A look at Value / Low Cost Carrier key economic indicators.

1. Growth Airline Economic
Analysis
Oliver Wyman – January 2009
Bob Hazel, Max Kownatzki, Aaron Taylor, Andrew Watterson
Introduction
In the current economic environment, there is little growth even
among growth airlines. However, those airlines still have
different costs and other characteristics than traditional network
carriers. In this report, we cover the following topics:
A) Domestic unit cost comparisons for value (low cost) versus
network carriers. The two groups are compared in terms of
average CASM (and RASM), and these same comparisons are
provided for the individual carriers within each group. Also,
value and network carrier cost trends are shown over time,
providing insight on the question – are network carriers reducing
their cost gap with value carriers, or is the gap widening?
B) Cost comparisons for similar aircraft operated by different
carriers, including stage-length adjustments.
C) A closer look at fuel costs and potential impacts on airline
profitability: Latest developments in system-wide and spot prices
for fuel, including competitive airline cost comparisons based on
equal fuel cost assumptions.
1

2. D) Discussion of cost differences between the smaller and larger
narrowbodies operated by selected value carriers.
E) A ranking of regional aircraft in terms of unit cost.
F) Strategic outlook: A brief look at changes in industry capacity
to help answer the question – where is the growth?
1. Carriers Included and Methodology
The four largest value carriers, along with Allegiant, are included
in this analysis as are the six largest U.S. network carriers.1
Our data sample – Value carriers (low cost):
1. AirTran
2. Allegiant
3. Frontier
4. jetBlue
5. Southwest
Our data sample – Network carriers:
1. American
2. Continental
3. Delta
4. Northwest
5. United
6. US Airways2
Most of the analysis is based on 3rd quarter 2008 data, which is
the most recent US DOT (Form 41) data available. DOT data was
used instead of SEC to permit comparisons of specific equipment
types and ensure that non-airline related costs did not dilute the
specific focus on airline costs. Allegiant does not report using
Form 41 and therefore more limited analysis is included for that
airline. Because unit costs are rapidly changing, we have used
data from a single quarter, rather than a twelve month period.
Additional historical perspective is also provided.
1 Hybrid carrier Alaska is not included because the company has requested filing immunity for the third quarter of 2008 and no comparative data is
available.
2 The US Airways numbers presented for 2007 and 2008 are both based on the consolidated entity of US Airways and America West.
2

3. Unless indicated otherwise, the costs provided are for mainline
domestic operations only. We have taken care to remove the
costs associated with the carriers’ regional affiliates by correcting
for their transport-related costs, although it is impossible to do so
with absolute precision.
2. Value versus network carrier RASM/CASM comparison
The following figure shows the RASM and CASM comparison for
network versus value carriers for the third quarter 2008.
Figure 1. Comparison of RASM and CASM for 2008 Q3
Cents Per ASM
16
14.68
13.56
14
12.46
12.01
12 38% 10.92 10.87
37% Other
10
34%
Cents
8
6 Fuel 40%
40%
40%
4
2
23% Labor 22% 26%
0
RASM CASM RASM CASM RASM CASM
Our airline sample overall Average for network carriers Average for value carriers
(American, Delta, (Frontier, AirTran, jetBlue,
Continental, Northwest, Southwest*)
United, US Airways)
Figure 1. RASM, CASM in US$ per ASM for airline sample, network carriers and value
carriers across fleet 2008 Q3
* Inclusion of Allegiant, which does not report using Form 41, would not materially change
results
In the third quarter of 2008, the average CASM of our sample
airlines was higher than the RASM, with the value carriers being
at about the break-even level. The network carrier CASM of
14.68¢ per ASM is 35% higher than that of the value carriers.
Bringing down CASM will be an important task, especially with a
softer economy and revenues per ASM potentially decreasing.
3

4. The largest component of CASM is fuel, which made up 40% of
total CASM in both airline segments in 2008 Q3. Fuel costs will be
examined in more detail later.
The following figure shows the CASM for each individual airline
in our sample for the third quarter of 2008. Not surprisingly, the
five value carriers have the lowest total CASM. Southwest ranks
first with a CASM of 10.6¢, followed by jetBlue with a CASM of
10.8¢ per ASM (+2% versus Southwest), Allegiant with a CASM of
11.5¢ per ASM (+8% over Southwest), AirTran with a CASM of
11.6¢ per ASM (+9% over Southwest), and Frontier with a CASM of
11.9¢ per ASM (+12% over Southwest). These are not stage-length
adjusted CASMs, and that adjustment will change the rankings.
During the 3rd quarter, Northwest has the highest CASM of 16.9¢,
which is 59% higher than Southwest.
Figure 2. 2008 Q3 CASM breakdown by airline
Cents Per ASM
25
20
16.5 16.9
14.0 14.4 14.6
15 13.1
11.9 32%
11.5 11.6
Cents
10.6 10.8 35%
35% 41% 48%
10 37%
32% 34% 36%
33% 35%
47%
40% 42%
36% 45% 40% 36% 34%
5 52% 48% 47%
31% 20% 23% 25% 23% 23% 18% 21%
16% 18% 16%
0
Southwest
Allegiant
Frontier
Northwest
AirTran
American
United
US Airways
Continental
jetBlue
Delta
Value carriers Network carriers
Labor Fuel Other
Figure 2. Overall airline costs per ASM (across aircraft fleet), 2008 Q3
Note: Allegiant Form 41 Data not available. Cost data derrived from SEC 10Q report.
4

5. Figure 2 also emphasizes the importance of labor and fuel as
significant components of an airline’s CASM. Frontier has the
smallest percentage of CASM made up of labor of all carriers
(only 16%), while Southwest has the largest (31%). It is important
to look not just at the percentages, however, but also at the
absolute CASM amounts. For example, Northwest’s 21% labor
component far exceeds JetBlue’s 20% in terms of absolute cents
per ASM.
Additional CASMs are provided for selected European carriers in
the Appendix. Because of differences in time period and other
factors, the European CASM information is not directly
comparable to that provided for US carriers. However, the cost
comparison (expressed in Euros for calendar year 2007) is useful
in showing the relative differences in CASM between European
carriers.
The following figure addresses the question whether network
carriers are making progress towards value carrier cost levels or
whether the value carrier cost advantage is further increasing.
Figure 3 shows the average network and value carrier CASM for
the 3rd quarter of each year from 2003 through 2008.
5

6. Figure 3. Comparison of CASM between Network and
Value carriers over time
Cents Per ASM
16 14.7
14
11.3 11.7 3.8
12 10.9 38% 10.9
10.1 10.3
2.5 9.0 2.7
10 8.8
2.9 41%
2.8 7.9 41% 34%
Cents
7.4 2.7 7.5 43%
8 43%
46%
38% 38%
40% 40%
6 45% 43%
13% 19% 27% 31% 30% 40%
4 30% 31%
20% 25%
18%
2 41% 38%
37% 37% 30% 35% 28% 32% 29% 31% 22% 26%
0
Value
Value
Value
Value
Value
Value
Diff.
Diff.
Diff.
Diff.
Diff.
Diff.
Network
Network
Network
Network
Network
Network
2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3
∆ Other Fuel Labor
Figure 3. CASM in US cents and percent by airline category (network versus value
carriers) for Q3 2003 to Q3 2008
Over the six-year period, the value carrier CASM has averaged
approx. 25% lower than that of network carriers. In absolute
terms, the gap increased significantly during the most recent
period from 2.7¢ to 3.8¢ per ASM (up 41% over 2007). However, as
a percentage, the cost gap has remained within a range of 23-27%
during the full period. The fuel cost share of CASM has grown
continually from between 13 and 18% in 2003 to 40% in 2008,
while airlines have managed to reduce labor costs from 37-to-41%
in 2003 down to 22-to-26% in 2008.
3. Comparing CASM for similar aircraft operated by different
airlines
As the focus of this report is value carriers, we selected an
aircraft roughly comparable to Southwest’s most efficient
aircraft, the 737-700, for CASM analysis among different carriers.
For carriers that operate several aircraft types that are similar to
the 737-700, we chose the one closest in capacity to, but larger
than, Southwest’s. For example, United brackets Southwest’s 137-
seat 737-700s with 120-seat A319s and 147-seat A320s. We chose
the A320.
6

7. In Figure 4 we set out the average stage length for each of our
airline/aircraft combinations and their CASM at that stage
length.3 Remember, these are costs for specific aircraft types and
not for the carriers’ total operations. A glance at the table shows
that AirTran, Southwest and jetBlue have the lowest unit costs
(AirTran at 9.66¢/ASM, Southwest at 9.74¢/ASM, and jetBlue at
10.06¢/ASM). Unlike Figure 2, one network carrier, Delta, has a
lower CASM than one value carrier, Frontier, in this comparison.
Figure 4. CASM per airline for selected aircraft type at actual average stage length
2008 Q3
(Cents per ASM; Excluding regional affiliates)
15.65
16
14.64
14.21
14
12.69 12.74
11.82 11.92
12
9.74 10.06
9.66
CASM (cents)
10
8
6
4
2
0
AirTran Southwest jetBlue Delta Frontier American Continental US Airways United Northwest
Aircraft 737-700/LR 737-700/LR A320 737-800 A319 737-800 737-800 A320 A320 A320
Stage
length 1,053 697 1,277 1,196 874 1,080 1,413 1,255 1,072 900
Figure 4. Average stage length in US Miles for Airline/Aircraft Combinations (Domestic
Entity excluding regional affiliates)
These results are not adjusted for stage length and reflect each
carrier’s actual fuel expense.
4. Adjusting for Stage Length
As Figure 4 shows, different carriers operate their aircraft at
different average stage lengths. Since length of flight strongly
affects unit costs – the longer the flight, the lower the unit costs –
it makes little sense to compare unit costs without relating them
to average stage length.
AirTran, Southwest, and JetBlue have very similar CASMs when
operating comparable aircraft, with AirTran the lowest, but
separated by only 1 percent from Southwest and 4 percent from
JetBlue. However, Southwest achieved its very low CASM with a
3 The SEC data available for Allegiant does not break out CASM differences between the airline’s two separate fleet types. However, Allegiant’s
unadjusted consolidated CASM of 11.49¢ ranks 4th lowest after JetBlue.
7

8. significantly shorter average stage length (697 miles) than either
AirTran or JetBlue. AirTran’s average stage length is 60% longer
than Southwest’s, while JetBlue’s is 83% longer. Thus
Southwest’s mileage-adjusted costs are the lowest of the three
and in fact the lowest of all airlines in the sample analyzed.
To help visualize the cost and stage length differences among the
carriers, we have plotted unit costs (Y axis) on a chart against
average stage length (X axis). This we do for our group of
carrier/aircraft combinations in Figure 5. To facilitate
comparisons we show a distance-related cost curve for
Southwest. From the curve, Southwest’s cost advantage is
obvious. By visualizing additional curves drawn above the
Southwest curve, it is apparent that AirTran has the next lowest
costs, followed by Allegiant, JetBlue, Frontier, and then the
network carriers. It is also apparent that the value carriers
operate systems with markedly different average stage lengths,
except for Allegiant and Frontier, which have similar stage
lengths, but different route networks and business models.
Figure 5. CASM plotted against average stage length
2008 Q3
18
16
Northwest
United US Airways
14
CASM (cents)
Frontier American Continental
12 Delta
Allegiant
Southwest
10 jetBlue
AirTran
8
6
600 800 1,000 1,200 1,400 1,600 1,800
Figure 5. Average CASM Plotted Against Average stage length for selected aircraft type
Note: Allegiant CASM based on combined MD80 (MD 83 and MD 87) data from SEC 10Q
report.
8

9. Using an accepted stage-length adjustment method, we
recomputed the 2008 Q3 CASM for each carrier operating the
comparable aircraft identified in Figure 4 based on a standardized
stage length of 1,000 miles. The table below, useful in
understanding which carrier runs a more efficient operation,
shows the results.
Figure 6. 2008 Q3 CASM at 1,000 mile stage length 2008 Q3
16 15.5
15.0 15.0
14.6
14 13.1
12.7
12 11.1 11.3
9.9
CASM (cents)
10
8.5
8
6
4
2
0
Southwest AirTran jetBlue Frontier Delta American Continental Northwest United US Airways
Figure 6. Actual CASM at 1,000-Mile stage length for selected Airline/Aircraft-type
Combinations
As you can see in Figure 6, Southwest (8.5¢/ASM) is the low-cost
champ at stage lengths of 1,000 miles. AirTran is second, but still
has costs 16% higher than Southwest (9.9¢). JetBlue moves into
third place, but jetBlue’s CASM of 11.1¢ is 31% higher than
Southwest’s.4 The carrier with the highest CASM is US Airways at
15.5¢, which is 83% higher than Southwest. However, other
network carriers United and Northwest have costs nearly as high
as US Airways (only 3 percent lower), while Continental’s CASM is
only 6 percent lower than US Airways’ and still 72% higher than
Southwest.
4 Comparable data is not available for Allegiant, although the airline would have equipment/stage-length adjusted CASM similar to that of JetBlue.
9

10. 5. A closer look at Fuel Prices and Costs
It is scarcely news that fuel prices have risen significantly
through much of 2008, peaking at an all-time high in July at
approximately $3.80 per gallon, and then declining through the
fall.
In Figure 7, we show average fuel prices for each of our
carrier/aircraft combinations for 2008 Q3 compared with the
same quarter in the previous year. On average, fuel prices across
the airlines in the sample grew by 73%, with Northwest
experiencing the largest percentage increase of 123% to the
highest actual fuel price of $4.69 per gallon. Southwest incurred
an increase of 54% over 2007, and managed to maintain the
lowest fuel price of $2.61 per gallon. Other carriers saw fuel prices
increase by between 55% (Delta) and 91% (United).
Figure 7. Average fuel price per gallon
2008 Q3 vs. 2007 Q3
Increase Difference from Percent Higher
Airline Aircraft 2007 2008 2008 over 2007 Southwest than Southwest
Southwest 737-700/LR $1.70 $2.61 54% $ -- 0%
jetBlue A320 $2.13 $3.42 61% $0.81 31%
Allegiant MD83/87 $2.32 $3.44 48% $0.83 32%
American 737-800 $2.12 $3.46 63% $0.85 33%
Delta 737-800 $2.26 $3.50 55% $0.89 34%
US Airways A320 $2.17 $3.63 67% $1.02 39%
AirTran 737-700/LR $2.14 $3.65 71% $1.04 40%
Continental 737-800 $2.13 $3.67 72% $1.06 41%
Frontier A319 $2.25 $3.92 74% $1.31 50%
United A320 $2.19 $4.19 91% $1.58 61%
Northwest A320 $2.10 $4.69 123% $2.08 80%
Figure 7. Average Fuel Price per Gallon for Airline/Aircraft Combinations (Domestic Entity)
including Comparison with Southwest, 2008 Q3 vs. 2007 Q3.
10

11. It is no secret that Southwest has been significantly more
successful than any of its competitors in keeping fuel costs in
check through a successful hedging program. In the above figure,
we compare Southwest’s average price for 2008 Q3 with the other
airlines. As noted, Southwest paid the lowest average fuel price,
$2.61 per gallon. At $4.69 per gallon Northwest paid the highest
average price (80% higher than Southwest), followed by United at
$4.19 (61% higher than Southwest). The second lowest price
among our study airline/aircraft combinations was $3.42 per
gallon paid by jetBlue, still 31% above Southwest’s price.
It is unlikely that Southwest or any other carrier can sustain a
substantial advantage in fuel cost over the long term. For that
reason and to provide another perspective on each of the carrier’s
operating efficiency, we have made a further adjustment to
CASM. We have recalculated the 2008 Q3 aircraft-specific CASM
for each carrier assuming that it had purchased fuel at
Southwest’s fuel prices. In the following figure, we show
individual carrier CASMs at Southwest’s average fuel price for an
adjusted standardized stage length of 1,000 miles. When we
adjust the other carriers’ fuel prices to Southwest’s, AirTran’s
CASM edges out Southwest by a margin of 0.2¢ (8.3¢/ASM vs.
Southwest’s 8.5¢/ASM).
Figure 8. 2008 Q3 CASM at 1,000 mile stage length,
at Southwest fuel price of $2.61/gal
16
14.0
14 13.1
12.8
11.9 12.1
12 11.5
9.6 9.8
CASM (cents)
10
8.3 8.5
8
6
4
2
0
AirTran Southwest Frontier jetBlue Delta American Northwest United Continental US Airways
Figure 8. CASM at Southwest Fuel Prices, 1,000-Mile stage length, Airline/Aircraft
Combinations.
11

12. 6. Fuel Prices Changes
As depicted in the following figure, the price of fuel has increased
since 2003 with the all-time peak occurring in July 2008 at approx.
$3.80 per gallon. Since then fuel prices have plummeted to levels
around $1.60 per gallon, a decrease of almost 60% in less than six
months.
Figure 9. System Average Fuel Prices (US Carriers) and Fuel Spot Price
January 2001 through January 2009
450
400
350
300
Cents per Gallon
250
200
150
100
50 System average fuel price
Fuel spot price
0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Jan Mar May Jul Sep Nov Jan
'01 '01 '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '08 '08 '08 '08 '09
Figure 9. System average fuel price in US$ per gallon, US Airlines, January 2001 through
October 2008 and fuel spot price per gallon Fuel by month in US$ per gallon
(Source: Air Transport Association)
Especially in times of reduced demand levels and potentially
declining yields, this sharp drop in fuel prices represents
welcomed cost relief to airlines. But how does this drop in fuel
prices help to compensate for the effects of the economic
downswing? The following Figure 10 depicts the effects of
different fuel prices on US airline profits, on the assumption that
all other variables remain constant.
12

13. Figure 10. Effects of Fuel Cost Decline on Airline Profitability
$7.00 Operating P&L in $B Fuel Cost in $B
$6.15
$6.00
$5.00 $4.45
$4.00
$3.00 $2.60
$1.85
$2.00
$1.00
$0.00
$0.00
($1.00)
($2.00)
($1.71)
($3.00)
3Q08 Breakeven Current Spot Price
@ $3.79/gal @ $2.74/gal @ $1.60/gal
Figure 10. Effects of changes in fuel costs on airline profitability all else being equal
(Source: DOT and Air Transport Association)
As shown in Figure 10, during the third quarter of 2008, US
airlines incurred an operating loss of $1.7b while paying an
average fuel price of approx. $3.80 per gallon (with total fuel costs
of approximately $6.1b). Applying the current fuel spot price of
$1.60 per gallon, while maintaining everything else as is, would
have turned the financial loss of the third quarter into a
significant operating profit of $1.85b. Under these circumstances,
US airlines would have achieved breakeven operating results
during the third quarter at a spot price of $2.74 per gallon, a price
higher than the current level. In practice, of course, it is never
possible to maintain everything else as is.
7. CASMs for smaller aircraft
In our airline sample, numerous carriers operate smaller aircraft.
In this section, we look first at the three value carriers in our
sample that operate two different sized narrowbody aircraft,
AirTran, JetBlue, and Frontier, to see how the smaller aircraft
13

14. compare in efficiency to the larger aircraft. We compare them in
Figure 11 at their own average fuel prices as well as ‘excluding
fuel’ to ensure fuel costs do not dilute the comparability between
the airlines.
Figure 11. CASM plotted against average stage length, actual fuel prices
2008 Q3
20
18
16
14
CASM (cents)
12
10
8
6
4
2
0
400 600 800 1,000 1,200 1,400 1,600 1,800
Stage length in miles
B6 A320 B6 A320 xF B6 ERJ 190 B6 ERJ 190 xF
FL 717-200 FL 717-200 xF FL 737-700 FL 737-700 xF
Figure 11. Distance-based Cost Curves for two Carriers Operating New Jet Aircraft in the
100 – 120 seat Category for various aircraft types including and excluding fuel costs: B6:
jetBlue; FL: AirTran; xF: excluding Fuel
AirTran’s 737 is the champion of this multi-aircraft operating
group with the lowest unit costs across all stage lengths, and its
smaller 717 has the second lowest costs. JetBlue’s A320 just
about matches AirTran’s 717, although not AirTan’s 737.
However, JetBlue’s E190 operation is still experiencing break-in
issues with much higher unit costs of roughly 25% above
AirTran’s B737 costs. This is also driven by the lower jetBlue
seating density of 100 seats compared to 117 seats at AirTran.
14

15. Regional carriers operate EMB-190 size aircraft and smaller
aircraft, such as the CRJ 200 or 700 or the ERJ 145 or 170. How do
those aircraft compare in terms of unit costs? The following
figure depicts the CASMs for specific aircraft operated by specific
airlines.
Figure 12. CASM per airline for selected aircraft type at actual average stage length
2008 Q3
(In cents per ASM; Excluding regional affiliates)1
30
CASM excluding fuel Fuel CASM 26.13
25.55
25
21.82 21.86
CASM (cents per ASM)
20.86
20.08
18.71 10.85
20
16.93 14.71
8.52
14.57 14.93 14.97 15.06 8.23 11.23
10.19
15 13.7 7.61
12.06 1.47
5.47 5.97 8.88
9.87 10.21 6.52
10 1.15 7.44
3.87 7.19
15.28
13.10 13.30
11.10 11.85 10.67 10.63 10.84
5 9.06 9.46 9.09
8.45 8.05
6.00 6.26
4.87
0
SkyWest
ExpressJet
SkyWest
Comair
ExpressJet
SkyWest
Comair
Comair
Comair
ASA
ASA
jetBlue
AAEagle
AAEagle
AAEagle
AAEagle
Aircraft CRJ 700 EMB 145 CRJ 900 CRJ 900 EMB 135 CRJ 200 EMB 190 CRJ 700 CRJ 700 EMB 145 CRJ 700 CRJ 200 CRJ 200 EMB 140 EMB 135 CRJ 100
Stage
710 609 747 674 420 455 753 546 562 417 596 431 426 438 449 428
Length
1 Fuel cost allocation may differ significantly between individual airlines based on contractual setup with parent company / network carrier
Figure 12. Overall airline costs per ASM for selected airline-aircraft-type combination,
2008 Q3
The low-cost champion is the Skywest CRJ 700 with an all-in
CASM of 9.87¢ per ASM, while its competitors American Eagle
and Delta with the same aircraft type but shorter stage lengths
only reach CASMs of 15.06¢ / ASM (+53%) and 20.08¢ / ASM
(+103%). Comair with its CRJ 100 is in last place with costs of
26.13¢ per ASM (+165% over Skywest’s CRJ700). Note that
JetBlue’s EMB-190 has significantly higher CASM than the
Skywest and Comair CRJ 900s. However, this comparison needs
further adjustment to reflect the fact that JetBlue operates as part
of its mainline system with other costs that the regional
operators might not have.
15

16. 8. Strategic outlook: Where is the growth?
During much of this decade, value carriers and regional carriers
experienced strong growth. Even as network carriers reduced
their mainline operations, regional carriers filled in. As
illustrated in Figure 13 below, regional aircraft increased their
share of mainline carrier ASMs by two points from 10% to 12%
from January 2007 to January 2009.
Figure 13. Distribution of scheduled domestic U.S. mainline
aircraft service including regional partners
Percent of ASMs
100%
15% 14%
90%
1% 1%
80% 10% 12%
70%
60%
50%
40%
74% 73%
30%
20%
10%
0%
January 2007 January 2009
Narrowbody RJ Turbo Widebody
Figure 13. Distribution of scheduled US mainline aircraft service by aircraft type, January
2007 to January 2009 in %
What has happened more recently? As shown below in Figure 14,
neither regional airlines nor value carriers have been spared
capacity reductions since the 3rd quarter of 2008. They have,
however, reduced capacity by less than the mainline carriers,
meaning that they continue to gain capacity share even during
these difficult times. As better times return, are these carriers
poised to resume their growth?
16

17. Figure 14. Change In Scheduled Domestic U.S. ASMs
Billions of Seat Miles
40
35
30
25
20
15
10
5
0
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Network Regional Value
Figure 14. Change in scheduled domestic US ASMs, January 2007 to January 2009 in
billion seat miles
US mainline carriers continue to look overseas, with their
domestic operations contributing less and less to their system
revenue. As shown in Figure 15 below, the shift towards
international service is clear even over the past three years as the
share of system revenue contributed by domestic operations
dropped by more than 10 points, from 72% to 60% between 2003
and 2008.
Figure 15. Source of Network Carrier Revenue
Operating Revenue Mainline Only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
Domestic Atlantic Latin Pacific
Figure 15. Source of network carrier revenue by geography, 2003 Q1 to 2008 Q3 in %
17

18. 18
Source: IATA WATS 2007
Note: Cost data reported on fiscal year basis, not year end 2007 in all cases.
Figure 16. Comparison of European carriers CASM in Euros per available seat mile
Euros Per ASM
0.00
0.05
0.10
0.15
0.20
0.25
Ryanair
0.08
Pegasus
Pegasus
Iberworld
0.09 0.09
2007 Euros Per ASM
Blue1
Aerosvit
0.10 0.11
Ukraine
Ukraine
Air Europa
Air Europa
0.11 0.11
Aeroflot
SkyEurope
0.12 0.13
Figure 16. European Carriers Cost Per ASM
Cyprus
Cyprus
0.14
Spanair
Spanair
Air Malta
British Airways 0.15 0.16
CSA
Malev
Malev
Iberia
0.17 0.17 0.17 0.17
LOT
Air France/KLM
0.18 0.18
Aegean
Aegean
Finnair
0.19 0.19
Austrian
Macedonian
0.20 0.21
Croatia
Croatia
0.21
Adria
SAS
0.22 0.22
Appendix – CASMs for selected European carriers (in EUR)

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transformation, and leadership development. The firm helps clients optimize their
businesses, improve their operations and risk profile, and accelerate their
organizational performance to seize the most attractive opportunities. Oliver Wyman
is part of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit
www.oliverwyman.com.
For more information please contact:
Robert Hazel
Bob.hazel@oliverwyman.com
+1 703 773 3105
Max Kownatzki
max.kownatzki@oliverwyman.com
+1 212 345 8273
Aaron Taylor
aaron.taylor@oliverwyman.com
+1 631 745 6875
Andrew Watterson
andrew.watterson@oliverwyman.com
+1 214 758 1874
www.oliverwyman.com
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