Continental Airlines Customer Analysis Chris Dwyer, Meghan Murphy, Kassonga Mwamba

Overview Industry Trends Product Markets Domestic vs. International Types of Passengers Market Opportunities/Strategies Potential Problems Future

Trends ~ Airline Industry Rapid Growth in International Demand Steady Growth in Domestic Demand Increased On-Line Distribution Decrease in Airline Capacity (due to bankruptcy) Increase Price per Flight Continued Pressure from LCCs in Domestic Market Alliance Agreements

Positive Growth2 Continued Growth for 32 of the past 35 years 1991 ~ Desert Storm 2001-2002 ~ 9/11 Terrorist Attacks Continued Economic Growth Continued Increase in World Trade Boeing · Current Market Outlook · 2005 · Demand for Air Travel See Source 2

Product Markets Domestic International Point to Point Routes Short-Haul Flights Highly Price Sensitive customer segment Increased Competition From LCCs Lower RASM International Network-Hub Routes Long-Haul Flights Less Price Sensitive Customer Segment Less Industry Competition Higher RASM

Domestic vs. International 2004 International Growth Increased 13.9% vs. Domestic Growth 4.8%12 “Majors” Shifting to More Profitable International Segments Typically Less Competition for International Travel Growing Demand in Latin American, Atlantic, & Pacific Segments International Yields Higher RPSM Data taken from 05’-02’ 10K reports: See Sources #1,5,6,10,14 See Source 12

Types of Passengers Leisure Traveler Business Traveler Preferences Lower Price Willing to Sacrifice Service Limited Route Needs Business Traveler 34% of Domestic Revenue in 2000 (Only 10% of Capacity)11 Price Sensitivity Driven by Economic Conditions Higher Class of Service Seeing Shift Towards LCCs See Source 11

Frequent Flyer (FF) ~ Demographics3 A person that takes AT LEAST 4 flights per year (17 Million Americans) Average FF takes 9 flights per year Only 18% of Total Airline Travelers BUT Account for 58% of ALL Flights Taken 68% of FF have College or Graduate Degree 75% are Employed Full or Part-time Majority are Male ~ Accounting for 58% of all FF 61 % of those are between the ages of 25-54 years of age See Source 3

Frequent Flyer Programs American Airlines AAdvantage Miles Continental Airlines OnePass United Airlines Mileage Plus Southwest Airlines Rapid Rewards

Market Opportunities International Segments Frequent Flyer Programs Pacific/Asia Latin America Atlantic/Europe Frequent Flyer Programs Travel Industry Alliances Miles Auctions Higher Level of Service Concierge

International Opportunities Continental Has More International Exposure than any of the Other “Majors”13 Current Hub and Spoke System Ideal for International Expansion Houston – Latin America Newark ~ Serving Richest DMA in the U.S. – Europe and Asia/Pacific Purchasing Power Growth of U.S. Hispanic and Latin American Market Segment International Revenues Grew 29% in 200513 See Source 13

International Strategies Continental Plans to Expand International Routes by 15% Over the Next Several Years ~ vs 2-4% Expansion in Domestic Market13 European Routes to Lower-Traffic European Airports8 Chinese Routes to Beijing and Hong Kong Serving Economically Expanding China Market Launch of Spanish-Language Web Site See Source 13 See Source 8

FF Opportunities11 Frequent Flyers Make Up Significantly Large Portion of Flight Segments Show High Level of Brand Loyalty Focus on Online Booking See Source 11

FF Strategies Forming Alliances with Other Airlines Increase Route Availability Allow Usage of FF Miles in Network Decreases Need for FF to Go Outside Network Enhance Web Site Booking System for FF Checking Points/Miles Status Booking Capabilities Miles Auctions

Service Opportunities Differentiation with High Service Levels Adding Service When Other Airlines Cutting Service Costs U.S. Economic Growth Trends Promising for Increased Service Requirements for Business Travelers Segmentation of “Top-Tier” passengers

Service Strategies Additional Focus on “Top-Tier” Customers and Business Travelers Enhancing In-Flight Reports for Flight Attendants4 Corporate Hosting of Discussion Groups for Frequent Travelers Gathering Complaints and Suggestions for Improved Service11 See Source 4 See Source 11

Potential Problems Increased Globalization Liberalization of International Regulation Domestic LCCs Potential Terrorists Attacks

Future Strategy Enhance/Expand Transcontinental Routes Continued Customer Service Focus Strengthen Alliances for Customer Convenience Focus on Top Revenue Producing Segments

References American Airlines, February 24, 2006. 2005 Annual Report. [on-line] http://www.shareholder.com/aa/edgar.cfm?DocType=Annual&SECYear=All ~ citg April 2, 2006.1 Boeing, 2005. Current Market Outlook 2005. [on-line] http://www.boeing.com/commercial/cmo/pdf/cmo2005_OutlookReport.pdf ~ citg April 2, 2006. Bouvard, Pierre and Williams, Diane. August 2005. The Arbitron Airport Advertising Study. [on-line] http://www.arbitron.com/downloads/Arbitron_Airport_Study.pdf ~ citg March 21, 2006. CIO Magazine, February 15, 2004. Getting To Know Them. [on-line] http://www.cio.com/archive/021504/customers.html ~ citg April 3, 2006. Continental Airlines, February 24, 2006. 2005 Annual Report. [on-line] http://www.continental.com/company/investor/reports.asp ~ citg April 2, 2006.2 Delta Airlines, March 27, 2006. 2005 Annual Report. [on-line] http://investor.delta.com/edgar.cfm ~ citg April 2, 2006.3 1. Same site used for 2003 Annual Report 2. Same site used for 2003 Annual Report 3. Same site used for 2003 Annual Report

References Donofrio, Susan. Cathay Financial, January 27, 2006. Continental Airlines: Initialing with Outperform Due to Low Costs & Strong International Presence. Keeton, Ann of Dow Jones Newswires. March 31, 2006. US Airlines Seek Revenue From More International Flights. [on-line] MorningStar.com. Lindsay, Greg. “Airworld Part 7: The ‘Demon Customers’: Inside the “FlyerTalk” Community.” Ad Age Magazine, September 20, 2005. Northwest Airlines, March 16, 2006. 2005 Annual Report. [on-line] http://ir.nwa.com/phoenix.zhtml?c=111021&p=irol-sec ~ citg April 2, 2006.4 Standard & Poor’s Industry Survey’s: Airlines, March 28, 2002. Cited from The Center for Hospitality Research at Cornell University case study. Can Continental Airlines Continue to Work Hard, Fly Right & Fund the Future. Standard & Poor’s Industry Survey’s: Airlines, May 19, 2005. Standard & Poor’s Stock Report, April 1, 2006. Continental Airlines. The McGraw-Hill Companies. United Arilines, March 31, 2006. 2005 Annual Report. [on-line] http://ir.united.com/phoenix.zhtml?c=83680&p=irol-sec ~ citg April 2, 2006.5 Same site used for 2002 Annual Report Same site used for 2003 Annual Report