Trends & Developments in the Global Airfreight Industry

William J. Flynn

President & CEO

Atlas Air Worldwide, Inc.

C R A F

ivil eserve ir leet

Aircraft committed to the CRAF program can be activated during a wartime or emergency scenario

In exchange for participation in the CRAF, carriers are eligible to fly peacetime airlift missions

The National Airlift Policy notes that military and commercial resources are equally important and interdependent in fulfillment of the Airlift Objective

(Source: National Airlift Policy, June 24, 1987)

Civilian Reserve Air Fleet – CRAF

THE NATIONAL DEFENSE

AIRLIFT OBJECTIVE

Ensure that military and civil

aircraft resources will be able

to meet defense mobilization

and deployment requirements.

3

US Transportation Command (USTRANSCOM)

* Source: A3 & A5/8 data PAA: Primary Authorized Aircraft

** Source: HQ AMC/A3BC CRAF Capability Summary as of 1 Oct 2017

MCRS – 16/CRAF

Military Sealift Command

(MSC)

Military Surface Deployment

and Distribution Command

(SDDC)

Air Mobility Command

(AMC)

Joint Enabling Capabilities

Command (JECC)

4

Strategic Airlift PAAs*

Aircraft PAA

C17 188

C5 40

Long-Range International CRAF Assets**

B747 B757 B767 B777

A330 DC10 MD11 Stage I Stage II Stage III

Aircraft Cargo 13 66 127

PAX 19 110 141

Wide-body

equivalents

Cargo 15 75 140

PAX 16 87 104

MTM/d Cargo 2.7 13.0 24,1

MPM/d PAX 11.1 62,3 78.4

CRAF Commitment by Carrier

Passenger

Carriers

Stage Commitment (Aircraft)

I II III

American 3 27 38

Atlas 2 6 6

Delta 3 27 37

Hawaiian 2 12 12

National 2 2 2

Omni 3 8 8

United 3 28 38

TOTAL 18 110 141

Large Cat-1: 747 aircraft

Large Cat-2: MD-11, 767-300

Source: AMC Form 312 1 July 2017

5

Teaming Team Entitlement

Cargo Lg. Pax Med. Pax

FedEx 53.22% 54.4% 52.63%

Patriot 43.49% 44.45% 43.01%

National 3.29% 0 3.25%

Delta 0 1.15% 1.11%

TOTAL 100% 100% 100%

Cargo

Carriers

Stage Commitment (Large Cat-2 Aircraft)

I II III

ABX 0 2 2

FedEx 2 9 27

UPS 2 9 29

Western Global 0 7 10

TOTAL 4 27 68

Cargo

Carriers

Stage Commitment (Large Cat-1 Aircraft)

I II III

Atlas/Polar 3 18 20

Kalitta 2 9 17

National 1 2 2

Western Global 1 2 2

TOTAL 7 31 41

Command and control with DOD Dispatchers / Controllers

Navigate unfamiliar airports

Coordination with 3rd Countries—overfly and permits

Handling Dangerous Goods / Hazmat

Load complexity and ground operations

Cyber security and operations assurance

Specialized Staff—load masters, air navigators, planners

Integration at major bases—access, offices, personnel

Train military ground crews

CRAF Readiness and Interoperability: More than Aircraft, Pilots and Cabin Crew

6

Commercial Market Perspective

8

Megatrends Will Drive Opportunity in Airfreight

Megatrends Increases in urban consumption by the

growing consuming class – increase by 1.8B by 2025

Global consumption to surpass $30 trillion – increase from $22 trillion today

e-Commerce Demographic trends suggest significant

growth in Asia, Africa and South America

Trends will require efficient air networks to serve effectively

Freighters will play a more important role in the future

General Air Cargo Global flows increasing – trade,

finance, people and data

Tourism and general travel increasing, adding jobs

Manufacturing moving away from traditional passenger hubs

Express Technological breakthroughs at an

increasing pace

Adoption of new technologies

Change in buying behaviors. e-Commerce related airfreight demand growing significantly

Middle class defined as households with yearly income between $20,000 and $150,000 at PPP in constant 2016 prices.

Source: Oxford Economics, Airbus

9

Long Term Macro Trends Middle class share of global population is increasing

0

1,000

2,000

3,000

4,000

5,000

6,000

2006 2016 2026 2036

AdvancedEconomies

DevelopingEconomies

1,950 2,900 3,900 4,950 Total Middle Class (Mil)

6,600 7,430 8,200 8,900 World Population (Mil)

30% 39% 48% 56% % Middle Class

Middle class* population,

driver of consumption,

to move from 2.9 Billion

to 4.9 Billion in 20 years.

Implications for

e-Commerce and

global trade trends.

10

Geo-Political Risks / Developments

Marsh

2017

Political

Risk Map

A CRAF activation scenario risk

is currently higher than it has

been in the last several years.

Geo-political risks impact trade – macro forecasts include this risk in their assessment but large shocks could significantly dampen global growth

Implication for AMC demand and overall market demand

Total

$83.4B

Sources: Flight Global, U.S. DOT F41, airline reports, and Boeing estimates (2015 data)

11

Freighters are Critical to Compete in Air Cargo Markets – Especially in Time-Definite Networks

Airlines operating freighters generate 90% of industry revenues

Express Carrier

41%

Combination Carrier

39%

All Cargo 10%

Passenger Belly Only

10%

$33.6B

$32.8B

$8.5B

$8.5B

Global Airfreight Drivers

By Sectors Chart Source: Atlas research

By Region Chart Source: International Air Transport Association – August 2017

Market Size

By Region

38%

26%

15%

16%

Asia Pacific

Europe

North

America

Middle East

Latin America 3%

Africa 2%

Percent of International Freight Tonne Kilometers (FTKs)

By Sectors Industry Sectors Served by AAWW Customers

17%

17%

16% 11%

10%

6%

11% High-Tech

Products

Capital

Goods

Apparel

Pharma-

ceuticals

Intermediate

Materials

Automotive

Other Live, 1%

Perishables

Mail &

Express 6%

5%

Products Strategic Choice Specialty Consideration Airfreight share:

1.5-2.5% global volume, 35% global value

High-value, time-sensitive items; items with short shelf lives

Products/supply chains with just-in-time delivery requirements

Products with significant security considerations

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Source: Boeing and IHS Global Insight Trade Forecast dated September 2016

13

Air Cargo Market Performance

Sources: IATA, ICAO, Euromonitor, Forrester, eMarketer, BofA Merrill Lynch Global Research estimates, Company Public Reports

14

Global Airfreight Industry Performance Trends

Global Airfreight Market International freight tonne kilometers (FTKs) flown up 3.8% in 2016

Very strong FTK growth anticipated in 2017

PMI Index at 55 for 2017 and semi-conductor sales +18% for 2017

Global Express Market The International Express market is showing robust growth

5.8% CAGR since 2011 vs. nominal CAGR for International FTK’s

The Express segment benefiting from the e-Commerce growth

40.8 43.4

45.4 45.1 41.1

49.1 49.3 48.8 49.5 51.5 52.2

53.9 [VALUE] (F)

25

35

45

55

65

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F

6% 12%

19% 25%

31%

??%

90%

100%

110%

120%

130%

140%

150%

2011 2012 2013 2014 2015 2016 2017

$590 $741

$943 $1,190

$1,433 $1,774

$2,176

$2,619

$0

$1,000

$2,000

$3,000

2011 2012 2013 2014 2015 2016 2017 2018

Global e-Commerce Market

Total Global Airfreight Tonnage Growing from Record Levels

Freight Tonnes

(Millions)

2.5% 6.4% 4.6% (0.7)% (8.9)% 19.5)% 0.4% (1.0)% 1.4% 4.0% 1.5% 3.3% >7.5% (F)

International Express Market – DHL, FedEx and UPS Change in Demand (Base year 2011 - 100%)

Global e-Commerce Estimates ($ Billion)

Overall e-Commerce market penetration is still low

-10%

-5%

0%

5%

10%

15%

FTK AFTK

FTK and AFTK Growth

Supply vs. Demand

Source: ieconomics.com

15

Current Macro Conditions Year-over-year growth in Global Purchasing Managers Indices (PMI)

Benchmark

The PMI Index across the globe have been climbing year-over-year – signaling an expanding global economy. (Index values greater than 50 signal growth)

There is approximately a 6 month lag between manufacturing growth and the resulting impact on transportation demand.

Germany

US

China

India

16

Current Macro Conditions Strong year-over-year growth in global semi-conductor sales

$0

$2

$4

$6

$8

$10

$12

Americas Europe Japan China Asia Pacific /All Other

July 2016 January 2017 July 2017

Billio

ns

Global semi-conductor sales increased 24% year-over-year in July 2017, with all regions posting strong increases.

Global sales for the month of July 2017 reached $33.7 billion, an uptick of approx. 10% over January. Annual growth of 11.5% projected for 2017.

7.4%

8.7%

10.1%

11.6%

13.1%

14.6%

15.5%

2015 2016 2017* 2018* 2019* 2020* 2021*

e-Commerce only accounts for ~10% of global retail sales

US e-Commerce spend $385B in 2016 – forecasted to grow to $600B by 2020

China: 700M internet users – 50% mobile penetration – 10% e-Commerce penetration

USA: 237M internet users – 73% mobile penetration – 9% e-Commerce penetration

India: 300M internet users – 25% mobile penetration – 2% e-Commerce penetration

Source: Forrester, Statista, eMarketer

17

e-Commerce – A Real Paradigm Shift

e-Commerce Penetration (as percentage of global retail sales)

Source: Various Market Reports

18

Asia Markets Will Continue to Lead Industry Growth

- 30 60 90 120 150

Intra-Europe

CIS

Middle East–Europe

South Asia–Europe

Africa-Europe

Latin America–North America

Europe-Latin America

Domestic China

Europe–North America

North America

Intra-Asia

Europe-Asia

Asia–North America 4.6%

4.6%

5.5%

2.2%

2.4%

6.2%

3.8%

3.9%

4.3%

3.8%

5.0%

2.2%

3.0%

2015 RTKs 2016 – 2035 RTKs

Annual Growth

%

(RTKs in billions)

~80% ~75%

~40%

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Even with an Increase in Lower Hold Cargo Capacity, Freighters Continue to Play a Dominant Role

Freighters carry more than 50% of the world’s air cargo

Total air cargo traffic carried by freighters between 2010 and 2015

Lower hold capacity

+27%

Large freighters

in service

+8% >50%

*excludes express aircraft: UPS, Fedex, & DHL

20

Wide-body Freighter Supply

Production lines have limited output over the next several years

– Limited backlog

– Limited slots available

Includes current wide-body freighter production forecasts

Only 13 747’s in storage under the age of 20 years

There are 29 active wide-body freighters expected to be retired due to age limitation

Expected fleet growth <1% annually while markets are expected to increase >4% annually over the next decade

Reduced supply due to fleet retirements and limited order backlog

21

Regulatory and Legislative Trends

Open Skies Agreements FAA Reauthorization Tax Reform

Administrative action

Legislative issues

ATC Reform

Pilot Flight Hour Requirement

Pilot Duty Time and Rest Requirements

Lower corporate income tax rates

Accelerated Depreciation

Interest Expensing

Atlas Air

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Atlas Air Worldwide

We manage diverse, complex and time-definite global networks

We deliver superior performance and value-added solutions across our business segments

We manage a world-class fleet to service multiple market segments

We are strategically positioned in a strengthening market and focused on new opportunities to continue to deliver future growth

Ownership

100% Ownership

100% Ownership

51% (49% DHL) Ownership

100%

* Includes to-be-converted aircraft

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Our Current Fleet Total Fleet: 96 Operating Fleet: 87

11 Boeing 777s 5 CMI 777Fs

6 Titan 777Fs

7 Boeing 737s 5 737-400Fs

1 737-300F Titan

1 737-800 passenger Titan

36 Boeing 767/757s 29 767-200/300Fs*

6 767-200/300 passenger

1 757-200 freighter Titan

…Heading to more than 100 aircraft ...with more than 40 B767s

42 Boeing 747s 10 747-8Fs

24 747-400Fs

4 747-400 passenger

4 Boeing Large Cargo Freighters (LCFs)

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Global Operating Network

210,444 Total Block Hours Operated in 2016

39,882 Flights

425 Airports in 119 Countries

730 Charters Completed

80+ Unique Customers

Afghanistan

Argentina

Australia

Azerbaijan

Bahrain

Bangladesh

Belgium

Brazil

British Indian

Ocean Territories

Bulgaria

Cape Verde

Cuba

Cyprus

Czech Rep

Djibouti

Estonia

Fiji Islands

Finland

Georgia

Germany

Operated passenger and cargo missions to

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Atlas DOD Operations – 2016

67 Counties

Ghana

Greece

Guam

Honduras

Hong Kong

Hungary

Iceland

India

Ireland

Israel

Italy

Japan

Jordan

Korea S.(Rep. Of)

Nigeria

Norway

Oman

Peru

Philippines

Poland

Portugal

Qatar

Romania Kuwait

Kyrgyzstan

Latvia

Lithuania

Malaysia

Mexico

Mongolia

Morocco

Netherlands

Saudi Arabia

Senegal

Serbia

Singapore

Slovakia

Slovenia

South Africa

Spain

Sweden

Taiwan

Thailand

Turkey

Ukraine

United Arab Emirates

United Kingdom

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North America Operating Network

Thank you