2010 SEC – AAAE Annual Conference After the Merger / Acquisition / Downsizing April 20, 2010

1. 2010 SEC – AAAE Annual Conference After the Merger / Acquisition / Downsizing April 20, 2010 • Morgan Keegan • D.J. Mehigan • Managing Director • Morgan Keegan & Company, Inc. • 951 East Byrd Street, Suite 930 • Richmond, VA 23219 • Tel: (804) 225-1147 • Fax: (804) 225-1180 • E-mail: dj.mehigan@morgankeegan.com

2. A United – US Airways Merger? Cons Pros • United & US Airways wages are closely aligned and among the industry’s lowest, requiring no labor approvals before integration occurs • Expected savings from consolidation such as common IT platforms, fewer airport operations and maintenance centers • Duplicative city-pair networks offer great potential for reduced capacity/savings • US Airways flies all the same aircraft as United, except for its A330 wide-body and the 777 • Monopoly is less of an issue. The footprint of the combined entity would be roughly 28% smaller than that proposed a decade ago. • If over 95% of revenue is retained, incrementaloperating profitability is projected to be $800 million - $1.4 billion • A merger may require capacity/job-related promises in order to curry regulatory favor. This would disappoint Wall Street and may require a divestiture • Concentration in the Washington metro area could prove problematic • When neither carrier is failing, regulatory approval has proven more difficult

3. Bear Stearns • 1923 – Bears Stearns is founded • 1985 – Bear Stearns goes public • 2004 – The SEC allows investment banks to increase debt on their books • 2006 – Bears Stearns earnings rise to $14.28/share • 2007 – Bear Stearns derivative instruments grow to $13 trillion • 2007 – Bears Stearns stock price peaks at $169.00/share • 2007 – An $8 trillion housing crisis begins • 2008 – S&P downgrades Bear Stearns from A to BBB • 2008 – Bear Stearns stock price falls below $3.00/share • 2008 – The Federal Reserve steps in with $29 billion of loss protection • 2008 – JP Morgan acquires Bears Stearns for $10.00/share

4. Financial Crisis Timeline Sep. 08 Apr. 09 Mar. 09 Dec. 08 Oct. 08 Nov. 08 May 09 Jan. 09 Feb. 09 • Fed takes over Fannie and Freddie • Chrysler files for bankruptcy, merges with Fiat • Obama elected 44th US President • $787 bil economic stimulus is approved by the House. Obama signs plan into law • B of A announces it will buy Merrill Lynch for $50 mil • Treas. Dept. will invest $20 bil in Citi in exchange for preferred stock • Treas. Sec. Geithner unveils plans for “Stress Tests” at major U.S. bank holding companies • Feds bails out AIG with $85 billion loan @ 11% • Obama issues plans to trim $17 bil from 2010 budget by reducing or eliminating 121 Federal programs • AIG announces losses of $61.7 bil – largest loss in history of US company – receives more funds from govt. • Barclays announces it will buy approx 1/2 of Lehman Brothers • FSA and Assured announce merger • Natl. Bureau of Econ. Research (private economists group) says the U.S. has been in recession since Dec. 07 • Pres. Bush signs TARP • Natl. unemployment rate hits 8.1% for Feb. – the nation’s highest in 25 years • Stress Tests are revealed • The number of "problem banks" increases to 305 institutions - $220 billion of assets • Iceland receives emergency loans, govt. seizes largest bank • Geithner asks Congress to give the govt. the authority to take over failing financial institutions • The Fed slashes its main interest rate to 0.00% - 0.25%, the lowest in history. The Dow increases 4% • Dow sheds 18% of its value • 9 largest banks agree to a $125 bil TARP injection • GM given 60 days to restructure

5. Financial Crisis Timeline Jun. 09 Jan. 10 Dec. 09 Sep. 09 Jul. 09 Aug. 09 Feb. 10 Oct. 09 Nov. 09 • GM files for Bankruptcy • Proposed guidance on bank incentive compensation released • Citi, Wells and BofA all repay TARP • Fannie Mae report s another loss of $14.8 bil • Treasury Dept. releases a proposal for reforming the financial regulatory system. Creation of a Financial Services Oversight Council and for new authority for the Federal Reserve to supervise all firms • Fed Target Rate kept at 0.00% - 0.25% • Obama nominates Bernanke for a second term • Treasury issues rulings on executive compensation for 7 TARP recipients • Geithner testifies to Congress on AIG deal • SEC issues a new rule to increase the resilience of money market funds to economic stress • Trade volume for July rose at its fastest rate in over 5 yrs • CIT Group files for bankruptcy • Fed Housing Fin Agency capital reserves fall to 0.53% • Chairman Bernanke testifies that "the extreme risk aversion of last fall has eased somewhat, and investors are returning to private credit markets." • PNC Bank repays TARP • Dubai World requests 6-month debt standstill • SEC approves restrictions on short selling • Talks between CIT and govt. agencies fail to yield support package – days later CIT announces a $3 bil debt restructuring

6. Historical Fed Funds Rate Source: Bloomberg

7. GDP

8. Municipal Yield Curve

9. Historical Credit Spreads to AAA MMD Credit spreads for the 10-year maturity of each rating category compared to the AAA-rated MMD were relatively tight until October 2008. At the start of the credit crisis in October 2008, spreads began to rise well above the AAA MMD reflecting underlying credit quality.

10. Oil Source: Energy Information Administration

11. Jet Fuel Source: Energy Information Administration

12. Passenger Capacity Source: U.S. Department of Transportation

13. Traffic Source: U.S. Department of Transportation

14. GARB Index

15. Airport Bond Issuance

16. Airport Transaction Summary

17. Conclusion • Diversify your investments and debt portfolio • Focus on improving your underlying ratings • Build liquidity – cash, reserves, liquid investments • Determine fallback position before you hear “filed for bankruptcy” • Review best practices for Airline Use Agreements, Bond Resolutions Debt Policies, etc. • Consider locking in rates that are projected to rise • Take advantage of the yield curve