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Confidential ? Subject To Non-disclosure Agreement Us Airways Presentation January 10, 2013

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US AIRWAYS GROUP INC | AMR Corporation | US Airways

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Title: Confidential ? Subject to Non-Disclosure Agreement US Airways Presentation January 10, 2013
Date: 2/14/2013

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Exhibit 99.1

 

Confidential – Subject to Non-Disclosure Agreement

US Airways Presentation

January 10, 2013


 

Table of Contents

Tab 1: Creating the World’s Best Airline

Tab 2: Network Overview

Tab 3: Synergies and Transition Costs Agreement

Tab 4: Labor Integration Disclosure

Tab 5: Valuation / Proposal Non

to

Subject

Appendix –

Tab A: Why Now? Confidential

Tab B: The US Airways Model

Tab C: What People Are Saying


 

Forward Looking Statements

Certain of the statements contained or referred to herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue” and similar terms used in connection with statements regarding, among others, the outlook, expected fuel costs, revenue and pricing environment, and expected financial performance and liquidity position of the Company, including whether or not a combination with AMR Corporation is implemented and the terms, conditions or future financial performance of any such combination. Such statements include, but are not limited to, statements about future financial and operating results, including synergies, the Company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties that could cause the Company’s actual results and financial position to differ materially from these statements. Such risks and uncertainties include, but are not limited to, the following: the impact of significant operating losses in the future; downturns in economic conditions and their impact on passenger demand, Agreement

booking practices and related revenues; the impact of the price and availability of fuel and significant disruptions in the supply of aircraft fuel; competitive practices in the industry, including the impact of industry consolidation; increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates; the Company’s high level of fixed obligations and ability to fund general corporate requirements, obtain additional financing and respond to competitive developments; any failure to comply with the liquidity covenants contained in financing Disclosure arrangements; provisions in credit card processing and other commercial agreements that may affect the Company’s liquidity; the impact of union—disputes, employee strikes and other labor-related disruptions; the inability to maintain labor costs at competitive levels; interruptions or disruptions Non in service at one or more of the Company’s hub airports or focus city; regulatory changes affecting the allocation of slots; the Company’s reliance to on third-party regional operators or third-party service providers; the Company’s reliance on and costs, rights and functionality of third-party distribution channels, including those provided by global distribution systems, conventional travel agents and online travel agents; changes in government regulation; the impact of changes to the Company’s business model the loss of key personnel or inability to attract and retain qualified Subject personnel; the impact of conflicts overseas or terrorist attacks, and the impact of ongoing security concerns; the Company’s ability to operate and – grow its route network; the impact of environmental regulation; the Company’s reliance on technology and automated systems and the impact of

any failure or disruption of, or delay in, these technologies or systems; costs of ongoing data security compliance requirements and the impact of

any significant data security breach; the impact of any accident involving the Company’s aircraft or the aircraft of its regional operators; delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity; the Company’s dependence on a limited number of suppliers for aircraft, Confidential aircraft engines and parts; the Company’s ability to operate profitably out of Philadelphia International Airport; the impact of weather conditions and seasonality of airline travel; the impact of possible future increases in insurance costs or reductions in available insurance coverage; the impact of global events that affect travel behavior, such as an outbreak of a contagious disease; the impact of foreign currency exchange rate fluctuations; the Company’s ability to use NOLs and certain other tax attributes; and other risks and uncertainties listed from time to time in the Company’s reports to and filings with the Securities and Exchange Commission (“SEC”). 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. The Company assumes no obligation to update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law. Additional factors that may affect the future results of the Company are set forth in the section entitled “Risk Factors” in the Company’s Report on Form 10-Q for the quarter ended September 30, 2012 and in the Company’s other filings with the SEC, which are available at www.usairways.com.

2

 


 

Creating The World’s Best Airline


 

AA – US Combination is Compelling for All Stakeholders

• AA-US combination would create the world’s premier airline

• Combined network can compete more effectively with United, Delta and others

• Impossible to accomplish without a US merger

• Significantly strengthens oneworld alliance

• Supported by employees

• Job security, improved opportunities through stronger carrier

• Labor contracts negotiated and supported by employees

• Superior recoveries for investors/creditors

• Enormous value creation through $1.4 billion in synergies

• Better service for customers/communities

• Third comprehensive network to compete with United and Delta

• Improved service to more cities

• Our work with AA has strengthened our view

Confidential – Subject to Non-Disclosure Agreement

• Synergy estimates conservative

• Tremendous upside to creditors versus ambitious AA standalone plan

2

 


 

Recent Mergers Have Reduced AA’s—Disclosure

Non

Prominence in the Industry to

Subject

Confidential

3

 


 

Mergers Have Dramatically Changed the Playing Field

Confidential – Subject to Non-Disclosure Agreement

Source: SEC Filings and Company Reports.

4

 


 

Big Three Now The Big Two

• The mergers of United-Continental and Delta-Northwest have dramatically changed the competitive playing field

• Mergers have created stronger competitors with more attractive networks that have reduced AA’s share

Internal growth cannot fix this structural network disadvantage

Source: Superset Domestic Revenue; pre-merger United and Delta do not include Continental and Northwest

5

 


 

Other Airlines’ More Attractive Networks Have Put AA at a Revenue Disadvantage

• Due to other airlines’ strengthened networks, AA’s unit revenue has declined

• If AA’s 2012 relative RASM had remained at 2005 levels, AA would have generated $1.7B in additional annual revenue

Source: ATA Industry Revenue, AA Reported Revenue, AA ASMs, RPMs, Onboards from T-100; jetBlue excluded from entire period Updated through 2Q12

6

 


 

The Response to the Challenges of Recent Agreement

Mergers: Disclosure

-

Non

to

AA-US Combination Creates The World’s Subject

Best Airline Confidential

7

 


 

Merger Creates A Network That Surpasses Delta and United

• A very complementary combination. US is strong where AA is not – the lucrative East Coast

• The merged network will rival the networks that Delta and United built through merging

• Adding capacity on existing international routes will not compensate for AA’s domestic network deficiencies


 

Combination Creates the Preeminent Global Network Carrier

Source: SEC Filings and Company Reports.

9


 

Combination Increases Competition Among Alliances

• By shifting the US network from Star to oneworld, the competitiveness of oneworld is significantly improved

“I’ve always seen it [an AA-US merger] as a great opportunity for IAG and for oneworld, because, without question, American will be stronger and will be better.”

–WILLIE WALSH, CHIEF EXECUTIVE OFFICER, INTERNATIONAL AIRLINES GROUP (7/17/12)

10 Source: FY11 Superset Revenue, Domestic Carriers only


 

Discussions Have Increased US Interest in Merger

• Work completed since signing NDA has confirmed a merger will create enormous value for

AA creditors

• Estimate of $1.4B in synergies seems conservative

• AA standalone plan is aggressive, projecting industry leading margins based on largely

unspecified project initiatives, betting creditor recoveries on the presumption that massive

capital expenditures in new product will reverse the loss of its historical revenue premium Agreement

without addressing its structural network deficiencies versus its primary competitors

• More we have learned, more bullish we have become Disclosure

-

Recent Airline Merger Synergies Non

As % of Pro Forma Revenue to

$2.0B $680M Cost Synergies Subject

Network Synergies

2.0%

3.2% Confidential

$1.0B—$1.2B $1.4B

0.9% 0.7%

4.3%

3.3% 3.0% 2.9%

Agreement

Disclosure


 

US Offer Provides Clear Path to Value Non -

to

Subject

Confidential

12


 

US Offer Provides Clear Path to Value

• Value to AA creditors well in excess of standalone plan

• 70% of New American to AA creditors

• 30% to US shareholders

• Easily satisfied closing conditions Agreement

• No anticipated regulatory issues or delays

• No financing conditions

• No additional approvals or consents from labor unions Disclosure

-

Non

• Resolution of social issues to

• Name: American Airlines Subject

• Headquarters: Fort Worth, TX –

• Management: CEO from US Airways. Best of both teams combined to build industry’s best

management team Confidential

• Board of Directors: Six directors in the aggregate separately designated by AA and

UCC. Five from US

13


 

Merger is the Answer for All Concerned

• AA-US combination is best outcome for all stakeholders

Creditors/Shareholders Employees Customers/Communities

• Enormous value • Great place to work • Global network

creation Agreement

• Larger, financially • More customers to

• Value-oriented stronger, more more places than any

leadership competitive airline other airline Disclosure

-

Non

• Better compensation • Strong competitor to to

and benefits DL, UA and others Subject

• Increased and more –

secure career

opportunities Confidential

• Change in leadership

14


 

Time to Move Forward

• More value created inside bankruptcy than outside

• Contract optimization: fleet (particularly regional), credit cards, facilities, IT, etc.

• Employees support and desire merger inside bankruptcy

• Much easier to manage airline post-bankruptcy with employee support

• Long term labor contracts negotiated and in place. Not available post bankruptcy Agreement

• Delta and United continue to extend their lead Disclosure

• Example: Delta/Virgin Atlantic -

Non

to

• Far too risky to wait Subject

• General industry event risk –

• Risk of post-emergence AA not completing transaction

• Risk of US or US management not being available Confidential

15


 

Confidential – Subject to Non-Disclosure Agreement


 

Network Overview

Confidential – Subject to Non-Disclosure Agreement

1

 


 

Recent Mergers Have Dramatically Changed the Playing Field

• Mergers of United-Continental and Delta-Northwest have dramatically changed the competitive playing field

• Mergers have created stronger competitors with more attractive networks that have reduced AA’s share

2

 


 

Impact of a Strategic Network Disadvantage vs. United/Delta

• Mergers have created network shortfalls that AA can’t address standalone:

• Increasingly less relevant in East outside cornerstones

• No domestic connecting hub on East Coast

• Lacks small and medium city presence

• Usurped in NYC in 2011 by competitors—abandoned New York shuttle routes in 2011 Agreement

• Network challenges result in:

• Loss of corporate high-yield traffic

• Loss of elite travelers Disclosure

-

• Deteriorating relative revenue performance Non

to

• Competitive challenges for oneworld Subject

• US has comparable network disadvantages –

Confidential

3

 


 

Consolidation Has Diminished AA’s Revenue Premium

• Due to other airlines’ strengthened networks, AA’s unit revenue premium has declined

• If AA’s 2012 relative RASM had remained at 2005 levels, AA would have generated $1.7B in additional annual revenue

Source: ATA Industry Revenue, AA Reported Revenue, AA ASMs, RPMs, Onboards from T-100; jetBlue excluded from entire period Updated through 2Q12

4

 


 

Delta and United Gaining Corporate Travel Revenue Share

• Comprehensive depth/breadth in Delta and United networks allows them to gain high-yield

business travelers

• Bulk of this share shift has come at the expense of AA

• Similar loss also has occurred with other elite business travelers

• Share loss has cost AA $522M in high-yield business in last 12 months (at large agencies

only; loss more significant if small and medium sized agency lost business is included) Agreement

Rolling 12-Month Revenue Share – All Agencies, All Corporations

Percent Change Disclosure

-

Non

to

Subject

Confidential

5

 

Source: global distribution systems bookings


 

East Coast Scope/Depth Example: AA Uncompetitive Versus Delta and United

• AA cannot connect customers up and down the East Coast

• Structural issue since AA does not have an East Coast connecting hub

• AA cannot fix standalone (e.g. by growing BUF-ORD by 20%)

• Merger solves problem

Source: Diio Mi July 2012 Peak Day Schedule

Southwest, jetBlue and others also provide competition in the marketplace

6

 


 

East Coast Scope/Depth Example: AA Uncompetitive Versus Delta and United

• AA cannot connect customers in Charleston, SC up and down the East Coast

• Like the Northeast example, AA cannot address this standalone

• Merger solves problem

7

 


 

US Adds Valuable Connectivity Along East Coast

8

 


 

Combined Company Will Have The Domestic Network to Compete with Delta, United and Others

• Need a domestic foundation to feed international in order to create a world class international network

Source: FY 2011 Superset Domestic Revenue

9


 

Merger Answers Network Challenges

• US and AA networks are perfectly complementary, and together they are undeniably better

than they are apart

• Consumer benefits of the combination will be attractive to a broad range of constituents

• Comprehensive network will attract corporate customers and other travelers

• Maintains existing hubs and strengthens them relative to other mergers Agreement

• Creates a more competitive industry with four leading players

(American+Delta+United+Southwest) and a number of other smaller competitors

• Nine cities will have access to the American Airlines network restored Disclosure

-

Non

• Enhances overall presence of oneworld with larger footprint in U.S. to

• Enhanced connectivity due to larger network Subject

• Significantly improved access to US east coast markets –

• Helps attract and retain more members in alliance fueling growth opportunities Confidential

• $1.4 billion synergies incremental to any standalone plan

10


 

Confidential – Subject to Non-Disclosure Agreement


 

Confidential – Subject to Non-Disclosure Agreement


 

US Shuttle Will Be a Critical Asset of the Combined Company

• The shuttle routes are two of the most important

New York routes for corporate accounts

• Delta currently uses shuttle against AA to win New Boston

York corporate deals and its international presence Agreement

against US to win shuttle corporate deals

• Merger solves problem Disclosure

-

New York City Non

LaGuardia to

Subject

Washington Confidential

Reagan National

Source: CRS Oct 11 TMC Bookings

13


 

Merged Airline Can Compete More Effectively in Chicago

• The combined airline will have a larger local passenger base in Chicago than United

• United will still have a larger overall operation due to its international flying, but with a solid domestic foundation, the combined airline can compete effectively for international business with United in Chicago

Local Chicago Passengers Agreement

Year Ending 1Q 2011 in millions

Disclosure

-

Non

to

Subject

Confidential

+

Source: Diio YE 1Q11 O&D Passengers

14


 

Combined Network Will Expand Medium/Small-City Service and Generate Synergies

• Combination creates new route opportunities to connect medium/small cities in the Midwest and East to complementary hubs

Source: Diio Mi March 2012 Peak Day Schedule

15


 

Combination Increases Competition Among Alliances

• By shifting the US network from Star to oneworld, the competitiveness of oneworld is significantly improved

“I’ve always seen it [an AA-US merger] as a great opportunity for IAG and for oneworld, because, without question, American will be stronger and will be better.”

–WILLIE WALSH, CHIEF EXECUTIVE OFFICER, INTERNATIONAL AIRLINES GROUP (7/17/12)

16 Source: FY11 Superset Revenue, Domestic Carriers only


 

US adds “dots to the map” for oneworld partners

Only 10 Destinations from JFK not

served by British Airways

Source: Diio Mi March 2012 Peak Day Schedule

98 Destinations from PHL and CLT not

served by British Airways

17


 

Combination Would Enhance oneworld’s Ability to Connect

• Biggest value of Alliance is adding more “dots to the map” (e.g., competitive connecting routes)

• Because JFK is not a 500 flight per day connecting hub, oneworld does not participate in most connecting routes (like United at EWR and Delta at ATL)

Source: FY11 Superset Connecting Revenue

18


 

AA – US Merger is Compelling for All Stakeholders

• Mergers have left AA with a structural network disadvantage

• AA losing corporate share

• AA cannot fix on its own

• Only a US merger addresses the structural issue

• Size and scale to compete with United, Delta and others Agreement

• Hubs that provide comprehensive service to customers (particularly on the East Coast)

Disclosure

-

Non

to

Subject

Confidential

19


 

Confidential – Subject to Non-Disclosure Agreement

Synergies and Transition Items

1

 


 

AA-US Merger Creates $1.4B in Recurring Synergies

• $1.4B of annual run-rate synergies associated with an AA-US merger

• Synergy estimate is conservative, achievable and sustainable

Synergies Estimate Value

Network Synergies $ 1.12B Agreement

Cost Synergies $ 0.64B Disclosure

Labor Harmonization ($ 0.36B) -

Non

Total Expected Annual Synergies $ 1.40B to

Subject

Key Transaction Benefits

• Combination of complementary networks closes the gap with competitors Confidential

• Improved cost structure achieved through efficiency initiatives and elimination of redundancies

• Provides industry-standard compensation and benefits, improved job security and advancement opportunities for all employees

2

 

Estimates subject to revision


 

Recurring Network Revenue Synergies of $1.1B

• $1.1B of recurring annual network revenue synergies associated with merger

Estimated Annual

Network Synergies Synergy, $M Comment

Network Connectivity 420 Improved schedules and connections for Agreement

passengers

Corporate and Frequent Flier 350 Corporate share shift, increased passenger

loyalty Disclosure

-

Fleet Optimization 310 Reassigning fleet to missions that better Non

optimize revenue to

Other 120 Optimization of US A319s and hub-to-hub

flying on regional jets Subject

Passenger Related Costs (80)

Total Network Synergies $1,120M Confidential

• Revenue synergies derived primarily from network connectivity improvements, fleet optimization, corporate share shift and the effect of frequent flier program scale

• Significant value can be unlocked through new hub connectivity and aircraft reassignment

Estimates subject to revision

3

 


 

Recurring Cost Synergies of $640M

• Conservative cost synergies of $640M

• Cost synergies derived from optimization of overlapping airports, information technology systems, corporate efficiencies and purchasing and distribution

• Improvements in costs of facilities and station services for overlapping airports due to larger scale Agreement

• Other potential incremental efficiencies not captured in maintenance and selling expenses

• Cost synergies are offset by $360M in expense associated with harmonizing the AA and US Disclosure

workforce

-

Estimated Annual Non

Cost Synergies Synergy, $M Comment to

Overlapping Airports 210 Overlapping facilities and airport services Subject

Purchasing 130 Improved purchasing power and moving to less

expensive contracts

IT and Corporate 300 Moving to one IT platform and corporate Confidential

efficiencies

Total Cost Synergies $640M

Labor Harmonization (360) Combining AA and US workforce

Total Net Cost Synergies $280

4

 

Estimates subject to revision


 

One-Time Transition-Related Cash Costs Less Than $1.0B

• Merger-related integration costs largely completed within 3 years

• Consistent with precedent transactions

• DL estimated one-time costs of $600M

• UA estimated one-time cost of $1.2B Agreement

Disclosure

Information Technology • Move to a single IT platform -

Non

to

Subject

• Standardize aircraft interiors,

Operational livery, airports and clubs

• Single operating certificate Confidential

• Streamline management

Corporate & Other • Professional Fees

5

 

Estimates subject to revision


 

US Synergy Estimates Are Conservative

• Synergy estimates are conservative relative to targets established in precedent transactions

Estimates subject to revision

6

 


 

Confidential – Subject to Non-Disclosure Agreement

Labor Integration

1

 


 

History

• US had introductory meetings with APA, APFA and TWU in March 2012

• Three weeks later, US completed binding “Conditional Labor Agreements” (CLAs) with

• APFA in four days of negotiating

• TWU in four days of negotiating Agreement

• APA in nine days of negotiating Disclosure

• In November, AA and the UCC asked for labor risk mitigation to resolve uncertainty around the -

labor integration process Non

to

• AA, US and the UCC began joint negotiations with labor groups in mid-December Subject

• Four-way historic MOU completed with AA, US, APA and USAPA –

• Acknowledgement letter signed by APFA Confidential

• Acknowledgement letter under consideration by TWU

• All effective on completion of merger

2

 


 

Historic Four-way Pilot MOU

• All US and AA pilots agreed to be bound by existing six-year AA CBA as modified by the US

CLA

• Incremental $87M in value

• Profit Sharing eliminated

• Move to US vacation program Agreement

• On closing of merger, US pilots will Disclosure

• Move to the AA CBA -

Non

• Waive all CIC provisions in their current contract to

• Receive $40M and retro pay at AA rates back to the date of MOU ratification Subject

• Transition arrangements protect pilots at US and AA (last approximately three years after

merger close) Confidential

• US aircraft will be flown by US pilots

• AA aircraft will be flown by AA pilots

• New American agrees to a minimum scheduled block floor (approximately 8% below combined

2012)

• Seniority integration will be completed post-merger based on McCaskill-Bond legislation

3

 


 

APFA Acknowledgement Letter

• Clarifies that the “me-too” language is not triggered by merger or four-way pilot deal

• Clarifies that certain pay raises in standalone and CLA are not multiplicative

Confidential – Subject to Non-Disclosure Agreement

4

 


 

TWU Acknowledgement Letter

• Clarifies that the “me-too” language is not triggered by merger or four-way pilot deal (or similar

future deal with flight attendants)

• Moves all TWU workgroups onto the AA CBAs

• Commits the New American to insource approximately 1,000 station jobs that would be

outsourced on a standalone basis Agreement

• Commits TWU to seniority integration based on Date of Hire with US IAM workforce, so long as

IAM is agreeable; otherwise McCaskill-Bond seniority integration will apply Disclosure

-

Non

to

Subject

Confidential

5

 


 

Summary

• Vast majority of employees at both US and AA strongly support merger

• Pre-merger agreements with labor are historic in the airline industry

• Six-year deals with all AA labor groups complete

• Creates a new paradigm for management-labor partnership in the airline industry Agreement

Disclosure

-

Non

to

Subject

Confidential

6

 


 

Confidential – Subject to Non-Disclosure Agreement

Valuation / Proposal

1

 


 

US 2012 Update and 2013 EBITDAR Forecast

Model Assumptions

Year Ended December 31,

2012 2013E

Group ASMs (mm) 88,425 91,014

Mainline % Growth 2.2% 3.9%

Express % Growth 1.0% (1.2%)

Consolidated % Growth 2.0% 3.0%

Group PRASM (¢) 13.92 14.20

Mainline % Growth 3.3% 2.3%

Express % Growth 7.7% 3.6%

Consolidated % Growth 4.3% 2.1%

TRASM (¢) 15.64 15.91

% Growth 3.9% 1.7%

Group CASM (¢) 14.65 14.48

% Growth 0.7% (1.2%)

Group CASM ex-Fuel, ex-Profit Sharing (¢) 9.39 9.42

% Growth 0.1% 0.2%

Year Ended December 31,

2012 2013E

Brent $ / BBL $111.42 $103.12

Brent cpg 2.65 2.46

Crack 0.37 0.43

Price per Gallon 3.02 2.89

Transportation, Tax and Other 0.15 0.17

Mainline Price per Gallon incl. Tax 3.17 3.06

Express Spread excl. Hedges and Tax 0.01 0.05

Express Price per Gallon 3.18 3.10

Source: US internal budget.

Income Statement

Year Ended December 31,

2012 2013E

Operating Revenues:

Mainline Passengers $8,979 $9,522

Express Passengers 3,329 3,403

Cargo 154 163

Other Operating Revenues 1,371 1,391

Total Operating Revenues 13,832 14,479 Agreement

% Growth 6.0% 4.8%

Operating Expenses:

Mainline Fuel 3,492 3,445

Express Fuel 1,097 1,053 Disclosure

Express Expenses 2,062 2,114 -

Other 5,413 5,673 Non

Total Operating Expenses 12,063 12,285 to

Adj. EBITDAR 1,769 2,194

% Margin 12.8% 15.2% Subject

ML Aircraft Rent 643 612 –

EBITDA 1,126 1,582

% Margin 8.1% 10.9%

ML Depreciation & Amortization 245 279 Confidential

EBIT 880 1,302

% Margin 6.4% 9.0%

Interest Income (2) (2)

Interest Expense 343 352

Other Expense (Income) 16 (0)

Total Other Expense (Income) 357 350

EBT 523 952

Income Taxes (Benefit) 0 240

Net Income (Excl. Non-Recurring) 523 712

US 2012 Update and 2013 EBITDAR Forecast Source: US internal budget, information as available on January 10th, 2013. Model Assumptions Income Statement Projected 12/31/2013 Cash Balance: Unrestricted: $3,026 million Total: $3,364 million

2

 


 

US Performance Consistently Beats Consensus Estimates

US quarterly EPS results have consistently outperformed Wall Street expectations

US Performance Consistently Beats Consensus Estimates Source: Company filings and FactSet. Note: Market data as of January 7, 2013. EPS represents non-GAAP ex-special charges reported results and estimates. US quarterly EPS results have consistently outperformed Wall Street expectations Q1 2012 Q2 2012 Q3 2012 Q4 2012 US Quarterly EPS Performance Actual Q1 EPS ($0.13) Actual Q2 EPS $1.61 Actual Q3 EPS $0.98 Proj. Q4 EPS $0.19

1/2012 4/2012 7/2012 10/2012 1/2013

LCC EPS Consensus Estimate Current Quarter LCC Stock Price

Source: Company filings and FactSet.

Note: Market data as of January 7, 2013. EPS represents non-GAAP ex-special charges reported results and estimates.

3

 


 

US Stock Price Performance Founded on Fundamentals Source: FactSet. US has traded above $12 in the recent past prior to any merger speculation and at a time when EBITDAR was significantly lower Peers have traded up more than US in the last two months LCC 2-Year Stock Price Performance 2-Month Indexed Stock Price Performance Fully Diluted Market Cap: $3,045mm

US has traded above $12 in the recent past prior to any merger speculation and at a time when EBITDAR was significantly lower

Peers have traded up more than US in the last two months

4

 


 

Research Perspectives on US’s Share Price US Analyst Estimates Source: FactSet and Wall Street Research. Note: Prices as of January 7, 2013. “Nonetheless, we continue to believe that the shares offer substantial value, regardless of whether or not the company eventually merges with American Airlines (AAMRQ, $0.28, Neutral). We are of the opinion that those talks will occur in late October and November, and investors should get a view of whether a merged entity or stand-alone AMR will result. In either case, we believe the shares of LCC are worth $21 without a merger, and $30 with one. Both are very attractive relative to the $11.68 current price.” - Sterne Agee, 10/3/2012 “AMR merger or not, we believe this is an attractive stock. The company gave limited commentary on the potential merger with American Airlines (AAMRQ, Not Rated). Although we believe a merger would be positive for both companies and the industry overall, we think the underlying LCC business is fundamentally strong.” - Imperial Capital, 7/26/2012 “Potential consolidation has created some short-term boosts to LCC shares, but we believe the primary reason LCC’s share price has doubled YTD is that earnings estimates have also doubled during this timeframe. At around 4x pretax earnings and EBITDA, LCC trades near industry low multiples.” - BofA Merrill Lynch, 7/25/2012 “LCC’s 2H12 fuel expectations are a little higher than our model (we were bracing for that), but our 1Q12 fuel cost estimate was higher than guidance and 1Q12E PRASM growth of +8.4% y/y is now up from +7.8%. The net result is higher estimates for 2012 and 2013, and we are increasing our target price from $9 to $11, which we derive using 5x our 2013 EPS estimate, and thus we reiterate our Outperform rating, which has nothing to do with potential M&A with AMR... we think LCC shares warrant upside with or without a merger attempt.” - Wolfe Trahan, 4/4/2012 Wall Street analysts see meaningful upside in US’s shares in the absence of a merger Company Price Current 14.84 Avondale Partners 15 Barclays 14 BofA 16 Buckingham 21 CRT Capital Group 14 Dahlman Rose 21 Deutsche Bank 18 Imperial Capital 17 JPMorgan 18 Raymond James 16 Stern, Agee & Leach 21 UBS 15 Wolfe Trahan 19


 

US Budget 2194 Avondale Partners 1849 Barclays 1893 BofA Merrill Lynch 1867 Buckingham 1894.4 CRT Capital Group 1827.6 Dahlman Rose 1769.1 Deutsche Bank 1752.4 Imperial Capital 2125 JP Morgan 1871 Morgan Stanley 1882 Raymond James 1827 Stern, Agee & Leach 1704 UBS 1869 Wolfe Trahan 1918 US 2013E EBITDAR Budget vs. Consensus US 2013E EBITDAR Estimates Source: FactSet and Wall Street Research. 1) EBITDAR estimates not published; used EBITDA estimate plus LTM rent expense of $643mm. Consensus Estimates: $1,861 ($ in millions) Research analysts do not currently reflect improved outlook for 2013; consensus could meaningfully improve when US publicly releases its 2013 guidance in January 2013 (1) (1) (1) (1) (1) (1)


 

Airline Trading Multiples Source: Company filings and consensus estimates. Note: Market Data as of 1/7/13. Note: Adjusted EV calculated as market capitalization plus net debt as of latest quarter and capitalized rent expense (@7x times) as of year end. Peer group includes AA, DAL, UAL. AA is not included after 11/29/11, the date it filed for bankruptcy. UAL adj. net debt includes Advanced Purchase of Miles liability that UAL does not classify as debt on their balance sheet. LCC spread to peer equals LCC minus peer average excluding LCC. US has consistently traded at a premium multiple relative to peers 2-Year Adjusted EV / NTM EBITDAR Trading Multiples


 

The Proposal – Principal Economic Terms Unsecured Creditors to receive shares representing 70% of the fully diluted equity of US Airways immediately after the combination Future employee equity issuances will dilute both US Airways shareholders and AMR unsecured creditors pro rata Fully diluted equity determined on a treasury share method The combination will be effected through a merger of AMR Corporation with a subsidiary of US Airways, which will be part of an agreed upon Plan of Reorganization. Principal elements of the plan include: Unsecured claims are satisfied in full with shares of US Airways common stock Secured debt does not exceed $7 billion and no unsecured debt OPEB obligations terminated Pension obligations frozen Limits on creation of priority claims and use of cash to satisfy pre-petition claims or prepay secured debt


 

The Proposal – Social Issues Name and Headquarters Public Company named “American Airlines Group Inc.” Combined airlines will be operated under the “American Airlines” brand Headquarters will be in Fort Worth Management CEO of US Airways to be CEO of combined Company Rest of management team to be built from best of AMR and US Airways Board of Directors Board of directors will have 11 members A total of six independent directors separately designated by the UCC and AMR Between two and four designated by the UCC UCC designees can not be current directors of AMR or US Airways Between two and four designated by AMR Four independent directors designated by US Airways CEO of combined Company who shall be Chairman


 

The Proposal – Principal Conditions Approval of agreed upon Plan of Reorganization by necessary creditors Court confirmation of agreed upon Plan of Reorganization Approval by US Airways stockholders HSR, other antitrust and regulatory approvals Accuracy of representations and compliance with covenants No financing condition No consents or approvals required from labor unions


 

The Proposal Provides value far superior to standalone plan Easily satisfied closing conditions provide a high degree of certainty Management team built by combining the best of both teams to successfully execute the integration and create the world’s best airline


 

Confidential – Subject to Non-Disclosure Agreement

Based on Public Information

Why Now?

1

 


 

AMR’s Unsecured Bonds Have Traded Up Significantly On News of a Combination With US Airways

AMR Corp 6.25% Convertible Notes Historical Trading


 

Creditors Lost Money When Delta Turned Down US Airways Offer

1. Implied equity valuation during bankruptcy (9/6/05 – 5/3/07) calculated as total unsecured claims of $15bn per Delta’s Plan of Reorganization multiplied by the daily trading price (cents on the dollar) of Delta’s 8.3% unsecured 2029 notes.

2. Delta creditors assumed to maintain ~47.5% ownership post-effective date of merger with Northwest (after giving effect to shares issued to Northwest shareholders (40.7%) and shares issued to Delta and Northwest pilots and employees (11.8%)). From merger closing until first SEC annual filing (10/29/08 – 12/31/08), market value calculated using 1/31/09 share count of ~698.5mm.

3

 

Based on Public Information


 

The US Airways Model

Confidential – Subject to Non-Disclosure Agreement

1

 

Based on Public Information


 

The US Airways Model: Overcoming Network Deficiencies

• US also has a network deficiency to United and Delta

• US offsets this deficiency in two ways:

• A cost advantage driven by lower labor costs

• A focus on cities where US has a superior service offering

• US is #1 in its hub cities. While those are smaller cities, US offers superior service and is the

#1 customer choice Agreement

US Airways Labor Cost Advantage US Airways Share

SLA Labor CASM ¢ Disclosure

-

% Share Rank Non

to

CLT 87% #1 Subject

PHL 77% #1 –

PHX 51% #1 Confidential

DCA 55% #1

Note: Stage adjusted to US Airways’ 1Q12 LTM mainline stage length of 992 miles; source Form 41 data, mainline CASM ex charges Source: Fully Dated August 2012 Scheduled Departures

2

 

Based on Public Information


 

The US Airways Model Difficult for AA to Replicate

• AA’s employees expect to be paid similar to employees at United and Delta

• AA is not the primary carrier in many of its cornerstone cities. As the #2 or #3 carrier, AA faces challenges being the preferred carrier in three of the five cornerstones.

American Airlines Cornerstone Share Agreement

% Share Rank Disclosure

-

DFW 84% #1 Non

MIA 72% #1 to

ORD 38% #2 Subject

NYC 13% #3

LAX 19% #2 Confidential

Source: Fully Dated August 2012 Scheduled Departures

3

 


 

 

 

 

 

 

Based on Public Information

What People Are Saying

1

 

Based on Public Information


 

What People Are Saying – Merger Benefits: Synergies and Timing

“The titan that emerges will be impressive with estimated $39.2 billion in revenue, $4.2 billion in EBITDA, and leverage flat to lower at 3-4x (pro forma as of September 30), roughly in line versus United and Delta (fierce competitors which will not sit idly by while American pulls itself together). Our estimates include $500-750 million of revenue benefits in the first 1-2 years as American optimizes and strengthens its network and competitive strategy. We estimate cost savings approaching $1 billion, mostly from concessions AMR recently achieved in labor negotiations and eliminations of overlapping overhead offset by modestly higher US Airways labor costs. Merger synergies could expand EBITDA margin by 250 basis points to an above average 10.7% versus 8.3% for US Airways (and AMR’s paltry 5.7%).”

– VICKI BRYAN, ANALYST, GIMME CREDIT (1/3/13)

“We think [US Airways] is about to win its aggressive bid to buy bankrupt AMR Corp. The resulting juggernaut would be rivaled only by global leaders United Continental and Delta Air Lines.”

– VICKI BRYAN, ANALYST, GIMME CREDIT (1/3/13)

“The upside of an American-US Airways combination is too good to pass up, and doing it in bankruptcy brings more benefits. In revenue, network, leadership, labor and corporate culture, this


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