Evoluation of Product 1

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

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* 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

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* 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%

. .

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* 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

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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

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* 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

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*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

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* 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

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* 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

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* 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


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


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


MemphisMemphis

AtlantaAtlanta

PhoenixPhoenixSan DiegoSan Diego

CharlestonCharleston


HoustonHoustonSan AntonioSan Antonio New OrleansNew Orleans


OrlandoOrlandoTampaTampa

Ft. MyersFt. MyersSarasotaSarasota

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Successful Diversification of Network

SeattleSeattle

PortlandPortland

BostonBoston


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


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


AtlantaAtlanta

MemphisMemphisPhoenixPhoenixSan DiegoSan Diego

CharlestonCharleston


San AntonioSan Antonio New OrleansNew OrleansHoustonHouston OrlandoOrlando


TampaTampaSarasotaSarasota

Ft. MyersFt. Myers

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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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Documents

Evoluation of Product 1