 36 42 HOU 2,058,588 $197.49 915 21.57 16.80 8 43 SAT 1,876,785 $234.37 1,116 21.01 19.94 27 44 IND 1,828,722 $207.81 1,041 19.96 17.68 13 45 PBI 1,828,053 $222.61 1,126 19.77 18.94 39 46 CLE 1,793,311 $196.94 1,069 18.43 16.75 2 47 IAD 1,778,549 $260.85 1,423 18.33 22.19 23 48 PIT 1,749,389 $211.63 1,041 20.33 18.00 40 49 MKE 1,536,277 $194.15 1,117 17.38 16.52 14 50 CMH 1,523,247 $221.16 985 22.45 18.82 First Quarter Avg Adjusted Cost By Airport- Reported O&D

12 The Islip Dynamic Recognizing The ULCC Model One of the challenges in forecasting traffic changes at specific airports in the future will be related to the enplanement effects of ULCC market shifts. This will be a thread throughout the IAFS - in discussions with senior ULCC executives, in the Airports:USA forecasts, and in the airliner forecasts from the major manufacturers. It s a whole new model with entirely different operating dynamics and different market strategies from traditional airlines. Not Air Service, But A New Spending Option. Unlike traditional air service, the ULCC model is focused primarily on posturing air travel as a consumer discretionary option, as opposed to the traditional model of airlines simply meeting intrinsic demand. There is no mathematical model or other analytical system to predict where a ULCC will decide to apply resources. There is no set of metrics to determine target airports that are viable for ULCC entry. These are entirely subjective corporate decisions. Not Just Forecasting Entry, But Exit, Too. Another undeterminable factor is when a ULCC may decide to reduce presence at a given airport. Since the majority of ULCC traffic generation is based on stimulation of consumers to shift discretionary dollars from other applications, when the ULCC makes the decision to pull down, the passenger traffic it captured does not shift to another airline most of it simply vaporizes, based on the reality that this option for discretionary spending no longer is available. We call this the Islip Dynamic an airport that typifies this part of the ULCC model. When the ULCC starts service, enplanements spike. But when the ULCC leaves, traffic levels return to those supported by organic demand for air travel. Islip is a poster child for this dynamic. Frontier unilaterally decided to enter the ISP market, with the intent of stimulating new traffic... traffic demand that was not there in the absence of Frontier service. The chart on the following page shows the dynamic vividly. Frontier entered Islip, experimented with up to nine destinations. They are down to three destinations, and schedule filings indicate that by the end of 2018, traffic levels at Islip will be back close to pre-frontier levels. What all airports and affected communities need to fully understand is that the ULCC model is not representative of the region s air service needs but is mostly traffic that would not be there at all without the ULCC presence. What We ll Be Exploring At The IAFS Fleet Effects... We ll look at the fleets that are on order from the four US ULCCs, Frontier, Allegiant, Spirit and Sun Country and discuss this with the executives from each of these airlines. Competitive Responses. The initial response from the three main comprehensive network carriers has been to simply offer a capacity-controlled product approximating that of the ULCCs. There appear to he changes coming. American has announced it will now include fee-waived carry-on luggage. Open question: can these carriers leverage their networks and other amenities as competitive responses to ULCCs?

13 A Hard Look At The Islip Dynamic When Frontier expanded operations the ISP market in late 2017, enplanements skyrocketed, with service to as many as nine markets. In the 1Q of 2018, however, Frontier was beginning to re-deploy assets to other markets, and the traffic decline started. As it stands, the airline will be down to just three markets, all leisure-based. Furthermore, despite outstanding attempts by Frontier to add point-topoint spokes mostly low-frequency Islip failed to stimulate sufficient traffic. By any ULCC measure, it is logical for the carrier to reduce destinations and move resources elsewhere, when demand does not quickly respond. 2 This has occurred elsewhere it is the nature of the ULCC model to attempt to stimulate ridership by offering an alternative to other discretionary options. When this does not materialize, or more likely when other, better market options evolve the ULCC will move resources. The traffic bubble it created will simply deflate. This was not air transportation demand so much as simply an alternative to discretionary spend options. 2 Source: Aviation DataMiner load factor data through April 2018. Data reflects load factors during the period 2017 through 4/18, including markets dropped during that period.

14 The positive news is that the airport and its region benefitted albeit for only a period of time from the ULCC entry. Scheduled Flights Are Not Necessarily Air Service In point of fact, while the Frontier decision to attempt market stimulation at ISP was entirely positive, it did not contribute materially to another necessary factor that affect traffic at a given airport: air access. Before, during and after the Frontier build-up at Islip, the true global access for the airport relied on one airline and one market American Airlines to its Philadelphia connecting hub. The rest of the ISP service was point-to-point, and as noted above, did not develop well. Regardless of the entry of Frontier, the majority of consumers seeking access to or from this part of Long Island are still in traffic on the Long Island Expressway, heading for LGA or JFK. Anticipating ULCC Entry Points The obvious challenge here is in forecasting where a ULCC may enter, and where they may pull down service. There is no methodology to divine airline strategies. However, there are some basics of where there may be markets of opportunities for ULCC entry: Strong potential for road-hubbing: ULCC service can draw traffic from a wide drive-area. Where an Interstate can draw significant population is a possibility for ULCC consideration. Relatively high O&D, no nonstops. Typically, it s frequency that underpins business traffic. However in certain regions there are relatively large mid-size city-pairs where existing connect traffic is completely un-useable due to time and hassle. Whether business travel preferences will shift to accommodate day-of-week nonstops is an open, but viable, question. Metro-Peripheral Airports. Particularly in the shadow of a large network carrier hubsite, there could be discretionary dollars in bank accounts that could be ready for a vacation to Florida, particularly where ambient local fares from the hubsite airport may be high. Discretionary income pockets. Particularly in the Deep South, where there is substantial growth in major industries particularly auto-related there can be increasing amounts of discretionary income. Typically, establishment of a car factory has not translated into strong new local traffic growth. Now, that may be changing when very low fares are in play. These are just considerations, but with over 100 more aircraft being added to ULCC fleets in the next two years, some planning pattern in regard to market entry will likely emerge.

15 More Insight & Business Intelligence The IAFS One August 18-21, the 23 rd International Aviation Forecast Summit in Denver will be exploring the future directly with the industry executives who will be driving it. With over 70 airline staff attending from CEOs through to market planners there will be enormous opportunities to network. Plus, there are outstanding forecasts of areas such as the fleets airlines will be operating in the future, the new technology that will change how airports will service customers, and the new strategies that will continue to alter air transportation within the channels of business communication. Data & Insight Not At Any Other Event! Plus, exclusive forecasts, including the Airports:USA projections covering 146 airports that handle over 95% of all passenger traffic. Another exclusive it the Airports:China forecast that is the premier source for US communities planning to increase traffic and air service with China. Insights from the CEOs and executives driving the future! Networking? Over 70 airline executives and staff from across the industry are attending. Bring business cards at the sessions and at the networking receptions, you ll have the opportunity to meet the decision-makers in the industry. The Supersonic Future. And don t forget the Saturday evening reception to be hosted by Boom Supersonic. Their 2.2 Mach aircraft will change how international travel is delivered and it s not much more than five years away. Optional Pre-Summit Workshops. Join us on Sunday afternoon, August 19, for an exciting series of Workshops covering areas that represent more data than other conferences in their entirety. So, take a look at the attached agenda, and then log on to www.aviationforecastsummit.com and be sure to reserve your space now at the #1 aviation event of the year!

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