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8/6/2019 Evoluation of Product 1
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Historical Perspective
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Top Airlines in 1978 Market Share
1. United 16.9% Domestic U.S.2. American 12.4% Domestic U.S.3. . omes c ransa an c4. Eastern 10.8% Eastern U.S.
6. Pan Am 9.0% International7. Western 4.4% Western U.S.8. Braniff 4.1% Domestic / Latin9. Continental 3.7% Domestic
. . . .11. Northwest 3.0% North & Pacific12. Allegheny (US) 1.7% Northeast
5
* Source: DOT Form 41
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Top Airlines in 1978 Post Deregulation
1. United Exited Chapter 11 in 20062. American3. an rup : cqu re y mer can4. Eastern Liquidated
6. Pan Am Bankrupt: Parceled out7. Western Acquired by Delta8. Braniff Liquidated9. Continental Multiple bankruptcies
. 11. Northwest Merged with Delta12. US Air Multiple bankruptcies / mergers
6
* Source: DOT Form 41
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Top Airlines Today Market Share
1. Delta / Northwest 25.4%2. American 17.6%3. n e .4. Continental 11.8%
6. US Airways 9.1%7. jetBlue 3.2%8. Alaska 2.8%9. AirTran 2.5%
. .
7
* Source: DOT Form 41, 2Q08 RPMs
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What Happened?
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Events that Restructured the Industry
MergersMergers
DeregulationDeregulation
19781978
PATCOPATCO 9/119/11 FuelFuel
19811981 20012001 TodaToda
9
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Why the Failure to Adapt?
Inefficiencies carried over from regulatory environment High costs in a commodity-like business
Cyclical business prone to excess capacity Low barriers to entry, high to exit Too many hubs
Historically a market share focus
Most mergers have not produced intended results Temporary revenue gains The most inefficient work rules typically survive
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U.S. Airlines Earnings Actually a Cumulative Loss
$28$30
Net Profit($Billions)
Cumulative Lossof $12 Billion
$15
$20
$25
$5
$10
$1$3$5
$10
($6) ($7) ($6)($4)
-$10
-$5
$0
Industry
($11)($13) ($12)-$15
1971-1978
1979-1989
1990-1994
1995-2000
2001 2002 2003 2004 2005 2006 2007 1H08
eregu at on
12
* Source: Air Transport Association
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Was Warren Buffet Right?
I like to think that if Id been at Kitty Hawk in 1903 whenOrville Wright took off, I would have been farsighted enough,and public spirited enough I owed this to future capitalists
.
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Challenges Facing the Industry Today
Cost: Unprecedented run up in fuel
re : an ng cr s s an s mpac on cre mar e s
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Recent Fuel Volatility Has Forced Dramatic Change
147.00
130
140
150
(Cost per Barrel)
100
110
120
66.0272.34
67.00
56.4860
70
80
24.5018.43
22.15 20.6014.40
19.25
30.3025.92 26.10
31.14
41.44
21.4817.19
20.56 18.4620
30
40
01990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 July
'08Today
15
*West Texas Intermediate at CushingSources: Air Transport Association, Energy Information Administration, PIRA Energy Group, Deutsche Bank
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Airlines Have Reacted Quickly to the Fuel Run Up
All airlines announced mainline domestic capacity reductions Industry domestic capacity down approximately 10% in Q408 Delta ca acit will be down 10-11% in 408
AirTran capacity will be down 6-7% in Q408 after original plans for 10% growth
Because of high fuel, airlines are probably six months in frontof many industries in addressing economic weakness
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Since World War Two, Ex-9/11, Annual U.S. AirlineRevenue Has Only Declined Twice
25%
Annual U.S. Airline Operating Revenue Growth(Revenue Growth)
15%
20%?
0%
5%
10%
-10%
-5%
-15%1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009E
17
* Source: Air Transport Association
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AirTrans View of Todays Challenges
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AirTran: Demonstrated Record of Adapting
Emerged stronger from9/11 by lowering costs andcapitalizing on legacy
Continued to lower non-fuel unit costs to thebest in industry
Continued to increase revenues
Under newmanagement AirTranrestores profitabilityin 1999
Capitalized on continued legacy domestic
restructuring and expanded network into theWest Completed re-fleeting toall 717 fleet
Negotiated 737 deal at
20001999 2002 2004 20062001 2003 2005 2007 2008
Increased cash balance to$100MM from low of $10MMin 1999
Successfully recapitalizedthe Company with $230MM
Transformed business to becomehighly regarded low-cost airline
Expanded network into Baltimoreand Florida
Proactive response to increase in fuel from $75 to$140 per barrel
Focused on reducing capacity growth, increasingunit revenues, continuing to lower non-fuel costs,limiting fuel exposure, and successfully raising
in debt maturities due 2Q01 capital
Low costs will allow us to further capitalize oncapacity reductions
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Strong Fundamentals: Unique Product
Business Class on every flight Only major U.S. airline with Business Class on
every flight
Assigned seating
Oversized luggage bins
Friendly Crew Members
Broad distribution AirTran.com Reservations Travel agencies
2020
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Strong Fundamentals: Low Cost Structure
(Cents Per Mile)
AirTrans Non-Fuel Unit Cost Trend
7.00
7.25
6.50
6.75
6.00
6.25
5.752001 2002 2003 2004 2005 2006 2007 2008
22
* Excludes non-recurring special items* 2008 is for the first nine months ended
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Strong Fundamentals: Low Cost Structure
(Cents)
Industry Cost ComparisonNon-Fuel Unit Costs at 734 Miles for 1H08
10
7
8
5
6
While legacy costs are down, gap remains large
2323
* Excludes fuel and special items
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AirTran Operates the Worlds Largest LCC Hub
CAL - HoustonAMR - DallasDAL - Atlanta
NWA - MinneapolisAMR - Miami
LUV - Las VegasAAI - Atlanta
LCC - CharlotteUAUA - Chicago
LCC - PhoenixUAUA - Denver
AMR - ChicagoLUV - ChicagoCAL - NewarkNWA - Detroit
AAI - Atlanta (2000)UAUA - San Francisco
LCC - PhiladelphiaLUV - Baltimore
JBLU - New YorkLUV - Phoenix
225 departures in December 2008
0 100 200 300 400 500 600 700 800 900 1,000
Mainline Departures Regional Departures
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Flexible Strategy: Florida Point to Point
SeattleSeattle
PortlandPortland
BostonBoston
MinneapolisMinneapolis
FlintFlintRochesterRochester
MilwaukeeMilwaukee
HarrisburgHarrisburg
BuffaloBuffalo
ChicagoChicagoDetroitDetroit Akron/Akron/
CantonCantonWhite PlainsWhite PlainsNew York City (LGA)New York City (LGA)
NewarkNewarkMolineMoline
Las VegasLas Vegas
DenverDenver
San FranciscoSan Francisco
DaytonDaytonColumbusColumbus PittsburghPittsburgh
RichmondRichmond
BaltimoreBaltimoreWashington, D.C. (DCA)Washington, D.C. (DCA)
Washington, D.C. (IAD)Washington, D.C. (IAD)Newport NewsNewport News
CharlotteCharlotteRaleighRaleigh //DurhamDurham
St LouisSt Louis
BloomingtonBloomingtonIndianapolisIndianapolis
Kansas CityKansas City
WichitaWichita
Dallas/Ft. WorthDallas/Ft. Worth
AtlantaAtlantaCharlestonCharleston
JacksonvilleJacksonville
MemphisMemphisPhoenixPhoenixSan DiegoSan Diego
San AntonioSan Antonio New OrleansNew OrleansHoustonHouston OrlandoOrlandoTampaTampaSarasotaSarasota
Ft. MyersFt. Myers
MiamiMiamiFt. LauderdaleFt. LauderdaleWest Palm BeachWest Palm Beach
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San JuanSan JuanCancunCancun
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Opportunistic Mindset: Baltimore Focus City
SeattleSeattle
PortlandPortland
BostonBoston
MinneapolisMinneapolis
RochesterRochester
Akron/Akron/CantonCanton
DetroitDetroitFlintFlintMilwaukeeMilwaukee
MolineMolineChicag oChicago
BuffaloBuffalo
HarrisburgHarrisburg
White PlainsWhite PlainsNew York City (LGA)New York City (LGA)
NewarkNewark
Las VegasLas Vegas
DenverDenver
San FranciscoSan Francisco ColumbusColumbus
RichmondRichmond
BloomingtonBloomingtonIndianapolisIndianapolis
St LouisSt LouisKansas CityKansas City
WichitaWichita
PittsburghPittsburghDaytonDayton
BaltimoreBaltimore
RaleighRaleigh //DurhamDurhamCharlotteCharlotte
Washington, D.C. (DCA)Washington, D.C. (DCA)Washington, D.C. (IAD)Washington, D.C. (IAD)
Newport NewsNewport News
Dallas/Ft. WorthDallas/Ft. Worth
MemphisMemphis
AtlantaAtlanta
PhoenixPhoenixSan DiegoSan Diego
CharlestonCharleston
JacksonvilleJacksonville
HoustonHoustonSan AntonioSan Antonio New OrleansNew Orleans
MiamiMiamiFt. LauderdaleFt. LauderdaleWest Palm BeachWest Palm Beach
OrlandoOrlandoTampaTampa
Ft. MyersFt. MyersSarasotaSarasota
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San JuanSan JuanCancunCancun
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Successful Diversification of Network
SeattleSeattle
PortlandPortland
BostonBoston
MinneapolisMinneapolis
FlintFlintRochesterRochester
MilwaukeeMilwaukee
ChicagoChicagoDetroitDetroit Akron/Akron/
CantonCantonWhite PlainsWhite PlainsNew York City (LGA)New York City (LGA)
NewarkNewarkMolineMolineHarrisburgHarrisburg
BuffaloBuffalo
Las VegasLas Vegas
DenverDenver
San FranciscoSan Francisco
DaytonDaytonColumbusColumbus PittsburghPittsburgh
RichmondRichmond
BaltimoreBaltimore
St LouisSt Louis
BloomingtonBloomingtonIndianapolisIndianapolis
Kansas CityKansas City
WichitaWichita
CharlotteCharlotteRaleighRaleigh //DurhamDurham
Washington, D.C. (DCA)Washington, D.C. (DCA)Washington, D.C. (IAD)Washington, D.C. (IAD)
Newport NewsNewport News
Dallas/Ft. WorthDallas/Ft. Worth
AtlantaAtlanta
MemphisMemphisPhoenixPhoenixSan DiegoSan Diego
CharlestonCharleston
JacksonvilleJacksonville
San AntonioSan Antonio New OrleansNew OrleansHoustonHouston OrlandoOrlando
MiamiMiamiFt. LauderdaleFt. LauderdaleWest Palm BeachWest Palm Beach
TampaTampaSarasotaSarasota
Ft. MyersFt. Myers
2828
San JuanSan JuanCancunCancun
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AirTran Responded Quickly and Decisively
Reduced growth Deferred 36 planned aircraft deliveries Agreements to sell / return 11 aircraft
Reduced costs Closed three cities Cut non-aircraft CAPEX by 50%
Raised cash Arranged over $375MM in financing / credit facilities
Limit fuel exposure Active and disciplined hedging program
Increase revenues Significant changes in ancillary revenues
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Summary
2008 has been a difficult year
r ran as move qu c y an ec s ve y
Positioning the company to return to profitability andcapitalize on opportunities Airlines are six months in front of this current economic problem AirTran is better positioned for this challenge
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