Evolution of the Airline Industry Since Deregulation g

Robinson Economic Forecasting Conference at Georgia State University November 2008

Safe Harbor
Certain f th t t C t i of the statements contained herein should be considered forward-looking statements, including within the meaning of the Private t t i dh i h ld b id d f d l ki t t t i l di ithi th i f th P i t Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as may, will, expect, intend, indicate, anticipate, believe, forecast, estimate, plan, guidance, outlook, could, should, continue and similar terms used in connection with statements regarding the outlook of AirTran Holdings, Inc., (the Company or AirTran). Such statements include, but are not limited to, statements about the Companys: expected financial performance and operations, expected fuel costs, the revenue and pricing environment, future financing plans and needs, overall economic condition and its business plans, objectives, expectations and intentions. Other forward-looking statements that do not relate solely to historical facts include, without limitation, statements that discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. Such statements are based upon the current beliefs and expectations of the Companys management and are subject to significant risks and uncertainties that could cause the Companys actual results and financial position to differ materially from the Companys expectations. Such risks and uncertainties include, but are not limited to, the following: the Companys ability to grow new and existing markets, the Companys ability to maintain or expand cost advantages in comparison to various competitors, the impact of high fuel costs; significant disruptions in the supply of aircraft fuel and further significant increases to fuel prices; the Companys ability to attract and retain qualified personnel; labor costs and relations with unionized employees generally and the impact and outcome of labor negotiations; the impact of global instability, including the current instability in the Middle East, the continuing impact of the U.S. military presence in Iraq and Afghanistan and the terrorist attacks of September 11, 2001 and the potential impact of future hostilities, terrorist attacks, infectious disease outbreaks or other global events that affect travel behavior; adequacy of insurance coverage; reliance on automated systems and the potential impact of any failure or disruption of these systems; the potential impact of future significant operating losses; the Companys ability to obtain and maintain commercially reasonable terms with vendors and service providers and its reliance on those vendors and service providers; security-related and insurance costs; changes in government legislation and regulation; competitive p practices in the industry, including significant fare restructuring activities, capacity reductions and in-court or out-of-court restructuring by y, g g g , p y g y major airlines and industry consolidation; interruptions or disruptions in service at one or more of the Companys hub or focus airports; weather conditions; the impact of fleet concentration and changes in fleet mix; the impact of increased maintenance costs as aircraft age and/or utilization increases; the Companys ability to maintain adequate liquidity; the Companys ability to maintain contracts that are critical to its operations; the Companys fixed obligations and its ability to obtain and maintain financing for operations, aircraft financing and other purposes; changes in prevailing interest rates; the Companys ability to operate pursuant to the terms of any financing facilities (particularly the financial covenants) and to maintain compliance with credit card agreements; the Companys ability to attract and retain customers; the y y; ; potential acquisitions or other business q cyclical nature of the airline industry; economic conditions; risks associated with actual or p transactions including the Companys ability to achieve any synergies anticipated as a result of such transactions and to achieve any such synergies in a timely manner, and other risks and uncertainties listed from time to time in the Companys reports to the Securities and Exchange Commission. There may be other factors not identified above of which the Company is not currently aware that may affect matters discussed in the forward-looking statements, and may also cause actual results to differ materially from those discussed. All forward-looking statements are based on information currently available to the Company. Except as may be required by applicable law, AirTran assumes no obligation to publicly update or revise any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such estimates. Additional factors that may affect the future results of the Company are set forth in the section entitled Risk Risk Factors in the Companys Annual Report on Form 10-K for the period ended December 31, 2007, which is available at www.sec.gov and at www.AirTran.com.

Historical Perspective
Industry Evolution & Change

Top Airlines in 1978 Market Share

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10 11. 12.

United American TWA Eastern Delta Pan Am Western Braniff Continental National Northwest Allegheny (US)

16.9% 12.4% 11.6% 11 6% 10.8% 10.0% 9.0% 4.4% 4.1% 3.7% 3.4% 3 4% 3.0% 1.7%

Domestic U.S. Domestic U.S. Domestic / Transatlantic D ti T tl ti Eastern U.S. Southeastern U.S. International Western U.S. Domestic / Latin Domestic Eastern U S U.S. North & Pacific Northeast

* Source: DOT Form 41

Top Airlines in 1978 Post Deregulation

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10 11. 12.

United American TWA Eastern Delta Pan Am Western Braniff Continental National Northwest US Air

Exited Chapter 11 in 2006 Bankrupt: A B k t Acquired b American i d by A i Liquidated Exited Chapter 11 in 2007 Bankrupt: Parceled out Acquired by Delta Liquidated Multiple bankruptcies Acquired by Pan Am Merged with Delta Multiple bankruptcies / mergers

* Source: DOT Form 41

Top Airlines Today Market Share

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10

Delta / Northwest American United U it d Continental Southwest US Airways jetBlue Alaska AirTran Frontier

25.4% 17.6% 15.6% 15 6% 11.8% 9.5% 9.1% 3.2% 2.8% 2.5% 1.3% 1 3%

* Source: DOT Form 41, 2Q08 RPMs

What Happened?

Events that Restructured the Industry

Mergers Deregulation 1978 PATCO 1981 9/11 2001 Fuel Today

Internet

Many Airlines Have Struggled to Adapt

Airline Bankruptcies Since Deregulation
18 16 14 12 10 8 6 4 6 2 2 0 4 5 6 12 10 9 7 6 5 3 2 5 6 4 4 2 4 2 4 2 6 5 1 2 17 11 16 11

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

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Why the Failure to Adapt?

Inefficiencies carried over from regulatory environment

High costs in a commodity-like business

Cyclical business prone to excess capacity

Low barriers to entry, high to exit Inexpensive asset financing has created too much capacity Too many hubs

Historically a market share focus Most mergers have not produced intended results

Temporary revenue gains The most inefficient work rules typically survive

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U.S. Airlines Earnings Actually a Cumulative Loss

Net Profit ($Billions)
$30 $25 $20 $15 $10 $5 $0 -$5 $ -$10 -$15 1971- 19791978 1989
* Source: Air Transport Association

$28

Cumulative Loss of $12 Billion $

$10 $5 $3 $1

($4)

Industry Deregulation D l ti

($6) ($11) ($13) 1990- 19951994 2000 2001

($7)

($6)

($12) 2002 2003 2004 2005 2006 2007 1H08

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Was Warren Buffet Right?

I like to think that if Id been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public spirited enough I owed this to future capitalists to shoot him down. down

13

Challenges Facing the Industry Today

Cost: Unprecedented run up in fuel Credit: Banking i i C dit B ki crisis and it i d its impact on credit markets t dit k t Revenue: Weakening economy and recession

14

Recent Fuel Volatility Has Forced Dramatic Change

(Cost per Barrel)

150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07

24.50 22.15 20.60 21.48 20.56 18.46 17.19 18.43 19.25 30.30 14.40 31.14 25.92 26.10 41.44 56.48 66.02 72.34

147.00

67.00

July Today '08

*West Texas Intermediate at Cushing Sources: Air Transport Association, Energy Information Administration, PIRA Energy Group, Deutsche Bank

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Airlines Have Reacted Quickly to the Fuel Run Up

All airlines announced mainline domestic capacity reductions

Industry domestic capacity down approximately 10% in Q408 Delta capacity will be down 10-11% in Q408 10 11% AirTran capacity will be down 6-7% in Q408 after original plans for 10% growth

Because of high fuel, airlines are probably six months in front of many industries in addressing economic weakness

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Since World War Two, Ex-9/11, Annual U.S. Airline Revenue Has Only Declined Twice
Annual U.S. Airline Operating Revenue Growth
(Revenue Growth)
25% 20% 15% 10% 5% 0% -5% -10% -15% 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009E

* Source: Air Transport Association

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AirTrans View of Todays Challenges

AirTran: Demonstrated Record of Adapting

Emerged stronger from

Continued to lower non-fuel unit costs to the

9/11 by lowering costs and capitalizing on legacy domestic retrenching

best in industry
Continued to increase revenues Capitalized on continued legacy domestic

Under new

Completed re-fleeting to

restructuring and expanded network into the West

management AirTran restores profitability in 1999

all 717 fleet

Negotiated 737 deal at

market bottom

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Increased cash balance to

Transformed business to become

Proactive response to increase in fuel from $75 to

$100MM from low of $10MM in 1999

Successfully recapitalized

highly regarded low-cost airline

Expanded network into Baltimore

$140 per barrel

Focused on reducing capacity growth, increasing

and Florida
Remained profitable post 9/11

the Company with $230MM p y in debt maturities due 2Q01

unit revenues, continuing to lower non-fuel costs, limiting fuel exposure, and successfully raising g p y g capital
Low costs will allow us to further capitalize on

capacity reductions

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Strong Fundamentals: Unique Product

Business Class on every flight

Only major U.S. airline with Business Class on every flight

Assigned seating Over 150 channels of free digital XM Radio Oversized luggage bins Friendly Crew Members Broad distribution

AirTran.com Reservations Travel agencies

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Strong Fundamentals: #1 in Quality

Airline Quality Rating for Major Carriers
2003 1. 2. 3. 3 4. 5. 6. 7. 8. 9. JetBlue Alaska Southwest America West US Airways Northwest Continental AirTran United 2004 JetBlue AirTran Southwest United Alaska America West Northwest American Continental ATA 2005 JetBlue AirTran Independence Southwest United America West Northwest Continental Alaska American 2006 JetBlue AirTran Frontier Northwest Southwest Continental United Alaska American ATA 2007 AirTran JetBlue Southwest Northwest Frontier Continental Alaska United American Delta

10. ATA

Notes: (1) Source: Wichita State University / University of Nebraska, Omaha. ( ) y y (2) Based on DOT reports for on-time performance, denied boardings, mishandled baggage, and customer complaints (3) AirTran not ranked prior to 2003

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Strong Fundamentals: Low Cost Structure

AirTrans Non-Fuel Unit Cost Trend
(Cents Per Mile)

7.25 7.00 6.75 6.50 6.25 6.00 5.75 2001 2002 2003 2004 2005 2006 2007 2008

* Excludes non-recurring special items * 2008 is for the first nine months ended

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Strong Fundamentals: Low Cost Structure

Industry Cost Comparison
(Cents)

Non-Fuel Unit Costs at 734 Miles for 1H08

11 10 9 8 7 6 5

While legacy costs are down, gap remains large

* Excludes fuel and special items

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Strong Atlanta Hub

Seattle

Burlington Portland Minneapolis Milwaukee Flint Detroit Chicago Akron/ Canton Rochester Buffalo Boston

San F S Francisco i Denver Kansas City Las Vegas Los Angeles San Diego Phoenix Wichita

White Plains New York City (LGA) Harrisburg Newark Moline Philadelphia Columbus Pittsburgh Baltimore Bloomington Washington, D.C. (DCA) Dayton Indianapolis Washington, D.C. (IAD) Richmond St Louis Newport News Raleigh/Durham Charlotte Memphis Charleston

Atlanta
Dallas/Ft. Worth Gulfport/Biloxi Houston San Antonio New Orleans Tampa Sarasota Ft. Myers Pensacola

Jacksonville Orlando West Palm Beach Ft. Lauderdale Miami San Juan

Cancun

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AirTran Operates the Worlds Largest LCC Hub

DAL - Atlanta AMR - Dallas CAL - Houston UAUA - Chicago LCC - Charlotte AAI - Atlanta LUV - Las Vegas AMR - Miami NWA - Minneapolis NWA - Detroit CAL - Newark LUV - Chicago AMR - Chicago UAUA - Denver LCC - Phoenix LUV - Phoenix JBLU - New York LUV - Baltimore LCC - Philadelphia UAUA - San Francisco AAI - Atlanta (2000) 0 100 200 300 400 500

225 departures in December 2008

600 700 800 900 1,000

Mainline Departures

Regional Departures

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Flexible Strategy: Florida Point to Point

Seattle

Burlington Portland Minneapolis Milwaukee Flint Detroit Chicago Akron/ Canton Rochester Buffalo Boston

San F S Francisco i Denver Kansas City Las Vegas Los Angeles San Diego Phoenix Wichita

White Plains New York City (LGA) Harrisburg Newark Moline Philadelphia Columbus Pittsburgh Baltimore Bloomington Washington, D.C. (DCA) Dayton Indianapolis Washington, D.C. (IAD) Richmond St Louis Newport News Raleigh/Durham Charlotte Memphis Charleston

Atlanta
Dallas/Ft. Worth Gulfport/Biloxi Houston San Antonio New Orleans Tampa Sarasota Ft. Myers Pensacola

Jacksonville Orlando West Palm Beach Ft. Lauderdale Miami San Juan

Cancun

26

Opportunistic Mindset: Baltimore Focus City

Seattle

Burlington Portland Minneapolis Milwaukee Flint Detroit Chicago Akron/ Canton Rochester Buffalo Boston

San F S Francisco i Denver Kansas City Las Vegas Los Angeles San Diego Phoenix Wichita

White Plains New York City (LGA) Harrisburg Newark Moline Philadelphia Columbus Pittsburgh Baltimore Bloomington Washington, D.C. (DCA) Dayton Indianapolis Washington, D.C. (IAD) Richmond St Louis Newport News Raleigh/Durham Charlotte Memphis Charleston

Atlanta
Dallas/Ft. Worth Gulfport/Biloxi Houston San Antonio New Orleans Tampa Sarasota Ft. Myers Pensacola

Jacksonville Orlando West Palm Beach Ft. Lauderdale Miami San Juan

Cancun

27

Successful Diversification of Network

Seattle

Burlington Portland Minneapolis Milwaukee Flint Detroit Chicago Akron/ Canton Rochester Buffalo Boston

San F S Francisco i Denver Kansas City Las Vegas Los Angeles San Diego Phoenix Wichita

White Plains New York City (LGA) Harrisburg Newark Moline Philadelphia Columbus Pittsburgh Baltimore Bloomington Washington, D.C. (DCA) Dayton Indianapolis Washington, D.C. (IAD) Richmond St Louis Newport News Raleigh/Durham Charlotte Memphis Charleston

Atlanta
Dallas/Ft. Worth Gulfport/Biloxi Houston San Antonio New Orleans Tampa Sarasota Ft. Myers Pensacola

Jacksonville Orlando West Palm Beach Ft. Lauderdale Miami San Juan

Cancun

28

AirTran Responded Quickly and Decisively

Reduced growth

Deferred 36 planned aircraft deliveries Agreements to sell / return 11 aircraft

Reduced costs

Closed three cities Cut non-aircraft CAPEX by 50%

Raised cash

Arranged over $375MM in financing / credit facilities

Limit fuel exposure

Active and disciplined hedging program

Increase revenues

Significant changes in ancillary revenues Fare increases

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Atlanta Has the Best of All Worlds in Aviation

Worlds busiest airport

More flights to more destinations than any other airport in the world

Large global carrier in Delta / Northwest AirTran and the worlds largest low cost hub High level of competition forces efficiency and quality Result i an economic growth engine f G R lt is i th i for Georgia b i i business

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Summary
2008 has been a difficult year AirTran has moved quickly and decisively Fundamentals remain strong Positioning the company to return to profitability and capitalize on opportunities

Airlines are six months in front of this current economic problem AirTran is better positioned for this challenge

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