Coping With Sky-High Jet Fuel PricesGeorge Ingram — Director Airline Operations, Air Transport Association of America

© ATA 2008 -- 2

The Air Transport Association of America, Inc.

Combination Services (12)

AirTran AirwaysAlaska Airlines

American AirlinesContinental Airlines

Delta Air LinesHawaiian AirlinesJetBlue AirwaysMidwest Airlines

Northwest AirlinesSouthwest Airlines

United AirlinesUS Airways

All-Cargo Services (6)

ABX AirASTAR Air Cargo

Atlas Air / Polar Air CargoEvergreen Int’l Airlines

FedEx CorporationUPS Airlines

Associate Members (3)

Air CanadaAir Jamaica

Mexicana

© ATA 2008 -- 3

One View From Above; One From the Man on the Street

“Our country’s vastness and its economy depend upon commercial aviation as the backbone of national and international commerce… Global trade undergirds America’s strength and allows the United States to project its economic power. In my opinion, the commercial aviation industry [is] a crucial component of America’s economic strength. This has been true for decades, and will remain true into the foreseeable future.”

Michael Wynne, Former Secretary, U.S. Air Force, Aero Club of Wash., DC (May 22, 2008)

“Passenger airlines have probably been hurt more significantly by high energy prices than any other sector… First, fuel represented a major operating expense for airlines…even before oil prices began their sharp increase over the past year. Now that proportion is over 40% for many airlines, having surpassed labor as the largest single cost item. Second, the cost of jet fuel is a function not only of oil prices, but also of the added cost (known as the ‘crack spread’) to refine oil into aviation kerosene. That added cost has surged from historical levels of $5-$10 per barrel to around $30 recently.”

“S&P Looks At How Two Airlines Try To Offset Ever-Higher Fuel Costs,” Standard & Poor’s (July 3, 2008)© ATA 2008 -- 3

© ATA 2008 -- 4

For Whom the Bell TollsU.S. Airline Bankruptcies Since End of 2007 Include Numerous Shutdowns*

Out of Business

Last Day of OpsMAXjet

25-Dec-07Big Sky

7-Jan-08Aloha

31-Mar-08ATA

2-Apr-08Skybus

5-Apr-08Eos

27-Apr-08Champion

31-May-08Air Midwest

30-Jun-08ExpressJet**

2-Sep-08

Source: ATA and company reports

Continuing Operations

Ch. 11 FilingFrontier

11-Apr-08Gemini Air Cargo

18-Jun-08

* Oasis Hong Kong Airlines and Silverjet are among the non-U.S. airlines that have ceased operations** Ceasing branded commercial operations; will continue to fly as a Continental Express and as ExpressJet Corporate Aviation

© ATA 2008 -- 5

U.S. Airlines: The Word on the Street

“Should current fuel prices persist, the impact on industry profitability is expected to rival – if not exceed – that of the 9/11 terrorist attacks.… While it may sound callous to frame fuel’s rapid ascent against the far greater tragedy of 9/11, the math is indisputable – at current fuel prices, a similar attack on the industry’s profitability appears

underway…” (J.P. Morgan, April 15, 2008)

“[W]e do not believe that the U.S. airline industry can withstand $100+/bbl oil prices without major structural change and as long as the industry remains highly fragmented,

sustainable profitability will remain an elusive goal.” (Merrill Lynch, March 7, 2008)

“[T]he impact of even a small price rise in WTI oil prices…is material to the industry’s bottom-line. For example, a 3% daily rise in oil prices is enough to wipe-out an entire year’s profit… The industry can attempt to pass on its higher fuel costs in the form of multiple fare increases, but given the elasticity of demand, only so much can be done

without substantially reducing domestic capacity.” (Merrill Lynch, May 8, 2008)

“The bear case for airlines is playing out (high fuel prices and weak demand). Historically this has led to bankruptcies of several major carriers.” (UBS Global Equity Research, “Numbers Still Awful Despite Capacity Cuts,” June 17, 2008)

© ATA 2008 -- 6

EIA Sees Jet Fuel Prices Soaring in 2008 and 2009Average Price of U.S. Jet Fuel per Barrel

30.38

56.6466.05

72.34

127.39132.75

7.455.39 3.61

4.93

9.24

15.91

16.69

18.59

25.2824.93

31.0826.18

41.51

25.98

$0

$20

$40

$60

$80

$100

$120

$140

$160

2000 01 02 03 04 05 06 07 08F 09F

Jet Fuel Crack Spread

Crude Oil (West Texas Intermediate)

Source: Energy Information Administration (www.eia.doe.gov/steo)

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” (Sheikh Zaki Yamani, former oil minister of Saudi Arabia, Oct. 23, 2003)

© ATA 2008 -- 7

“Oil Dot-com”

“Our study indicated that for every $100 million in new inflows, WTI prices increase by 1.6%... [W]e are seeing the classic ingredients of an asset bubble. Financial investors tend to ‘herd’ and chase past performance, comforted by the growing analytical conclusion that markets are tightening, and new inflows, in turn, drive prices higher. Larger allocations by institutional investors, including new sovereign wealth funds desiring to increase their commodity exposure, play a role. So does uncertainty about the true state of market fundamentals…and other factors that buttress the current bullish consensus.” (“Oil Dot-com,” Lehman Brothers Energy Special Report, May 29, 2008)

“With the latest push to the upside, we see the crude oil market becoming even more completely divorced from any connection to fundamental factors and becoming even more obsessed with the simple question, ‘How high can it go?’ Traders have often cited a weak dollar as an influence on the rising price of crude oil, …but the US dollar index has not actually posted a new low since March 17 and its net decline since we began tracking on August 22, 2007 has been 10.6%, compared with a corresponding rise in crude oil of 109.8%.” (“PM Energy News & Views,” Citi Futures Perspective, July 3, 2008)

“The increasing prevalence of futures contracts has transformed the nature of oil markets. It is no longer only about the value of oil as an energy commodity, but also… oil as a financial asset.” (Goldman Sachs, “Energy Roundup: Oil Bulls Take Charge,” Oct. 19, 2007)

© ATA 2008 -- 8

“Not Justified; Starved for Access”

May 30 — During testimonies to Congress last week, oil executives said that while limited access to foreign resources and rising industry costs have helped push prices higher, the current level isn’t justified by oil market fundamentals. The price of oil should be “somewhere between $35 and $65 a barrel,” John Hofmeister, president of Shell Oil Co., the Houston-based subsidiary of Royal Dutch Shell Plc, said at a Senate hearing on May 21. John Lowe, executive vice president of ConocoPhillips, said oil should be “about $90 a barrel in this environment.”

May 22 — U.S. oil policy is causing speculators to drive up prices to record levels, said John Hofmeister... Hofmeister said that by restricting access to domestic supplies, U.S. policymakers are sending a signal to investors that output will be constrained, thereby driving up prices. “There is no confidence that we can explore and produce more barrels given the U.S. is not letting us do it and that is preventing people from having an optimistic outlook on oil futures, so it looks like demand will continue to run ahead of supply,” Hofmeister said... “We are starved for access, we are not making that up; it is a fact,” said John Lowe, executive vice president for ConocoPhillips.

Matthew Leising and Alexander Kwiatkowski, “U.S. Probes Crude Oil Trading for Price Manipulation,” Bloomberg.com (May 30, 2008) and Daniel Whitten, “U.S. Policies Fuel Oil

Speculation, Hofmeister Says,” Bloomberg.com (May 22, 2008)

© ATA 2008 -- 9

(10.6)

145.6

(20)

0

20

40

60

80

100

120

140

160

U.S. Dollar (Index) WTI Crude Oil Price

Sources: Energy Information Administration and Federal Reserve Bank of Atlanta

% C

han

ge

fro

m J

an-0

7 to

Ju

n-0

8Since the Beginning of 2007, the Increase in the Price of Oil

Has Dwarfed the Decline in the Dollar

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180J

an

-90

Ja

n-9

2

Ja

n-9

4

Ja

n-9

6

Ja

n-9

8

Ja

n-0

0

Ja

n-0

2

Ja

n-0

4

Ja

n-0

6

Ja

n-0

8

Crack Spread

Jet Average

Crude Oil

© ATA 2008 -- 10

Jet Fuel Prices Soaring – Only Partly on Soaring CrudeCrack Spread is Far Above $5 Historical Norm and Hurricanes Katrina/Rita

Source: Energy Information Administration

Ave

rag

e M

on

thly

Pri

ce p

er B

arre

l

“The U.S. airlines…have a relatively low proportion of their 2008 fuel needs hedged, because hedging high and volatile fuel prices is expensive and may require posting cash collateral.” “High Fuel Prices Prompt Review of U.S. Airline Rating Outlooks,” Standard & Poor’s (March 11, 2008)

$61.2

$33.1

$38.5

$22.7

$15.5

$41.2

$16.8 $15.0$12.8

10

20

30

40

50

60

70

2000($0.81)

2001($0.78)

2002($0.71)

2003($0.85)

2004($1.16)

2005($1.66)

2006($1.97)

2007($2.10)

2008F($3.40)

Expense ($ Billions)

Consumption (Billion Gals.)

© ATA 2008 -- 11

2008 Jet Fuel Expense1 Will Break 2007 Record Total Expense (Excluding Taxes and Into-Plane Fees) Could Exceed $61 Billion

Sources: ATA, Energy Information Administration, Department of Transportation

1. U.S. passenger and cargo airlines2. Based on $75K to employ one FTE3. Based on approx. $70M per aircraft

Equivalent of 267,000 Airline Jobs2

or 286 New Narrow-body Jets3

Note: Value in parentheses below year is average price paid per gallon excluding taxes, into-plane fees, pipeline tariffs and hedging costs

($7-13)

$22.8

$5.8$2.5

($27.0)

($13.1)

($30)

($20)

($10)

$0

$10

$20

$30

1947-79 1980-89 1990-94 1995-00 2001-07 2008F

U.S. Airlines Face Massive Net Loss in 2008

Sources: U.S. Bureau of Transportation Statistics, ATA research and estimates

Net

Pro

fit/

Lo

ss (

$Bill

ion

s) –

GA

AP

*

* Based on generally accepted accounting principles (GAAP), excluding extraordinary restructuring charges/gains for all U.S. passenger and cargo airlines

© ATA 2008 -- 12

“The industry hasn’t seen a real upcycle. 2006-2007 in retrospect now looks more like a brief reprieve from a downcycle rather than an upcycle. The industry has not been profitable enough to justify investment.” (Gary Chase, Lehman Brothers, “Implications of a Profound U.S. Airline Industry Restructuring,” June 27, 2008)

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

4.251

Q0

2

1Q

03

1Q

04

1Q

05

1Q

06

1Q

07

1Q

08

1Q

09

Labor Fuel

© ATA 2008 -- 13

Surging Fuel Expense Offsetting Labor RestructuringFor Passenger Airlines, Fuel CASM Has Overtaken Labor CASM

Un

it O

per

atin

g C

ost

(¢

per

Ava

ilab

le S

eat

Mile

)

Source: ATA Passenger Airline Cost Index

Product (unit) 1978 1990 2007 Growth

College Tuition—Public (yr.) 1 $688 $1,908 $6,185 9.0 x

College Tuition—Private (yr.) 1 $2,958 $9,340 $23,712 8.0 x

Prescription Drugs (index) 2 61.6 181.7 369.2 6.0 x

New Single-Family Home 3 $55,700 $122,900 $247,900 4.5 x

New Vehicle 6 $6,470 $15,900 $28,800 4.5 x

Unleaded Gasoline (gallon) 7 $0.67 $1.16 $2.80 4.2 x

CPI (all items) 2 65.2 130.6 207.3 3.2 x

Movie Ticket 8 $2.34 $4.22 $6.88 2.9 x

First-Class Domestic Stamp 5 $0.15 $0.25 $0.42 2.8 x

Whole Milk (index) 2 81.0 124.4 205.4 2.5 x

Grade-A Large Eggs (dozen) 2 $0.82 $1.01 $1.68 2.0 x

Air Travel-International (mile) 4 7.49¢ 10.83¢ 12.71¢ 1.7 x

Air Travel-Domestic (mile) 4 8.49¢ 13.43¢ 12.98¢ 1.5 x

Television (index) 2 101.8 74.6 16.9 0.2 x

Price of Air Travel Growing Below Average Basket of GoodsTrailing College Tuition, Drugs, New Homes, New Vehicles, Gasoline and U.S. CPI

1 The College Board (based on beginning of academic year) 5 U.S. Postal Service – www.usps.com/postalhistory/welcome.htm, Publication 1002 U.S. Bureau of Labor Statistics (incl. hedonic “quality-change” adjustments) 6 National Automobile Dealers Association – www.nada.org (average retail selling price)3 U.S. Census Bureau – www.census.gov/const/uspriceann.pdf (median) 7 U.S. Department of Energy – www.eia.doe.gov/emeu/mer/pdf/mer.pdf, Table 9.44 ATA via U.S. Bureau of Transportation Statistics – www.airlines.org 8 National Association of Theatre Owners – www.natoonline.org (average U.S. ticket prices)

© ATA 2008 -- 14

© ATA 2008 -- 15

Relative to 2000, Jet Fuel Prices Overwhelming FaresSince 2000, Average U.S. Jet Fuel Price Up 265%, Domestic Fares Up 1%

Average U.S. Jet Fuel Price(Cents per Gallon)

Source: U.S. Energy Information Administration

Avg. Fare to Fly 1,000 Miles Domestically (U.S. Dollars, Excluding Govt. Taxes)

70

130

190

250

310

370

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

1H

08

$125

$130

$135

$140

$145

$150

$155

$160

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

1H

08

Source: ATA passenger revenue report (mainline + regionals)

Up 1.0%

Up 265

.3%

© ATA 2008 -- 16

69.4

7.0 7.5

0

10

20

30

40

50

60

70

80

Jet Fuel Price Domestic Airfares* International Airfares*

Source: EIA and ATA passenger revenue report

% C

han

ge

Yea

r-o

ver-

Yea

r (J

anu

ary-

Jun

e)Fares* Lagging Fuel Prices in 2008

* Fares per mile flown, also known as passenger yield

“It’s very difficult for airlines to simply raise prices to levels that cover their higher fuel costs. Raising prices chokes demand: If tickets get too expensive, business travelers make alternate plans, pick cheaper airlines or buy discounted tickets further in advance. For vacationers, if prices get too high, they don’t buy or they switch to cheaper destinations. Airlines can price themselves right out of a sale.”

Scott McCartney, “What to Expect as Airlines Cope With Soaring Fuel Costs,” Wall Street Journal (May 22, 2008)

© ATA 2008 -- 17

Domestic Load Factor Stabilizing (Annually) at 80%

68%

72%

76%

80%

84%

88%J

an

-05

Ap

r

Ju

l

Oc

t

Ja

n-0

6

Ap

r

Ju

l

Oc

t

Ja

n-0

7

Ap

r

Ju

l

Oc

t

Ja

n-0

8

Ap

r

Ju

l

Oc

t

Ja

n-0

9

Monthly

12-Month Avg.

Source: U.S. Bureau of Transportation Statistics

Uti

lizat

ion

of

Sea

tin

g C

apac

ity

© ATA 2008 -- 18

Just Raise Fares?

“Although airlines will seek to recover the higher costs through additional fare hikes and higher fees, …this will prove increasingly difficult in a weak U.S. economy.” (Standard & Poor’s, May 22, 2008)

“Airlines have no choice but to pass on the cost of fuel…and when passengers do begin to push back in significant numbers the airlines have no choice but slash capacity.” (Rick Seaney, FareCompare.com, WSJ, May 23, 2008)

“The rapid increase in jet fuel prices will add substantially to airline costs at a time when a weakening U.S. economy will make it more difficult to offset those costs with higher fares.” (“High Fuel Prices Prompt Review of U.S. Airline Rating Outlooks,” S&P, March 11, 2008)

“[R]aising airfares isn’t like raising the price of milk… Consumers have almost perfect information… – the Internet can hunt the cheapest fare worldwide in seconds. If one carrier has some empty seats to fill, it will have to cut the price because getting something for that seat is better than flying it empty.” (Scott McCartney, “As Airlines Cut Back, Who Gets Grounded?” Wall Street Journal, June 5, 2008)

“If oil prices keep climbing, rising fares could start to push a significant percentage of travelers away from flying entirely. That could reverse one of the most dramatic effects of the industry’s deregulation in 1978, which led to a huge increase in flights, and brought intense fare competition, opening the world of air travel to millions of people.” (Susan Carey and Paulo Prada, “American Cuts Flights, Adds Fees As airlines Face Crisis,” Wall Street Journal, May 22, 2008)

“Every time the price of fuel increases the cost of a ticket by a dollar, a percentage of travelers opt not to fly.” (Richard Crum, President, Association of Corporate Travel Executives, May 23, 2008)

© ATA 2008 -- 19

Portion of Ticket Needed to Buy Fuel Exceeds 40%Airline Fuel Expense per Passenger-Mile Will Exceed 7 Cents in 3Q08

Fuel Cost (¢) per Passenger Mile Fuel Cost as % of Passenger Revenue

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

1Q

08

2Q

08

10%

15%

20%

25%

30%

35%

40%

45%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

1Q

08

Source: ATA quarterly airline cost index, reflecting systemwide (domestic and international) operations

0.70%

0.75%

0.80%

0.85%

0.90%

0.95%

1.00%

1.05%

1.10%1

98

0

82

84

86

88

90

92

94

96

98

20

00

02

04

06

08

10

Spending on U.S. Airlines Falling, Again, as % of EconomyPassenger Revenue Now $25.5 Billion Below Historical Norm

Sources: ATA Passenger Airline Cost Index; Bureau of Economic Analysis; U.S. Department of Transportation

Historical Band

*Four-quarter rolling systemwide passenger revenue (including charter revenue) of U.S. passenger airlines divided by four-quarter average U.S. nominal GDP

Pas

sen

ger

Rev

enu

e as

% o

f U

.S. G

DP

*

$25.5B

© ATA 2008 -- 20

$18,005$512$574$2,136

$8,197

$428$265$554

$2,806

$1,960$573

PFC

Sept. 11th Fee

ASIF

INS Fee

Customs Fee

APHIS Fees

Passenger Taxes

Int'l Dep./A

rr. Taxes

Waybill Tax

Jet Fuel +

LUST TaxesTOTAL

* Some taxes and fees shown include collections from non-U.S. carriers

Sources:• Department of Homeland Security• Federal Aviation Administration• Office of Management and Budget• Transportation Security Administration

DHS Collections = $3.8B

AATF + LUST = $11.4B

“Special” Aviation Taxes/Fees* Add $18B BurdenEstimated Collections Shown in $Millions

© ATA 2008 -- 21

$0.53$1.49

($9.12)

($10.89)

($14)

($12)

($10)

($8)

($6)

($4)

($2)

$0

$2

$4

1979-1989 1990-2000 2001-2007 1Q08

“It’s Only a Few Bucks per Passenger”In “Deregulated” Era, ATA Member Airlines Average $1.76 Net Loss per Passenger

Sources: ATA Annual Reports of the U.S. Airline Industry and carrier reports and www.acte.org/resources/press_release.php?id=307

Air

line

Net

Pro

fit

per

Pas

sen

ger

En

pla

ned

*

* Based on ATA-member passenger airlines only for each respective year

© ATA 2008 -- 22

1979-2007 Average = ($1.76) per pax

(10)

(9)

(8)

(7)

(6)

(5)

(4)

(3)

(2)

(1)

0

Flights (2.3) (1.6) (4.8) (8.0) (8.3)

Seats (1.0) (1.3) (4.3) (7.9) (7.7)

ASMs* (0.1) (1.3) (5.1) (9.3) (8.8)

1q08 2q08 3q08 4q08 1q09

Soaring Fuel Prices Forcing Industry ContractionReduction in Domestic Route Frequency and Seating Capacity Reverses 2007 Trend

Source: ATA analysis of Seabury APGDat airline schedules as of July 18, 2008

© ATA 2008 -- 23

% C

han

ge

in D

om

. Ser

vice

vs.

200

7

* An available seat mile (ASM) is one seat flown one mile and is the standard unit of capacity in the passenger airline sector

© ATA 2008 -- 24

CV

G

HN

L

LA

X

MC

O LA

S

MD

W SA

N

IAH

PH

X

SL

C TP

A

OR

D LG

A

BW

I

DF

W MIA IA

D AT

L FL

L SE

A

BO

S JF

K EW

R

DE

N

MS

P

PH

L

DT

W

SF

O

DC

A

CL

T

(27)

(24)

(21)

(18)

(15)

(12)

(9)

(6)

(3)

0

3Sources: Seabury APGDat airline schedules (July 18, 2008) and Federal Aviation Administration

Few “Large Hub” Airports Have Escaped Service Cuts% Change in Scheduled Domestic Departures: 4Q08 vs. 4Q07

© ATA 2008 -- 25

ON

TO

AK M

CI

OG

GT

US SM

FR

NO PIT S

JU

RD

U JA

XC

LE

CM

HA

US

OM

AA

BQ

SN

AS

JC

MK

EM

HT

BD

LP

DX

BU

RO

RF

BN

AD

AL

ST

L SA

TM

SY

HO

UP

BI

IND M

EM

AN

CB

UF R

SW

PV

D

(45)

(40)

(35)

(30)

(25)

(20)

(15)

(10)

(5)

0

5

10

15Sources: Seabury APGDat airline schedules (July 18, 2008) and Federal Aviation Administration

Few “Medium Hub” Airports Have Escaped Service Cuts% Change in Scheduled Domestic Departures: 4Q08 vs. 4Q07

Soaring Fuel Prices Taking Heavy Toll on Airline WorkersU.S. Passenger Airline Jobs Will Fall Below 400,000 Before 2009

390

400

410

420

430

440

450

460

4702

00

3

Ma

y

Se

p

20

04

Ma

y

Se

p

20

05

Ma

y

Se

p

20

06

Ma

y

Se

p

20

07

Ma

y

Se

p

20

08

Ma

y

Se

p

20

09

Ma

y

Se

p

Source: U.S. Bureau of Transportation Statistics

Th

ou

san

ds

of

Fu

ll-T

ime

Eq

uiv

alen

ts (

FT

Es)

© ATA 2008 -- 26

FOR

EC

AS

T

20

40

60

80

100

120

140

160

180

2001

/2/2

00

1

6/2

1/2

00

1

12

/8/2

00

1

5/2

7/2

00

2

11

/13

/20

02

5/2

/20

03

10

/19

/20

03

4/6

/20

04

9/2

3/2

00

4

3/1

2/2

00

5

8/2

9/2

00

5

2/1

5/2

00

6

8/4

/20

06

1/2

1/2

00

7

7/1

0/2

00

7

12

/27

/20

07

6/1

4/2

00

8

12

/1/2

00

8

USD Jet Fuel Spot Price

Euro Jet Fuel Spot Price

© ATA 2008 -- 27

Sources: Energy Information Administration (NYH/USGC/LA) and http://www.oanda.com/convert/fxhistory

U.S

. Do

llar

(US

D)

Eq

uiv

alen

ts p

er B

arre

lU.S. Airlines Paying Transatlantic Premium for Jet FuelUSD-Euro Exchange Rate Has Boosted Fuel Price Differential to Nearly 60%

$60-65 D

ifferential

© ATA 2008 -- 28

Fuel Conservation Via Weight or Drag Reduction

One airline saved over 17 gallons/year per pound of weight per airplane after shedding in-flight phones, ovens, excess potable water, and some galley equipment on an older fleet

In removing seatback phones from its MD-80s and B737-400s, another airline shed 200 pounds per airplane, translating into 3,400+ gallons saved annually

Alaska Airlines indicated in March 2004 that removing just five magazines per aircraft could save $10,000 per year in fuel; also, the airline has reduced the weight of catering supplies

Air Canada considered stripping primer and paint from its 767s to save 360 lbs. per plane

JetBlue and US Airways and others have moved toward a paperless cockpit

By removing six seats, JetBlue reduced A320 weight by approximately 904 pounds

Airlines have been able to remove ovens, trash compactors, or even entire galleys, due to the elimination of hot meals on selected flights; others are using lighter seats; they have also removed magazine racks and replaced hard cabin dividers with curtains

AirTran ordered carbon fiber Recaro seats for its 737-700s to shave 19.4 pounds per row, resulting in estimated fuel savings of $2,000 per year per aircraft

Alaska’s new beverage cart, at 20 lbs. lighter, could save $500,000 in annual fuel costs

Many airlines are using Pratt & Whitney’s EcoPower engine-washing process to save fuel

Some airlines flush lavatories during extended ground delays to minimize takeoff weight

© ATA 2008 -- 29

Fuel Conservation Via Operational Means

En route, airlines utilize sophisticated software optimize speed, flight path, and altitude to reduce airborne consumption and avoid consuming extra fuel while awaiting a gate

ALK, AA, SWA et al have added life vests on domestic routes (e.g., LAX-CUN, DFW-MIA, MIA-NYC, AUS-TPA) to enable over-water routings in cases where they are more efficient

American redistributed cargo in the airplane’s belly to minimize fuel consumption

Alaska Airlines is deploying a new flight planning system to yield more direct routings

American and Delta use super tugs on the ground to reposition aircraft where feasible

Many have installed winglets to reduce drag – est. fuel savings of 3%-4% per B737-700 flight

Several airlines taxi in on one engine when conditions permit; AA saves $10-$12 million/year

American, Southwest, and others are using ground power to provide electricity and ground-conditioned air, rather than the plane’s auxiliary power unit (APU)

Delta has deployed a decision support tool to provide pilots with coordinated speed adjustments, allowing more evenly spaced landings and less airspace congestion @ ATL

Most airlines have reduced excess fuel on international flights with FAA approval thanks to more precise navigation allowed by GPS and better wind forecasts

New “end-around” taxiway at ATL will save airlines $26-$30 million per year; DFW is next

Delta estimates saving 400 pounds of fuel per flight from continuous descent arrivals @ ATL

© ATA 2008 -- 30

Fuel Conservation Via Air Traffic Management Reform

Domestic Reduced Vertical Separation Minima (DRVSM) doubled the number of usable altitudes between 29,000 and 41,000 feet, allowing greater access to fuel-efficient routes previously unavailable

Area Navigation (RNAV) procedures (e.g., ATL, DFW) entail more efficient climb and descent gradients; shorter, more predictable, and more repeatable ground tracks, and reduced delays

Required Navigation Performance (RNP) uses on-board technology that allows pilots to fly more direct point-to-point routes reliably and accurately; gives pilots lateral guidance and vertical precision

Florida airspace redesign reduced flight distances on standard arrival and preferential routes into south Florida airports, re-routes into adjoining foreign airspace, and departure delays from BOS/NYC/WAS

Advanced Technologies & Oceanic Procedures (ATOP) reduces separation minima, permitting more aircraft to access fuel-efficient trajectories because routes and aircraft can be spaced more closely

User Request Evaluation Tool (URET) permits controllers to predict potential aircraft-to-aircraft/airspace conflicts earlier, allowing them to construct alternative flight paths or cancel climb or descent restrictions

New flight patterns over NY/NJ/PHL and new procedures will combine high- and low-altitude sectors to create more efficient arrival/departure routes while improving safety (less complexity and voice communications); integrates NY TRACON airspace with portions of surrounding en route centers’ airspace; allows controllers to direct IFR traffic more efficiently and improves use of available runways

20% reduction in airport delays, 12 million fewer minutes of delay annually, substantial reduction in severe-weather delay costs, and 600,000 fewer people exposed to significant noise levels

See www.faa.gov/ats/ato/drvsm/benefits.asp, http://www.faa.gov/airports_airtraffic/air_traffic/nas_redesign/regional_guidance/eastern_reg/nynjphl_redesign/ and Testimony of Mike Cirillo, FAA VP-Systems Operations Services (Feb. 15, 2006)

© ATA 2008 -- 31

Continental Drift?LGA to DCA: Variability in Block Time Amounts to $8.2M Annually ($724 per Flight)*

60

62

64

66

68

70

72

74

76

782

00

1

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Monthly Annualized

Source: ATA analysis of DOT T-100 segment database

Ave

rag

e B

lock

Min

ute

s fr

om

LG

A t

o D

CA

* Assumes $60.46 per minute in direct (aircraft) operating costs per http://www.airlines.org/economics/specialtopics/ATC+Delay+Cost.htm

© ATA 2008 -- 32

U.S. Airlines Have Steadily Improved Fuel Efficiency

47

49

51

53

55

57

59

61

63

65

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: ATA Airline Cost Index

Air

pla

ne

Fu

el E

ffic

ien

cy (

AS

Ms

per

Gal

lon

) “It isn’t hard to make the case that…it will cost aviation more than other industries to reduce its CO2 emissions, that aviation accounts for only 2-3% of current CO2 emissions and would remain a lesser contributor in an unregulated future, and that aviation’s value to society and the world economy justify favorable treatment.”David Bond, “For Aviation’s Greenhouse-Gas Emissions, It’s Technology Versus Growth,”Aviation Week & Space Technology (Aug. 20, 2007)

© ATA 2008 -- 33

Potential Environmental Benefits of ATC ReformPromoting a Single European Sky

IATA CEO Giovanni Bisignani “Airlines Seek Unified Air Traffic System for Europe” (Oct. 18, 2007)

“Europe has achieved a single currency…but the 34 European air navigation service providers are living in a completely different age, wasting 12 million tons of CO2 annually in delay and

inefficiencies…. If we could shave even just a minute off every commercial flight, the potential savings are 5 million tons of CO2 and $3.8 billion.”