Global Airlines

Presented By:

Parveen RaiDan WurstAmar LeekhaAman Sandhu

Overview of PresentationIndustry Overview

Current StateTrendsKey Statistics

Regional OverviewsEurope, North America & Asia-Pacific

British AirwaysSingapore AirlinesSouthWestConclusion

Characteristics of the IndustryVery cyclical, moves with strength of economy

Low Profit Margins….and falling Economic growth

Asset intensive industryInvestments in aircraft, facilities & equipmentLabour constitutes largest costJet fuel costs second largest expense

Strategic Alliances to defend against competition

TechnologyE-ticketsOnline Vendors

Future OutlookRecovery of US economy

• Confidence in President Bush

Fuel Prices?Government Funding

• National security• Subsidies

High tax burden & RegulationsCost structure

Increase buying power of customers

Customer demands• Personal & Business customers

Employee Cost

Profitability

Macroeconomic Forces Slow Economy

Airlines lost $2.5 billion in 2003 (IATA)Total 2001-2003 losses: $23.2 billion

External Factors Leading to Losses:

September 11th Costs of implementing new security measures at

airports Severe Acute Respiratory Syndrome (SARS) Increased insurance premiums Rising fuel prices in 2003

TrendsGrowth in Traffic

RPM’s grew 2.3% in 2003Average industry load factor reached record 73.4 %Increase in cargo volume

Large Layoffs

Increased competition from low-cost carriersWestjet, Southwest and other clone airlines

Increased borrowing to cover losses from macroeconomic effects

Capacity Utilization

Regional Overview:

EuropeanNorth American Asia-Pacific

European Market Overview

European Market

Slower growth for major European carriers:

Increase of “no frill” carriersDeregulationWorldwide Economic downturnStructural problems of overcapacityThreats of terrorism*

***Carriers exposed to US market***

Trends: Euro MarketNo-frills airlines growing rapidly

Traffic levels within Europe have remained strongAccount for 1/3 of UK domestic services and routes between the UK and EuropeIncrease in amount of planes & routes

Deregulations reduce barriers to entryLikely to be followed by industry consolidationFurther Growth expected

Future focus on other Euro hubs

Alliances and Strategic Partnerships

North American Market

North American Market

Most mature market

1978 Deregulation: emergence of “no-frills” market

Followed by consolidation of industry

“No-frills” make up 20% of US domestic market

Southwest leading low-cost carrierSending major carriers into bankruptcy

North America (cont)Major Domestic Airlines expanding international presence

US signing of “open skies” agreement Unrestricted capacity and frequency

Factors depressing air travelSeptember 112001 RecessionFall of US Airways & United: currently restructuring

Asia-Pacific Market

Asia-Pacific MarketRelatively immature airline market

Strong growth in airline travel

1997-98 Asian crisis temporarily halted growth

RestructuringDisposal of non core assetsTermination of loss making routesWide ranging cost reduction programs

Asia-PacificAsian carriers look to form alliances with European and N. American carriers

Affected by US economy downturn (2001-2002)Less sever on air travel industry compared to US

Growth rate expected to be greater than that of western airline markets

Rapid growth in large domestic markets (China)

Most regulated region for air travelCompetitive Advantage: closer to home

Key Measures of Performance

International Routes (Passengers Carried)

International Routes (RPK)

Total Passengers Carried (All Routes)

Total RPK

Past YieldsYields

0

5

10

15

20

25

30

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

Yields

Nominal Yields Real Yields

Industry Growth Trends

Industry Growth Trends (cont)Forecasted Revenue Passengers (in millions)

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

180.0

190.0

200.0

210.0

220.0

230.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industry Growth Trends (cont)Forecasted RPK's (in millions $)

40,000.045,000.050,000.055,000.060,000.065,000.070,000.075,000.080,000.085,000.090,000.095,000.0

100,000.0105,000.0110,000.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Projected Revenue Growth

What Does the Future Look Like?

Profits/Losses

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

***

Profitable StrategiesRecovery of airline industry helps other industriesCarriers must demonstrate:

• “Comfortable” Security• Customer service• Productivity

Government Involvement:• Cooperation with airports and airlines• Encourage travel• Minimize hassles• Airport fees

Alternatives for short Hauls

Profitable Strategies

Airport – Airline Relationship • Work together with final customer in mind

Ticket Prices• Low cost carriers• Increased competition• Price conscious business customers

Labour ProductivityConsolidation of Industry

• Mergers/Strategic Alliances

Growth Constraints: Fuel Costs

Fuel Efficiency: 43.6

pm/gallonHedging

Fuel Costs: PastPast Fuel Costs

0

0.2

0.4

0.6

0.8

1

1.2

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

$/Gallon

Fuel Costs: FutureForecasted Fuel Costs

0.600.620.640.660.680.700.720.740.760.780.800.820.84

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$/Gallon

Growth Constraints: Taxes

Taxes:1972: Taxes = 7% of ticket price2004: 26% of ticket

British Airways

British Airlines

Listed and Traded on the London Stock ExchangeTrading symbol: BAYAlso Trades as an ADR on the TSX and NYSE

• Symbol: BAB• 1 ADR = 10 Shares

British Airlines

As of Market Close on November 2, 2004

• Bid: 218.75 Pents ($4.93 CDN)• Ask:219 Pents ($4.94 CDN)• Volume 28,551,043• Outstanding Shares: 1,070,077,000

Background

One of the leading airlines in Europe• Second biggest in Europe by passengers carried

Operating Bases• Heathrow• Gatwick

British Airways is a public limited companyEmployed approximately 49,072 employees in 2004It operates 291 aircraftFlies to 550 destinations in 133 countries

A Quick History LessonSuccessors:

• Aircraft Transport and Travel Limited (Daimler Airways)

• Instone• Handley Page• British Air Marine Navigation• Smaller Airlines (1935 merged into British Airways

Limited)Merged In 1939

• British Overseas Airways CorporationTrading of BA shares began in 1987

AllianceMember of Oneworld

• American airlines• Qantas• Cathay Pacific• Iberia• Finair• Aer Lingus• LanChile

Franchises and HoldingsFranchises

• GB airlines• British Mediterranean• British Airlines Citiexpress• Loganair• Sun Air

Holdings• Air Mauritius• Qantas• Spanish Iberia

Stated Objectives

Future size and shape strategy • Achieve a 10% operating margin• Operating margin up 1.6 points from 3.8 points in 2003• 13,000 reduction in employees since August, 2001

Fleet and network strategy• Aircraft replacements• Reduced fleet by 39 aircraft• Gatwick moving to point and spoke strategy

Low fares strategy• On 180 shorthaul routes• Compete with no frill competitors

External cost reductionsHedging strategiesEmployee cost saving strategiesProduct and service improvements

Main Competitors

Europe Market• Lufthansa• Air France

North American Market• United

Cost Structure

30%

9%2%13%7%

8%

13%

8%10%

Employee costs

Depreiction and ammoritization

Aircraft lease costs

Fuel and oil costs

Engineering and other aircraft costs

Landing fees and en route charges

Handling charges, catering and other operating costs

Selling costs

Accomodation, ground equipment costs and currency differences

Geographic Revenue Distribution

Geographic Distribution of Revenue

Europe The Americas

Africa, Middle East ,and India Far East and Australia

Strengths/Opportunities

Strong Brand EquityAccount for over half of flights within UKNew low fares strategy to compete against “no frills airlines”37.3% increase in operating profitIncreasing air travel

Weaknesses and ThreatsHeavy CompetitionStrict Government Regulations

• Route flying rights• Fare setting• Airport access• “Slots” availability• New operational standards (security, safety)

Jet Fuel PricesTerrorismDemand for travel affected by economic conditions (SARS)Increased Insurance CostsIncreased Security Costs

Management

Rod Eddinghton• Chief Executive• May 2000

John Rishton• CFO• September 1994 via controller

Mike Street• Director of customer service and operations• 1997

Robert Webb QC• General Counsel• 1998

Martin George• Director Marketing and Communications• 1987 via director of Marketing

Management Con’t

Roger Maynard• Director of Investments• 1987 via VP Commercial Affairs N.A

Alan McDonald• Director Engineering• 1966

Lloyd Cromwell Griffths• Director of Flight Operations• 1973 via Chief Pilot

Paul Coby• Chief Info Officer

Robert Boyle• Director of Commercial Planning

Neil Roberts• Director for People

2004 2003 2002 2001 2000Passenger Load Factor

.73 .719 .704 .714 .696

RPK (Millions)

103,092 100,112 106,270 123,970 127,425

Passengers Carried

36,103,000 38,019,000 40,004,000 44,462,000 18,315,000

ASK (Millions)

141,272 139,172 151,046 17,2524 183,158

Breakeven Load Factor

.636 .639 .65 .644 .659

RTK (Millions)

14,771 14,231 14,362 16,987 17,215

Tons Cargo Carried

796,000 764,000 755,000 914,000 909,000

Operations

Q1-2004 2004 2003 2002 2001 2000 1999

Current

.922 0.922 .773 .799 .813 .777 .847

NWC -242 -231 -818 -642 -562 -774 -465

Liquidity Analysis

Q1-2004 2004 2003 2002 2001 2000 1999

Debt/Equity

4.21 5.54 6.15 5.16 4.44 4.53 3.04

Interest Coverage

2.1 1.6 .3 1.7 1

Capital Structure Analysis

Q1-2004 2004 2003 2002 2001 2000 1999

Price Earnings

7.58 7.62 -10.7 -21.35 14.99 -7.85 3.96

Market to Book

1.56 1.52 .62 1.16 1.34 1.42 1.44

Dividend Yield

0 0 0 .057 .054 .042

Dividend Payout

0 0 0 .852 -.427 .164

Capital Market Analysis

Q1-2004 2004 2003 2002 2001 2000 1999

ROA 4.38% 3.05% -.87% -.88% 1.64% -3.28% .9%

ROE 20.53% 19.96% -6.21% -5.42% 8.92% -18.11%

3.64%

Profit Margin

5.23% 3.84% -1.32% 4.1% .94%

EPS .370 -.103 -.114 .210 -.420

Profitability Analysis

2004 2003 2002 2001 2000

Free Cash Flow

£676,000,000

£ 942,000,000

£ 213,000,000

£ 491,000,000

£ 316,000,000

Cash Flow Analysis

Stock ValuationDiscount Rate

• Beta = 1.98459• Market Return = 7.48% (FTSE 20 yr

average return)• Risk Free = 2.47% (1 Year LIBOR)• Discount Rate = 12.22%• Average Cash Flow = £527,600,000

PV = £7,789,940,000Market Capitalization = £3,032,128,400Undervaluation = £4,757,811,600

2004 2005 2006 2007 2008 2009 2010 2011 2012

Free Cash Flow

527.6 527.6 527.6 527.6 527.6 527.6 527.6 527.6 527.6

Discounted 470.23

419.1 373.53

332.91

296.72

264.45

235.7 210.07

187.23

Stock Valuation

Pricing Chart

                                                                                                                                                                                                                                                                                           

Pricing Chart (5 Year)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Recommendations

Poor operating statisticsLiquidity ProblemsBarely covering interestPoor earnings

Therefore…Sell

Singapore Airlines

Listed and traded on the Singapore Stock ExchangeShare price as of Nov 3 10.90 SDAlso traded in the US as an ADR: Symbol SPAAFExchange Rate: 1.37414 SD – 1 CAD (As of Nov 3rd) Number of shares issued 1,218,149,660

Brief HistorySIA began in May 1947, when Malaysian Airways first operated a twin-engined Airspeed Consul between Singapore, Kuala Lumpur, Ipoh and Penang.

1963 – Changed to Malaysian Airlines with formation of federation of Malaysia

1966 – Became Malaysian-Singapore Airlines

1972 – Restructured itself into 2 airlines (Malaysian & Singapore Airlines)

Stated ObjectivesContinue to offer innovative promotions to attract new customers and maintain competitive advantageCreate new non-stop routes which will connect the East to West. These flights offer quick and efficient non-stop service utilizing SIA’s new Airbus A340-500’s

• After implementing the longest flight in the world from Singapore to Los Angeles and recently creating a new non-stop route from Singapore to New York, SIA plans to create new routes to decrease flight and stop-over time

Provide competitive fares through their low-cost subsidiaries (Tiger, SilkAir and Virgin Airways)Build new terminal in strategic locations to cater for low-cost airlines (i.e. new terminal built in Changi Airport)

Route Map

Star Alliance MembersAir CanadaAir New ZealandANAAsian AirlinesAustrianBMILOT Polish AirlinesLufthansa

Singapore AirlinesSpanairThai AirwaysUnitedUS AirwaysVARIGSAS

Subsidiaries of SIASilk AirSIA Engineering Co.TradewindsSIA Cargo SATS

Main Competitors

Cathay PacificJapan AirlinesMalaysian Airlines

StrengthsGreat Reputation for

quality serviceLow Debt Structure

(low interest costs)Addition of new

Airbus A340-500’sNew non-stop routesPartners & AlliancesProfit Sharing Plans Excellent in flight-

service (fleet)

WeaknessesTerrorismJet Fuel PricesSARSWar in IRAQDecrease in load

factorDecline in EPS

Cost Structure17%

13%

2%

19%11%6%

9%

7%

10% 2% 4%

Staff CostsDepreiction and ammoritizationAircraft lease costsFuel and oil costsAircraft Maintenance and Overhaul CostsAirport and Overflying ChargesHandling charges, catering and other operating costsSelling costsRentals on Leased AircraftCommunication and Information Tech CostsOther Costs

Geographic Distribution Of Revenue29%

21%

19%

11%

20%

East Asia Europe

Americas South and West Pacific

West Asia and Africa

Operating Data

Pax Carried 13278000 15326000 14765000 15002000 13872000

ASK882527000

00995659000

00945885000

009264800000

0877283000

00

RPK646852000

00741832000

00699945000

007111840000

0657184000

00

Pax Load Factor 73.30% 74.50% 74.00% 76.80% 74.90%

Pax Break/ Even Factor 72.80% 73.60% 71.10% 70.20% 66.2%

04-03 03-02 02-01 01-00 00-99

Liquidity Analysis

2004 2003 2002 2001 2000

CurrentRatio

0.9177

0.6871 0.9243 0.8925 0.9432

NetWorking

Capital Ratio

-0.013 -0.0596

-0.0128

-0.0237

-0.0129

Capital Structure Analysis

2004 2003 2002 2001 2000

D/E 0.3900

0.3952 0.3937 0.3619 0.3547

InterestCoverage

Ratio

13.333

15.159 21.811 50.792 39.352

Capital Market Analysis

2004 2003 2002 2001 2000

P/E 15.638 10.011 27.746 10.751 17.505

Market-Book

11.802 11.286 10.951 10.738 9.537

Dividend Yield

0.01376

0.01142

0.01597

0.02573

0.01250

Dividend Payout

0.12904

0.17064

0.33528

0.20861

0.19716

Profitability Analysis Ratio

2004 2003 2002 2001 2000

ROA 4.336%

5.639%

3.462%

9.017%

6.923%

ROE 6.038% 7.863% 4.770% 12.25% 9.172%

Profit Margin

.08700 0.10126

0.06740

0.15772

0.13077

EPS 0.697 0.874 0.519 1.265 0.914

Quarterly Financial DataQ1 April – June Q2 July – Sept

ROE 0.017679754 0.024443137

ROA 0.012441246 0.01693934

P/E 52.830 37.201

D/E .42105 .44297

EPS 0.212 0.293

P/BV 11.99111 11.98700

2004

Cash Flow Analysis

2004 2003 2002 2001 2000Free Cash Flow (SGD)

1153.7 Million

94.4 Million

-472.7Million

756.2Million

87.3Million

Stock Valuation

Discount Rate• Beta = 0.631• Market Return = 5.36% Strait Times

Index (10 Yr Average)• Risk Free Rate = 1.4% (5 Year Bond)• Discount Rate = 3.8988%• Average Cash Flow = 441.08 Million SGD

Stock Valuation

2004 2005 2006 2007 2008 2009 2010 2011 2012

Free Cash Flow

441.08 Million

441.08 Million

441.08 Million

441.08 Million

441.08Million

441.08Million

441.08 Million

441.08 Million

441.08 Million

Discounted

424.52

408.58

393.26

378.50

364.29

350.63

337.46

324.80

312.62

• Present Value: 3,294,660,000

• Market Capitalization: 13,281,736,011.48 SGD

• Overvalued: 9,987,076,011.48 SGD

Recommendation

Moderate Buy

Very Liquid Company (high current ratio and large cash on hand)Great track record for exceptional customer service Constant dividend payoutExpanding routes and servicesDiversified risk through low cost subsidiariesVery low levels of debt (low interest payments)

Southwest Airlines

Share Price: USD$15.96

Southwest Airlines (LUV)Listed on: NYSESymbol: LUVIndex Member:

S&P 500, DJTA

Market Cap: $12.44BShares Outstanding:

779.58M

Daily Departures: 2,800 flights a day

Company BackgroundBegan service June 18, 1971 with flights to Houston, Dallas, and San Antonio.

Shorthaul, high-frequency, point-to-point, low-fare service

Most airlines use the hub-and-spoke system

As of December 31, 2003, Southwest served 337 nonstop city pairs.

largest carrier based on scheduled domestic departures.

2003 marked Southwest's 31st consecutive year of profitability.

Growth and Expansion

nonstop service to: Orlando Fort Lauderdale/Hollywood Manchester Las Vegas Raleigh-DurhamTampa Bay

will begin in the first quarter of 2005

Oakland Phoenix Seattle Providence Philadelphia, and Columbus Los Angeles International

Addition of 16 nonstop flights from Chicago Midway Airport to 13 existing nonstop markets.

Cost Reducing Strategies

RestructuringConsolidation of reservations operationsElimination of traditional travel agency commissionsFuture fleet of Boeing 737-700 will have fuel-saving Blended WingletsHedging 70-80% of fuel costs at approx. $24/barrel of crude oil

Mission Statement

“…dedication to the highest quality of Customer Service delivered with

a sense of warmth, friendliness, individual pride, and Company

Spirit.”

Statement of Objectivesto provide safe, low price transportation

maximum customer convenience

to be the cheapest and most efficient operator In specific domestic regional markets

to provide customers with a high level of convenience and service

Outstanding customer service through highly motivated employees.

Main Competitors

AMR Corp. (AMR)JetBlue Airways Corp. (JBLU)Delta Airlines Inc. (DAL)

Strengths/WeaknessesStrengths

Known for superior customer serviceLow-cost, no-frillsDirect one-way travelPoint-to-point efficiencyLargest carrier for domestic serviceOne fleet typeHedge against exposure to fuel prices (80%)Only airline rated investment grade

WeaknessesPoint-to-point creates excessive expenditureToo many locations, administrative costsRisk to shocks in US economy, since it is a domestic carrier

Cost Structure

41%

15%8%

1%

3%

7%

7%

18%

Salaries, wages & benefits Fuel & oil

Maintenance materials & repairs Agency commissions

Aircraft rentals Landing fees & other rentals

Depreciation & amortization Other operating expenses

Market Share & Capacity

System Map

Boeing 737 Fleet

737 Type Seats Average Age

(Yrs)

# of Aircraft

# Owned # Leased

-200 122 21.2 23 21 2

-300 137 12.6 194 110 84

-500 122 12.7 25 16 9

-700 137 3.3 146 145 1

Totals 9.6 388 292 96

• Plans to retire 23 737-200 by end of first quarter 2005.

Operating Data($’s in millions) 2003 2002 2001 2000 1999

RPM (000s) 47,943,066

45,391,903

44,493,916

42,215,162

36,479,322

ASM (000s) 71,790,425

68,886,546

65,295,290

59,909,965

52,855,467

Passenger load factor

66.78% 65.89% 68.14% 70.46% 69.02%

Passenger revenue yield per RPM

$0.1197 $0.1177 $0.1209 $0.1295 $0.1251

Size of fleet at year end

388 375 355 344 312

Financial Data($’s in millions) 2003 2002 2001 2000 1999

Operating revenue

$5,937 $5,522 $5,555 $5,650 $4,736

Operating expense

5,454 5,105 4,924 4,628 3,954

Operating income

483 417 631 1,022 782

Operating margin

8.14% 7.55% 11.36% 18.09% 16.51%

Net income 442 241 511 603 474

Net margin 7.44% 4.36% 9.20% 10.67% 10.02%

EPS (basic) $0.56 $0.31 0.67 0.81 0.63

EPS (diluted) $0.54 $0.30 0.63 0.76 0.59

Liquidity2003 2002 2001 2000 1999

Current Ratio 1.34 1.56 1.13 0.64 0.66

NWC (million’s)

590 798 281 (466.5) (329.4)

Capital Structure2003 2002 2001 2000 1999

Interest Coverage

5.31 3.93 9.01 14.59 1.45

D/E 0.96 1.02 1.24 0.93 0.99

Capital Market Analysis2003 2002 2001 2000 1999

P/E 28.82 44.84 27.58 27.60 17.13

MV/BV 2.52 2.44 3.51 4.82 2.87

Dividend Yield

0.11% 0.13% 0.10% 0.07% 0.13%

Profitability2003 2002 2001 2000 1999

ROA 4.69% 2.68% 6.53% 9.79% 9.15%

ROE 9.33% 5.71% 13.69% 19.19% 18.13%

Profit Margin

7.44% 4.36% 9.20% 10.67% 10.02%

EPS $0.54 $0.30 $0.63 $0.76 $0.59

Cash Flow Analysis(dollars in millions)

2003 2002 2001 2000 1999

Cash Flow From Operations

1,336 520 1,485 1,298 1,029

Free Cash Flow

98 (83) 487 163 (139)

Cash Flow Analysisincrease in operating cash flows in 2003 a result of:

due to higher net income$271 million government grant from the Wartime Act increase in accrued liabilities decrease in accounts and other receivables

Heavy investments result in FCF of $98Mill for 2003

Large cash increase due to exercise stock optionsUse increase in cash flow to repurchase up to $300 million of common stock in the open market

Stock Valuation

Discount Rate• Beta = 0.852• Market Return = 9.98% Average Return S&P

500 Index (22 Yr Average)• Risk Free Rate = 4.85% (30 Year Bond)• Discount Rate = 9.2105%• Average Discounted Cash

Flow=$96,318,685.20

Discounted Cash Flow

Present Value: $528,970,792 Market Capitalization: $12.44B

Net Market Value of Assets

737 Type Seats Average Age (Yrs)

# of Aircraft

# Owned

# Leased

-200 122 21.2 23 21 2

-300 137 12.6 194 110 84

-500 122 12.7 25 16 9

-700 137 3.3 146 145 1

Totals 9.6 388 292 96

Competitor ComparisonLUV AMR DAL JBLU Industry

Market Cap: 12.44B 1.33B 713.46M 2.45B 635.40M

Employees: 32,847 96,400 70,600 4,704 5.30K

Rev. Growth: 7.50% 0.80% -0.00% 57.20% 10.10%

Revenue: 6.36B 18.50B 14.54B 1.19B 1.46B

Gross Margin: 29.01% 21.18% 7.02% 39.34% 20.71%

EBITDA: 902.00M 1.30B 158.00M 206.19M 158.97M

Oper. Margins: 7.56% -0.09% -7.37% 12.56% 4.24%

Net Income: 284.00M -482.00M -2.86B 64.61M N/A

EPS: 0.349 -3.027 -22.958 0.585 N/A

PE: 45.73 N/A N/A 40.50 15.03

PEG: 2.53 N/A N/A 2.69 0.81

PS: 1.90 0.07 0.05 1.93 0.31

As of Sept. 30, 2004: for trailing twelve months

Quarterly Financials

3rd Q Sept 30/04

2nd Q June 30/04

ROE 2.21% 4.30%

ROA 1.06% 2.09%

D/E 1.13 1.06

EPS $0.15 $0.14

P/B 2.14 2.58

P/E 90.80 119.79

Market Trend

Commitments & Contingencies

contractual obligations and commitmentsfuture purchases of aircraftpayment of debtlease arrangements

primarily of scheduled aircraft acquisitions from Boeing

28 scheduled for delivery in 2005, 22 in 2006, 25 in 2007, and 6 in 2008

$650Mill worth of accrued liabilites in 2003

Profitability

Valuation

Investment grade ratingP/E ratio > industryPEG ratio > industryEPS > industryLow D/E ratio (not highly leveraged)Market Cap > DCFCFCurrent ratio, interest coverage, D/E > industry average

RecommendationHOLDShowing of strong future growthCash Flows are not consistentSeasonal, so expect price to go up during springPretty consistent stock

31st consectutive year of profitabilitySteady dividend for common shareholdersNot very leveraged, hedging of fuel costs limit exposure to risk

Safety in the StockCurrent ratio, interest coverage, D/E > industry average

Senior unsecured debt considered investment grade:

S&P, Moody’s and Fitch