of 2006 in the area of revenue and network productivity improvements include:

simplifying our fleet, including retiring four aircraft types;

right-sizing capacity to better meet customer demand, including utilizing smaller aircraft in domestic operations, which reduced domestic mainline capacity by 16% in 2006 compared to 2005;

growing our international presence by shifting wide-body aircraft from domestic to international operations, which increased international capacity by 21% in 2006 compared to 2005; and

increasing point-to-point flying and right-sizing and simplifying our domestic hubs to achieve a greater local traffic mix.

  

We strengthened our domestic hubs and are continuing to increase international service. For example, in 2006, we added more than 50 new daily flights to 20 cities in 18 countries in Europe and other countries such as India and Israel, capitalizing on our international gateways at Hartsfield-Jackson Atlanta International Airport, which is the world’s largest hub, and John F. Kennedy International Airport in New York. In addition, we offer more than 600 weekly flights to 58 destinations in Latin America and the Caribbean.

 

In-Court Restructuring Initiatives. Our business plan includes annual cost reductions through in-court initiatives such as debt restructurings, lease and facility restructurings, aircraft lease renegotiations and rejections, vendor contract renegotiations and retiree healthcare benefit modifications. Some of our accomplishments through the end of 2006 include:

restructuring our fleet by rejecting, returning or selling approximately 188 aircraft; and

making cost-saving progress on many facility agreements, including a review of approximately 55 locations. We have rejected or restructured leases at various airports, including Dallas, Orlando and Tampa.



Labor Cost Reductions. Our business plan includes annual benefits through reduced employment costs. During our Chapter 11 proceedings, by the end of 2006, we had:

 

	·	reached an agreement with the Air Line Pilots Association, International (“ALPA”) under which we expect to receive approximately $280 million in average annual pilot labor cost savings between June 1, 2006 and December 31, 2009 from changes in pilot pay rates, benefits and work rules. This excludes savings we will achieve from the termination of the primary qualified defined benefit pension plan for pilots (“Pilot Plan”) and the related non-qualified plans;

 

	·	implemented plans designed to achieve more than $600 million per year in non-pilot employment cost reductions. These cost reductions included charges to pay and benefits for non-pilot employees and staffing reductions;

 

	·	reached agreements with committees representing our retired pilots and retired non-pilot employees that provide us with approximately $50 million in annual savings from changes to retiree healthcare benefit coverage;

 

	·	advocated successfully for pension reform legislation, culminating in the Pension Protection Act. As a result, we intend to preserve our defined benefit pension plan for active and retired non-pilot employees;

 

	·	reached agreement with the Pension Benefit Guaranty