Updated August 24, 2020

Tracking the Impacts of COVID-19

2

COVID-19 Has Forced Several Airlines Across the Globe to Restructure or Cease OperationsSelected Airline Bankruptcies and/or Shutdowns From March 1 to Present

Source: A4A research

United StatesCompass Airlines

ExpressJet (pending 9/30)Miami Air International

RavnAir GroupTrans States Airlines

Outside the USA*Aeromexico (Mexico)

Air Mauritius (Mauritius)Alitalia (Italy)

Avianca (Colombia)Comair (South Africa)

Flybe (UK)German Airways (Germany)

Germanwings (Germany)LATAM (Chile)

South African (S. Africa)Thai Airways (Thailand)

TAME (Ecuador)Virgin Australia (Australia)

* UK-based Virgin Atlantic filed Chapter 15 in the United States – “a solvent restructuring of an English company”

3

New U.S. Cases of COVID Surged in Mid-June, Peaked in Late July

Source: World Health Organization and U.S. Centers for Disease Control and Prevention

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

20-J

an27

-Jan

3-Fe

b10

-Feb

17-F

eb24

-Feb

2-M

ar9-

Mar

16-M

ar23

-Mar

30-M

ar6-

Apr

13-A

pr20

-Apr

27-A

pr4-

May

11-M

ay18

-May

25-M

ay1-

Jun

8-Ju

n15

-Jun

22-J

un29

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6-Ju

l13

-Jul

20-J

ul27

-Jul

3-Au

g10

-Aug

17-A

ug24

-Aug

31-A

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Sep

14-S

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-Sep

28-S

ep5-

Oct

12-O

ct19

-Oct

26-O

ct2-

Nov

9-N

ov16

-Nov

23-N

ov30

-Nov

7-D

ec14

-Dec

21-D

ec28

-Dec

China Japan India Italy Spain Brazil USA (CDC)

New Cases of COVID-19 (7-Day Moving Average)

4

The World Economy Is Projected to Shrink Nearly 4 Percent in 2020Revenues Will Take Even Longer to Recover

-5.0%

1.2%

-7.8% -8.1%

-4.9% -5.0%-7.0%

-3.8%

USA China Eurozone UK Japan India Brazil World

Source: Standard & Poor’s, “The Global Economy Begins A Slow Mend As COVID-19 Eases Unevenly, (July 1, 2020)

“The consensus among health experts is that the pandemic may now be at or near its peak in some regions, but COVID-19 will remain a threat until a vaccine or effective drug treatment is made widely available, which may not occur until the second half of 2021.”

S&P Global GDP Growth Forecasts* for 2020

* S&P Global Economics and Oxford Economics

5

We Are Unlikely to See a Return to 2019 Passenger Volumes Before 2023-2024Revenues Will Take Even Longer to Recover

-60%

-40%

-10% -5%

5%

2020E 2021F 2022F 2023F 2024F

Source: A4A, Goldman Sachs and Wolfe Research

Estimated U.S. Airline Industry Passenger Traffic vs. 2019 Levels

6

For U.S. Airlines Passenger Volumes* Remain 71 Percent Below Year-Ago LevelsIn Week Ending August 16 – Domestic Air Travel Down 68 Percent, International Down 88 Percent

(100)

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0

20

7-Ja

n14

-Jan

21-J

an28

-Jan

4-Fe

b11

-Feb

18-F

eb25

-Feb

3-M

ar10

-Mar

17-M

ar24

-Mar

31-M

ar7-

Apr

14-A

pr21

-Apr

28-A

pr5-

May

12-M

ay19

-May

26-M

ay2-

Jun

9-Ju

n16

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23-J

un30

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7-Ju

l14

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21-J

ul28

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4-Au

g11

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18-A

ug25

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1-Se

p8-

Sep

15-S

ep22

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29-S

ep6-

Oct

13-O

ct20

-Oct

27-O

ct3-

Nov

10-N

ov17

-Nov

24-N

ov1-

Dec

8-D

ec15

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22-D

ec29

-Dec

Domestic USA Canada Mexico Atlantic Latin (excl. Mexico) Pacific

7-Day Rolling Year-Over-Year Change (%) in Onboard Passengers

Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Onboard (“segment”) passengers

7

For U.S. Passenger Airlines, Worldwide Departures Remain 49 Percent Below 2019 LevelsIn Week Ending August 16 – Domestic Flights Down 45 Percent, International Flights Down 78 Percent

Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners)

(100)

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0

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18-F

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3-M

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17-M

ar24

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31-M

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Apr

14-A

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May

12-M

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26-M

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Jun

9-Ju

n16

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23-J

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7-Ju

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18-A

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1-Se

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15-S

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29-S

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Oct

13-O

ct20

-Oct

27-O

ct3-

Nov

10-N

ov17

-Nov

24-N

ov1-

Dec

8-D

ec15

-Dec

22-D

ec29

-Dec

Domestic USA Canada Mexico Atlantic Latin (excl. Mexico) Pacific

7-Day Rolling Year-Over-Year Change in Aircraft Departures (%)

8

Nationwide, New York Has Seen the Largest Reduction in Scheduled Passenger FlightsPercent Change: July 2020 vs. July 2019

Sources: TSA for traveler throughput; Diio by Cirium published schedules (July 31, 2020) for all airlines providing scheduled service to all destinations

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Note: DC consists of Washington Reagan (DCA) and Dulles (IAD)

9

Domestic U.S. Load Factor Averaged 48% in Most Recent Week, Versus 87% a Year Earlier

48.4

0102030405060708090

100

5-Ja

n12

-Jan

19-J

an26

-Jan

2-Fe

b9-

Feb

16-F

eb23

-Feb

1-M

ar8-

Mar

15-M

ar22

-Mar

29-M

ar5-

Apr

12-A

pr19

-Apr

26-A

pr3-

May

10-M

ay17

-May

24-M

ay31

-May

7-Ju

n14

-Jun

21-J

un28

-Jun

5-Ju

l12

-Jul

19-J

ul26

-Jul

2-Au

g9-

Aug

16-A

ug23

-Aug

30-A

ug6-

Sep

13-S

ep20

-Sep

27-S

ep4-

Oct

11-O

ct18

-Oct

25-O

ct1-

Nov

8-N

ov15

-Nov

22-N

ov29

-Nov

6-D

ec13

-Dec

20-D

ec27

-Dec

2019 2020

Weekly Average Domestic Load Factor* (%)

Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Revenue passenger miles divided by available seat miles

10

In the Week Ending August 16, Domestic U.S. Flights Averaged 58 Passengers*Domestic Flights Averaged ~99 Passengers per Departure Over the Course of 2019

Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Onboard (“segment”) passengers

7-Day Moving Average Onboard Passengers per Flight

0

50

100

150

200

250

7-Ja

n-19

6-Fe

b-19

8-M

ar-1

9

7-Ap

r-19

7-M

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9

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n-19

6-Ju

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Domestic USA Canada Mexico Atlantic Latin (excl. Mexico) Pacific

11

U.S. Airline Capacity Cuts Have Not Caught Up With the Severe Drop in Demand

(78)

(58)

(100)(90)(80)(70)(60)(50)(40)(30)(20)(10)

01020

7-Ja

n14

-Jan

21-J

an28

-Jan

4-Fe

b11

-Feb

18-F

eb25

-Feb

3-M

ar10

-Mar

17-M

ar24

-Mar

31-M

ar7-

Apr

14-A

pr21

-Apr

28-A

pr5-

May

12-M

ay19

-May

26-M

ay2-

Jun

9-Ju

n16

-Jun

23-J

un30

-Jun

7-Ju

l14

-Jul

21-J

ul28

-Jul

4-Au

g11

-Aug

18-A

ug25

-Aug

1-Se

p8-

Sep

15-S

ep22

-Sep

29-S

ep6-

Oct

13-O

ct20

-Oct

27-O

ct3-

Nov

10-N

ov17

-Nov

24-N

ov1-

Dec

8-D

ec15

-Dec

22-D

ec29

-Dec

Traffic (RPMs)

Capacity (ASMs)

* RPM = revenue passenger mile; ASM = available seat mile

7-Day Rolling Year-Over-Year Change (%) in Systemwide Traffic and Capacity

Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners)

12

TSA Checkpoint Traveler Throughput* Down 70 Percent Year Over YearDaily Average Bottomed Out at 95K in April 11-17

Source: Transportation Security Administration

704

0250500750

1,0001,2501,5001,7502,0002,2502,5002,750

1-Ja

n8-

Jan

15-J

an22

-Jan

29-J

an5-

Feb

12-F

eb19

-Feb

26-F

eb4-

Mar

11-M

ar18

-Mar

25-M

ar1-

Apr

8-Ap

r15

-Apr

22-A

pr29

-Apr

6-M

ay13

-May

20-M

ay27

-May

3-Ju

n10

-Jun

17-J

un24

-Jun

1-Ju

l8-

Jul

15-J

ul22

-Jul

29-J

ul5-

Aug

12-A

ug19

-Aug

26-A

ug2-

Sep

9-Se

p16

-Sep

23-S

ep30

-Sep

7-O

ct14

-Oct

21-O

ct28

-Oct

4-N

ov11

-Nov

18-N

ov25

-Nov

2-D

ec9-

Dec

16-D

ec23

-Dec

30-D

ec

2019 2020

* U.S. and foreign carrier customers traversing TSA checkpoints; 2019 is year-ago same weekday

TSA Traveler Throughput: 7-Day Moving Average (in Thousands)

Jan 5.5%Feb 2.1%Mar (50%)Apr (95%)May (90%)Jun (81%)Jul (73%)

13

In July, TSA Checkpoint Volumes Declined Most in New York, Hawaii, DC, Vermont and MA/NJ% Change in Traveler Throughput by U.S. State – July 2020 vs. July 2019

Source: TSA

14

Travel to the State of Hawaii* Is Almost Nonexistent – Down 94 Percent Year Over Year

Source: Hawaii Department of Business, Economic Development & Tourism

339 0

5,00010,00015,00020,00025,00030,00035,00040,00045,000

1-Ja

n8-

Jan

15-J

an22

-Jan

29-J

an5-

Feb

12-F

eb19

-Feb

26-F

eb4-

Mar

11-M

ar18

-Mar

25-M

ar1-

Apr

8-Ap

r15

-Apr

22-A

pr29

-Apr

6-M

ay13

-May

20-M

ay27

-May

3-Ju

n10

-Jun

17-J

un24

-Jun

1-Ju

l8-

Jul

15-J

ul22

-Jul

29-J

ul5-

Aug

12-A

ug19

-Aug

26-A

ug2-

Sep

9-Se

p16

-Sep

23-S

ep30

-Sep

7-O

ct14

-Oct

21-O

ct28

-Oct

4-N

ov11

-Nov

18-N

ov25

-Nov

2-D

ec9-

Dec

16-D

ec23

-Dec

30-D

ec

2019 2020

* Daily passenger counts include returning residents, intended residents and visitors but exclude interisland and Canada passengers

Air Travel to Hawaii: 7-Day Moving Average*

On March 26, the State of Hawai‘i initiated a mandatory 14-day self-quarantine for all passengers arriving from out of state. (On April 1, it was expanded to include interisland travel.)

15

The Rapid Decline of Demand – Especially Business Travel – Has Pummeled Airline Revenues

YOY Change (%) in Operating Revenues*

(17.4)

(86.5)

1Q20 2Q20 3Q20 4Q20

9

10

11

12

13

14

15

16

1Q 2Q 3Q 4Q

2019 2020

Total Operating Revenues* (Cents) per ASM

* As reported on a consolidated company basis for systemwide operationsSource: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United

16

Sales* for Future Air Travel From U.S. Airports Remain Highly Depressed Net Booked* Revenue Down 86% From 2019 Driven Largely by Evaporation of Business Travel

Source: Airlines Reporting Corporation (ARC) for most U.S. and foreign carriers for any flight to/from/within the United States

(73)(86)

(120)

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(20)

0

20

7-Ja

n14

-Jan

21-J

an28

-Jan

4-Fe

b11

-Feb

18-F

eb25

-Feb

3-M

ar10

-Mar

17-M

ar24

-Mar

31-M

ar7-

Apr

14-A

pr21

-Apr

28-A

pr5-

May

12-M

ay19

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26-M

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9-Ju

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23-J

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7-Ju

l14

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21-J

ul28

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4-Au

g11

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18-A

ug25

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1-Se

p8-

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15-S

ep22

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29-S

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13-O

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10-N

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24-N

ov1-

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8-D

ec15

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22-D

ec29

-Dec

Tickets Revenue

* Sales transactions minus refunds, for all future travel up to 330 days out

Year-Over-Year Change (%) in 7-Day Rolling Net Bookings*

17

Corporate Air Travel* Has Yet to Recover From the Steep Declines That Began in March

Source: Airlines Reporting Corporation (ARC)

(100)

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* Results do not include sales of tickets purchased directly from airlines and are not net of refunds or exchanges.

Year-Over-Year Change (%) in Weekly Tickets Sold* by U.S. Travel Agencies: Corporate Segment

18

Domestic U.S. Air Cargo Demand Continues to Outperform U.S.-InternationalAsia Up on Non-China Volumes

Source: Bureau of Transportation Statistics, T1 (U.S. carriers) and T-100 International Market (U.S. and foreign flag carriers)

2.8

2.2 3.1

3.1 4.2

13.7

(5.4

)

(7.0

)

(17.

0)

(16.

5)

(13.

7) (5.3

)

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

Domestic International

(29.8)

(10.8)

10.6

1.4

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

EuropeLatin AmericaAsiaCanada

% Change YOY in Air Cargo* Between the United States and World Areas – U.S. and Foreign Airlines

* Pounds of freight and mail enplaned in scheduled and nonscheduled services

19

Airlines Are Taking a Wide Variety of Self-Help Actions to Reduce Cash BurnSelected Examples of Actions to Improve Cash Flow From Operations, Investing and Financing

Source: A4A and member companies

» Making historic capacity cuts, parking and/or retiring older aircraft (and, in some cases, entire fleet types)» Utilizing passenger planes on cargo-only missions, either belly-only or belly and main cabin» Cutting executive compensation and implementing voluntary leave and early retirement programs» Freezing hiring and non-essential spending (e.g., employee travel, consultants, events, marketing, training)» Consolidating footprint at airport facilities (e.g., concourses); shuttering lounges; halting real estate projects» Simplifying onboard product (e.g., food and beverage)» Negotiating with vendors: cobranded credit cards, airports (i.e., zero-interest rent deferrals), regional airline

partners (i.e., reduced block hours), fuelers, caterers, etc. to achieve relief on payment terms/timing» Deferring aircraft deliveries and reducing non-aircraft (e.g., ground equipment, IT) capital expenditures» Raising funds via capital markets: borrowing funds via unsecured or secured loans and/or selling stock» Selling/mortgaging aircraft/engines/other assets» Suspending capital return programs, including share repurchases and the payment of future dividends

20

The Pandemic Has Taken a Material Toll on U.S. Airline EmploymentVoluntary Reductions, Retirements, Job Changes, Employer Shutdowns and Other Factors at Play

Source: Bureau of Transportation Statistics

Carrier Universe Scheduled U.S. Passenger Airlines

All U.S. Passengerand Cargo Airlines

Measure FTEs* (000) Headcount (000)

All-Time High Jun-2001: 545.9 May-2001: 760.8

Post-2000 Low Point Apr-2010: 376.7 Apr-2010: 562.3

Pre-COVID Peak Mar-2020: 460.0 Feb-2020: 755.2

Latest Available Data Point Jun-2020: 410.6 Jun-2020: 699.7

Change vs. Pre-COVID (49.4) (55.5)

* Full-time equivalents (FTE) = full-time workers plus 0.5 * part-time workers

21

Over the Past Two Decades, Job Gains/Losses Have Mirrored the Industry’s Financial HealthFrom March to June, U.S. Passenger Airline Employment Fell by Nearly 50,000 FTEs

Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines (i.e., all that report scheduled passenger revenue)

Jun-01545.9

Feb-03460.9

Apr-10376.7

Mar-20460.0

Jun-20410.6

300

350

400

450

500

550

600

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

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l-09

Jan-

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l-10

Jan-

11Ju

l-11

Jan-

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l-12

Jan-

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l-13

Jan-

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l-14

Jan-

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l-15

Jan-

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l-16

Jan-

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l-17

Jan-

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l-22

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Jan-

24

U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s)

All-Time High

Lowest Since1Q 1987

Pre-COVID Peak

?

22

Twenty-Nine Percent of the U.S. Passenger Airline Fleet Remains IdlePeak Occurred in Mid-May

Source: masFlight

U.S. Passenger Airlines: Idled Aircraft*

300 353 316

1,171

3,002 3,204 2,991

2,4031,874 1,759

5 6 519

49 52 4939

30 29

0

25

50

75

100

0

1,000

2,000

3,000

4,000

31-Dec 31-Jan 29-Feb 31-Mar 30-Apr 18-May 31-May 30-Jun 31-Jul 23-Aug

PercentNum

ber

# of Aircraft % of Active Fleet

* Idle defined as inactive for the previous seven days

23

Lower Jet-Fuel Prices Have Provided Some Cost Relief, But Rising Again With More Flying

Sources: Energy Information Administration (EIA) Weekly Petroleum Status Report

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2-Ja

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16-J

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31-J

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14-F

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16-M

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30-M

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14-A

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28-A

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27-M

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15-O

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1-D

ec

15-D

ec

30-D

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2020 2019

Price of Jet Fuel (U.S. Gulf Coast, $ per Gallon)

24

Decline in Demand for Air Transportation Has Meant Greatly Reduced Jet-Fuel Consumption

Source: Bureau of Transportation Statistics F41 Schedule P12A, all services

2.4

2.5

(22.

4)

(65.

4)

(66.

3)

(60.

7)

(100)

(80)

(60)

(40)

(20)

0

20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Domestic International Systemwide

% Change YOY in U.S. Airline Industry Fuel Consumption

25

U.S. Airlines Are Facing an Elevated Breakeven Load Factor Throughout 2020In April-September 2020, Even a Load Factor of 100 Percent Would Not Suffice

Source: Wolfe Research estimates and filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United

76 79

124107

91

0

20

40

60

80

100

120

140

2019A 1Q20A 2Q20A 3Q20F 4Q20F

Breakeven Load Factor* (%)

* Calculation excludes CARES Act payroll support program funds

26

Collectively, U.S. Airlines Will Continue to Burn Cash Through the Remainder of 2020Given Lack of Demand (Especially Business Travel), Survival Depends Primarily on Cost Reduction

Source: A4A, BofA Global Research and Wolfe Research

($8)

($7)

($6)

($5)

($4)

($3)

($2)

($1)

$0

2Q avg Jul Aug Sep Oct Nov Dec

Estimated Monthly Cash Burn* (in Billions), U.S. Passenger Airlines

* Ticket and cargo sales - cash operating expenses - cash refunds - capital expenditures - interest expense – repayment of debt

27

Source: Wolfe Research and filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United

Airlines Are Coping by Taking on Billions in DebtTotal Debt Projected to Increase ~50 Percent From End of 2019 to End of 2020

108.

1

105.

4

158.

7

146.

7

138.

0

130.

4

2018 2019 2020F 2021F 2022F 2023F

Year-End Total Debt ($ Billions)

2.0 1.9

3.5

4.44.0

3.6

2018 2019 2020E 2021F 2022F 2023F

Net Interest Expense ($ Billions)

* Net debt divided by EBITDA (earnings before interest, taxes, depreciation and amortization)

“For 2021 and beyond, we anticipate a major deleveraging cycle as the industry will have no choice but to address its significant debt load.” (Deutsche Bank, “Airline Industry Update,” July 1, 2020)

+$53

B

28

In 2020, S&P Has Lowered Its Credit Ratings on Eleven U.S. and Canadian Airlines*Ratings Actions Taken to Reflect Weakened Financial Condition and Heightened Risk

Source: Standard & Poor’s

Alaska Allegiant American Delta Hawaiian JetBlue Southwest Spirit United Air Canada WestJet

15-Mar 24-Aug

BBB+BBBBBB-BB+BBBB-B+BB-CCC+CCCCCC-CCCD

* Publicly traded U.S. carriers in S&P Global coverage universe

A-

29

Zoom’s Market Value Exceeds That of All U.S. Passenger Airlines Combined

Source: Refinitiv via Microsoft Excel

$82

$29

$65$55

$137

0

20

40

60

80

100

120

140

160

Zoom Clorox US Pax Airlines* FedEx UPS

Equity Market Capitalization (Billions)

* Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United

30

With the U.S. Economy Contracting, Unemployment Is Rising

2.2

(4.8)

3.1 3.7

8.6 7.6

2019 2020F 2021F

Real GDP Unemployment Rate

Source: IHS Markit, “Executive Summary: US Economic Outlook” (August 2020)

“On 8 June, the…National Bureau of Economic Research made official what we already knew: February marked the end of the longest…US economic expansion on record…” (June)

“[W]e assume a vaccine becomes available by mid-2021, allowing the economy toaccelerate then. We project growth of 3.1% in 2021 and 4.1% in 2022. GDP surpasses its previous peak in the spring of 2022, andthe economy regains full employment late in 2023…” (August)

31

After 9/11 and the Global Financial Crisis, It Took Years for Air-Travel Demand to RecoverPassenger Volumes Took More Than Seven Years to Recover From the Financial Crisis/Oil Spike

Source: A4A Passenger Airline Cost Index and Bureau of Transportation Statistics (Form 41 Schedule T1)

Four-Quarter Rolling Passenger Volume (Millions) and Operating Revenues (Billions)

$0

$50

$100

$150

$200

$250

0100200300400500600700800900

1,000

4Q00

2Q01

4Q01

2Q02

4Q02

2Q03

4Q03

2Q04

4Q04

2Q05

4Q05

2Q06

4Q06

2Q07

4Q07

2Q08

4Q08

2Q09

4Q09

2Q10

4Q10

2Q11

4Q11

2Q12

4Q12

2Q13

4Q13

2Q14

4Q14

2Q15

4Q15

2Q16

4Q16

2Q17

4Q17

2Q18

4Q18

2Q19

4Q19

2Q20

4Q20

2Q21

4Q21

2Q22

4Q22

2Q23

4Q23

2Q24

4Q24

Passengers Enplaned (Mils) Operating Revenues ($ Bils)

* Passengers enplaned systemwide on U.S. airlines in scheduled and nonscheduled services

9/11

Global Financial Crisis + $100 Oil ?

32

After 9/11 and the Global Financial Crisis, It Took Years for Air-Cargo Demand* to RecoverCargo Volumes Took 10 Years to Recover From the Financial Crisis/Oil Spike

Source: Bureau of Transportation Statistics (Form 41 Schedule T1)

Four-Quarter Rolling Air Cargo Revenue Ton Miles (Billions)

05

101520253035404550

4Q00

2Q01

4Q01

2Q02

4Q02

2Q03

4Q03

2Q04

4Q04

2Q05

4Q05

2Q06

4Q06

2Q07

4Q07

2Q08

4Q08

2Q09

4Q09

2Q10

4Q10

2Q11

4Q11

2Q12

4Q12

2Q13

4Q13

2Q14

4Q14

2Q15

4Q15

2Q16

4Q16

2Q17

4Q17

2Q18

4Q18

2Q19

4Q19

2Q20

4Q20

2Q21

4Q21

2Q22

4Q22

2Q23

4Q23

2Q24

4Q24

* Cargo revenue ton miles (RTMs) flown on U.S. passenger and cargo-only airlines in scheduled and nonscheduled services

9/11 Global Financial Crisis + Oil Spike ?

33

Key Points

» In the first two months of 2020, operating revenues grew more than 5 percent – we were on our way to another record.

» After burning ~$10B per month of cash in late March, U.S. airlines are burning over $5B per month in summer 2020.

» Air travel took 3 years to recover from 9/11 and 7+ years from the global financial crisis. Air cargo took 10 years post-GFC.

» When traffic returns, low-yield (VFR, then vacationers) is likely to return faster than high-yield (corporate) and international, with implications for the pace of revenue recovery, the need for cost reduction/containment, and the return to profitability. Businesses first cut back hiring and travel and entertainment; in a recovery, those are the last things they restore. These travelers are

essential due to how often they fly and the cabins/fares they purchase, among other reasons.

» People will be reluctant to travel – or even to book travel – until there is a strong degree of confidence that the health crisis and associated risks are behind us. The COVID-19 global pandemic constitutes a black-swan public health crisis that will only be solved once an effective vaccine is developed, but vaccines usually take a year or longer to develop.

» In addition to concerns about the spread of the virus and the associated restrictions on the movements of citizens, businesses and consumers are facing a sharp global economic downturn of unknown duration. The economic and consumer psychology effects of COVID-19 are deep and global. High unemployment and reduced HHNW worth + strained government coffers = curtailed travel budgets for households and organizations.

» Once demand has recovered, it will take years for airlines to retire the newly accumulated billions of dollars of debt and toaddress the sizable associated interest expense, limiting their wherewithal to rehire and reinvest.

34