Freighter Airline Strategies For Growth & Financial Viability

1. Freighter Airline Strategies For Growth & Financial Viability Presentation To 30th Annual FAA Aviation Forecast Conference Ron Lane Chief Marketing Officer March 17, 2005

2. AGENDA • Company Overview • Industry Structure • Supply / Demand Outlook • Freighter Airline Strategies • Conclusions

3. Company Overview

4. Company Overview Atlas Air Worldwide Holdings • World’s largest Boeing 747 freighter operator • 20 Boeing 747-400Fs • 22 Boeing 747 “Classic” Freighters (-200s/-300s) • Global network serving all major trade lanes • Diversified portfolio of businesses • Scheduled, airport-to-airport (Polar) • ACMI Outsource (Atlas Air and UK-based GSS) • Charters Primary Operating Units

5. Company Overview AAWH’s operating units participate in all major air trade lanes around the world. AAWH Capacity Deployment: 2004 Source: Atlas Air Worldwide Holdings. Data reflect scheduled services, charters and ACMI Outsource operations.

6. Company Overview Polar’s scheduled service network • Hub networks at Chicago, Amsterdam and Seoul • Serving most major intercontinental markets • Recently awarded China authority

7. Industry Structure and Major Airline Competitors

8. Industry Structure There are two basic business models: integrated and non-integrated. Retail competitors deal with shippers Wholesale competitors deal with retail firms Customer-Airport Interface Airport-To-Airport (A-T-A) Airport-Customer Interface Origin Destination Integrated Carrier Integrated Carrier Integrated Carrier C O N S I G N E E S H I P P E R Forwarder Airline Agent ACMI and Charter carriers provide primary and supplemental capacity to Shippers, Forwarders, Airline’s and Integrators Retail competitors deal with shippers

9. Industry Structure The consolidation trend is well underway… TRAFFIC SHARES: 2003 • Forwarders are free to acquire and merge as they see fit. • Carrier consolidation is limited by national-ownership rules. • Integrator business model requires large-scale operations, so there are virtually no small players. 109.7 mm FTKs 2.6 bn shipments 12.6 mm metric tons 100% = Top 15 Rest /a International air freight traffic only. /b IATA members only; Scheduled freight FTks – Freight Tonne-Kilometers. /c Integrators defined as: DHL, FedEx and UPS. Data represent U.S. air and ground parcel shipments. Sources: MergeGlobal, Inc. primary research, IATA World Air Transport Statistics, company reports.

10. FedEx Lufthansa Korean UPS Singapore [Atlas/Polar]* Industry Structure The Top 16 Cargo Airlines by freight tonne-kilometers (CY 2003) • Cargolux • British Airways • KLM • Northwest • Emirates • Polar Air • Cathay • Air France • China Airlines • EVA Air • JAL *Consolidated Traffic Source: International Air Transport Association and company data

11. Supply / Demand Outlook

12. Supply / Demand Outlook Overall air freight market prospects are good. • According to IATA, 2004 saw 13.4% world air freight traffic increase over 2003 • Forecasted average market growth rate to average 6.3% per year compared to 5.4% average growth in large freighter capacity increase* • ACMI lift represented 8.2% of capacity in 2003, up from approximately 5% in 1995 * • Charter market rebound attests to supply/demand constraints * Source: Boeing 2004/2005 World Air Cargo Forecast

13. “Growth Gap” Supply / Demand Outlook Cargo demand is growing faster than passenger traffic. More freighters will be required to handle the demand. Intercontinental Passenger/Cargo “Growth Gap” Historical Index (1990 = 100) Forecast Index (2003= 100) Freight Traffic Growth = 6.2% CAGR Freight Traffic Growth = 6.3% CAGR Passenger Traffic Growth =3.1% CAGR Passenger Traffic Growth =5.2% CAGR Source: IATA historical data and Boeing forecasts (contained in Commercial Market Outlook and World Air Cargo Forecast)

14. Asia will account for the majority of the world’s air freight growth in the next five years. Forecast Growth In U.S. Intercontinental Air Freight Demand Thousands Of Additional Metric Tons Compared To 2004 Imports Into The U.S. Exports From The U.S. +1,042 Asia/Pacific represents ≈ 60% of new import tons! +698 +568 +418 +405 +271 +246 +127 Asia/Pacific Europe Latin America Source: MergeGlobal, Inc.

15. Supply / Demand Outlook Near term growth in Large Freighter capacity will come principally from MD-11 and B747-400 conversions. • MD-11 conversions are continuing at a high pace. Eventually, the feed stock will be used up. • 747-400 conversions will begin to come on line in 2006. Production capability will increase over time. • Retirements of less productive 747 Classics will continue as new capacity comes on line. • Production of 747-400F/ERF aircraft is continuing. • New types of freighter production will come at the end of the decade (A380, B777, B7XX)

16. Supply / Demand Outlook Air freight is inherently a cyclical market driven by demand that is more flexible than supply, leading to pockets of problems and opportunities. Global Freighter Supply and Demand* 747-200 Freighter Equivalents Historical Projected * Data and projections from MergeGlobal 2003 Study

17. Freighter Airline Strategies

18. Freighter Airline Strategies Two logical extremes capture and project the main issues in freighter strategy. High Revenue Low Cost “Air cargo is segmentable” “Air cargo is a commodity” Philosophy Strategy • Complex product range • Heavy marketing spend • Large network – emphasize scope, scale and quality • Superior operational execution – especially with regard to revenue integrity! • Bare-bones product • Little or no marketing – willing dependence on key customers • Small network (“cherry-picking”) • Focus on being absolute low-cost producer

19. Freighter Airline Strategies Low costs do not guarantee profit or survival in a network- based business. It is critical to understand scale effects on both costs and revenue. • Minimum Competitive Scale (MCS) is the fleet size below which unit revenue will not exceed unit cost over the long term. • Both unit revenue and unit cost curves are unique to each airline. • Objective is to maximize the profit envelope, not unit cost or unit revenue. Unit Cost Versus Unit Revenue USD Per Block Hour ILLUSTRATION Minimum Competitive Scale (MCS) Average Unit Cost USD Per Block Hour Profit Average Unit Revenue Fleet Size (Freighters Or Equivalents) Source: MergeGlobal, Inc.

20. Freighter Airline Strategies AAWH has adopted a Diversification Strategy • Achievable only with a large fleet • More complex approach to business • Portfolio of different services between which capacity can be reallocated as market conditions change • Reduces overall risks

21. Freighter Airline Strategies Atlas Air Worldwide Holdings – Sales Channels Charter Business Unit Atlas Polar Sales Unit U.S. Gov’t Brokers Direct Shipper Airlines Freight Forwarders Customer AMC & Com’l Charter ACMI ACMI Charter Forwarder Charter Scheduled Service Service Type

22. Conclusions

23. Conclusions Conclusions: • Air freight demand will continue to grow – but will be volatile • Tight supply versus demand is projected to continue for several years – resulting in stronger yields • Higher fuel costs will require higher yields, but will make efficient fleets more competitive over the long term • Consolidation will continue in the industry making scale and scope of operations important competitive factors • Carriers with greater market reach and diversification will be better able to profit by the market circumstances and be better equipped to weather any volatility