March 05 0 Freighter Airline Strategies For Growth & Financial Viability Ron Lane Chief Marketing Officer Presentation To 30 th Annual FAA Aviation Forecast Conference March 17, 2005

March 05 1 AGENDA I.Company Overview II.Industry Structure III.Supply / Demand Outlook IV.Freighter Airline Strategies V.Conclusions

March 05 2 I.Company Overview

March 05 3 Atlas Air Worldwide Holdings World’s largest Boeing 747 freighter operator 20 Boeing Fs 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 Company Overview Primary Operating Units

March 05 4 AAWH’s operating units participate in all major air trade lanes around the world. Company Overview AAWH Capacity Deployment: 2004 Source: Atlas Air Worldwide Holdings. Data reflect scheduled services, charters and ACMI Outsource operations.

March 05 5 Polar’s scheduled service network Hub networks at Chicago, Amsterdam and Seoul Serving most major intercontinental markets Recently awarded China authority Company Overview

March 05 6 II.Industry Structure and Major Airline Competitors

March 05 7 There are two basic business models: integrated and non-integrated. Agent Destination ForwarderAirline Origin CONSIGNEECONSIGNEE SHIPPERSHIPPER Airport- Customer Interface Customer- Airport Interface Airport-To- Airport (A-T-A) Integrated Carrier Retail competitors deal with shippers ACMI and Charter carriers provide primary and supplemental capacity to Shippers, Forwarders, Airline’s and Integrators Industry Structure Retail competitors deal with shippers Wholesale competitors deal with retail firms

March 05 8 The consolidation trend is well underway… 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. Rest 100% = /a International air freight traffic only. /b IATA members only; Scheduled freight FTks – Freight Tonne-Kilometers. /cIntegrators defined as: DHL, FedEx and UPS. Data represent U.S. air and ground parcel shipments. TRAFFIC SHARES: bn shipments 12.6 mm metric tons mm FTKs Top 15 Sources: MergeGlobal, Inc. primary research, IATA World Air Transport Statistics, company reports. Industry Structure

March 05 9 The Top 16 Cargo Airlines by freight tonne-kilometers (CY 2003) 1.FedEx 2.Lufthansa 3.Korean 4.UPS 5.Singapore 6.[Atlas/Polar]* 6.Cathay 7.Air France 8.China Airlines 9.EVA Air 10.JAL 11.Cargolux 12.British Airways 13.KLM 14.Northwest 15.Emirates 16.Polar Air Source: International Air Transport Association and company data * Consolidated Traffic Industry Structure

March III.Supply / Demand Outlook

March 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 Supply / Demand Outlook

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

March 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 Asia/Pacific Europe Latin America , Exports From The U.S.Imports Into The U.S. Asia/Pacific represents ≈ 60% of new import tons! Source: MergeGlobal, Inc.

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

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

March IV.Freighter Airline Strategies

March Two logical extremes capture and project the main issues in freighter strategy. Strategy High RevenueLow Cost Philosophy “Air cargo is a commodity”“Air cargo is segmentable” 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 Freighter Airline Strategies

March 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. Fleet Size (Freighters Or Equivalents) USD Per Block Hour Unit Cost Versus Unit Revenue USD Per Block Hour ILLUSTRATION Average Unit Cost Average Unit Revenue Minimum Competitive Scale (MCS) Source: MergeGlobal, Inc. Profit Freighter Airline Strategies

March 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 Freighter Airline Strategies

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

March V.Conclusions

March 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 Conclusions