Ron Cole Vice President, Sales

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Ron ColeVice President, Sales
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Topics

• Environment that produced frustration
• Outline of ACTE White Paper
• Airline talk, but little action why?
• America Wests model why its working
• How you can help

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Environment That Produced Frustration

• 1978
• F
• Y
• YM
• 30 day advance
• Family fares

• 2004
• F
• Y
• YUP
• ABCDEGHIJKLMNOPQRSTUVWXZ
• Travelocity, Expedia, Orbitz, Cheap Tickets,
  Trip.com, Vegas.com, Lasvegas.com,
  Lowestfare.com, Getthere, Hotwire, Priceline,
  1travel.com, Bestfares.com, Justfares.com,
  Air4less, Youpriceit.com, Sidestep
• Corporate programs
• Airline web specials
• Agency specific discounts
• Consolidations

Ten fold difference from highest to lowest fare
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Outline of ACTE White Paper

• Summits ACTE conducted after 9/11 to identify
  strategies for travel industry recovery.
  Findings
• Airline executives are reluctant to change
  pricing model
• Corporate buyers work hard to avoid full business
  fare tickets

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Outline of ACTE White Paper (cont.)

• Summits ACTE conducted after 9/11 to identify
  strategies for travel industry recovery.
  Findings

• Evidence of need for reform
• Airlines are losing money
• Corporations utilizing fare types not intended
  for business travelers
• Gap grows between leisure and business airfares

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Outline of ACTE White Paper (cont.)

• Summits ACTE conducted after 9/11 to identify
  strategies for travel industry recovery.
  Findings

• Where reform is needed
• Complexity
• Unpredictable pricing
• Reverse customer segmentation
• Unaffordable business fares

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Outline of ACTE White Paper (cont.)

• Summits ACTE conducted after 9/11 to identify
  strategies for travel industry recovery.
  Findings

• What do customers want
• Simplified airfare structure
• Escalation and de-escalation clauses
• Affordable airfares

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Airline Talk, But Little ActionWhy?

• Business customers continue to pay full-fare
• Majors can get away with tactical matching
• Lowering business fares costs the majors revenue
• Majors will not change until business customers
  change

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America Wests Model Why Its Working

• In March 2002, AWA restructured its fares
• Lowered business fares 40 70
• No Saturday night stay
• Most fares are one-way

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America Wests Model Why Its Working
Source of Revenue Pre April 2002
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Full Fare Business
All Other Tariff
70
25
Deep Discounted / Off Tariff
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America Wests Model Why Its Working
Source of Revenue April 2004
Business Fares
42
58
All Other Tariff
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LCC More Profitable
1Q 2004 Pre-Tax Margin
LCC Average
Legacy Average
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Source Companies Press Releases Excludes
special charges
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How Can You Help

• If you dont like 1,000 fares, dont buy them
• Do not promise what you cannot deliver
• Be willing to accept risk