FEDERAL AVIATION FEDERAL AVIATION ADMINISTRATIONADMINISTRATION

Annual Forecast ConferenceAnnual Forecast Conference

Washington, D.C.Washington, D.C.

March 18, 2005March 18, 2005

AIR CARGO DEMAND:AIR CARGO DEMAND:An OverviewAn Overview

Stephen A. AltermanStephen A. AltermanPresidentPresident

Cargo Airline AssociationCargo Airline AssociationWashington, D.C.Washington, D.C.

CARGO AIRLINE ASSOCIATION CARGO AIRLINE ASSOCIATION AIR CARRIER MEMBERSHIPAIR CARRIER MEMBERSHIP

Board of DirectorsBoard of Directors

ABX Air, Inc.ABX Air, Inc.Atlas AirAtlas AirFederal ExpressFederal ExpressUPSUPS

MembersMembers

Air Transport InternationalAir Transport InternationalCapital Cargo InternationalCapital Cargo InternationalCNF, Inc. CNF, Inc. DHL ExpressDHL ExpressFirst AirFirst AirGeminiGeminiKalitta AirKalitta AirKitty HawkKitty HawkUSA JetUSA Jet

AIR CARGO OVERVIEWAIR CARGO OVERVIEW Air Cargo Industry SegmentsAir Cargo Industry Segments

Bellies of Passenger AircraftBellies of Passenger AircraftAir Freight ForwardersAir Freight ForwardersAll-Cargo AircraftAll-Cargo AircraftRegional AircraftRegional Aircraft

All segments provide the services necessary to All segments provide the services necessary to satisfy shipper demand.satisfy shipper demand.

DEMAND DRIVERSDEMAND DRIVERS

Time Definite Service (Reliability)Time Definite Service (Reliability)SpeedSpeedTraceabilityTraceability

Probably NOT PriceProbably NOT Price

DEMAND LIMITATIONSDEMAND LIMITATIONS

Uncertain Economic PictureUncertain Economic PictureSecurity ConcernsSecurity ConcernsEscalating Fuel Prices Escalating Fuel Prices

Necessary Fuel SurchargesNecessary Fuel Surcharges

Price Competition from Other ModesPrice Competition from Other Modes

HIGH VALUE COMMODITIES ARE HIGH VALUE COMMODITIES ARE TRADITIONALLY TRANSPORTED TRADITIONALLY TRANSPORTED

BY AIRBY AIR

High-tech electronicsHigh-tech electronicsHuman organsHuman organs Important documentsImportant documents

WHAT THIS MEANSWHAT THIS MEANS

While only approximately 2% of all freight While only approximately 2% of all freight moves by air, 45-50% of the moves by air, 45-50% of the valuevalue of of freight transported qualifies as air freightfreight transported qualifies as air freight

WHO CARRIES THIS FREIGHT?WHO CARRIES THIS FREIGHT?

DOMESTIC TRAFFICDOMESTIC TRAFFIC

20042004

Passenger Carriers – 24.1%Passenger Carriers – 24.1%All-Cargo Carriers – 75.9%All-Cargo Carriers – 75.9%

Forecast Period (12 Years)Forecast Period (12 Years)

Passenger Carriers – 20.0%Passenger Carriers – 20.0%All-Cargo Carriers – 80.0%All-Cargo Carriers – 80.0%

Source: 2005 FAA Forecast, March 2005Source: 2005 FAA Forecast, March 2005

WHO CARRIES THIS FREIGHT?WHO CARRIES THIS FREIGHT?

International TrafficInternational Traffic

20042004

Passenger Carriers – 40.3%Passenger Carriers – 40.3%All-Cargo Carriers – 59.7%All-Cargo Carriers – 59.7%

Forecast Period (12 Years)Forecast Period (12 Years)

Passenger Carriers – 36.4%Passenger Carriers – 36.4%All-Cargo Carriers – 63.6%All-Cargo Carriers – 63.6%

Source: 2005 FAA Forecast, March 2005Source: 2005 FAA Forecast, March 2005

DOMESTIC v. INTERNATIONALDOMESTIC v. INTERNATIONAL

Demand increasing more dramatically in Demand increasing more dramatically in international markets – particularly Asiainternational markets – particularly Asia

For 2004, FAA estimates approximately 45% For 2004, FAA estimates approximately 45% more growth internationally (5.5% annually more growth internationally (5.5% annually internationally v. 3.8% domestically). FAA March internationally v. 3.8% domestically). FAA March 2005 Forecast2005 Forecast

91% more annualized international growth than 91% more annualized international growth than domestic for next twelve years – 2005-2015 domestic for next twelve years – 2005-2015 (6.3% annually v. 3.3 %). FAA March 2005 (6.3% annually v. 3.3 %). FAA March 2005 Forecast Forecast

DOMESTIC v. INTERNATIONALDOMESTIC v. INTERNATIONAL

Relatively smaller domestic growthRelatively smaller domestic growth

Less than robust domestic economyLess than robust domestic economyMature industryMature industry

Greater international growthGreater international growth

Opening of new marketsOpening of new marketsExpanding Asian economyExpanding Asian economy

CONCLUSIONCONCLUSION

Demand for air cargo services continues Demand for air cargo services continues to grow – especially in international to grow – especially in international marketsmarkets

Industry members are well positioned to Industry members are well positioned to meet these growing demandsmeet these growing demands

Governments must move to further open Governments must move to further open markets to allow carriers to meet the markets to allow carriers to meet the needs of the world’s shippersneeds of the world’s shippers