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August 25, 2010 Kevin Knight - Senior Vice President, Planning

Future Of Aviation Advisory Committee Domestic and Global Airline Competition – Current State of Play and Challenges Looking Forward. August 25, 2010 Kevin Knight - Senior Vice President, Planning Graham Atkinson – EVP / President, Mileage Plus United Airlines.

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August 25, 2010 Kevin Knight - Senior Vice President, Planning

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  1. Future Of Aviation Advisory CommitteeDomestic and Global Airline Competition – Current State of Play and Challenges Looking Forward August 25, 2010Kevin Knight - Senior Vice President, Planning Graham Atkinson – EVP / President, Mileage Plus United Airlines

  2. The World Is Changing And Growth Is Occurring On A Global Scale Population Weighted Map With 2010 Real GDP Growth Rates (%) +4% +1% +2% +11% +3% +1% +5% +5% +5% +8% +3% +6% +5% +6% Sources: Cartogram of the World's Population (2007); Global Insight (WMM), Real GDP growth rates for 2010 (base year as 2005).

  3. Open Skies Agreement Restrictive Agreement No Agreement Access To Some Of The World’s Largest And Fastest Growing Markets Remains Restricted U.S. Air Services Agreements By Country

  4. Foreign Airline Competitors Have Been Supplanting U.S. Carriers In World Leadership… Global Top 10 Airline Rankings (By Revenue) 1999 2009 United 1 Lufthansa Group 1 American 2 2 Air France-KLM 3 FedEx Delta 3 Delta 4 4 FedEx British Airways 5 5 American Japan Airlines 6 6 British Airways / Iberia1/ Lufthansa 7 7 Japan Airlines ANA Group 8 8 United 9 ANA Group 9 Northwest Air France 10 10 Continental 1/ Pro forma Source: Airline Business, Air Transport Intelligence

  5. …And There Are Emerging Carriers Like Emirates That Are Positioned To Capture This Global Growth Europe To Asia: Emirates Via Dubai Hub 106 Dubai 77 57 • Emirates connects 24 European airports with 29 Asian airports via their Dubai hub (nearly 700 airport pairs) • In contrast, British Airways serves 517 Europe to Asia airport pairs via their London-Heathrow hub • Qatar and Etihad have implemented similar network strategies at Doha and Abu Dhabi, respectively Emirates currently operates 143 widebody aircraft with orders for 197 more Source: OAG, August 2010

  6. Alliances Have Emerged To Help Carriers Compete Effectively In Response To Regulatory Barriers In Restricted Markets Online International Destinations Served – August 2010 Source: OAG, August 2010. International is defined as non-U.S. online destinations.

  7. These Alliances Offer Many KeyBenefits To Airlines And Consumers For Airlines: • Linking route networks • Expansion of nonstop international services • Increased profitability • For Consumers: • Connectivity • Seamless travel • Recognition

  8. To Produce Greater Benefits, Alliances Are Moving Toward Deeper And Broader Commercial Relationships Degree of Integration Joint Venture Interline Codeshare • Open Skies Required • Anti-Trust Immunity Required • Profit/Revenue Sharing • Combined/Seamless Consumer Offer • Bilateral relationships • Basic Cooperation (Ticketing and Baggage) • Seamless Connectivity • Reciprocal Frequent Flyer Cooperation

  9. Mergers And Cross-Border Investments Have And Will Continue To Impact The Make-Up And Effectiveness Of Alliances Carrier(s) From Alliance To Alliance Catalyst

  10. Conclusions • The world is changing and growth is occurring on a global scale • The highest growth rates are occurring outside the United States • Access to many of the world’s emerging markets is still highly restricted • The U.S. has lost its leadership role to foreign airlines • Emerging airlines are changing the competitive landscape • The development of alliances has been a key strategy for U.S. airlines to compete effectively in the global marketplace • Cross-border investments and mergers have and will continue to impact the effectiveness of U.S. airline alliances

  11. Suggestions • Establish access to most important international growth markets • Reaffirm policy to support open skies • Negotiate additional open skies agreements • Support removal of trade barriers • Enable effective cross-border alliances • Facilitate immunized commercial relationships • Facilitate deeper commercial relationships • Facilitate access to needed infrastructure (e.g., slots, gates)

  12. APPENDIX

  13. Three Robust Global Alliances Exist In A Highly Competitive Marketplace

  14. Cross-Border Investments Of U.S. Owned Companies Have Become Commonplace In Other Industries Technology Healthcare Banking Consumer

  15. Growth In Open Skies Agreements Since The Early 1990’s

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