aai masflight webinar on american and us airways

March 14, 2013 10:30am EDT

American Airlines and US Airways Reviewing the impact of the proposed merger Darryl Jenkins Joshua Marks More information at www.theairlinezone.com and www.masflight.com

4 8 3 3 R U G B Y AV E N U E S U I T E 3 0 1 B E T H E S D A M D 2 0 8 1 4

A M E R I C A N A V I A T I O N I N S T I T U T E © 2 0 1 1 A L L R I G H T S R E S E R V E D 2

A M E R I C A N A V I A T I O N I N S T I T U T E © 2 0 1 3 A L L R I G H T S R E S E R V E D

SECTION 1

Background & Participants

S L I D E 2


Study Participants

S L I D E 3

The American Aviation Institute is a commercial aviation think

tank and research organization based in Washington, D.C.

AAI works with airlines, airports, and labor unions on the

development of commercial aviation regulatory policy,

operations, and safety initiatives.

www.aviationinstitute.org

The Airline Zone is a website focused on airline economics

with contributors from across the aviation industry. It investigates aviation economics at the airport

and route level, emphasizing competition and pricing.

The Airline Zone offers a range of analytics and metrics for the

U.S. aviation industry.

www.theairlinezone.com

masFlight is an aviation data analytics firm that aggregates

terabytes of schedule, operations and weather data from around

the world. masFlight helps airlines, airports, and vendors

worldwide optimize operations, find new opportunities and

reduce cost. OAG provided flight schedule data in this report.

www.masflight.com

This study was conducted by the following organizations, under the direction of Darryl Jenkins and Joshua Marks


Questions

• Is there a material change in competitive position? • Is airport-level analysis the right focus? • How much low-fare competition is there? • What’s the small community impact? • What about international alliance competition? • What does this mean for travelers?

Our observations are based on a rigorous review of schedule, operations and passenger revenue data from public government and commercial sources.

S L I D E 4



SECTION 2

Competition & Consolidation

S L I D E 5


What we’ll be presenting

We examine the following to assess how the merger changes overall competitive dynamics:

• Competition before and after US/AA

• US/AA overlap by routes and airports served

• Looking at competition by city, not just specific airport

• Low-cost carrier overlap

• Small community competition

We divide our analysis into nonstop and O&D competition

S L I D E 6


Big picture: Before the Mergers

S L I D E 7

Daily Flights

Mainline Flights

Regional Flights

Domestic Flights

Int’l Flights

Seats per Day

Seat Share %

Seats /Flight

United Airlines 5,023 1,735 3,289 4,277 747 447,953 18.7% 89.2

Delta Air Lines 4,684 2,149 2,535 4,244 440 502,791 21.0% 107.3

American Airlines 3,441 1,850 1,590 2,809 632 371,988 15.5% 108.1

US Airways 3,007 1,205 1,801 2,800 207 287,041 12.0% 95.5

Southwest Airlines 2,840 2,840 - 2,840 - 400,573 16.7% 141.1

Alaska Airlines 745 387 358 661 84 84,905 3.5% 113.9

JetBlue Airways 697 697 - 532 165 92,193 3.9% 132.2

AirTran Airways 528 528 - 472 56 63,936 2.7% 121.1

Frontier Airlines Inc. 230 207 23 210 20 31,923 1.3% 138.8

Spirit Airlines 220 220 - 189 31 35,288 1.5% 160.2

Hawaiian Airlines 206 206 - 193 13 31,181 1.3% 151.3

Virgin America 135 135 - 132 3 19,262 0.8% 142.8

Allegiant Air LLC 111 111 - 111 - 18,597 0.8% 167.5

Sun Country Airlines 47 47 - 35 12 6,961 0.3% 149.0

masFlight/OAG Schedules for February 1 to February 7 2013, operations by US major and national airlines with more than 29 seats per departure. Excludes freight and mixed cargo flights. Nonstop flights, no code-shares included. Average flights per day during sample period.

Competition before US/AA and WN/FL Integration


Notes on current dynamics • United and Delta have similar competitive positions

– Broad, multi-hub domestic and international networks

– Significant regional jet operations (almost 2:1 regional to mainline at United)

– Foundation members of respective alliances

• American and US Airways have similar scale – American has a broad international network and flies larger aircraft

Average flight distance 1,121 miles (836 including regional operations)

– US Airways operates in smaller markets with smaller aircraft Average flight distance 848 miles (573 including regional operations)

– #2 or #3 in several key markets (NYC, Los Angeles, San Francisco, etc.)

• Southwest has the highest number of mainline departures

S L I D E 8


Big Picture: After Mergers & Integration

S L I D E 9

Daily Flights

Mainline Flights

Regional Flights

Domestic Flights

Int’l Flights

Seats per Day

Flight Share %

Seat Share %

Seats /Flight

American + US 6,448 3,055 3,391 5,609 839 659,029 29.4% 27.5% 102.2

United Airlines 5,023 1,735 3,289 4,277 747 447,953 22.9% 18.7% 89.2

Delta Air Lines 4,684 2,149 2,535 4,244 440 502,791 21.4% 21.0% 107.3

Southwest + AirTran 3,368 3,368 - 3,312 56 464,509 15.4% 19.4% 137.9

Alaska Airlines 745 387 358 661 84 84,905 3.4% 3.5% 113.9

JetBlue Airways 697 697 - 532 165 92,193 3.2% 3.9% 132.2

Frontier Airlines Inc. 230 207 23 210 20 31,923 1.0% 1.3% 138.8

Spirit Airlines 220 220 - 189 31 35,288 1.0% 1.5% 160.2

Hawaiian Airlines 206 206 - 193 13 31,181 0.9% 1.3% 151.3

Virgin America 135 135 - 132 3 19,262 0.6% 0.8% 142.8

Allegiant Air LLC 111 111 - 111 - 18,597 0.5% 0.8% 167.5

Sun Country Airlines 47 47 - 35 12 6,961 0.2% 0.3% 148.1

masFlight/OAG Schedules for February 1 to February 7 2013, operations by US major and national airlines with more than 29 seats per departure. Excludes freight and mixed cargo flights. Nonstop flights, no code-shares included.

Pro Forma After US/AA Merger and Southwest/AirTran Integration


Shift in nonstop seat share Coast to coast overlap between the three majors &

significant competition on almost all O&D markets inside the U.S.

S L I D E 1 0

Source: masFlight/OAG, shares of major U.S. carriers and national airlines, nonstop systemwide seats including both mainline and regional operations. Includes Delta, United, American, US Airways, Southwest, Alaska, JetBlue, AirTran, Hawaiian, Frontier, Spirit, Virgin America, Allegiant, and Sun Country. Schedule sample from February 1, 2013 through February 7, 2013 for passenger services with 19 seats or greater.

UA 18.7%

DL 21.0%

WN 16.7%

AA 15.5%

US 12.0%

Others 16.1%

Seat Share, Before US/AA and WN/FL

UA 18.7%

DL 21.0%

WN/FL 19.4%

US/AA 27.5%

Others 13.4%

Seat Share, After US/AA and WN/FL


DCA and LGA Post-Merger Shares

S L I D E 1 1

March 2013, Post-Merger Departure % Shares per Week, March 1, 2013 through March 7, 2013

American/US, 66.9%

Delta, 12.1%

United, 8.3%

Others, 4.8%

JetBlue, 4.3%

Southwest/AirTran,

3.6%

American/US, 29.9%

Delta, 46.7%

United, 7.3%

Others, 7.9%

JetBlue, 3.2%

Southwest/AirTran,

4.9%

Washington Reagan (DCA) Departure Shares After Mergers

New York LaGuardia (LGA) Departure Shares After Mergers


US + AA Networks and Unique Cities

S L I D E 1 2

US Airways Airports February 2013

American Airlines Airports February 2013

Unique Cities Brought to Merger Unique US cities added (Black) Unique AA cities added (Red)

Combined network fills geographic gaps and adds nearly 8,000 new O&D pairs

61 unique airports not served by AA

130 unique airports not served by US

Schedules for February 1 through 7, 2013 Graphics masFlight and gcmap.com


Airport, City and Metro Definition

S L I D E 1 3

Term Definition Example

Airport A specific airport Washington Reagan (DCA)

City DOT-defined city with multiple airports

Washington, including both Reagan (DCA) and Dulles (IAD)

Metro All regional airports that compete for air service

Baltimore/Washington, including BWI, IAD and DCA

Competition is regional, not airport-to-airport You need a more nuanced definition of competition than simply airport-to-airport service


Nonstop Overlap

S L I D E 1 4

Feb 1-7 2013 Airport Pairs

City Pairs

Metro Pairs

US serves, but not AA 772 754 558

AA serves, but not US 1,021 981 620

Overlap by US and AA 24 30 34

Total US 796 784 592

Total AA 1,045 1,011 654

Combined Network

1,817 airport pairs

1,765 city

pairs

1,212 metro pairs

Feb 1-7 2013 Unique Airports

Unique Cities

Unique Metros

US serves, but not AA 61 60 45

AA serves, but not US 130 128 70

Overlap by US and AA 134 131 87

Total US 195 191 132

Total AA 264 259 157

Combined Network

325 unique airports

319 unique cities

202 unique metros

Nonstop Airport, City and Metro Pairs

(2 Directional Pairs = 1 Route)

Airports, Cities and Metros Count of unique origins

with nonstop service

masFlight/OAG Schedules February 1-7 2013


Assessing overlap • AA and US networks are highly complementary • The American network has considerably more scope,

but US Airways has more departures on routes they serve – Average of 4x daily per route for US vs. 3.4x daily for AA

• We now focus on the overlap markets for US and AA – Who are the other competitors on the airport pair?

– Do low-cost carriers compete in the overall market?

How competitive are these markets?

S L I D E 1 5


Competition in Overlap Markets

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Overlap Route Legacy @ Specific Airports

Legacy @ Other City Airports

LCCs in the same metro area pair

Phoenix to Los Angeles DL (4x), UA (2x) - WN (29x)

Phoenix to Dallas/Ft. Worth - - WN (9x 1-stop)

Charlotte to NY LaGuardia DL (6x) DL (1x), UA (6x) B6 (2x)

Charlotte to O’Hare UA (4x) - -

Charlotte to Dallas/Ft. Worth - - -

Charlotte to Miami - - -

Chicago to Philadelphia UA (7x) - WN (6x)

Chicago to Phoenix UA (3x) - WN (7x)

DC Reagan to Raleigh - UA (5x), DL (3x) WN (6x)

DC Reagan to Nashville - UA (3x) WN (6x)

Philadelphia to Dallas/Ft. Worth - - WN (1x 1-stop)

Philadelphia to Miami - - WN/FL (6x), NK (3x)



Positive change for small communities

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Code Small Airports where US/AA will provide 100% of Service

ABI Abilene, Texas (AA) HHH Hilton Head, South Carolina (US) SBY Salisbury, Maryland (US) CMI Champaign, Illinois (AA) LYH Lynchburg, Kentucky (US) FLO Florence, South Carolina (US) MHK Manhattan, Kansas (AA) FLG Flagstaff, Arizona (US) PGV Greenville, North Carolina (US) ACT Waco, Texas (AA) HVN New Haven, Connecticut (US) SJT San Angelo, Texas (AA) SPS Wichita Falls, Kansas (AA) IPT Williamsport, Pennsylvania (US)

ROW Roswell, New Mexico (AA) TXK Texarkana, Texas (AA) DBQ Dubuque, Iowa (AA) GCK Garden City, Kansas (AA) JLN Joplin, Missouri (AA) ALO Waterloo, Iowa (AA) SUX Sioux City, Iowa (AA) ART Watertown, New York (US)

Code Small Airports with 50%+ Share (% Given of Weekly Departures)

LAW Lawton, Texas (97% - AA) GGG Longview, Texas (93% - AA) TOL Toledo, Ohio (87% - AA) GRI Grand Island, Nebraska (87% - AA) HTS Huntington, West Virginia (81% - US) EWN New Bern, North Carolina (78% - US) STX St. Croix (68% - US and AA) YUM Yuma, Arizona (66% - US) OAJ Jacksonville, North Carolina (64% - US) GRK Killeen, Texas (62% - AA) FSM Fort Smith, Arkansas (58% - FSM) BGR Bangor, Maine (58% - US) CLL College Station, Texas (57% - AA) TYR Tyler, Texas (57% - AA) LSE La Crosse, Wisconsin (55% - AA) ITH Ithaca, New York (52% - US) EGE Eagle, Colorado (51% - AA)

The network’s small communities are already either US or AA so combining networks doesn’t change competition.

Combining the networks does significantly enhance network connectivity options in each of these small communities.



Nonstop LCC Overlap • Start with an aggregate review of all LCCs • US has more direct LCC competition on airport pairs • American has more competition at other city airports • This understates true overlap – we need to consider O&D

S L I D E 1 8

Feb 1-7 2013 Airport Pairs % LCC Overlap

City Pairs % LCC Overlap

Metro Area Pairs % LCC Overlap

US not AA 18.4% 19.2% 28.4%

AA not US 15.3% 24.3% 41.1%

AA and US Overlap 8.3% 53.3% 76.5%

System Nonstop Overlap (not O&D!) 16.5% 22.6% 36.3%


So what about O&D?

• We’ve been looking at nonstop overlaps • It’s really network competition that’s relevant • This is particularly true for metro areas • Reviewing O&D traffic helps us understand:

– Where there’s competition for passengers

– How US/AA stacks up against legacy and LCC peers

– How top 40 U.S. cities will be impacted by US/AA merger Our analysis is based on Q3 2012 fare data released by DOT and available at the BTS website. We did not utilize confidential information.

S L I D E 1 9


Metro Area O&D Network Overlap • What alternatives exist to flying

US+AA domestically?

• Metro area O&D comparison (NYC area, Balt/Wash, etc.) with nonstop + connect options

• Less than 3% of US+AA passengers will travel itineraries where US+AA is the only option

• 78% of US+AA passengers have a low-fare alternative

• 96% have a legacy alternative

S L I D E 2 0

Metro Area Pairs Served by US+AA

% Daily O&D Pax

No overlap US+AA was the only O&D option

< 3%

LCC overlap Spirit, Southwest, AirTran, JetBlue, Virgin, Frontier, Allegiant, Sun Country O&D

78%

Legacy overlap Delta, United, Alaska or Hawaiian O&D

96%

Our analysis is based on Q3 2012 fare data released by DOT and available at the BTS website.


Top 20: Big 4 Shares of Departing Passengers

S L I D E 2 1

Rank Metro Area (Airports) Southwest +

AirTran Delta United US Airways + American

Other Airlines

1 New York (EWR/LGA/JFK/HPN/ISP/SWF) 7.3% 22.9% 20.0% 19.7% 30.1% 2 Los Angeles (LAX/BUR/SNA/LGB/ONT) 28.2% 10.4% 14.1% 18.2% 29.1% 3 San Fran/Oakland/San Jose (SFO/SJC/OAK) 31.5% 7.6% 20.3% 10.9% 29.6% 4 Chicago Metro (ORD/MDW) 28.1% 6.7% 24.9% 28.7% 11.7% 5 Baltimore/Washington (BWI/IAD/DCA) 30.2% 12.2% 16.2% 24.8% 16.6% 6 Las Vegas, NV 40.3% 9.1% 7.8% 10.3% 32.5% 7 Boston Metro (BOS/PVD/MHT) 18.7% 12.5% 10.4% 21.3% 37.2% 8 Denver, CO 30.4% 7.2% 24.3% 8.5% 29.6% 9 South Florida (MIA/FLL/PBI) 15.9% 17.0% 7.5% 27.9% 31.7%

10 Dallas Metro (DAL/DFW) 19.4% 6.0% 4.7% 54.4% 15.6% 11 Atlanta, GA 24.8% 58.4% 3.0% 7.9% 5.9% 12 Orlando Metro (MCO/SFB) 32.7% 14.3% 8.0% 13.0% 32.0% 13 Seattle, WA 15.0% 10.4% 10.2% 9.5% 54.9% 14 Houston Metro (IAH/HOU) 33.3% 6.3% 41.0% 10.7% 8.6% 15 Phoenix Metro (PHX/IWA) 41.9% 8.6% 5.9% 31.6% 12.0% 16 San Diego, CA 38.6% 9.4% 11.2% 12.9% 28.0% 17 Minneapolis, MN 10.6% 52.4% 6.6% 11.5% 18.8% 18 Philadelphia, PA 17.3% 9.8% 8.1% 52.9% 11.9% 19 Tampa Metro (TPA/PIE) 36.2% 15.1% 8.9% 15.6% 24.1% 20 Detroit, MI 10.3% 54.4% 4.1% 11.9% 19.3%

Southwest/AirTran will be the #1 or #2 airline in 17 of the top 20 markets, and AA/US will be the #1 airline in 5 of the top 20 markets.

Q2 2012 DB1B Data (DOT via masFlight) – Excludes bulk tickets and non-credible fares


Top 20: LCC Competition

S L I D E 2 2

Rank Metro Area (Airports) % Revenue by LCCs

Average Domestic

Fare

% Legacy Average Base Fare is

Higher than LCC

% Legacy Average Fare Per Mile is Higher than LCC

1 New York (EWR/LGA/JFK/HPN/ISP/SWF) 28% $195 27% 25% 2 Los Angeles (LAX/BUR/SNA/LGB/ONT) 37% $181 44% -12% 3 San Fran/Oakland/San Jose (SFO/SJC/OAK) 40% $181 44% -14% 4 Chicago Metro (ORD/MDW) 30% $178 34% 32% 5 Baltimore/Washington (BWI/IAD/DCA) 34% $180 38% 14% 6 Las Vegas, NV 56% $154 38% -8% 7 Boston Metro (BOS/PVD/MHT) 43% $176 26% 23% 8 Denver, CO 49% $161 34% 18% 9 South Florida (MIA/FLL/PBI) 37% $154 35% 22% 10 Dallas Metro (DAL/DFW) 22% $190 59% 15% 11 Atlanta, GA 21% $171 45% 35% 12 Orlando Metro (MCO/SFB) 56% $142 23% 3% 13 Seattle, WA 23% $189 18% 6% 14 Houston Metro (IAH/HOU) 30% $206 39% 3% 15 Phoenix Metro (PHX/IWA) 41% $163 28% -11% 16 San Diego, CA 42% $164 50% -17% 17 Minneapolis, MN 18% $202 43% 44% 18 Philadelphia, PA 18% $190 29% 40% 19 Tampa Metro (TPA/PIE) 50% $147 27% 9% 20 Detroit, MI 16% $186 68% 69%


LCC fares appear lower on average than legacy fares – but in most cases it’s driven by shorter stage lengths and single-cabin configurations


#21-40: Big 4 Shares of Departing Passengers

S L I D E 2 3

Rank Metro Area Southwest +

AirTran Delta United US Airways + American

Other Airlines

21 Portland, OR 22.5% 9.7% 12.1% 7.2% 48.5% 22 St. Louis, MO 42.8% 14.1% 7.0% 22.2% 14.0% 23 Charlotte, NC 4.6% 13.3% 5.8% 65.9% 10.5% 24 Salt Lake City, UT 22.3% 46.8% 5.3% 8.4% 17.2% 25 Kansas City, MO 39.0% 15.0% 9.5% 16.3% 20.2% 26 Sacramento, CA 50.2% 7.2% 7.2% 9.1% 26.3% 27 Austin, TX 35.0% 10.1% 11.7% 22.1% 21.1% 28 Raleigh/Durham, NC 24.7% 23.4% 7.4% 26.3% 18.2% 29 Nashville, TN 46.9% 13.4% 5.7% 20.8% 13.2% 30 Pittsburgh, PA 26.5% 15.2% 12.9% 26.4% 19.0% 31 New Orleans, LA 35.1% 18.5% 13.3% 16.2% 17.0% 32 San Antonio, TX 39.3% 14.6% 12.2% 22.7% 11.1% 33 Milwaukee, WI 45.2% 19.6% 7.1% 9.8% 18.3% 34 Indianapolis, IN 29.3% 20.3% 9.1% 21.5% 19.7% 35 San Juan, PR 13.4% 12.0% 5.9% 23.3% 45.4% 36 Columbus, OH 32.6% 18.5% 9.4% 24.1% 15.4% 37 Buffalo, NY 30.5% 15.1% 7.6% 12.2% 34.5% 38 Cleveland, OH 19.0% 9.5% 45.7% 15.6% 10.3% 39 Hartford, CT 26.9% 17.2% 8.3% 21.3% 26.4% 40 Albuquerque, NM 50.2% 9.5% 8.6% 17.5% 14.3%


Charlotte is the smallest US/AA hub by O&D traffic, but it is a stronghold. All other US/AA hubs are top 20 markets.


#21-40: LCC Competition

S L I D E 2 4

Rank Metro Area % Revenue by LCCs

Average Domestic

Fare

% Legacy Average Base Fare is

Higher than LCC

% Legacy Average Fare Per Mile is Higher than LCC

21 Portland, OR 32% $167 34% 4% 22 St. Louis, MO 46% $163 16% 1% 23 Charlotte, NC 5% $193 47% 19% 24 Salt Lake City, UT 26% $182 41% 8% 25 Kansas City, MO 45% $161 28% 8% 26 Sacramento, CA 52% $156 49% -24% 27 Austin, TX 43% $176 22% 1% 28 Raleigh/Durham, NC 29% $153 25% 12% 29 Nashville, TN 49% $168 26% 16% 30 Pittsburgh, PA 29% $164 35% 32% 31 New Orleans, LA 40% $169 20% -7% 32 San Antonio, TX 38% $179 25% -5% 33 Milwaukee, WI 52% $156 31% 42% 34 Indianapolis, IN 32% $174 34% 43% 35 San Juan, PR 47% $170 32% 2% 36 Columbus, OH 30% $164 40% 29% 37 Buffalo, NY 53% $139 23% 19% 38 Cleveland, OH 16% $192 44% 12% 39 Hartford, CT 35% $173 36% 19% 40 Albuquerque, NM 52% $161 34% -11%


As you move to mid-tier U.S. cities, LCC competition intensifies. Legacy airfare spread over LCCs drops significantly.



SECTION 3

Global Alliances

S L I D E 25


Alliances & Global Competition

• We have been focused on domestic competition

• Let’s turn to the international arena

• International competition is dominated by global alliances and joint-venture agreements

• US shifting to oneworld will have a leveling impact on alliance dynamics, particularly transatlantic

S L I D E 2 6


Alliance Mix: From the United States US’ shift from Star to oneworld will reduce the gap with

Star Alliance – and should have a tangible competitive benefit

S L I D E 2 7

Oneworld 19.9%

SkyTeam, 16.2%

Star Alliance,

41.8%

Unaligned, 22.1%

Before Realignment

Oneworld 25.6%

SkyTeam, 16.2%

Star Alliance,

36.0%

Unaligned, 22.1%

After Realignment

Schedule snapshot for first week of February 2013 (masFlight/OAG) – Share of Departures per Week

A M E R I C A N A V I A T I O N I N S T I T U T E © 2 0 1 3 A L L R I G H T S R E S E R V E D S L I D E 2 8

Oneworld 19.9%

SkyTeam, 23.7%

Star Alliance,

41.7%

Unaligned, 8.9%

Before Realignment

Oneworld 30.2%

SkyTeam, 23.7%

Star Alliance,

37.2%

Unaligned, 8.9%

After Realignment


North Atlantic: Competitive Rebalance US’ shift to oneworld will make a significant difference

in the competitive North Atlantic market


What does it mean? • US brings strength to Caribbean, Atlantic and Canada • Star Alliance will be particularly impacted in Caribbean • US shift improves competitive balance in key markets

S L I D E 2 9

Change in weekly departures: oneworld Pickup

% of weekly departures

U.S. to Canada +257 flights per week 7.1%

U.S. to Caribbean +204 9.9%

U.S. to Central America +162 5.9%

U.S. to Europe +86 4.5%

U.S. to Israel +7 3.7%

U.S. to South America +7 0.8%

Weekly Shift, Star oneworld +723 weekly flights +5.8%




SECTION 4

Conclusions

S L I D E 30


Conclusions: Network Combination US Airways and American are highly complementary

1. There is low direct overlap on an airport-to-airport basis

2. Measured by city pairs, more overlap – and competition!

3. US strength on the coasts, in the Caribbean and to Europe

4. AA strength in the central U.S., Latin America and Asia

5. New O&D pairs result – new competition

6. There’s minimal hub overlap in catchment area

S L I D E 3 1


Conclusions: Competition Still a very competitive industry after these mergers

1. United, Delta, American, Southwest, plus smaller airlines

2. Most traffic is between major cities, and that’s where both legacy and LCC carriers compete intensively

3. Southwest has a strong position in the Top 20 markets

4. US + AA does not fundamentally change competition

5. Larger markets continue multi-hub trend (e.g. DC – UA at IAD, Southwest at BWI, US/AA at DCA)

6. LCC overlap is significant on both nonstop and O&D basis

S L I D E 3 2


Conclusions: Small Communities Small community forecast improves

1. Competitive change is minimal

2. Smaller markets gain O&D connectivity and viability through combination of US+AA networks

3. We don’t buy the argument that the merger will cause small community service reduction or higher fares

S L I D E 3 3


Conclusions: Alliances Alliance competition increases

1. Minor shift in alliance share from Star oneworld Particularly relative to DL/NW and UA/CO shifts

2. Meaningful across Atlantic and Caribbean markets

3. Significantly increases oneworld network (O&D pair) options from Central U.S. to Europe

4. We think this is good for competition and long-term viability of three alliance model

S L I D E 3 4


Conclusions: Other Thoughts Benefits for consumers

1. New O&D and routing options from the merged network will benefit both business and leisure passengers

2. Stronger network better local service options

3. Pricing pressure is alive and well. Southwest may not be as aggressive as it used to be, but their competitive footprint is wide and evident in fares and yields

4. There are just 2 city pairs with high impact

– Charlotte to South Florida – ripe for LCC entry

– Charlotte to Dallas – more complex forecast

S L I D E 3 5



Time for Questions and Answers

S L I D E 36

Darryl Jenkins The Airline Zone (540) 364-6913

[email protected]

Joshua Marks masFlight

(703) 994-0000 [email protected]

www.theairlinezone.com www.masflight.com

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