Midwest Express Holdings, Inc.

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Midwest Express Holdings, Inc.
Raymond James Associates January 23, 2001
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Investment Highlights

• Proven Premium Service Niche Market
• High cost, high yield product and service
• Strong business communities/underserved markets
• Historical Growth in Revenue and Earnings
• Attractive Growth Strategy
• Plan to Improve on Poor 2000 Results

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Business Summary

• Began commercial operations in 1984
• Recognized as Best U.S. Airline by leading
  consumer surveys
• Single-class, premium service catering to
  higher-yield business travelers
• Only nonstop jet service on over 60 of core
  routes
• Serves 27 cities from Milwaukee, 5 from Omaha and
  7 from Kansas City
• Fleet of 24 DC-9 and 10 MD-80 jet aircraft in
  service
• Developed Skyway Airlines operations to build
  feeder traffic
• Fleet of 15 Beech 1900D turboprop aircraft and 6
  Fairchild Aerospace 328JET aircraft
• Serves 30 cities

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Midwest Express Airlines Today
Midwest Express Serves 28 Destinations in 18
States
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Growing Skyway Service
Skyway Serves 30 Markets, Enhancing the Strength
of the Milwaukee Hub
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Premium Service Product - Key Features

• Superior Value
• Fare structure competitive with other airlines
• Convenient Schedule
• Only nonstop service on over 60 of core markets
  served
• Designed to allow maximum use of business day
• Most Spacious Seating
• First-class leather seats
• Fewer seats / no middle seat / better pitch
• Consistently rated the most comfortable coach
  seat
• Superior Amenities
• Premium food served on china
• Complimentary champagne, wine and newspapers
• Chocolate chip cookies baked onboard on luncheon
  flights
• Customer Focus
• Extensive employee training directed at service
  to the customer
• Same service niche for 16 years

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Premium Service Product - Key Benefits

• Customer Preference / Loyal Following
• Independent research shows 75 of Milwaukee
  frequent fliers prefer Midwest Express
• More Profitable Passenger Mix
• Higher percentage of business travelers than
  other airlines
• Effective yield management
• Premium Yields
• In aggregate, 30 to 40 higher than industry

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Our Track Record
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Consistent Revenue Growth

• 10-year compounded annual revenue growth of 14

Revenue
(Dollars in Millions)
Source Midwest Express Holdings, Inc.
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Operating Profits for Each of the Past 14 Years

• 1987-2000 operating income of 282.9 million on
  sales of 3.1 billion
• 1987-2000 operating margin of 9.1
• 1995-2000 operating margin of 10.2

Operating Income
13.6
14.3
11.2
11.3
12.1
9.6
5.5
8.1
11.9
9.4
4.0
1.4
3.1
0.5
(Dollars in Millions)
Note Information as reported, not pro forma
Source Midwest Express Holdings, Inc.
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Ability to Capture Premium Yields

• Midwest Express has Historically Maintained a
  Significant Yield Premium

Revenue Yield
.193
.133 e
(Dollars)
Source Midwest Express Airlines, Inc./Airline
Monitor
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Yield Premium Example
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Yields More Than Offset Higher Product Costs
Operating Profit per ASM for Midwest Express
vs. U.S. Majors
(Cents)
Source Midwest Express Airlines, Inc./The
Airline Monitor (MEA information as reported,
not proforma)
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2000 - It Was a Difficult Year
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Several Issues Impacted 2000

• Higher Fuel Prices
• 36.1 million fuel price impact
• Essentially no fuel was hedged in 2000
• Threatened Pilot Labor Action
• Revenue impact from travelers booking on other
  carriers
• Higher labor costs
• Slower Capacity Growth than Planned Resulted in
  Higher Unit Cost
• Training constraints
• Aircraft refurbishment delays
• Pilot attrition
• Unsuccesful start-up of Indianapolis operation
• Competitive reaction
• Inability to acquire Washington DC slots
• Limited resources to support plan

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Profitability 1999-2000
Year-to-Date as of December
31, 1999 2000 Change

• Revenue 447.6 480.0 7.3
• Oper Income 60.7 6.9 (88.7)
• Net Income 38.8 5.2 (86.5)
• Net Margin 8.7 1.1 (7.6 pts)
• Earnings/ Share 2.71 .37 (86.3)
• Cash Flow(1) 52.0 22.2 (57.3)

Note Represents the consolidated financial
results of Midwest Express Holdings, Inc. - All
dollars in millions except Earnings Per
Share (1) Cash Flow Net Income plus
depreciation and amortization
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Operating Statistics 1999-2000
Year-to-Date as of December
31, 1999 2000 Change

• Yield 18.5 19.3 4.1
• RPMs (millions) 1,958.5 1,974.5 0.8
• ASMs (millions) 2,993.8 3,163.2 5.7
• Load Factor 65.4 62.4 (3.0 pts)
• Revenue Per ASM 13.4 13.3 (1.1)
• Cost Per ASM 11.5 13.0 12.7
• Fuel Price 60.7 100.0 64.4

Note For Midwest Express Only
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Areas of Focus/Opportunity

• Pilot Training - Our Solution
• Competitive Environment/Corporate Discounting -
  Our Strategy
• Fleet Maintenance and Fleet Plan - Our Design
• Marketing Programs - Our Vision

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Pilot Training

• Investment in flight standards and training
  infrastructure
• Better long-term planning for simulator
  requirements
• Preferred customer status for simulator time
• In-house technology to reduce simulator
  requirements
• Attrition still a potential problem because of
  other airline pilot contracts

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Competitive Environment

• Current competitive environment is not expected
  to change significantly
• Recent study supports continued targeting of
  business traveler segment
• Continued focus on sustaining market share
  dominance in Milwaukee
• Grow Kansas City with the objective of being a
  dominant player
• Air Midwest codeshare effective March 2001
• Advertising promotion focus first quarter 2001
• Improve schedules/more markets

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Fleet Maintenance

• Several aircraft maintenance issues impacted
  operational/financial results
• Transition to phased maintenance program (MSG3)
• Aircraft damage incidents increased
• Aircraft conformity issues with recent aircraft
  acquisitions
• Higher than anticipated employee turnover
• Unscheduled engine repair costs abnormally high
  (3.0 million)
• Situation will improve as the year progresses
• Phased maintenance transition completed by
  mid-2001
• Selective outsourcing
• Organization realignment for process improvement

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Fleet Plan

• Three additional MD80 aircraft and three
  additional 328JET aircraft will provide
  double-digit capacity growth in 2001
• Fairchild decision to cancel 428JET program will
  result in new aircraft type
• Decision expected in first quarter 2001
• Evaluating Embraer and Bombardier regional jets
• Midwest Express evaluating long-term fleet growth
  options
• Decision expected in first quarter 2001
• Evaluating Boeing and Airbus products

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Marketing Programs

• Corporate discounting will participate more but
  selectively
• Evaluating internet alternatives
• Continued focus on on-line sales
• Implementation of a corporate Web site product

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Attractive Growth Strategy
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Recreating the Success of Milwaukee
Omaha

• Began operations in May 1994 with three jet
  aircraft
• Successfully replicated the business strategy
  from Milwaukee
• 6 overall market share, but dominant carrier in
  markets served
• Profitable since 10th month of operation
• Kansas City
• Serving Milwaukee-Kansas City since November 1989
• Initiated service from Kansas City to Boston
  (9/96),
• New York (5/97), San Antonio (5/99),Washington
  Dulles (2/00), Washington National (10/00) and
  Atlanta (4/01)
• Consistently profitable, meeting expectations
• Announced as third base of operation in September
  2000
• Air Midwest codeshare effective March 2001

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Looking Ahead
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Objectives in 2001

• Return to historical revenue and earnings growth
• Continued focus on customer satisfaction
• Improved operational performance
• Aggressively defend Milwaukee base and grow
  Kansas City
• Fleet plan decisions in first quarter

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Consistent Profitability DuringDifficult
Industry Conditions
Operating Margin
()
Note Information as reported, not pro forma
Source Midwest Express Holdings, Inc./Airline
Monitor
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Strong Cash Flow From Operations

• Modest capital expenditures to fund market
  expansion and fleet maintenance

Capital Expenditures and Cash Provided by
Operations
(Dollars in Millions)
Note Information as reported, not pro forma
Source Midwest Express Holdings, Inc.
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Maintained Proven Sources of Liquidity

• Diversity of Available Funding Sources
• XX million cash balance at end of Fourth quarter
  2000
• Lease market successful financing since IPO
• Unused 55 million bank credit facility
• Financing from aircraft manufacturers
• Own 60 of our jet fleet debt free
• Strong and Consistent Cash Flow from Operations

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ECONOMIC ENVIRONMENT

• OUTLINE AND DISCUSSION OF IMPACT OF ECONOMIC
  SLOWDOWN ON BUSINESS TRAVELER AND MIDWEST EXPRESS

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Competitive Position Success of Milwaukee

• Consistent market share growth from
  1984-2000(UPDATE)in face of competitive
  challenges from other airlines

Market Share at Milwaukee Airport
Market Share ()
Source Midwest Express Airlines, Inc. and
Astral Aviation, Inc.
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Expansion Strategy
Managements Stated Strategy of Continued
Profitability and Growth

• I. Increased frequency to existing markets
• II. New markets from Milwaukee, Omaha and Kansas
  City
• III. New bases of operations - Strong
  business communities with population growth -
  OD traffic of 50,000 to 100,000 annual
  passengers - Target stage length of 600 miles
  to 1,000 miles - Underserved nonstop jet
  routes, too small for majors
• IV. Growth in commuter service via regional jets
• - Greater capacity
• - New markets
• - Longer stage length