The document summarizes a presentation given at the Federal Aviation Administration's Annual Forecast Conference about air cargo demand. It discusses the different segments of the air cargo industry, including passenger aircraft bellies and all-cargo aircraft. It notes that while air cargo only makes up about 2% of total freight by volume, it accounts for 45-50% of the total value of freight transported. The presentation also examines trends in domestic versus international air cargo, finding that international demand is growing more dramatically, especially in Asian markets. It concludes that demand for air cargo services continues to grow internationally and that industry members and governments need to further open markets to meet shipper needs globally.

1. FEDERAL AVIATION ADMINISTRATION Annual Forecast Conference Washington, D.C. March 18, 2005

2. AIR CARGO DEMAND: An Overview Stephen A. Alterman President Cargo Airline Association Washington, D.C.

3. CARGO AIRLINE ASSOCIATION AIR CARRIER MEMBERSHIP Board of Directors ABX Air, Inc. Atlas Air Federal Express UPS Members Air Transport International Capital Cargo International CNF, Inc. DHL Express First Air Gemini Kalitta Air Kitty Hawk USA Jet

4. AIR CARGO OVERVIEW Air Cargo Industry Segments Bellies of Passenger Aircraft Air Freight Forwarders All-Cargo Aircraft Regional Aircraft All segments provide the services necessary to satisfy shipper demand.

5. DEMAND DRIVERS Time Definite Service (Reliability) Speed Traceability Probably NOT Price

6. DEMAND LIMITATIONS Uncertain Economic Picture Security Concerns Escalating Fuel Prices Necessary Fuel Surcharges Price Competition from Other Modes

7. HIGH VALUE COMMODITIES ARE TRADITIONALLY TRANSPORTED BY AIR High-tech electronics Human organs Important documents

8. WHAT THIS MEANS While only approximately 2% of all freight moves by air, 45-50% of the value of freight transported qualifies as air freight

9. WHO CARRIES THIS FREIGHT? DOMESTIC TRAFFIC 2004 Passenger Carriers – 24.1% All-Cargo Carriers – 75.9% Forecast Period (12 Years) Passenger Carriers – 20.0% All-Cargo Carriers – 80.0% Source: 2005 FAA Forecast, March 2005

10. WHO CARRIES THIS FREIGHT? International Traffic 2004 Passenger Carriers – 40.3% All-Cargo Carriers – 59.7% Forecast Period (12 Years) Passenger Carriers – 36.4% All-Cargo Carriers – 63.6% Source: 2005 FAA Forecast, March 2005

11. DOMESTIC v. INTERNATIONAL Demand increasing more dramatically in international markets – particularly Asia For 2004, FAA estimates approximately 45% more growth internationally (5.5% annually internationally v. 3.8% domestically). FAA March 2005 Forecast 91% more annualized international growth than domestic for next twelve years – 2005-2015 (6.3% annually v. 3.3 %). FAA March 2005 Forecast

12. DOMESTIC v. INTERNATIONAL Relatively smaller domestic growth Less than robust domestic economy Mature industry Greater international growth Opening of new markets Expanding Asian economy

13. CONCLUSION Demand for air cargo services continues to grow – especially in international markets Industry members are well positioned to meet these growing demands Governments must move to further open markets to allow carriers to meet the needs of the world’s shippers