1. 1 NWA 2nd Qtr. 2007 Industry Results & Review ALPA Economic & Financial Analysis Department 3rd Quarter MEC Meeting Oct. 17, 2007 – Memphis, TN

2. 2 E&FA Presentation Overview  Airline Industry Economic Trends  2 nd Quarter 2007 - Northwest Financial Results  2 nd Quarter 2007 – Selected Industry Financial Results  Questions

3. 3 Airline Industry Economic Trends

4. 4 First Half of 2007 Went From Great to Good  U.S. airlines exit bankruptcy  Strong international RASM  Fuel prices moderating  Capacity discipline  Rising fuel prices  Weakening economy  Slowing domestic RASM

5. 5 Airline Industry - 2007  2Q07 results were best since 2000 on a quarterly basis  8 largest posted an 8.6% adjusted pre-tax margin – profit sharing payouts  3 rd quarter RASM fairly strong for most carriers (YOY comps easier)  Merrill Lynch estimates $2.0B pretax profit for 8 largest carriers (vs. $1.2B 3Q06)  4 th quarter results have been reduced by most industry observers  Fuel is the main culprit, plus slightly less demand due to the economy  Only modest domestic PRASM growth projected at Goldman Sachs Source: E&FA analysis, Company Reports, Morgan Stanley Capacity forecast

6. 6 Airline Industry - 2007  Capacity discipline continues in 2H07 – just 1.9% domestic growth projected (excl. Skybus/Virgin America)  Capacity restraint is the key driver of profitability these days…industry has never seen a continuous period of capacity restraint like this before during deregulation  International growth fairly aggressive at 4.6%  US Airways cuts mainline capacity by 4% now vs. less than 1% in prior plan (PIT)  NWA 2007 system capacity reduced from 4% growth earlier to less than 1% now Domestic shrinking 2-3%, with growth in international  Southwest is planning to reduce capacity growth for the rest of the year and 2008  Fuel continues to rise – hit record high of over $87/bbl for crude on 10/16/07  This week’s rise mainly attributed to tensions building between Turkey & Iraq  Crack spread increasing as well – higher refining costs  IATA recently increased its 2007 projection to a $5.6B global industry profit (up from $5.1B) Source: E&FA analysis, Company Reports, Morgan Stanley Capacity forecast, Lehman Airline Research

7. 7 Projections for the Airline Industry  Domestic capacity anticipated to grow 3.2% in 2008  Significant capacity growth by LCCs offsetting very limited growth from legacy carriers  Skybus and Virgin America could push 2008 rate by 1.0 pp.  International capacity growth from U.S. carriers in the 3.5% range in 2008, and PRASM growth projected to slow  Worldwide capacity expected to grow 5% for next 3 years  Legacy carriers forecast to grow about 3%  LCCs about 10% LCCs command 18% of worldwide seats (2006) Represent 5% of Asia-Pacific market Forecasted to be 40% of market share (worldwide) by 2010  Regionals about 5%  The potential for large increases in government taxes/fees are a cost concern  Labor costs expected to rise - executive bonuses fueling labors’ fires  Global pilot shortages projected - current and future Source: JP Morgan, Morgan Stanley forecasts

8. 8 Projections for the Airline Industry  If credit crunch continues and fuel rises, possibility of a recession grows, resulting in less passenger demand  Industry would need to cut capacity on lowest margin routes - most network carriers have the flexibility to do this  Strong cash position of most carriers means they might weather a storm better than in past downturns  Could fuel industry consolidation  IATA recently revised 2008 global industry profits down to $7.8B (from $9.6B) due to fuel and credit markets  Most other industry observers have also reduced their 2008 profit forecasts  U.S. airlines have a lot of work to do to refurbish aging fleets, equipment, & facilities  Levels of debt and cash on hand will affect the ability and timing of doing this  Poor financial performance, high debt/equity ratios, and tight supply of aircraft have contained aircraft orders and capacity over the past few years – will it continue? Source: JP Morgan, Morgan Stanley forecasts

9. 9 GDP Growth Estimates Declining in Face of Credit Crunch and Energy Demand Source: Bureau of Economic Analysis, Wachovia Bank Economics Group Forecasts

10. 10 Airlines Showing Restraint in Domestic Capacity… Source: JP Morgan 9/20/07 report sourcing Air Transport Assoc.

11. 11 …Resulting in Very High Load Factors… Source: Air Transport Assoc.

12. 12 …And Giving Airlines More Pricing Power Source: JP Morgan 9/20/07 report sourcing Air Transport Assoc.

13. 13 Source: ATA, JP Morgan Sept. 20, 2007 Last Year, Domestic RASM Was the Story… This Year, Intl. RASM Is the Story

14. 14 Jet Fuel Prices Outpacing Crude Again Source: U.S. Energy Information Administration

15. 15 Since Beginning of 2006, Crack Spread Is Up Nearly 70% Source: U.S. Energy Information Administration

16. 16 Source: NYMEX Futures Data 20072008 2006 July 14, 2006 Fuel Curve Keeps Sliding Up July 31, 2007 Sep. 25, 2007 February 27, 2007

17. 17 Jet Fuel Prices Outpacing Domestic Fares Source: ATA and U.S. Energy Information Administration

18. 18 Significant New Aircraft Fleet Growth Projected 5,236 deliveries in next 10 years with 2,785 additional options Source: BACK Aviation Solutions Commercial Jet Fleets April 2007

19. 19 US Air Carriers Total Aircraft Forecast Source: FAA Aerospace Forecasts Fiscal Years 2007-2020, US Dept. of Transportation, March 2007. Includes Mainline, Regional and Cargo Carriers 43% Increase 2000-2020

20. 20 Pilot Shortage  Decreased military supply  Falling wages at US carriers  Retirement of baby boomers  Age 60 ruling in US not expected to happen immediately  Growing business jet sector (fractional ownership)  NetJets manages a fleet of 683 aircraft  NetJets flies over 370,000 flights annually  NetJets Europe doubling its pilot workforce over next 4 years to 1,500 Source: NetJets website, Press Release May 23, 2007

21. 21 Active Commercial Pilots Source: FAA Aerospace Forecasts Fiscal Years 2007-2020, US Dept. of Transportation, March 2007. FAA Civil Airmen Statistics. (An active pilot is a person with a pilot certificate and a valid medical certificate.) 15 Years to Get Back to Peak

22. 22 Pilot Hiring  Total new pilot jobs expected to increase by more than 12,000 in 2007  Forecast increased from 10,000 in May 07  Total new pilot jobs created in 2006: 8,256  Total pilots on furlough continues to decline  June 06 to June 07 decline of more than 5,200 pilots  All major and regional airlines now hiring - first time since 2001  China will need 3,110 new aircraft over the next 20 years to meet capacity demand Source: Air Inc., June 2007 Summary; IATA

23. 23 Other Significant NWA and Industry Issues  Midwest Air Group buyout by NWA and TPG at $17/share cash  NWA at $213M for their “passive minority” stake of 47%; TPG at $238M  Antitrust regulators at DOJ want more information - completion of deal may be delayed at least 30 days (into 2008), but Midwest shareholders will vote Oct. 30  Airline managements looking at options for increasing shareholder value  AMR pre-paying $545M in aircraft debt, saving$25M in interest and releasing 16 aircraft from encumbrances on loans Some carriers have stated they will use less free cash to pay down debt this year and more to pay shareholders  Mergers and acquisitions  Sale of assets/subsidiaries (frequent flyer, regionals, maintenance, cargo, etc.) A major shareholder of AMR is promoting some of these options NWA and UAL have also said they will review such transactions Air Canada successfully spun off assets in the past two years (LCC, FF, & aircraft leasing), but can it work in a more competitive U.S. marketplace? If these transactions come to fruition, ALPA will need to scrutinize them further – potential of negative consequences for labor and the company  NWA secured $450M public financing for 27 Compass aircraft last week  Corporate strength allowed access to capital markets, even with the current economic credit crunch; Wall Street analysts are bullish on NWA

24. 24 2 nd Quarter 2007 – Northwest Financial Results

25. 25 NWA Corp. 2Q07 Summary P&L

26. 26 NWA Corp. 2Q07 Revenues & Expenses

27. 27 Northwest Airlines 2Q07 Operating Statistics

28. 28 Net Debt of NWAC Pre- and Post-Bankruptcy

29. 29 2 nd Quarter 2007 - Selected Industry Financial Results

30. 30 Industry Comparison of 2Q07 Pre-Tax Margin Source: SEC filings & press releases; E&FA adjusted to exclude restructuring/unusual items

31. 31 2Q07 Passenger Unit Revenues Moderating Source: Company reports; E&FA adjustments; DOT Form 41

32. 32 Mixed Results in 2Q07 Unit Costs Source: Company reports (excluding unusual items); E&FA adjustments; DOT Form 41

33. 33 Comparison of 2Q07 Capacity Changes Source: SEC filings & press releases

34. 34 Comparison of 2Q07 Load Factor Changes Source: SEC filings & press releases

35. 35 2Q07 Industry Liquidity Comparison Source: ALPA E&FA analysis using company press releases and SEC filings Note: Unrestricted amount is total cash & short-term investments less reported restricted cash.

36. 36 QUESTIONS?