U.S. airlines delivered one of their best years ever for operational performance, built on their stellar safety record, and achieved a narrow profit despite weathering some of the highest jet fuel prices and steepest tax burdens in history. Much more needs to be done to ensure the U.S. airlines remain profitable, continue to create American jobs, restore and grow air service and remain global competitors. This is where a National Airline Policy comes in. We look forward to working with Congress and the administration on this important initiative.

1. U.S. Airline Industry Financial Results
and Operations: An Early 2013 Review
John Heimlich Dan Elwell
VP & Chief Economist SVP-Safety, Security & Operations
February 21, 2013

2. U.S. Airlines Incurred More Than $50 Billion in Fuel Costs in 2012
Average Spot Price of Jet Fuel Has Risen 260 Percent Since 2000, 42 Percent Since 2010
Due to Rising Prices . . . . . . Incurring Higher Costs
Dollars per Gallon (U.S. Gulf Coast) Billion U.S. Dollars per Year
$3.06
$50.4
$2.15 $38.8
$33.2
$1.72
$0.85 $16.8
2000 2005 2010 2012 2000 2005 2010 2012
Source: Energy Information Administration Source: BTS for U.S. airlines
2 airlines.org

3. Price of Jet Fuel Reached All-Time High in 2012, on the Rise Again in 2013
Price per Gallon (U.S. Gulf Coast) Price per Barrel (Five-Day Moving Average)
$3.26
$140
$3.13
$3.06
$3.00 $130
$2.17
$120
$110
$1.02
$0.58
$100
$0.54
$90
$80
20-Sep-12
11-Aug-12
27-Feb-13
7-Feb-13
10-Oct-12
30-Oct-12
18-Jan-13
19-Nov-12
9-Dec-12
2-Jul-12
22-Jul-12
31-Aug-12
29-Dec-12
19-Mar-13
Last Week
2011
2012
1991-1995
1996-2000
2001-2005
2006-2010
YTD 2013
WTI Brent Jet
Source: A4A and EIA (for WTI and Brent crude oil and U.S. Gulf Coast jet fuel)
3 airlines.org

4. Relative to Most Goods/Services (and Airlines’ Costs), Air Travel Remains a Bargain
U.S. Inflation and Airline Costs Have Sharply Outpaced the Price of Domestic Air Travel
Product (Unit) 2000 2012 Change (%)
College Tuition: Public (Year) $3,508 $8,655 146.7
Gasoline (Gallon, Unleaded) $1.51 $3.64 141.3
Costs Faced by U.S. Airlines (A4A Index) 100.0 204.9 104.9
Increase
Eggs (Dozen, Grade A, Large) $0.91 $1.84 102.0
Real
MLB Baseball Game (Nonpremium Ticket) $16.22 $26.98 66.3
NFL Football Game (Nonpremium Ticket) $49.35 $78.38 58.8
Prescription Drugs (BLS Index) 285.4 440.2 54.2
Postage Stamp (First-Class) $0.33 $0.45 36.4
Whole Milk (BLS Index) 156.9 211.3 34.7
U.S. CPI (All Urban Consumers)1 172.2 229.6 33.3
Air Travel (R/T Domestic Fare + Ancillary)2 $316.96 $380.05 19.9
Decrease
Air Travel (R/T Domestic Fare Only)2 $314.46 $356.98 13.5
Real
Apparel: Clothing/Shoes/Jewelry (BLS Index) 129.6 126.3 (2.6)
Television (BLS Index) 49.9 5.4 (89.1)
1. Bureau of Labor Statistics “measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”
2. A4A analysis of data collected by BTS for YTD 3Q 2012 – excludes taxes; “ancillary” includes revenue from reservation changes and baggage
4 airlines.org

5. From 2000 to YTD 3Q12, Real (Inflation-Adjusted) Domestic Fares Fell 15 Percent
With Ancillary Revenue Included, Domestic Journey Price Fell 10 Percent
Average Round-Trip Domestic Airfare in Constant CY2000 Dollars
$425
Fares Fares + Ancillary
$400
$375
$350
$325
$300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q12
Sources: DOT O&D Survey (Data Bank 1B) and Bureau of Labor Statistics for the Consumer Price Index (CPI)
5 airlines.org

6. In 2012, Results of 10 U.S. Passenger Airlines* Results Inferior to 2011
Despite 4.5% More Revenues, 4.7% Higher Costs Reduced Profit Margin to 0.1%
2012 vs. 2011 % Better/(Worse) Net Profit Margin
Operating Revenues 4.5 Earnings as % of Revenues
Operating Expenses (4.5) 2.2
Fuel (36%) (5.9)
Wages and Benefits (24%) (4.7)
Landing Fees & Rents (5%) (1.3)
Maintenance/Materials (6%) (9.0)
Depreciation & Amortization (4%) (2.9)
Other (26%) (2.3) 0.3
Other Income/(Expenses) (11.8) 0.1
Subtotal Expenses (4.7)
2010 2011 2012
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways
6 airlines.org

7. U.S. Airline Profitability: It’s a Matter of Pennies
$152 Million in Profit Spread Over 711 Million Passengers Translates to . . .
2010: 318¢ per Passenger 2011: 77¢ per Passenger 2012P: 21¢ per Passenger*
Airfare
94%
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways
7 airlines.org

8. In 2012, U.S. Airline* Earnings Amounted to 1/10th of a Penny per Dollar of Revenue
Weak Profit Margin in Stark Contrast to Other Fortune 500s
U.S. Airlines* 2012 Ford Motor Co. 2012
Net Income ($ Millions) 152 Net Income ($ Millions) 5,665
Net Margin (Percent) 0.1 Net Margin (Percent) 4.22
Starbucks 2012 Apple 2012
Net Income ($ Millions) 1,434 Net Income ($ Millions) 41,747
Net Margin (Percent) 10.5 Net Margin (Percent) 25.35
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways
8 airlines.org

9. Improved Airline Finances Translated to 21 Consecutive Months of Job Growth
After Years of Losses, U.S. Airlines Have Also Been Able to Reinvest in Equipment
Airline Jobs Grow When Times Are Good Airline Capital Reinvestment Underway
YOY Change (%) in Full-Time Equivalent Employees Aircraft and Non-Aircraft Capital Expenditures (Billions)
4
$15.3
2
0
(2)
$6.1 $6.2
(4) $5.2
(6)
(8)
2011
2007
2008
2009
2010
2012
2013
2000 2005 2010 2011
Source: A4A and company reports for AirTran, Alaska, Allegiant, America
West, American, Continental, Delta, Hawaiian, JetBlue, Northwest, Southwest,
Source: BTS for U.S. scheduled passenger airlines Spirit, United and US Airways
9 airlines.org

10. The Airline Industry’s Financial Condition Is Improving, But Far From Stellar
Per S&P, Only One U.S. Passenger Airline Has Investment-Grade Credit
Investment Grade1 (>= BBB-) Speculative2 Grade (< BBB-)
ExxonMobil, Microsoft AAA Ford Motor Co. BB+
GE AA+ British Airways, TAM BB
Wal-Mart AA Alaska, Allegiant BB-
Toyota AA- Avis, Hertz B+
UPS A+ Delta, Gol, United B
BP, eBay A Air Canada, JetBlue, US Airways B-
Amtrak, Starbucks A- SAS CCC+
FedEx, Marriott, Starwood BBB American D
Lufthansa, Qantas, Southwest BBB-
Passenger Airline
1 Describes issuers with relatively high levels of creditworthiness and credit quality
2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk
Source: Standard and Poor’s as of Nov. 19, 2012; “Guide to Credit Rating Essentials: What are credit ratings and how do they work?”
10 airlines.org

11. Financial Pressures Have Generally Translated to Cuts in Domestic Air Service
As Rising Costs Outpace Revenues, the USA Continues to See a Smaller Airline Industry
“We’ve lost a lot of markets that were served only with the 50-seat (aircraft). We’d like more flights.
But you’re not going to have any flights if the airlines don’t make money, so we understand their
predicament.” (Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority)
─ “Regional airlines face closings, bankruptcy,” USA Today (Aug. 20, 2012)
(13.2)
Domestic Flights
(0.3)
(9.3)
Domestic Seats
0.6
% Change: 2Q13 vs. 2Q07
(5.7)
% Change: 2Q13 vs. 2Q12 Domestic ASMs
1.4
Source: Innovata (via Diio Mi) published schedules as of Feb. 16, 2013; an available seat mile (ASM) is one seat flown one mile
11 airlines.org

12. Some of the Domestic Capacity Cuts Resulted from Brands Ceasing to Operate
Soaring Costs and Volatile Economic Conditions Took Their Toll on Many During the 2000s
12 airlines.org

13. Liquidations, M&A, Globalization and Financial Pressures Have Reshaped the Industry
Domestic O&D Share* = 57% Global Network Carriers, 37% Low Cost Carriers, 6% Other
US Airways, 10.2%
Southwest, 24.9%
American, 11.4%
Other, 1.0%
Frontier, 2.2%
Spirit, 1.8%
Hawaiian, 1.5%
United, 15.6% Allegiant, 1.5%
Virgin America, 1.3%
JetBlue, 5.2%
Delta, 19.5% Alaska, 4.0%
* A4A analysis of BTS Data Bank 1B for marketing airlines (incl. regional partners flying under code-share agreements) for the year ended 3Q 2012
13 airlines.org

14. Industry Restructuring Has Helped Pave the Way for Four Major National Networks
Delta (including Northwest) United (including Continental)
Southwest (including AirTran) American (including US Airways): Proposed
14 airlines.org

15. Competing National Networks Mean Enhanced Service Offerings for Travelers
15 airlines.org

16. U.S. Airline Operations Have Improved Substantially Over Past Five Years
Improvements Enabled by Profitability (Reinvestment), Fewer Flights, Better Weather
2007 2012
Load Factor
79.9 83.0 (est.)
(% of seating capacity utilized)
On-Time Arrival Rate
73.4 81.9
(% of domestic flights within 00:15)
Involuntary Denied Boardings
1.12 0.99
(per 10,000 passengers)
Mishandled Bags
7.05 3.09
(per 1,000 domestic passengers)
Flight Cancellations
2.16 1.29
(% of scheduled domestic departures)
Sources: BTS and DOT Air Travel Consumer Report (http://airconsumer.dot.gov/reports/index.htm)
16 airlines.org

17. Coping with Storms: Increasingly Proactive, Collaborative and Tech-Savvy
Then Now
Less precise, High-capacity weather
Weather forecasts
manual process modeling, more real-time tools
Many, high-tech - social media,
Communication tools Fewer, low-tech 24-hour news, PDA alerts;
steady stream to customers
Earlier decision-making,
Operations philosophy “Wait and see”
quicker recovery
Intense - across airlines,
Collaboration Limited
airports, FAA, DHS/CBP/TSA
17 airlines.org

18. www.airlines.org