FEDERAL AVIATION ADMINISTRATION Annual Forecast Conference Washington, D.C. March 18, 2005

AIR CARGO DEMAND: An Overview Stephen A. Alterman President Cargo Airline Association Washington, D.C.

CARGO AIRLINE ASSOCIATION AIR CARRIER MEMBERSHIP Board of Directors Board of Directors ABX Air, Inc. Atlas Air Federal Express UPS Members Members Air Transport International Capital Cargo International CNF, Inc. DHL Express First Air Gemini Kalitta Air Kitty Hawk USA Jet

AIR CARGO OVERVIEW Air Cargo Industry Segments Air Cargo Industry Segments Bellies of Passenger Aircraft Air Freight Forwarders All-Cargo Aircraft Regional Aircraft All segments provide the services necessary to satisfy shipper demand.

DEMAND DRIVERS Time Definite Service (Reliability) Time Definite Service (Reliability) Speed Speed Traceability Traceability Probably NOT Price Probably NOT Price

DEMAND LIMITATIONS Uncertain Economic Picture Uncertain Economic Picture Security Concerns Security Concerns Escalating Fuel Prices Escalating Fuel Prices Necessary Fuel Surcharges Price Competition from Other Modes

HIGH VALUE COMMODITIES ARE TRADITIONALLY TRANSPORTED BY AIR High-tech electronics High-tech electronics Human organs Human organs Important documents Important documents

WHAT THIS MEANS While only approximately 2% of all freight moves by air, 45-50% of the value of freight transported qualifies as air freight While only approximately 2% of all freight moves by air, 45-50% of the value of freight transported qualifies as air freight

WHO CARRIES THIS FREIGHT? DOMESTIC TRAFFIC Passenger Carriers – 24.1% All-Cargo Carriers – 75.9% Forecast Period (12 Years) Forecast Period (12 Years) Passenger Carriers – 20.0% All-Cargo Carriers – 80.0% Source: 2005 FAA Forecast, March 2005

WHO CARRIES THIS FREIGHT? International Traffic Passenger Carriers – 40.3% All-Cargo Carriers – 59.7% Forecast Period (12 Years) Forecast Period (12 Years) Passenger Carriers – 36.4% All-Cargo Carriers – 63.6% Source: 2005 FAA Forecast, March 2005

DOMESTIC v. INTERNATIONAL Demand increasing more dramatically in international markets – particularly Asia Demand increasing more dramatically in international markets – particularly Asia For 2004, FAA estimates approximately 45% more growth internationally (5.5% annually internationally v. 3.8% domestically). FAA March 2005 Forecast For 2004, FAA estimates approximately 45% more growth internationally (5.5% annually internationally v. 3.8% domestically). FAA March 2005 Forecast 91% more annualized international growth than domestic for next twelve years – (6.3% annually v. 3.3 %). FAA March 2005 Forecast 91% more annualized international growth than domestic for next twelve years – (6.3% annually v. 3.3 %). FAA March 2005 Forecast

DOMESTIC v. INTERNATIONAL Relatively smaller domestic growth Relatively smaller domestic growth Less than robust domestic economy Mature industry Greater international growth Greater international growth Opening of new markets Expanding Asian economy

CONCLUSION Demand for air cargo services continues to grow – especially in international markets Demand for air cargo services continues to grow – especially in international markets Industry members are well positioned to meet these growing demands Industry members are well positioned to meet these growing demands Governments must move to further open markets to allow carriers to meet the needs of the world’s shippers Governments must move to further open markets to allow carriers to meet the needs of the world’s shippers