Industry Review: Allocating Capital to Benefit Customers, Employees and Investors

Updated August 11, 2021

https://www.airlines.org/dataset/impact-of-covid19-data-updates/ http://airlines.org/dataset/a4a-presentation-industry-review-and-outlook/ http://airlines.org/blog/the-nature-and-status-of-u-s-airline-competition-beyond-the-80-percent-rhetoric/ https://atwonline.com/aeropolitics/op-ed-how-lower-aviation-fuel-taxes-boost-local-economies U.S. Passenger and Cargo Airlines Facilitate the Safe and Efficient Movement of People and Goods Worldwide, 2019 Facts and Figures

Powering Almost 750,000 28,000 flights direct employees per day across the globe

Carrying 2.5M Moving 58,000 passengers tons of cargo per day to/from per day to/from nearly 80 more than 220 countries countries

Sources: A4A, Bureau of Transportation Statistics, Diio by Cirium and company literature

2 Contents

» Core » Trends in Traffic, Fares, Operations and Financial Performance » Initiatives to Improve Profitability » Affordability, Competition and Access to Air Travel » Reinvestment in People and Product » Customer Satisfaction » APPENDIX

3 As Real Airfares Plunged Since Deregulation, Growth in Flyers Sharply Exceeded Population Ancillary Services Included, 2020 Domestic Air Travel Was ~61% Cheaper Than in 1980

Domestic Round Trip (in 2019 Dollars) Passengers per Capita Up 2.3x (+129%) $800 200 1,100 3.0 190 2.82 $698 1,000 2.8 $700 175 927 900 2.6 $600 150 800

2.4 Capita Per 700 $500 125 2.2 600 $400 100 2.0 500 1.8 $300 75 Millions $274 400 369 1.6 $200 50 300 200 330 1.4 43 $100 25 100 1.2 1.12 $0 0 0 1.0 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030

Fare+Fees Possible Trips on Disposable Income Per Capita Sched Pax U.S. Pop

Source: Bureau of Economic Analysis, Bureau of Labor Statistics and Bureau of Transportation Statistics (DB1B via Airline Data Inc. and T1 scheduled service for U.S. airlines)

4 As Air Travel Has Become Safer and More Accessible, More Americans Have Taken to the Skies 87% of the U.S. Population Has Flown Commercially

Share (Percent) of U.S. Adult Population That Flew… 100 86 87 90 81 80 73 70 63 60 49 45 50 39 40 29 30 21 25 22 20 10 0 1971 1977 1988 1997 2019 2020

Past 12 Months In Lifetime

Sources: Historical A4A air travel surveys conducted by Gallup and Ipsos

5 Even in Best Years, Airline Profitability (Pre-Tax Margin) Lags the U.S. Corporate Average Pre-Tax Profit Margin (%) Gap Widened in 2016-2018, But Narrowed in 2019

25

0

(25)

(50)

(75) 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

U.S. Recession U.S. Passenger Airlines All U.S. Corporations

Source: ATA Annual Reports (1970-1976), A4A Passenger Airline Cost Index (1977-present); Bureau of Economic Analysis Note: Recessions highlighted in gray

6 In the 10 Years Preceding the Pandemic, U.S. Passenger Airlines Achieved Sustained Profitability But Remained Less Than Half as Profitable as the U.S. Private Sector Average

Pre-Pandemic Pre-Tax Profit Margin (%)

34.5 33.4 31.5 29.9 29.8 28.5 25.5 23.3 20.5 21.8 18.7 16.6 15.8 14.6 10.8 9.6 6.0 7.1

McDonald's Rails* Apple Disney Hotels* Starbucks All USA Chipotle Airlines

2010-2019 2017-2019

Sources: Bureau of Economic Analysis, A4A Passenger Airline Cost Index and company SEC filings * Hotels = Choice/Hilton/Hyatt/Marriott/Wyndham; Rails = CSX/Norfolk Southern/Union Pacific

7 In 2020, Travel-Sector Profitability Took a Massive Hit; Overall Corporate Profitability Was Flat Pre-Tax Profit Margin (% of Operating Revenues) 34.6 32.9 32.0 28.6 27.8 25.4 21.5 14.5 14.5 13.8 13.8 9.8 6.3 4.9 3.6 (7.1) (34.3) (58.8)

Chipotle Airlines Disney Starbucks All USA Apple Hotels McDonald´s Railroads

2019 2020

Source: Company SEC filings Note: Airlines = Alaska/Allegiant/American/Delta/Hawaiian/JetBlue/Southwest/Spirit/United; Hotels = Choice/Hilton/Hyatt/Marriott/Wyndham; Railroads = CSX/Norfolk Southern/Union Pacific

8 World Crude-Oil Prices Have Climbed Steadily Since October Spot Price of Brent Crude Oil ($ per Barrel)

$90 81.03 $80 75.17 $70 67.12 $60 $50 $40 $30 $20 $10 18.38 $0 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

Sources: A4A, Energy Information Administration (https://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm) and IHS Markit

9 For U.S. Airlines, the Price of Oil* Is a Significant Determinant of Capacity Growth When Fuel Costs Decline and Finances Improve, Growth Accelerates

10 4.6 5 1.0 1.3 2.0 2.4 0 (5) (1.8) (3.4) (10) (15) (20) Oil Shock Extreme Oil Oil Relief COVID-19 (25) + Weak GDP + Better GDP + Good GDP + Recession (30) (35) (40)

Compound Annual Compound Annual Growth Rate (%) (45) (39.0) 2005-2010 ($75) 2010-2014 ($108) 2014-2019 ($57) 2020 ($42) Domestic Airline Capacity (ASMs) U.S. Economy (Real GDP)

Source: Bureau of Economic Analysis, EIA, IHS Markit and published airline schedules via Diio by Cirium as of Jan. 23, 2021 * Brent crude oil in dollars per barrel, shown next to each time period

10 In 2019, U.S. and Foreign Airlines Offered a Record 3.16M Daily Seats From U.S. Airports In 2019, 2.7 Percent YOY Growth in Flights Helped Drive 3.5 Percent Growth in Seats

Scheduled U.S. Airport Flights/Day (000s) Scheduled U.S. Airport Seats/Day (Millions)

26.1 24.3 24.5 24.8 25.4 20.8

15.8

3.1 3.2 2.7 2.8 2.9 1.9 2.6

2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021

Sources: Diio by Cirium published schedules as of July 9, 2021, for all U.S. and non-U.S. airlines

11 Scheduled Flights From Small Community U.S. Airports* Up 10 Percent From 2015 to 2019 Flights Up 14 Percent at “Small Hub” Airports and 6 Percent at “Nonhub” Airports

7,000 6,512 6,000 5,443 5,123 5,000 2,805 4,657 2,372 4,000 2,322 2,199 3,000

2,000 3,707 3,072 2,801 Average Flights Daily Average 1,000 2,458 0 2005 2010 2015 2019 FAA Small Hub Airport FAA Nonhub Primary Airport

Notes: Recession (Dec-2007–Jun-2009); FAA pilot qualification (1,500-hour) rule effective Jul-2013; pilot flight/duty/rest rule effective Jan-2014 * Per https://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/categories/, U.S. airports with less than 0.25% of annual passenger boardings Sources: Diio by Cirium published schedules as of Jan. 10, 2020, for all airlines providing scheduled passenger service from U.S. airports to all destinations

12 Airlines Have Deployed Larger Aircraft, and Mainline-Only Carriers Have Grown Regionals Now Just 43% of Domestic Departures; Over Half of Those are Large RJs

% of Domestic U.S. Departures by Aircraft Size*

11 11 34 39 37 36 22 18 8 15 23 26 45 38 21 17 2005 2010 2019 2021

≤ 50 51-100 101-150 151+

Source: Diio by Cirium published schedules as of July 9, 2021 * Numbers may not add to 100 due to rounding

13 Almost All U.S. Airlines Have Migrated to Larger Aircraft Domestically Ultra Low-Cost Carriers Operate the Most Seats per Domestic Flight

Average Seats per Domestic Departure by Marketing Airline* 200

175 193 191 187 184 175

150 170 160 155 153 151 150 147 144 125 144 138 136 133 126 123 122 100 119 113 112 111 107 99 102 102 75 94 83 50

2010 2019 2021

Source: Diio by Cirium schedules as of July 9, 2021, for selected marketing airlines * Includes flights operated by regional/express airline partners

14 Domestically, Traditional U.S. Network Carriers Fly Similarly Sized Mainline Equipment Aircraft Size Varies More Widely Across Their Regional Partners

Average Seats per Domestic Departure for Traditional U.S. Network Carriers 175 150 168 167 166 165 165 160 159 159 155 152

125 147 143 100 75 76 76 74 69 67 67

50 64 60 60 56 52 25 51 0 Alaska American Delta United Alaska American Delta United MAINLINE OPERATIONS REGIONAL PARTNER OPERATIONS

2010 2019 2021

Source: Diio by Cirium schedules as of July 9, 2021

15 Preceding the Pandemic, Nonstop Domestic Service Was More Prevalent Than Ever Before Share of Busiest Markets With a Nonstop Service Option Rose From 69% in 1990 to 90% in 2019

Share (%) of Top 2000 Domestic Markets (Origin-Destination Airport Pairs) With Nonstop Service* 100 90.1 90 84.5 80.7 78.8 80 75.3 69.2 70.8 70 60 50 40 30 20 10 0 1990 1995 2000 2005 2010 2015 2019

Source: Compass Lexecon analysis of DOT O&D, OAG and T-100 and Form 298C * Top 2000 markets accounted for 80% of domestic O&D passengers in 2019; nonstop = as at least 40 round-trip flights per quarter

16 From 2000-2019, the Number of Competitors per Domestic Trip Rose From 3.33 to 3.46 In 2019, the 500 Busiest City Pairs—Accounting for 62% of Passengers—Averaged 3.8 Competitors

Average Number of Competitors* in Domestic U.S. Markets (O&D City Pairs)

4.90 4.74 4.30 3.80 3.66 3.33 3.39 3.46 3.53 7% of Pax7% Pax of 12% Pax of 29% Pax of 62% Pax of 76% Pax of 95%

2000 2010 2019 Top 10 Top 25 Top 100 Top 500 Top 1000 Top 5000

Made possible by 1) lack of entry barriers allowing rapid expansion of lower-cost carriers and 2) mergers of complementary networks enabling those carriers to offer competitive connecting service on more city pairs and new nonstop service into markets they previously did not serve.

Source: Compass Lexecon analysis of DOT Data Bank 1B (O&D Survey data) * Carrying at least 5% of O&D passengers in the city pair; average number of competitors is passenger-weighted across city pairs

17 By Combining Complementary (Rather Than Overlapping) Networks, Merged Carriers Were Able to Offer Comprehensive Networks, Providing Them With a Platform for Growth

Pre-Merger Delta (2008) Pre-Merger Northwest (2008) Post-Merger Delta (2010)

Pre-Merger United (2009) Pre-Merger Continental (2009) Post-Merger United (2012)

Pre-Merger US Airways (2013) Pre-Merger American (2013) Post-Merger American (2016)

Source: Compass Lexecon analysis of DOT Data Bank 1B and T-100 * NJ/NY and DC/MD/VA are grouped. Maps show the states in which at least 10% of domestic O&D passengers travel on the respective carrier.

18 Global Network Carriers Have Grown Aggressively at Each Other’s Hubs Competitive Hub Growth Averaged 61% From 2010 to 2019 – Almost Three Times U.S. GDP Growth

Domestic Capacity* Growth (%) at Each Other’s Hubs: 2010 to 2019 180 160 167.1 140 120 Real U.S. GDP 100 Growth = 21.6% 106.2 80 60 70.0 69.0 59.7 40 49.8 49.0 43.1 42.9 36.7 38.5 20 27.5 32.5 20.2 19.7 25.2 0

Source: Compass Lexecon analysis of OAG published schedules * Domestic scheduled available seat miles (ASMs)

19 The Comprehensive Networks of Global Network Carriers Enabled Them to Provide Service to More Than 130 Small Communities in 2019 That Were Not Served by Lower-Cost Carriers

Source: Compass Lexecon analysis of OAG schedule data for 2019

20 Competition in Select City Pairs: Airline Share of O&D Passengers in 2019 vs. 2007 More Diversity of Business Models and Balanced Distribution of Market Share*

L.A. (BUR/LAX/LGB)-Seattle (PAE/SEA) Boston-Cleveland (CAK/CLE) 2007 2019 2007 2019 Alaska 63.7 Alaska 56.5 Continental 63.2 JetBlue 46.6 United 17.1 Delta 22.3 AirTran 29.5 Delta 28.4 Southwest 7.9 JetBlue 6.5 Spirit 12.8 American 6.5 Southwest 5.0 United 6.3

Chicago (MDW/ORD)-Sacramento Memphis-Orlando (MCO/SFB) 2007 2019 2007 2019 United 45.1 United 40.6 Northwest 60.6 Southwest 46.0 Southwest 41.8 Southwest 35.3 AirTran 22.2 Delta 15.5 US Airways 5.0 American 17.6 Frontier 8.7 Allegiant 14.7 Delta 5.6 Frontier 13.5 American 8.1

Source: DOT Data Bank 1B (nondirectional data) via Diio * Showing only those airlines with at least 5% of O&D share in each year

21 Global Network Carrier Share Fell From 73 Percent in 2000 to 52 Percent* in 2020 In 2020, Ultra Low-Cost Airlines Carried 15 Percent of Domestic Passengers

Share (%) of U.S. Domestic O&D Passengers by Airline Business Model

2 2 2 2 3 3 3 4 4 4 5 6 6 6 7 8 9 9 10 4 5 6 7 7 7 8 11 15 9 10 10 11 11 12 13 13 18 13 13 13 13 13 19 20 21 21 21 11 22 23 24 25 25 25 25 24 24 24 24 24 23 22 22

73 71 70 68 68 67 65 62 60 59 59 57 57 57 56 55 54 53 53 54 52 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

American/Delta/United Southwest ALK/HA/JBLU ULCCs* Other

Source: DOT Data Bank 1B (each airline shown on a marketing-carrier basis and tracked with its respective merged/acquired predecessors [e.g., UA/CO]) via Diio Mi * Allegiant/Frontier/Spirit/Sun Country

22 Lower-Cost Airlines Now Carry a Significant Share of Domestic Passengers in Largest Cities Low-Cost, Ultra Low-Cost and Niche Carriers Have Increased Their Share Across the Country

Lower-Cost Carrier Share (%) of U.S. Domestic O&D Passengers by Metro Area* 70

66 60 2000 2019 63 63 61 61

55 50 52 51 48 50 48 45 45 40 42 43 39 36 35 35 33 33 30 31 30 29 28 28 28 28 26 26 25 20 22 23 19 16 17 14 14 10 12 12 4 8 7 0 ATL BOS CLT CHI DAL DEN DTW HOU LAX MIA MSP NYC ORL PHL PHX SAN SLC SFO SEA STL TPA WAS

Source: Compass Lexecon analysis of DOT Data Bank 1B *AirTran/Alaska/Allegiant/ATA/Frontier/Hawaiian/JetBlue/Midway/National/Pro Air/Southwest/Spirit/Sun Country/Vanguard; metro areas may contain multiple airports

23 Domestic U.S. Passengers Have Greater Access to Lower-Cost Carriers Than Ever Before Up From 25% in 1990 to 87% in 2019

Percentage of Domestic O&D Passengers With Access to Lower-Cost Carriers* 100 90 84.4 87.1 86.9 80 78.0 70 62.3 60 50.0 50 40 30 24.7 20 10 0 1990 1995 2000 2005 2010 2015 2019

* Carrying at least 5% of O&D passengers in the city pair; Lower cost carriers include Southwest, AirTran, JetBlue, Frontier, Allegiant, Spirit, Sun Country, Alaska, Virgin America, Independence Air, National, Morris Air, Accessair, Pro Air, Reno Air, Valujet, ATA, Eastwind, Vanguard, Skybus, Western Pacific, Air South, Kiwi, Midway Airlines and Hawaiian. Includes merged carriers in all years. Source: Compass Lexecon analysis of DOT Data Bank 1B (O&D Survey data)

24 Among 11 U.S. Airline Brands, Lower-Cost Carriers Have Been Growing the Fastest Allegiant and Spirit Have Grown Fivefold and Threefold, Respectively, Since 2010

Change (%) in Systemwide Scheduled ASMs — 2010 to 2021

430

180 210 116 52 54 57 12

(24) (14) (10)

Source: Diio by Cirium schedules as of August 6, 2021, for selected marketing airlines including merged/acquired predecessors

25 Lower-Cost U.S. Carriers Are Serving More and More Domestic Markets Competitive Presence of Low-Cost and Ultra Low-Cost Carriers Continues to Expand

Number of U.S. Airports Served*

128

104 104 106 104 90 86 74 63 65 60 53 47 49 30 33 21 21 14 19 14

Alaska Allegiant Frontier Hawaiian JetBlue Southwest Spirit

2005 2015 2021

Source: Diio by Cirium schedules as of July 9, 2021, for selected marketing airlines * July 15-21 of each year

26 In 2020, Inflation-Adjusted Domestic Fares/Fees Fell for Sixth Consecutive Year From 2010-2020, the Real Price* of Domestic Air Travel — Including Ancillaries — Fell 24 Percent

Round-Trip Ticket Price (in $ 2020)*

421 426 429 437 423 401 10 9 9 10 13 10 396 13 13 12 13 383 9 9 373 372 13 13 9 14 8 8 14 16 306 8 21

396 401 404 412 398 375 371 359 351 348 277

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Airfare/Seat Selection/Upgrades Bag Fees Change Fees

Source: A4A analysis of DOT Data Bank 1B (all cabins and fare basis codes) and DOT Form 41 via Airline Data Inc. (airlinedata.com) * Excludes taxes; CPI rose 1.2% in 2020

27 In Contrast to Domestic Air Travel, Prices for Many Leisure and Hospitality Goods and Services Have Risen Much Faster Than Overall Inflation

% Change in Nominal Price: 2010 to 2019 60

50 57

40

30 34 29 20 26 24 23 U.S. CPI: 17 10 16 9 0 4

Sources: AllEars.net, Team Marketing Report, Bureau of Labor Statistics, National Association of Theatre Owners, DOT Data Bank 1B and T-100. Notes: Disney World Magic Kingdom one-day/adult/regular season tickets, nonpremium National Football League game tickets, BLS Index for "Food Away From Home“, BLS Index for lodging (hotels/motels/inns), nonpremium Major League Baseball game tickets, BLS U.S. Consumer Price Index (CPI-U), one adult movie ticket, and round-trip domestic fares plus ancillary (excludes taxes; includes revenue from reservation changes and baggage).

28 From 2010 to 2019, U.S. Passenger Airlines Added More Than 71,000 Jobs

U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s) 525

500 520.0 2000-2010 475 -141,367 (27%) 2010-2019 450 +71,473 (19%) 450.1 425

400 416.3

375 393.5 378.6 350 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines

29 In the Five Years Preceding the Pandemic, U.S. Passenger Airline Job Growth Outpaced Overall U.S. Job Growth; In the Pandemic, Airline Jobs Have Trailed the U.S. Recovery

Year-Over-Year Change (%) 15 10 5 0 (5) (10) (15) U.S. Passenger Airlines Overall USA (20) (25) Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22

Source: Bureau of Labor Statistics (U.S. nonfarm employment, CES0000000001) and Bureau of Transportation Statistics (U.S. scheduled passenger airline FTEs)

30 From 2010-2019, U.S. Passenger Airlines Spent $424B on the Workforce and $143B on Fleet and Other Investments While Retiring $91B in Debt and Returning $56B to Shareholders

2010 through 2019 $ Billions Cash Flow From Operations 189

Employee Wages and Benefits 424

Fleet and Other Investments (“CapEx”) 143

Debt Retirement 91

Dividends 8

Share Repurchases 48

Source: Bureau of Transportation Statistics (Form 41 filings), SEC filings (10-K annual reports) and A4A research

31 U.S. Passenger Airlines Spent $424 Billion on Salaries/Wages/Benefits in 2010 Through 2019 Average Compensation per Employee Rose Approximately $46K (57 Percent) From 2009 to 2019

Employee Wages and Benefits $56.8 Total ($Bils) Per FTE ($000) $50.3 $52.7 $46.7 $46.9 $42.6 126.1 $38.3 $35.8 118.1 119.9 $33.3 $35.6 113.6 112.7 $31.0 $32.3 107.8 99.5 92.4 94.0 85.3 86.5 80.4

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: A4A Passenger Airline Cost Index

32 U.S. Airlines Have Been Spending Billions on Planes/Facilities/Ground Equipment/Technology Collectively, U.S. Passenger Carriers Took Delivery of More Than 1,000 New Aircraft in 2017-2020

Capital Expenditures (Billions) for U.S. Passenger Airlines $25 20.7 19.4 $20 18.4 18.8 17.3

$15 14.0 12.5 13.0 9.8 $10 8.5 6.6 5.2 $5

$0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F

* Includes payments made for aircraft and other flight equipment, ground and other property and equipment (e.g., vans, air stairs, lavatory trucks, deicing vehicles), airport and other facility construction and information technology Source: SEC filings of Alaska, Allegiant, American, Delta, Frontier, Hawaiian, JetBlue, Southwest, Spirit, United and merged/acquired predecessors

33 From 2010-2019, Following the Financial Crisis, U.S. Airlines Retired ~$91 Billion in Debt and Returned ~$56 Billion to Shareholders to Lure and Retain New Equity Investors

Retirement of Long-Term Debt ($ Billions) Returns to Shareholders ($ Billions)

13.1 18.9 10.5 8.8 9.3 7.8 11.2 12.1 10.5 9.8 9.1 8.5 7.5 7.9 8.0 4.6 6.1 2.1 1.2 0.1 0.3 0.6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Stock Repurchase Cash Dividends

Source: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors * Payments on long-term debt and capital lease obligations

34 In 2015-2019, Relative to Other U.S. Industries, Airlines Reinvested Far More Cash Into the Business (via Capital Expenditures) Than They Spent on Shareholders (“Capital Returns”)

Dividends & Stock Repurchases Investments in the Business (“CapEx”) Spending Relative (%) to Operating Cash Flow Spending Relative (%) to Operating Cash Flow 125 107.9 100 95.7 78.3 78.0 75 67.0 69.4 71.4 58.6 54.5 50 42.8 31.9 26.8 25.8 25.4 22.9 23.9 25

0 Rails Tech Rails Tech Retail Retail Hotels Hotels Cruise Cruise Airlines Airlines Industrials Industrials Restaurants Restaurants

Source: Goldman Sachs, “Cash Flow Benchmarking by Sector” (March 2020), with data from CapIQ and Bloomberg compiled for 2015-2019 * Industry medians for 2015-2019

35 Investments in Aircraft, Facilities, Ground Vehicles and IT on the Rise for U.S. Cargo Airlines

Capital Expenditures ($ Billions) for Atlas/FedEx/UPS $14 12.7 12.2 11.8 $12 10.9 $10 8.1 $8 6.7 7.0 6.2 6.0 6.4 $6 4.3 $4 $2 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Aircraft and Related Equipment Other*

Source: SEC filings of Atlas, FedEx and UPS * Facilities, vehicles, information technology, package handling and ground support equipment

36 J.D. Power: North America Airport Satisfaction* Climbs to Record High Latest Results Released Sept. 23, 2020 “This unprecedented leap in satisfaction is driven by significant improvements in satisfaction with the check-in and in the food, beverage and retail factors. Passengers also have provided airport terminals with high marks for cleanliness, less crowding and lower noise levels…”

800 Note: Scale = 0-1000; study not conducted in 2009/2011-2014 Six factors (in order of importance):

750 784 • Terminal Facilities* 762 761 • Airport Arrival/Departure 749

700 731 • Baggage Claim 725 • Security Check 690 650 689 • Check-In / Baggage Check 675 • Food / Beverage / Retail

600 * Concourses, lounges, signage, restrooms, gate areas 2007 2008 2010 2015 2016 2017 2018 2019 2020

*Now in its 15th year, the study is based on 26,058 completed surveys from U.S. or Canadian residents who traveled through at least one U.S. or Canadian airport and covers both departure and arrival experiences (including connecting airports) during the past 30 days. Travelers evaluated either a departing or arriving airport from their round-trip experience. The study was fielded from August 2019 through July 2020.

Source: : J.D. Power North America Airport Satisfaction StudySM

37 ACSI 2021 Airline Customer Satisfaction Index Reaches All-Time High Ease of Check-In, Mobile Apps, Websites Rank Highest

Customer Satisfaction Index for Airlines* Ease of check-in 81 80 Mobile app quality 81 78 Mobile app reliability 81 76 Website satisfaction 81 76 Baggage handling 80 74 Courtesy of flight crew 80 Ease of making reservation 80 100 72 Timeliness of arrival 80 70 Boarding experience 79 Courtesy of gate staff 79 68 Loyalty program 79 Scale = 0 - 66 Cabin and lavatory cleanliness 78 Call center satisfaction 77 64 Range of flight schedules 77 62 Overhead storage 75 Food and beverage: premium 75 60 Food and beverage: free 74 Inflight entertainment 74

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Seat comfort 73

Note: ACSI and its logo are Registered Marks of the University of Michigan; see http://www.theacsi.org/the-american-customer-satisfaction-index Source: American Customer Satisfaction Travel Report 2020-2021 (April 27, 2021) reflect surveys conducted between April 2020 and March 2021 * Commenced in 1994

38 J.D. Power: North America Airline Customer Satisfaction Climbs to Record High Latest Results Released May 2021

“The airline industry adapted to a most unusual year by simplifying ticketing processes, waiving change fees and baggage fees which were key to persuading people to fly during the pandemic. Airline personnel rose to meet the challenges of a drastically altered travel environment. Maintaining that level of flexibility and recognition of individual passenger needs will be a strategic advantage for airlines that want to set themselves apart in passenger satisfaction as travel volumes start to recover.” (Michael Taylor, J.D. Power, May 12, 2021)

1,000 Aircraft Baggage Boarding Check-in Cost and fees Flight crew In-flight services Reservation

800 819 792 773 762 600 756 726 717 712 695 692 687 683 681 673 668 658 400

200

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Note: The 2021 study is based on responses from 2,309 passengers who flew on a major North American airline between August 2020 and March 2021. Source: J.D. Power North America Airline Satisfaction StudySM

39 Denied Boardings (ex-2019) and Customer Complaints (ex-Pandemic) Trending Down Grounding of B737 MAX Largely Responsible for Anomalous 2019 Increase in Denied Boardings

Involuntary Denied Boardings per 10K Pax* DOT Customer Complaints per 100K Pax* 2.0 12.0 9.92 10.0 1.5 B737 MAX 8.0 1.09

0.99 Grounded 3/13 0.92 0.92

1.0 0.82 6.0 0.76 0.62 4.0 0.40

0.5 1.90 1.52 0.24 1.42 1.38 1.34 1.20 1.18 1.13 0.99 0.98 0.14

0.10 2.0 2.89 0.08

0.0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 1Q21 1Q21

Source: DOT Air Travel Consumer Report (http://www.dot.gov/airconsumer/air-travel-consumer-reports) * U.S. passenger airlines

40 41 Heightened Competition and Substitutes to Air Travel Have Put Downward Pressure on U.S. Airlines’ Revenue Footprint Relative to the Size of the U.S. Economy

U.S. Passenger Airline Revenues* as Share of U.S. Gross Domestic Product 1.20% 1980-2000, 1.04% 1.00%

0.80%

0.60%

0.40% 0.37% 0.20%

0.00% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Source: A4A Passenger Airline Cost Index * DOT Form 41 systemwide operating revenues

42 U.S. Airlines Have Continued to Move More People and Goods Over Longer Distances

Revenue Passenger Miles (Billions) Cargo Revenue Ton Miles (Billions)

1,200 100 50 100 90 45 90

1,000 80 80 40

70 70 800 35 60 30 60 600 50 25 50 40 20 40

400 30 30 15

20 20 200 10 10 5 10 0 00 0 00 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030

Source: U.S. Bureau of Transportation Statistics (T1 systemwide for U.S. airlines – all services) Note: Recessions highlighted in gray

43 Especially Since 2000, Changes in the Price to Fly a Mile on U.S. Carriers Have Correlated Closely With Changes in the Cost of Inputs to Airline Production

15.00 250 Cost Index (2000=100) Index Cost 14.00 200

13.00 150

12.00 100

11.00 50 Yield (Cents Yield per RPM)

10.00 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Passenger Yield (Left Axis) Airline Cost Index (Right Axis)

Source: A4A Passenger Airline Cost Index

44 In 2011-2019, Average Load Factor Exceeded the Airlines’ Breakeven Requirement

Load Factor (%) 140

120 Breakeven Actual 118.1 100 82.8 83.8 77.2 80 68.0 81.3 57.1 61.4 78.7 58.8 60 71.1 62.6 66.2 56.7 40

20

0 1971-1980 1981-1990 1991-2000 2001-2010 2011-2014 2015-2019 2020

Source: A4A Passenger Airline Cost Index Note: Load factor = revenue passenger miles (RPMs) ÷ available seat miles (ASMs)

45 Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares “Southwest Effect” Remains in Force – Brueckner/Lee/Singer

. A December 2016 update of the frequently cited Brueckner/Lee/Singer study (2013) demonstrated that the “Southwest Effect” remains in force:

o In the period 3Q 2015 through 2Q 2016, Southwest’s presence on a route lowered fares 21.2 percent

o In addition, the update found that many smaller but rapidly expanding carriers put substantial downward pressure on global network carrier domestic air fares, e.g.:  Alaska ↓ 24.0 percent  JetBlue ↓ 25.4 percent  Spirit ↓ 18.5 percent

Source: Jan K. Brueckner, Darin Lee and Ethan S. Singer, “Airline competition and domestic US airfares: A comprehensive reappraisal,” Economics of Transportation, 2013

46 Low-Cost Carriers In Particular Continue to Put Substantial Pressure on Fares “Southwest Effect” Remains in Force – Beckenstein/Campbell

“The presence and magnitude of the Southwest Effect has endured through time. Even today, when new markets have frequently been affected already by Southwest’s fares on connecting services, the Southwest Effect still shows, on average, an additional market fare reduction of 15% and corresponding traffic increase of 28% to 30%, from the introduction of nonstop service by Southwest.”

“The Southwest Effect is alive and well. We find no evidence that the Southwest Effect has been eroded or overtaken in significance or magnitude by other airlines… Our study finds that Southwest produces $9.1 billion annually in domestic consumer fare savings. One-way average market fares are $45 lower when Southwest serves a market nonstop than when it does not. If Southwest provides only connecting service in a city-pair market, average market fares are $17 lower (one-way) than when there is no competitive effect from Southwest.”

Source: Alan R. Beckenstein, Ph.D., Professor of Business Administration at the Darden School of Business, University of Virginia; and Brian M. Campbell, Ph.D., Principal, the Campbell-Hill Aviation Group, LLC, “Public Benefits and Private Success: The Southwest Effect Revisited,” Darden Business School Working Paper Number 206 (August 2017)

47 From 2017-2019, Medium-Sized U.S. Airports Grew Faster Than Large U.S. Airports Percent Change in Scheduled Available Seat Miles at Top U.S. Airports: 2017 to 2019

90 81 80

70

60 53 50 44 40 34 31

30 27 25 22 20 20 20 18 18 16

20 15 15 15 14 13 12 12 12 11 11 11 11 11 10 10 9 9 9 9 8 8 8 7 7 7 7 6 6 6 6 6 5 10 5 5 5 4 4 3 3 3 3 3 2 2 0 (2) (3) (10) (4) PIT PBI IAD IAH FLL IND JFK MIA MCI STL ATL JAX BWI CLT LAS LAX SJC SJU BDL DAL PHL SLC CLE SAT TPA HNL BUF LGA SEA SFO PDX PHX SNA SAN BNA AUS ONT BUR DCA SMF ANC OAK DEN BOS ABQ MKE RDU MSP CVG MSY HOU ORD DFW DTW OMA CMH MCO EWR OGG RSW MDW

Source: Diio by Cirium published schedules as of Jan. 10, 2020, for all airlines providing scheduled service

48 E-Commerce and Rapid Fulfillment Redrawing the Map for Distribution of Air Cargo Cincinnati (CVG), Baltimore (BWI), Rockford (RFD) and Ontario (ONT) Have Grown the Fastest

% Change in Outbound Cargo Payload at Largest U.S. Cargo Airports, 2010-2020

318

172 151 116 98 53 65 36 26 24 36 9 18 7 8 14 17 5 9 (4) (3) (6) (26) (19) (12) IAH IND JFK MIA ATL BWI LAX PHL SDF HNL SEA RFD SFO PHX PDX ONT ANC DEN OAK CVG AFW ORD DFW EWR MEM

Source: DOT T100 segment data

49 In the Deregulated Period, U.S. Airline “Earnings” Have Been Cyclical and Volatile Cumulative Net Income for 1979-2019 = $50 Billion (1.2 Percent of Revenues)

125 30 103.8 100 20

75 3.8 10 Net (%) Margin 50 6.2 0 0.4 25 (3.3) 20.6 (10) 1.8 (6.3) 0 (20) (25) (11.4) (30) (50) (35.2) (40) Net Income ($ Billions) (75) (65.0) (45.7) (50) (100) (60) 1979-1989 1990-1994 1995-2000 2001-2009 2010-2019 2020

Net Income Net Margin

Source: A4A Passenger Airline Cost Index

50 As U.S. Airlines Generate Sufficient Cash from Operations, They Are Better Able to Fund Capital Improvements, Improve Customer Experience and Enhance Shareholder Value

$40 Free* (FCF) Operating $30 $20 $10 (Billions) 11.1 10.5 6.8 9.8 $0 4.5 3.0 (0.0) 0.6 2.5 1.5

($10) (24.8)

Cash Flow ($20) ($30) ($40) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: SEC filings of AAL/ALGT/ALK/DAL/HA/JBLU/LUV/SAVE/UAL and merged predecessors * Operating cash flow minus capital expenditures

51 In February 2020, U.S. Airline Headcount Reached Its Highest Level Since May 2001 From April 2010 to February 2020, U.S. Airlines Added ~191,000 Jobs – a 34 Percent Increase

Full-Time + Part-Time Employees at U.S. Passenger and Cargo Airlines (000s)

800 753.6 760.8 749.5 753.4 690.0 709.7 700 666.8 669.2

600 562.3

500

400

300

200

100

0 Dec-00 May-01 Dec-01 Apr-10 Dec-19 Feb-20 Oct-20 Dec-20 Jun-21

Source: Bureau of Transportation Statistics based on payroll near the 15th of the month Note: FedEx acquired TNT on May 25, 2016, increasing headcount by approximately 55,000

52 53