Delivering Transformative Growth Dahlman Rose Global Transportation Conference September 8, 2011
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect AAWW s current views with respect to certain current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of AAWW and its subsidiaries that may cause actual results to be materially different from any future results, express or implied, in such forward-looking statements. For additional information, we refer you to the risk factors set forth in the documents filed by AAWW with the Securities and Exchange Commission. Other factors and assumptions not identified above are also involved in the preparation of forward-looking statements, and the failure of such other factors and assumptions to be realized may also cause actual results to differ materially from those discussed. AAWW assumes no obligation to update the statements in this presentation to reflect actual results, changes in assumptions, or changes in other factors affecting such estimates, other than as required by law. This presentation also includes some non-gaap financial measures. You can find our presentations on the most directly comparable GAAP financial measures calculated in accordance with Generally Accepted Accounting Principles and our reconciliations in our earnings releases dated August 2, May 3 and February 14, 2011, which are posted on our Web site at www.atlasair.com. 2
Key Themes Leading industry position Transformative growth Substantial Operating Leverage Enhance shareholder value 3
Atlas Growth Map CMI Boeing Dreamlifter DHL 767 SonAir Growth Strategy 1. Leverage core competencies 2. Develop new organizational capabilities 3. Drive efficiencies across company 4. Manage balance sheet Dry Lease ACMI Commercial Charter PAX AMC Cargo Agency 4
Our Transformed Model Is Delivering Results Indicative BHs Expected from Growth Plans* AMC Passenger Other CMI Boeing CMI Passenger CMI B747-8F 56,800 7,000 6,200 7,500 4,300 92,900 9,000 9,800 12,500 4,300 57,300 102,500 9,000 9,800 13,100 4,300 66,300 PTI ($MM) 400 300 200 100 Pretax Income Trend 2005 Future 3,610 13,200 700 4,400 976 4,300 2,634 3,800 31,800 2010 2011F 2012F 2013F 2014F 0 05 06 07 08 09 10 11F FUTURE * As of May 2011 5
Transformative Growth Mix Transformative Growth 6
Atlas Strategic Fleet Plan Aircraft placement/renewal projection On average, 3-4 ACMI contracts are up for renewal annually All 747-200 aircraft are retired by mid-2012 2 747-400BCF aircraft are returned in 2013-14 747-400 aircraft replace 747-200s in AMC and Commercial Charter 12 new, better-performing aircraft replace 8 older, lesser-performing aircraft 2011-2014 Aircraft Placement Risk 2011 2012 2013 2014 Required New Aircraft Placements 747-8F Deliveries 3.0 4.0-7.0 2.0-5.0 0.0 Avg. ACMI Contracts up for Renewal 1.0 3.5 3.5 3.5 Total New Placements Required 4.0 7.5-10.5 5.5-8.5 3.5 Aircraft Retirements 747-200 (1.0) (5.0) 0.0 0.0 747-400BCF 0.0 0.0 (1.0) (1.0) Total Retirements (1.0) (5.0) (1.0) (1.0) Net Placements Required 3.0 2.5-5.5 4.5-7.5 2.5 Incremental Over Typical Placements 0.0 0.0-1.5 0.5-3.5 0.0 7
Game-Changing Financial Benefits 747-8Fs Common pilot-type rating Favorable financing conditions Heavy maintenance honeymoon No C Checks for two years No D Checks for eight years First engine overhauls after five years Warranties cover repair of major components for first four years Bonus depreciation 100% in 2011 & 2012 50% in 2013 8
Strong Balance Sheet and Liquidity Limited Debt Maturity: No near-term balloon or refinancing requirements Remaining commitment of ~$1.7B for -8F order program; deliveries expected to commence in 4Q11 (Millions) $700 Considerable Liquidity as of 2Q11 $500 $470 $471 Market Leadership $300 $100 $1 ($100) Cash & Investments Total Debt (Face Value) Net Debt Note: Cash & Investments defined as cash, cash equivalents, and short-term Investments. Total Debt (Face Value) is balance sheet debt plus unamortized discount. 9
The Future Looks Bright Our Industry Airfreight continues to grow from near-record levels Supported by tight wide-body freighter supply Asian markets will lead global growth and underscore the value of the 747 freighter asset Approximately 80% of airfreight from Asia is carried on freighters Airfreight provides a compelling value proposition opportunity for sea-to-air mode shift exists Atlas Largest and best-performing 747F fleet Only ACMI operator with new 747-8F on order; strong customer interest Strong portfolio of long-term customers committed to further expansion Unique integrated value proposition single source for valued-adding solutions 747-8F deliveries & new CMI businesses will create additional operating leverage to drive growth Balance sheet is well-positioned to fund that growth Transformative Earnings Growth Enhanced Shareholder Value 10
Appendix 11
Atlas Air Worldwide Ownership 100% Ownership 51% (49% DHL) Ownership 100% Ownership 49% Recognized leader in international aviation outsourcing World s largest fleet of Boeing 747 freighter aircraft Comprehensive global infrastructure Providing superior assets and services to the airline industry, freight-forwarding community, commercial, U.S. military customers 12
Core Business Segments Business Segments % of 2010 Block Hours ACMI (1) 71 CMI (2) Description Offers aircraft that are crewed, maintained, and insured by Atlas for lease on a long-term basis Customers assume fuel, demand and yield risk Provides outsourced CMI operating solutions for passenger and freighter operations Air Mobility Command (AMC) Charter 15 AMC Charter provides full planeload charter flights to the U.S. military Cost-plus business Commercial Charter Other: Dry Leasing Other Services 14 -- Commercial Charter segment provides full planeload charter services to charter brokers, freight forwarders, direct shippers, and airlines Provides aircraft and engine dry leasing solutions to third parties Selected by the U.S. government to train pilots who fly the President on Air Force One Note: (1) Aircraft, Crew, Maintenance, Insurance. (2) Crew, Maintenance, Insurance 13
We Carry the World Boeing Dreamliner Components High-tech Goods Pharmaceuticals Automotive Express Livestock Perishables Capital equipment Machinery / Components Intermediate Materials 14
Current Earnings and Future Growth Our earnings and growth reflect... The strategic actions we have taken to transform our business and reduce our commercial and operating risk The complementary nature of our business segments and our ability to optimize capacity allocations among them Our ability to leverage the global scale and scope of our business to capitalize on profitable market opportunities and strong market conditions The innovative, value-added solutions we deliver for our customers 15
Current Earnings and Future Growth (continued) Our earnings and growth reflect... A solid track record of execution Sustainable core earnings growth The global nature of our business Global airfreight tonnage at record levels and expected to grow Above-average growth on Asian routes where we fly Tight supply of fuel-efficient, high-payload wide-body freighter aircraft 16
Operating Momentum 2011 will be another strong year for Atlas High 2H11 utilization in core ACMI Sequential improvement in quarterly results New business opportunities Continued productivity gains and cost control 17
Our Fleet 24 Boeing 747-400 Freighters 21 747-400Fs 3 747-400 BCFs 12 Boeing 747-8Fs On Order Options for 14 additional 747-8F 4 Boeing Large Cargo Freighters (LCFs) (customer-owned) 3 Boeing 747-400 Passenger Aircraft 2 Custom Aircraft (customer-owned) 1 Boeing 747-400 (on lease) 5 Boeing 747 Classics 18
Leading Industry Position AAWW surpasses the competition with scale & new technology Number of Aircraft / Orders 12 21 3 5 6 2 1 14 12 9 1 4 4 B747-8F Order B777 B747-400F B747-400 Converted MD-11 B747-200F 4 9 Atlas Kalitta Southern Evergreen Air Atlanta Icelandic World Sources: AAWW, Ascend (July 2011). 747-200F total includes -100s and -300s. 19
Diversified Global Operating Network Global scale and infrastructure New consumer product launches in 2H11 Majority of flying outside of U.S. Strong demand for airfreight services 20
Global Airfreight Drivers High-value, time-sensitive items; items with short shelf lives Products/Supply chains with just-in-time delivery requirements Products with significant security considerations By Drivers Industry Sectors Served by AAWW Customers By Region Percent of Freight Tonne Kilometers (FTKs) Automotive Pharmaceuticals Other Mail & 5% Express 6% 6% Live 1% 11% 17% 17% High-Tech Products Capital Goods North America Middle East 23% 10% Latin America 3% Africa 1% 41% Asia Pacific 10% Apparel 11% Perishables 16% Intermediate Materials Europe 22% By Drivers Chart Source: Atlas research By Region Chart Source: International Air Transport Association June 2011 21
Market Outlook Global airfreight tonnage growing from near-record levels Benefiting our ACMI customers and our Commercial Charter operations Supported by tight wide-body freighter supply 2H11 ACMI customer utilization expected to be ~5% - 7% above minimum contractual block hours Global Airfreight Tonnage at Near-Record Levels and Expected to Grow 50 40 30 Freight Tonnes (Millions) 32.3 35.2 37.5 41.1 42.1 44.6 46.8 45.4 40.8 45.8 48.2 20 Y-o-Y 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F -- 9.0% 6.5% 9.6% 2.4% 5.9% 4.9% (3.0)% (10.1)% 12.3% 5.2% Source: ICAO 2000 2008, IATA 2009 2011, IATA June 2011 22
Large Freighter Order Book and Production Capacity Current orders and projected production capacity will result in large freighter capacity to grow by 3.2% annually not enough to keep up with future demand First available production slots not until late 2014 18 0 16 0 14 0 13 7 14 0 150 14 8 151 12 0 10 0 96 104 60 80 60 40 20 0 Jan 2008 Jan 2009 72 Jan 2010 62 Jul 2011 33 48 43 65 44 78 Tight supply of efficient, wide-body freighters to continue. Source: Ascend (July 2011) and Boeing (August 2011). Excludes parked aircraft, aircraft in express operations, combis and tankers; 747-200F total includes -100s and -300s. August 2011 777F total includes 44 deliveries (including 12 with FedEx, 8 with Aerologic). 23
Asian Markets Will Lead Industry Growth Average Annual Demand Growth 2010 2019 (% CAGR of air cargo weight) Intra-Asia 8.4 NA-Asia 7.4 EU-Asia 7.2 Asia-NA Asia-EU 3.3 3.2 World Average: 4.5% EU-NA NA-EU North America 1.4 1.3 1.5 Asian Routes vs. Non-Asian Routes 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Source: Atlas research 24
Trans-Pacific, Trans-Asia Routes Becoming More Balanced Trade flow imbalance is the key challenge to long-haul freight operating economics. Long-haul freight operators will benefit from a balancing of Asian trade lanes. Trade Lane Volumes '10 Asia-NA NA-Asia 1.2 2.0 1.6x '19 Asia-NA NA-Asia 2.3 2.6 1.15x '10 Asia-EU EU-Asia 1.5 2.4 1.6x '19 Asia-EU EU-Asia 2.8 3.2 1.15x 0 1 2 3 Tons (MM) Source: Seabury; Boeing; Atlas Research 25
Core Airfreight Demand Mode Inelastic 6 4 2 0 Cost gap at $100 oil Transport cost 1 ($/kg) 0.25 Sea Freight +3.46 3.69 Air Freight Cost gap at $200 oil 6 4 2 0 Transport cost 1 ($/kg) 0.29 Sea Freight +4.34 4.63 Air Freight Implications Absolute size of the gap has limited impact from Large changes in oil price Large percentage changes in sea-freight price For most goods that travel by air, direct transport cost outweighed by other factors Perishability Opportunity cost Inventory related costs Time-definite requirements As a result, most airfreight demand is mode inelastic Source: Atlas Research 26
Our Customers Reflect Our Focus on Quality Long-term, profitable relationships Resilient Business Model & Predictable Revenues Strategic focus on cargo Growth-oriented market leaders High degree of customer integration Focus on continuous development and growth Long-term earnings growth Long-term contractual commitments 27
The 747-8F A Market-Leading Asset The 747-8F is expected to deliver marketleading performance 16% lower cash operating cost per tonne mile than the -400F 135% Relative Direct Operating Cost Tonne Mile Cost Comparison % cost difference 111% 100% 84% 747-200SF 747-400BCF 747-400F 747-8F Source: Boeing (June 2010) 3,000-nmi trip U.S. freighter rules Fuel price, $3.00 per U.S. gallon 28
CMI Operations Delivering Value & Growth Key Supply Chain support for 787 Dreamliner production program Using four Boeing 747-400 Dreamlifter aircraft Premium Charter Passenger Operation Using two Customer-Owned 747-400 aircraft 29
Launched Passenger Service for U.S. Military Leveraged our military cargo and SonAir passenger experience to pursue DoD approval to fly military charter passenger service Worked closely with military to define and satisfy all Air Mobility Command's requirements Established cross-functional project team to plan for first mission Commercial Airlift Review Board (CARB) approval received April 29 First mission on May 17 30
Our De-leveraging Efforts Have Paid Off $140M bank debt facility repaid in 2006 747-200 fleet completely unencumbered by 2009 Raised $113M of net proceeds from equity offering in 2009 Purchased $142M of Atlas EETC certificates and Owner Participant trust in 09/ 10 at a meaningful discount driving over $0.40/share in annual EPS Paid down $168M of pre-delivery payment borrowings on first three 747-8F aircraft 31
Financing Our 747-8Fs Total remaining commitments of ~$1.7B Deliveries expected to begin in 4Q11 and complete by 2Q13 In May 2010, closed debt facility to finance pre-delivery payments on aircraft 4 through 12 PDPs for aircraft 1 through 3 are now fully repaid In July 2010, closed on a 12-year term loan for the first aircraft delivery; fixed rate 6.15% In February 2011, closed permanent financing for deliveries 2 3; fixed rate 6.38% Permanent financing efforts are focused on multiple alternatives 32
AAWW Leverage Trends 2008-2011 Net Leverage / EBITDAR Ratio 5.1 4.2 3.9 3.7 Excluding EETC Asset Including EETC Asset 3.1 3.2 2.7 2.4 2.5 2.7 3.1 3.0 2.9 2.4 2.1 2.2 2.4 2.7 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 33
Free Cash Flow Generation Free Cash Flow Per Share (1) $7.89 $8.99 $2.54 2008 2009 2010 (1) FCF = Cash Flows from Operations Base CapEx Capitalized Interest. Base CapEx excludes purchase of aircraft. 34
Reconciliation to Non-GAAP Measures For the Years Ended In $ thousands, except per share data December 31, 2008 December 31, 2009 December 31, 2010 Net Cash Provided by Operating Activities $ 125,318 $ 214,573 $ 280,543 Less: Capital expenditures (59,531) (30,188) (29,612) Capitalized interest (11,282) (12,215) (16,373) Free Cash Flows $ 54,505 $ 172,170 $ 234,558 Free Cash Flows per Share $ 2.54 $ 7.89 $ 8.99 35
AAWW Summary Leading industry position Transformative growth Delivering on commitments Substantial operating leverage Global airfreight growth Global scale, scope and execution Enhance shareholder value 36
The future looks bright. Thank you. 37