(dollars in millions, except per share amounts and ingot prices; production and shipments in thousands of metric tons [kmt])

Forward-Looking Statements

This report contains statements that relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as "anticipates," "believes," "estimates," "expects," "hopes," "targets," "should," "will," "will likely result," "forecast," "outlook," "projects," or other words of similar meaning. All statements that reflect Alcoa's expectations, assumptions, or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning aluminum industry growth or other trend projections, anticipated financial results or operating performance, and statements about Alcoa's strategies, objectives, goals, targets, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Actual results, performance, or outcomes may differ materially from those expressed in or implied by those forward-looking statements. For a discussion of some of the specific factors that may cause Alcoa's actual results to differ materially from those projected in any forward-looking statements, see Alcoa's Form 10-K, Part I, Item 1A, for the year ended December 31, 2008 and the following sections of this report: Note I to the Consolidated Financial Statements and the disclosures included below under Segment Information, Environmental Matters, and Quantitative and Qualitative Disclosures about Market Risk. Alcoa disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Results of Operations

Selected Financial Data:



                                                                    First quarter ended
                                                                         March 31,
                                                                     2009           2008
Sales                                                             $    4,147       $ 6,998
Amounts attributable to Alcoa common shareholders:
(Loss) income from continuing operations                          $     (480 )     $   299
(Loss) income from discontinued operations                               (17 )           4

Net (loss) income                                                 $     (497 )     $   303

Earnings per share attributable to Alcoa common shareholders:
Diluted - (Loss) income from continuing operations                $    (0.59 )     $  0.36
Diluted - Net (loss) income                                            (0.61 )        0.37
Shipments of aluminum products (kmt)                                   1,175         1,357
Shipments of alumina (kmt)                                             1,737         1,995
Alcoa's average realized price per metric ton of aluminum         $    1,567       $ 2,801

Loss from continuing operations attributable to Alcoa was $480, or $0.59 per diluted share, in the 2009 first quarter compared with income from continuing operations of $299, or $0.36 per share, in the 2008 first quarter. The loss from continuing operations in the 2009 first quarter was the result of a decline of $779 compared to the corresponding period in 2008, primarily due to the following: significant declines in realized prices for alumina and aluminum; decreases in volume in the downstream segments; and a loss on the sale of an equity investment; all of which was partially offset by net favorable foreign currency movements due to a stronger U.S. dollar; a gain on the exchange of equity interests; income tax benefits due to various discrete items and a current operating loss position; productivity improvements and procurement efficiencies across all businesses; and various favorable inventory adjustments.

Net loss attributable to Alcoa for the 2009 first quarter was $497, or $0.61 per share, compared with net income of $303, or $0.37 per share, for the corresponding period in 2008. Net loss in the 2009 first quarter included a loss of $17 from discontinued operations and net income in the 2008 first quarter included income of $4 from discontinued operations. The amount from discontinued operations in both periods represents the operational results of the Electrical and Electronic Solutions business.

In March 2009, Alcoa announced a series of operational and financial actions, which were in addition to those announced at the end of 2008, to significantly improve the Company's cost structure and liquidity. Operational actions include procurement efficiencies and overhead rationalization to reduce costs and working capital initiatives to yield significant cash improvements. Financial actions include a reduction in the quarterly common stock dividend from $0.17 per share to $0.03 per share beginning with the dividend payable May 25, 2009 and the issuance of 172.5 million shares of common stock and $575 in convertible notes that collectively yielded $1,438 in net proceeds.

Sales for the 2009 first quarter decreased $2,851, or 41%, compared with the same period in 2008. The decline was mainly driven by a drop in realized prices for alumina (36%) and aluminum (44%), decreases in volume in the downstream segments due to weak end markets, and the absence of sales from the businesses within the former Packaging and Consumer segment ($497 in the 2008 first quarter).

Cost of goods sold (COGS) as a percentage of Sales was 99.9% in the 2009 first quarter compared with 79.0% in the 2008 first quarter. The percentage was negatively impacted by the significant declines in realized prices for alumina and aluminum and decreases in volume in the downstream segments. These items were slightly offset by favorable foreign currency movements due to a stronger U.S. dollar, productivity improvements and procurement efficiencies across all businesses, favorable inventory adjustments as a result of the considerable drop in LME prices, and decreases in energy costs.

Selling, general administrative, and other expenses (SG&A) decreased $77 in the 2009 first quarter compared with the corresponding period in 2008. The decline was primarily due to reductions in labor costs as a result of implemented severance programs; decreases in expenses for travel, selling and marketing, contractors and consultants, and information technology as part of Alcoa's cost savings initiatives; and the absence of the businesses within the former Packaging and Consumer segment ($34 in the 2008 first quarter). SG&A as a percentage of Sales increased from 4.6% in the 2008 first quarter to 5.9% in the 2009 first quarter.

Research and development expenses declined $22, or 35%, in the 2009 first quarter compared to the same period in 2008. The decrease was mainly driven by implementation of Alcoa's cost reduction initiatives and the absence of the businesses within the former Packaging and Consumer segment ($3 in the 2008 first quarter).

The Provision for depreciation, depletion, and amortization decreased $31, or 10%, in the 2009 first quarter compared to the corresponding period in 2008. The decline was principally the result of a reduction in depreciation expense due to the extension of depreciable lives for a majority of various rolled products and hard alloy extrusions locations based upon a review of estimated useful lives completed in the 2008 third quarter, and the cessation of depreciation expense beginning in January 2009 related to the Global Foil and Transportation Products Europe businesses due to the classification of these businesses as held for sale.

Restructuring and other charges in the 2009 first quarter were $69 ($46 after-tax and noncontrolling interests), which were comprised of $48 ($32 after-tax and noncontrolling interests) for the layoff of approximately 2,500 employees (2,190 in the Engineered Products and Solutions segment, 160 in the Primary Metals segment, 60 in the Flat-Rolled Products segment, and 90 in Corporate) to continue to address the impact of the global economic downturn on Alcoa's businesses; $18 ($12 after-tax) for the write-off of previously capitalized third-party costs related to potential business acquisitions due to the adoption of SFAS 141(R) (see Recently Adopted and Recently Issued Accounting Standards); and $3 ($2 after-tax and noncontrolling interests) in net charges

Alcoa does not include restructuring and other charges in the segment results. The pretax impact of allocating restructuring and other charges to the segment results would have been as follows:

                                                     First quarter ended
                                                          March 31,
                                                     2009           2008
          Alumina                                 $       -      $       -
          Primary Metals                                  11             (1 )
          Flat-Rolled Products                             4              2
          Engineered Products and Solutions               27             -
          Packaging and Consumer                          -              36

          Segment total                                   42             37
          Corporate                                       27              1

          Total restructuring and other charges   $       69     $       38

As of March 31, 2009, approximately 340 of the 2,500 employees associated with 2009 restructuring programs and 4,100 of the 6,300 employees associated with 2008 restructuring programs were terminated. The remaining terminations for 2008 restructuring programs are expected to be completed by the end of 2009. In the 2009 first quarter, cash payments of $4 and $42 were made against the severance reserves related to the 2009 and 2008 restructuring programs, respectively.

Interest expense rose $15, or 15%, in the 2009 first quarter compared with the corresponding period in 2008. The increase was primarily due to a 38% higher average debt level, mostly the result of the $1,500 in new senior notes issued in July 2008 and borrowings on the BNDES loans related to the Juruti and São Luís growth projects that began in April 2008, partially offset by an increase of $9 in interest capitalized on construction projects, principally due to the Juruti and São Luís growth projects.

Other expenses, net declined $28, or 48%, in the 2009 first quarter compared with the same period in 2008. The decrease was mostly due to a $188 gain on the Elkem/Sapa AB exchange transaction; mark-to-market gains on derivative contracts; smaller unfavorable foreign currency movements due to a stronger U.S. dollar; and a $22 gain on the sale of property in Vancouver, WA. These positive impacts were partially offset by a $182 realized loss on the sale of the Shining Prospect investment and a decrease in equity income related to Alcoa's share of the results of Elkem, Sapa AB, and Shining Prospect prior to the exchange and sale of these investments.

The effective tax rate for the first quarter of 2009 and 2008 was 39.5% (benefit on a loss) and 36.7% (provision on income), respectively. The rate for the 2009 first quarter differs from the U.S. federal statutory rate of 35% primarily due to a $28 discrete income tax benefit related to a Canadian tax law change allowing a tax return to be filed in U.S dollars, an $11 discrete income tax benefit related to the Elkem/Sapa AB exchange transaction, and a $15 tax benefit for unbenefitted operational losses that are excluded from the estimated annual effective tax rate calculation. The rate for the 2008 first quarter differs from the U.S. federal statutory rate of 35% primarily due to a $28 discrete income tax charge related to the allocation of the sale proceeds of the businesses within the former Packaging and Consumer segment to higher tax rate jurisdictions as opposed to the allocation previously contemplated, mostly offset by lower taxes on foreign income.

Net income attributable to noncontrolling interests for the 2009 first quarter decreased $57, or 85%, compared with the corresponding period in 2008. The decline was primarily due to lower earnings at Alcoa World Alumina and Chemicals (AWAC) mainly driven by a significant drop in realized prices.

Segment Information

I. Alumina



                                                    First quarter ended
                                                         March 31,
                                                     2009          2008
            Alumina production (kmt)                    3,445       3,870
            Third-party alumina shipments (kmt)         1,737       1,995

            Third-party sales                     $       430    $    680
            Intersegment sales                            384         667

            Total sales                           $       814    $  1,347


            After-tax operating income (ATOI)     $        35    $    169

Alumina production decreased 11% in the 2009 first quarter compared with the corresponding period in 2008. The reduction was mostly the result of the effects of the curtailments initiated between the fourth quarter of 2008 and the first quarter of 2009, including approximately 1,500 kmt-per-year at the Point Comfort, TX refinery.

Third-party sales for the Alumina segment declined 37% in the 2009 first quarter compared with the same period in 2008. The decrease was primarily due to a 36% drop in realized prices, driven by significantly lower LME prices, and a 13% reduction in volume.

Intersegment sales decreased 42% in the 2009 first quarter compared to the corresponding period in 2008 mostly due to a drop in realized prices and a reduction in demand from the Primary Metals segment.

ATOI for this segment declined 79% in the 2009 first quarter compared to the same period in 2008. The decrease was primarily the result of the significant drop in realized prices, partially offset by favorable foreign currency movements due to a stronger U.S. dollar, a net decrease in input costs, and productivity improvements and procurement efficiencies across all regions.

In the second quarter of 2009, continued productivity improvements and procurement efficiencies are anticipated and a slight decline in refinery production in order to match smelter demand is expected. Also, start-up costs between $10 and $15 related to the São Luís refinery expansion and Juruti bauxite mine development will impact results.

                                                               First quarter ended
                                                                    March 31,
                                                                2009           2008
 Aluminum production (kmt)                                          880           995
 Third-party aluminum shipments (kmt)                               683           665

 Alcoa's average realized price per metric ton of aluminum   $    1,567       $ 2,801

 Third-party sales                                           $      844       $ 1,877
 Intersegment sales                                                 393         1,105

 Total sales                                                 $    1,237       $ 2,982


 ATOI                                                        $     (212 )     $   307

Aluminum production decreased 12% in the 2009 first quarter compared with the corresponding period in 2008. The reduction was mainly the result of the effects of smelter curtailments that began at the end of the second quarter of 2008, including the smelters in Rockdale, TX (267 kmt-per-year), and Tennessee (215 kmt-per-year), slightly offset by an increase in production at the Iceland smelter, as this smelter was not at full capacity until April 2008.

Third-party sales for the Primary Metals segment declined 55% in the 2009 first quarter compared with the same period in 2008. The decrease was mostly the result of a 44% drop in realized prices driven by a 50% decline in LME prices.

Intersegment sales decreased 64% in the 2009 first quarter compared to the corresponding period in 2008 mainly as a result of a drop in realized prices and a decline in volume due to lower demand from the downstream segments.

ATOI for this segment declined $519 in the 2009 first quarter compared to the same period in 2008. The decrease was primarily due to the significant drop in realized prices somewhat offset by lower costs for alumina and a gain ($112) related to Alcoa's acquisition of the other 50% of Elkem Aluminium ANS (Elkem). Through the first quarter of 2009, the Primary Metals segment recognized its existing 50% share of the operating results of Elkem as equity income. Starting in the second quarter of 2009, this segment will reflect 100% of the operational results of the two smelters (282 kmt-per-year) and anode facility owned by Elkem.

At March 31, 2009, Alcoa had 1,202 kmt of idle capacity on a base capacity of 4,813 kmt. In the 2009 first quarter, idle capacity increased by 395 kmt compared to December 31, 2008 due to the completion of targeted curtailment reductions, including 215 kmt at the Tennessee smelter and 180 kmt at various other smelters. Base capacity rose by 282 kmt at March 31, 2009 as compared to December 31, 2008 due to the addition of the Elkem smelters. In the second quarter of 2009, idle capacity will increase by an estimated 100 kmt due to the temporary shutdown of the Massena East smelter (125 kmt), as a result of continued curtailments to address the significant decline in LME prices and aluminum demand.

In the second quarter of 2009, lower production is anticipated as the full impact of the various smelter curtailments is realized. Procurement actions and productivity improvements are expected to benefit results.

                                                     First quarter ended
                                                          March 31,
                                                      2009           2008
            Third-party aluminum shipments (kmt)          455           610

            Third-party sales                      $    1,622       $ 2,492
            Intersegment sales                             30            77

            Total sales                            $    1,652       $ 2,569


            ATOI                                   $      (62 )     $    41

Third-party sales for the Flat-Rolled Products segment decreased 35% in the 2009 first quarter compared with the corresponding period in 2008 mostly the result of a reduction in volumes across all businesses, mainly due to weak end markets in Europe and North America, and a decline in realized prices.

ATOI for this segment declined $103 in the 2009 first quarter compared to the same period in 2008. The decrease was primarily due to reduced volumes across all businesses and lower prices, partially offset by favorable foreign currency movements, principally the result of a weaker Russian ruble, and productivity improvements and procurement efficiencies.

In the second quarter of 2009, weak end markets are expected to persist while benefits from productivity and procurement actions are anticipated.

IV. Engineered Products and Solutions

                                                     First quarter ended
                                                          March 31,
                                                      2009          2008
            Third-party aluminum shipments (kmt)            28          48

            Third-party sales                      $     1,158    $  1,395

            ATOI                                   $        96    $    140

Third-party sales for the Engineered Products and Solutions segment decreased 17% in the 2009 first quarter compared with the corresponding period in 2008 mostly due to lower volumes across all businesses because of weak end markets.

ATOI for this segment declined 31% in the 2009 first quarter compared to the same period in 2008. The decrease was principally the result of lower volumes across all businesses, partially offset by productivity improvements and procurement efficiencies realized in all businesses.

In the second quarter of 2009, benefits from productivity and procurement actions are anticipated while weak end markets are expected to persist.

V. Packaging and Consumer



                                                    First quarter ended
                                                         March 31,
                                                   2009            2008
          Third-party aluminum shipments (kmt)          -                19

          Third-party sales                      $      -      $        497

          ATOI                                   $      -      $         11

On February 29, 2008, Alcoa completed the sale of its Packaging and Consumer businesses to Rank Group Limited. The Packaging and Consumer segment no longer contains any operations.

Items required to reconcile segment ATOI to consolidated net (loss) income attributable to Alcoa include: the impact of LIFO inventory accounting; interest income and expense; noncontrolling interests; corporate expense, comprised of general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities, along with depreciation and amortization on corporate-owned assets; restructuring and other charges; discontinued operations; and other, which includes intersegment profit eliminations and other metal adjustments, differences between tax rates applicable to the segments and the corporate effective tax rate, and other nonoperating items such as foreign currency translation gains/losses.

The following table reconciles total segment ATOI to consolidated net (loss) income attributable to Alcoa:

                                                            First quarter ended
                                                                 March 31,
                                                             2009           2008
   Total segment ATOI                                     $     (143 )     $   668
   Unallocated amounts (net of tax):
   Impact of LIFO                                                 29           (31 )
   Interest income                                                 1             9
   Interest expense                                              (74 )         (64 )
   Noncontrolling interests                                      (10 )         (67 )
   Corporate expense                                             (71 )         (82 )
   Restructuring and other charges                               (46 )         (30 )
   Discontinued operations                                       (17 )           4
   Other                                                        (166 )        (104 )

   Consolidated net (loss) income attributable to Alcoa   $     (497 )     $   303

The significant changes in the reconciling items between total segment ATOI and consolidated net (loss) income attributable to Alcoa for the 2009 first quarter compared with the corresponding period in 2008 consisted of:

• a $60 change in the Impact of LIFO due to lower prices for alumina and metal, both of which were driven by a significant drop in LME prices;

• a $10 increase in Interest expense, primarily due to a 38% higher average debt level, mostly the result of the $1,500 in new senior notes issued in July 2008 and borrowings on the BNDES loans related to the Juruti and São Luís growth projects that began in April 2008, partially offset by an increase in interest capitalized on construction projects, principally due to the Juruti and São Luís growth projects.

• a $57 decrease in Noncontrolling interests, mainly due to lower earnings at AWAC primarily driven by a significant drop in realized prices;

• an $11 decline in Corporate expense, principally due to reductions in labor costs as a result of implemented severance programs and decreases in expenses for travel, selling and marketing, contractors and consultants, and information technology as part of Alcoa's cost savings initiatives;

• a $16 increase in Restructuring and other charges, primarily due to $34 in restructuring charges, mostly for a further headcount reduction of 2,500; and $12 for the write-off of previously capitalized third-party costs related to potential business acquisitions due to the adoption of SFAS
141(R); partially offset by the absence of a $28 loss on the sale of the businesses within the former Packaging and Consumer segment;

• a $21 change in Discontinued operations, reflecting the declining operating results of the Electrical and Electronic Solutions business, mainly the result of the significant deterioration of the automotive markets this business serves; and

• a $62 change in Other, principally the result of a $118 realized loss on the sale of the Shining Prospect investment, partially offset by a $28 discrete income tax benefit due to a change in Canadian tax law; a $21 adjustment for the finalization of the estimated fair value of the Sapa AB joint venture; and the absence of a $28 discrete income tax charge related . . .