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Art Torno Senior Vice President Mexico, the Caribbean and Latin America Global Competition in the Airline Industry.

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Presentation on theme: "Art Torno Senior Vice President Mexico, the Caribbean and Latin America Global Competition in the Airline Industry."— Presentation transcript:

1 Art Torno Senior Vice President Mexico, the Caribbean and Latin America Global Competition in the Airline Industry

2 Agenda Global Aviation Overview Factors Affecting the Airline Industry Integration with US Airways 2014 Results Product Investment Cargo Q & A

3 Aviation provides the only rapid worldwide transportation network, which makes it essential for global business and tourism. It plays a vital role in facilitating economic growth, particularly in developing countries Airlines transport over 3.0 billion passengers annually. Air transport facilitates world trade, helping countries participate in the global economy by increasing access to international markets and allowing globalization of production. The total value of goods transported by air represents 35% of all international trade. Global Aviation Overview A major contributor to global economic prosperity

4 1,397 Commercial airlines 3,864 Airports with scheduled commercial flights 25,332 Number of commercial aircraft in service 3.5 Billion Passengers that will fly in Billion Gallons of jet fuel used by commercial airlines in Million Jobs supported by aviation worldwide 8.7 Million People that work directly in the aviation industry 21st If aviation were a country, it would rank 21 st in size by GDP $606 billion Of GDP per year are generated by the aviation industry $2.4 trillion Aviation's total global impact including direct, indirect and the catalytic effects of tourism $18.5 billion Of goods travel by air each day – 1/3 of all world trade by value 3.4% Of the global economy relies on aviation Global Aviation Overview By the numbers Source: ATAG and IATA

5 Global Competition Passengers Carried

6 Source: ATAG Global Aviation Overview Passenger Traffic by Region

7 Unlike other transport modes, the air transport industry pays for a vast majority of its own infrastructure costs (runways, airport terminals, air traffic control), rather than being financed through taxation and public investment or subsidy (typically the case for roads and railways). As of Jan there are airport construction projects to the value of $543 billion globally. The benefits to society of research and development spending by the aerospace industry are estimated to be much higher than in manufacturing as a whole – every $100 million of spending or research eventually generates additional GDP benefits of $70 million year-after-year. Factors Affecting the Airline Industry Heavy Investment in Vital Infrastructure

8 In spite of airlines’ enormous contribution to the economy, air travel is taxed at a higher federal rate than alcohol and tobacco – products that are taxed to discourage their use Since 1990, the number of aviation taxes/fees has increased from 6 to 17; the total amount of taxes paid by the industry has grown from $3.7 billion to $17 billion over the same period The tax burden on a typical $300 round-trip ticket has nearly tripled since 1972, rising from $22 (7%) to $62.98 (21%) Airlines and their customers contribute $10 to $12 billion annually to the Airport and Airway Trust Fund; general aviation contributes about $200 million Airlines and their customers incur $3.4 - $3.8 billion per year in federally imposed security taxes/fees Higher taxes raise costs. Typically, airlines cannot pass along these costs. Increases in the cost of air travel often result in decreases in travel demand and air service, which harms consumers through upward pressure on fares and fewer markets being served, slows economic growth and negatively impacts jobs Factors Affecting the Airline Industry Taxation of U.S. Airlines Source: A4A

9 How Low Will Crude Oil Go? Source: Bloomberg

10 Factors Affecting the Airline Industry Industry Consolidation

11 Factors Affecting the Airline Industry Industry Consolidation 11 Synergy estimates are conservative relative to targets established in precedent transactions $2.0B* $680M $1.0B - $1.2B >$1.0B** *Delta/Northwest announced merger with $1.1B in synergies and revised upward to $2.0B after closing ** 2015 Synergies estimate

12 Asia/Pacific 5 Destinations Mexico 20 Destinations South America 23 Destinations Europe / Middle East 21 Destinations Caribbean 31 Destinations Central America 10 Destinations Canada 9 Destinations Diio 2013 published schedules as of January 25, 2013 US Airways / AA Merger World Class Global Network

13 Domestic Network 218 Destinations 682 Routes Diio 2013 published schedules as of January 25, 2013 US Airways / AA Merger Complementary Domestic Network

14 Highlights of a Record Breaking Year

15 2014 Consolidated Passenger RASM Consolidated PRASM increased by 2.2 percent in 2014, in line with other network carriers Source: Company reports

16 2014 Mainline CASM Despite labor cost increases in 2014, mainline CASM excluding fuel and special items was up 2 percent YOY, ahead of Delta and Southwest Source: Company reports. Excludes net special items. Please refer to the company’s GAAP to Non-GAAP reconciliation on SEC Form 8-K issued January 27, 2015

17 2014 Pretax Margin American’s 2014 pretax margin was 9.8 percent, up 4.3 pts. YOY. Source: Company reports. Excludes net special items. Please refer to the company’s GAAP to Non-GAAP reconciliation on SEC Form 8-K issued January 27, 2015

18 Our Fleet In 2014, American Airlines took delivery of nearly 100 aircraft. In 2015, American will take delivery of 116 aircraft, giving it the youngest fleet of any U.S.-based network carrier, with an average aircraft age of 12.3 years. Orders include the Airbus A320 family, A s, Boeing 737 MAX, ERs and 787s, which will make American's fleet even younger, more modern and fuel efficient.

19 Fleet Renewal American will have one of the most modern and fuel efficient fleets in the industry Beyond 2018Total A320 Family A320 Neo A B B737-8 Max B ER224 B787 Family ERJ CRJ Total

20 $2 Billion In new investments in products and branding 500+ New aircraft arriving in the coming years 116 New aircraft arriving this year 2–4 years General timeline to design/build an aircraft $250k Cost of an international first class seat ( type of first class suites) 4 billion Gallons of fuel the airline will consume in 2015 $43.44 million Increase in expenses for each cent that fuel goes up on a per gallon basis 35% Improvement in fuel efficiency generated by replacing MD-80s with 737 and Airbus A320 family aircraft Fleet Renewal By the numbers

21 An Improved Travel Experience +$2 Billion in new investment in products and branding, include: New Seats: American is upgrading the customer experience on several aircraft types that customers already fly today, including the Boeing , , 757 and A319. The investments mean that every First Class and Business Class seat on nearly every American Airlines widebody jet will feature fully lie-flat and direct aisle access seats. Airport Experience: American is improving the customer's passage through the airport by removing barriers between customers and agents, reducing queues and congestion, and keeping tech-savvy customers connected with charging stations for their devices. Admirals Club customers will see new and expanded complimentary food options, refurbished restroom and shower facilities, toiletry amenities, and improved technology for customers to use before flights.


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