UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY Washington, D.C. ALASKA AIRLINES, INC., et al ., v. LOS ANGELES WORLD AIRPORTS, LOS ANGELES BOARD OF AIRPORT COMMISSIONERS, and THE CITY OF LOS ANGELES, CALIFORNIA

. Docket No. OST-2007-27331

COMPLAINANTS’ AND RESPO NDENTS’ JOINT REPORT ON THE STATUS OF S ETTLEMENT DISCUSSIONS

M. Roy Goldberg SHEPPARD MULLIN RICHTER & HAMPTON LLP 1300 I Street, NW Suite 1100 East Washington, DC 20005-3314 Phone: (202) 218-0007 Fax: (202) 218-0020 rgoldberg@sheppardmullin.com Counsel for: Alaska Airlines, Inc. AirTran Airways, Inc. ATA Airlines, Inc. Frontier Airlines, Inc. Midwest Airlines, Inc. Southwest Airlines Co. US Airways Group, Inc. Steven S. Rosenthal Jeffery A. Tomasevich J.D. Taliaferro K AYE S CHOLER LLP 901 Fifteenth Street, NW Washington, DC 20005 Phone (202) 682-3500 Fax: (202) 682-3580 email: srosenthal@kayescholer.com jtomasevich@kayescholer.com jtaliaferro@kayescholer.com

Carmen A. Trutanich Los Angeles City Attorney Kelly Martin General Counsel, Los Angeles World Airports Raymond S. Ilgunas Assistant General Counsel Lynn Mayo Deputy City Attorney L OS A NGELES C ITY A TTORNEY ’ S O FFICE Los Angeles World Airports One World Way Los Angeles, CA 90045 Phone: (424) 646-5010 Counsel for RespondentsCOMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS Robert W. Kneisley Associate General Counsel Leslie Abbott Attorney SOUTHWEST AIRLINES CO. 1901 L Street, N.W. Suite 640 Washington, DC 20036

Howard Kass Vice President, Legal Affairs US AIRWAYS GROUP, INC. 1401 H Street, N.W. Suite 1075 Washington, DC 20005 Thomas R. O’Grady Staff Vice President, Commercial and Regulatory Law ALASKA AIRLINES, INC. 19300 International Blvd. Seattle, Washington 98188-5303 Jacqueline Peter Counsel FRONTIER AIRLINES, INC. 7001 Tower Road Denver, Colorado 80249 Richard P. Magurno Senior Vice President, General Counsel & Secretary AIRTRAN AIRWAYS, INC. 9955 AirTran Boulevard Orlando, Florida 32827

Edward P. Faberman WILEY REIN LLP 1776 K Street, N.W. Washington, DC 20006 Counsel for: Air Tran Airways Frontier Airlines, Inc. DATED: March 18, 2010COMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

1 The T1/T3 Airlines 1 and Los Angeles World Airports 2 (“LAWA”) (collectively, the “Parties”) hereby jointly file a status report, in conformity with DOT’s “Order Granting an Interim Stay of Proceedings and Extending Deadline to File Procedural Comments,” Order 2010-01-14 (“ January 21 Order”), regardi ng the settlement of certain procedural and evidentiary issues relating to the remanded issues as set forth in DOT’s Order 2009-11-24 (“November 24 Notice” ) and Order 2009-12-17 (“December 22 Order”).

BACKGROUND On November 24, 2009, following remand of cer tain issues by the United States Court of Appeals for the Dist rict of Columbia Circuit (the “D.C. Circuit”), the Department of Transportation (“DOT”) issued the November 24 Notice in this case.

DOT’s November 24 Notice directed the T1 /T3 Airlines and LA WA “to advise the Department . . . whether there is a possibility of settlement on the issues remanded” by

the D.C. Circuit. November 24 Notice at 5. The November 24 Notice further directed another submission on procedural issues at a later date. Id

. Following LAWA’s and the T1/T3 Airlines’ initial submissions on December 2, 2009 and December 4, 2009, respectively, the Par ties held a conference call with DOT on December 16, 2009. During that call, the Partie s discussed additional procedural issues, and DOT subsequently issued the December 22 Order, directing the Parties to file, no

1 The T1/T3 Airlines are the seven air car riers that on February 16, 2007, filed with the Office of the Secretary of the United St ates Department of Transportation a “Joint Complaint in Opposition to New Terminal Charges at Los Angeles International Airport.” 2 Respondents in this case are the LAWA , the Los Angeles Board Of Airport Commissioners (“BOAC”), and the City Of Los Angeles, California (“City”). As used herein, LAWA refers to all Respondents.COMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

2 later than January 18, 2010, additi onal comments with regard to the five issues remanded by the D.C. Circuit as set forth in the November 24 Notice. On January 11, 2010, the T1/T3 Airlines and LAWA filed a joint motion to extend deadlines in this proceeding in order to attempt to reach agreement on the issues identified in the Notice. In its January 21 Order, DOT granted the Parties’ motion to extend the deadline to provide written submissions on remain ing written and evidentiary issues from January 18, 2010 to October 18, 2010, but directed the Par ties to file periodic reports regarding the status of settlement negot iations. The first such report is due March 18, 2010.

DESCRIPTION OF SETTL EMENT DISCUSSIONS SINCE THE JANUARY 21 ORDER By the time of DOT’s January 21 Order, the T1/T3 Airlines and LAWA had already reached agreement on one of the five remanded issue identified by the November 24 Notice — the “[t]imeliness of [the] T1 Air lines’ objection to fair market valuation” used by LAWA in setting base rent (also known as the “Base Charge”) at LAX

Terminal 1. November 24 Notice at 2. DOT’s November 24 Notice identified four

additional issues for consideration on remand. Since January 11, 2010, the T1/T3

Airlines and LAWA have undertaken the fo llowing steps towards resolving those four

issues. First, the airline members of the Airport-Airline Affairs Committee 3 (a.k.a. the Airline-Airport Affairs Co mmittee) (“AAAC”) have created a “Subcommittee for Finance” consisting of airlines that have an in terest in issues relating to rates and charges

at LAX. Airlines that are members of that Subcommittee in clude airlines with long-term

3 Every air carrier and foreign air carrier ope rating at LAX is a member of the AAAC.COMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

3 leases, airlines that have recently signed l eases, and airlines that are operating at LAX pursuant to the existing Tariff (portions of which the T1/T3 Airlines challenged). The

T1/T3 Airlines on the Subcommittee for Financ e include Alaska Airlines, Inc, Southwest Airlines Co. and US Airways Group. The Subcommittee for Finance reports to the

AAAC. The Subcommittee for Finance and LAWA held their first bilateral meeting on February 24, 2010. During this initial meeti ng, LAWA identified the following goals for discussion with the Subcommittee: (1) ma king some administra tive changes to the existing Tariff; (2) memorializing in the existing Tariff the terms in the letter agreements

between LAWA and some of the T1/T3 Airlin es; and (3) taking step s to achieve more uniformity of charges collected throughout L AX, such as existing joint use charges and existing federal inspections services (“FIS”) charges, as well as implementing a unified capital charge (with the ability to impose an extraordinary cove rage charge to ensure that LAWA will always remain in the position to pay its bondholders). The AAAC

Subcommittee for Finance and LAWA are sche duled to meet next during the week of March 25, at which time discussions on these topics are scheduled to continue. Second, LAWA and Alaska Airlines. Inc. (one of the T1/T3 Airlines) have had

discussions about the airline making significant investments in one of the LAX terminals and a lease that would be entered into pursu ant to that undertaking which would resolve all pending disputes between th at airline and LAWA, including the remand issues. In addition, LAWA and another one of the T1/T3 Ai rlines have engaged in discusions about that airline relocating to a new terminal.CERTIFICATE OF SERVICE FOR COMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS CERTIFICATE OF SERVICE I, John David Taliaferro, hereby certif y that on March 18, 2010, I caused to be served by email, a true and correct copy of the foregoing COMPLAINANTS’ AND RESPONDENTS’ JOINT REPORT ON THE STATUS OF SETTLEMENT NEGOTIATIONS on the following: M. Roy Goldberg, Esq. SHEPPARD MULLIN RICHTER & HAMPTON LLP 1300 I Street, NW Suite 1100 East Washington, DC 20005-3314 Phone: (202) 218-0007 Fax: (202) 218-0020 rgoldberg@sheppardmullin.com Counsel for: Alaska Airlines, Inc. AirTran Airways, Inc. ATA Airlines, Inc. Frontier Airlines, Inc. Midwest Airlines, Inc. Southwest Airlines Co. US Airways Group, Inc. David A. Berg, Esq. AIR TRANSPORT ASSOCIATION OF AMERICA 1301 Pennsylvania Ave., NW Washington, DC 20004 Phone: (202) 626-4234 Fax: (202) 626-4139 dberg@airlines.org Robert P. Silverberg, Esq. SILVERBERG, GOLDMAN & BIKOFF, LLP 1101 30th Street, NW, Suite 120 Washington, DC 20007 Phone: (202) 944-3304 Fax: (202) 944-3306 rsilverberg@sgbdc.com Counsel for ATA Scott P. Lewis, Esq. A NDERSON & K REIGER LLP One Canal Park Suite 200 Cambridge, MA 02141 Phone: (617) 621-6560 Fax: (617) 621-6660 slewis@andersonkreiger.com Monica Hargrove Kemp, Esq. A IRPORTS C OUNCIL I NTERNATIONAL

- N ORTH A MERICA 1775 K Street, NW Washington, DC 20006 Phone: (202) 293-8500 Fax: (202) 331-1362 mkemp@aci-na.org Counsel for ACI-NA