American Airlines Rhett Workman Managing Director, Government - PowerPoint PPT Presentation

American Airlines Rhett Workman Managing Director, Government & Airport Affairs April 5, 2017

Industry Overview

The U.S. Airline Industry: Fundamental Change If a farsighted capitalist had been present at Kitty Hawk, he would have done his Airlines have been successors a large favor a death trap for by shooting Orville down. investors. February 2008 May 2013 November 2016: Warren’s investment firm Berkshire Hathaway amassed a $1 billion investment in American Airlines

Airlines Are Closing the Gap to U.S. Corporate Profitability AVERAGE Pre-Tax Profit Margin (%) 20 15 10 5 0 (5) (10) (15) U.S. Recession (20) (25) 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 YTD16 2018 2020 Source: ATA Annual Reports (1970-1976), A4A Passenger Airline Cost Index (1977-present); Bureau of Economic Analysis NIPA Table 1.14

Reinvestment in Customer Experience U.S. Passenger Airline* Capital Expenditures ($ Billions per Month) 1.43 1.41 1.29 1.16 1.15 1.04 0.82 0.64 0.55 0.47 0.43 2016 2000 2001 2002 2003-09 2010 2011 2012 2013 2014 2015 YTD16 * SEC filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and Virgin America

U.S. Airlines are Putting Their Profits Back Into the Business  Renewing fleets, improving the product at all stages of travel  Adding capacity  Adding staff  Improving airports  Increasing job security  Restoring/increasing employee wages and benefits  Shoring up pensions/retirement accounts  Reducing debt  Returning cash to shareholders  Buying back stock airlines.org  Issuing dividends

North American Airline Satisfaction Climbs to 10-Year High “The airlines are clearly listening to their passengers and are taking action. As a result, we see satisfaction rising across all touch points of the passenger experience. Airlines are making positive strides by adding value to its products and services with newer and cleaner planes, better in-flight services, improving on-time arrivals and bumping fewer passengers from their flights.” -- Rick Garlick, J.D. Power (May 11, 2016) 750 Up 68 points from 2009-2016 726 730 717 Note: Scale = 0 to 1000 712 710 695 692 687 683 681 690 673 668 670 658 650 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: J.D. Power 2016 North America Airline Satisfaction Study (http://www.jdpower.com/press-releases/2016-north-america-airline-satisfaction-study)

Air Travel is Still a Great Bargain! 350 Airfare* Food Transit Baseball (MLB) Movie 325 * Domestic round-trip average, including bag and change fees 300 Price Index: 1990 = % Change 275 Baseball Game +232 250 Movie Ticket 100 100 225 Public Transit 88 200 Food 87 Airfare* 34 175 150 125 100 75 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: A4A, BTS Data Bank 1B, Federal Reserve Bank of St. Louis, National Association of Theatre Owners, Team Marketing Report

American Airlines Update

American Airlines 2017 Airline of The Year

Unprecedented Investment in Product $22.7 Billion Total Capital Expenditures 2014 - 2017 $6.2 $5.7 $5.5 $5.3 $4.3 $3.5 $3.4 $3.2 $3.2 $2.7 $2.2 $2.0 2014 2015 2016 2017E Non-Aircraft Aircraft Source: SEC filings and other company guidance

Investments in Our Fleet  By the end of 2017, we will have inducted 395 new airplanes into the fleet since the merger, while retiring 391 older aircraft – giving us the youngest fleet of the major airlines . . . one new plane every five days. Average Fleet Age 18 16.6 yrs 16.8 yrs 14.4 yrs Years 14.0 yrs 13 13.3 yrs 10.4 yrs 10.4 yrs 9.8 yrs 8 2012 2013 2014 2015 2016 2017E Source: Company filings and Ascend data

Enhanced Customer Notifications  Deliver customers the right information, at the right time, through the right channel Proactive Baggage Mobile Boarding Text Updates Dynamic Reaccom Notification

Enhancing our Product: Airports DCA Express Terminal PHL OTG Boarding Gates New lounges; refreshed airport experience LGA Terminal Rebuild

Investing in the Future: Product Investments Planned Completion Lie-flat seats 2017 2018 Wi-Fi Lounge renovation 2018 2020 Premium Economy 2021 Power outlets 15

Investing in Our Team  10,000 additional team members  38% average pay rate increase per team member  Implementation of profit sharing ($314M for 2016) Trust  Elevate the Experience customer service training  Two positive space tickets for ATW Airline of the Year  Best-in-class maternity and adoption assistance program

The PHL Story

Existing PHL I-95 I-95 Tinicum Township Terminal Complex Runway 8 – 26 Runway 9L – 27R Runway 9R – 27L UPS Facility Delaware River 18

PHL – Capacity Expansion Program (CEP)  In 2010, the FAA approved a $7.8 billion CEP that included a new river runway and a new terminal complex and new cargo areas  The FAA approved at $467.5 million LOI toward airfield development 19

PHL EIS Alternatives  Alternative A: Parallel Runway 8-26 East  Alternative B: Parallel Runway 8-26 West  Alternative C: Midfield Terminal

The PHL CEP Was Based on Outdated Data Forecast 2016 Actual 2002 (actual) 2005 2010 2015 2020 Enplaned Passengers Air Carrier 10,986,782 11,200,000 13,350,000 15,850,000 18,650,000 Commuter 1,429,801 2,350,000 2,790,000 3,310,000 3,900,000 Total Enplaned 15,059,111 12,416,583 13,550,000 16,140,000 19,160,000 22,550,000 Passengers Aircraft Operations Passenger Airlines-- Air Carrier 242,702 238,400 270,400 306,400 342,400 Passenger Airlines-- Commuter 132,586 180,000 188,000 202,000 226,000 Cargo and Air Taxi 19,732 28,600 36,600 40,600 47,600 General Aviation 67,499 60,000 63,000 66,000 69,000 Military 648 1,000 1,000 1,000 1,000 Total Aircraft 394,022 463,167 508,000 559,000 616,000 686,000 Operations Air Cargo (tons) 596,394 620,000 780,000 980,000 1,200,000 Average Aircraft Size Air carrier 139 138 142 147 153 Commuter 38 43 48 52 54 Average Load Factor Air carrier 65% 68% 69% 70% 71% Commuter 57% 61% 62% 63% 64%

CEP Passenger Forecast Summary of Passenger Forecast Range 36 Historical Forecast 30 Enplaned Passengers 24 (millions) 18 12 6 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 Calendar Year Forecast Base Forecast 2002 (actual) 2005 2010 2020 Forecast Range Enplaned Passengers Actual Enplaned Passengers Base 12,416,583 13,550,000 16,140,000 22,550,000 Low 12,416,583 12,500,000 14,000,000 19,500,000 High 12,416,583 15,270,000 18,750,000 26,400,000

CEP - Operations Forecast Summary of Operations Forecast Range 1000 1000 Historical Historical Forecast Forecast 800 800 Aircraft Operations Aircraft Operations (thousands) (thousands) 600 600 400 400 200 200 0 0 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 2005 2005 2010 2010 2015 2015 2020 2020 Calendar Year Calendar Year Base Forecast Base Forecast Forecast 2002 Forecast Range Forecast Range (actual) 2005 2010 2020 Actual Operations Aircraft Operations Base 463,167 508,000 559,000 686,000 Low 463,167 429,000 447,000 549,000 High 463,167 582,000 657,000 811,000

FAA vs. Actual Forecasts Trending Lower PHL Aircraft Operations which drive airfield delay are down significantly Actual Operations vs. Forecasts 900,000 2010 TAF 800,000 FINAL EIS 2011 TAF 700,000 2013 TAF 2012 TAF 600,000 2014 TAF 500,000 2016 TAF 400,000 300,000 200,000 Actual Operations 100,000 Linear Trend on Actuals 0 2004 2009 2014 2019 2024 2029 2034 2039 2044 March 28, 2017 24

The PHL Story – Operational Changes Total Operations vs. Passengers (all PHL airlines) 35 540 520 30 Total Passengers (Millions) Total Takeoffs & Landings 500 25 (Thousands) 480 20 460 15 440 10 420 5 400 - 380 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 25

PHL Airspace Linked to other NE Airports

New Runway Won’t Ease Congestion – 2008 Slide Runway to Nowhere? 27

NY/NJ/PHL Airspace Redesign Record of Decision (ROD) Record of Decision & Written Re-Evaluation of the NY/NJ/PHL Metropolitan Area Airspace Redesign Final Environmental Impact Statement July 31, 2008 “A Capacity Enhancement Program (CEP) is on -going at PHL. As noted in the ROD, the CEP has the potential for cumulative impacts with the Airspace Redesign. However at the time the ROD was signed, there was insufficient information about this evolving proposal to include it within the study of cumulative impacts in the Airspace Redesign EIS. The ROD for CEP is expected to be published in September 2009, and if approved, construction would not be completed until 2020, well beyond the 2011 full implementation date for the Airspace Redesign CEP alternatives retain the runway geometry, and the Airspace Redesign procedures are incorporated into the CEP analysis. Thus potential cumulative impacts from the projects will be captured in the environmental analysis for that proposed project.”