TRAINING & FLIGHT SERVICES

Current Market Outlook

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Copyright © 2011 Boeing. All rights reserved.
Five decades of Current Market Outlook
TRAINING & FLIGHT SERVICES

BOEING is a trademark of Boeing Management Company.

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Market forecast drivers and considerations
Economic growth
Fuel price Market liberalization

Environment Airplane capabilities

Traffic forecast Network development
growth, 2009
Annual growth, 2011-2030
- 2028
WORLD 4.9
Northeast Asia 4.3
Europe 4.1
North America 3.2
Oceania 5.1
Central America 5.6
South America 7.0
Middle East 6.6
CIS 5.1
Southeast Asia 6.6
Africa 5.8
Southwest Asia 7.5
China 7.8

0 2 4 6 8
Percentage

Emerging markets Infrastructure

Airline strategies &

High speed rail business models

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World air travel has grown 5% per year
since 1980
6.0
 4 recessions
 2 financial crises
5.0
 2 Gulf wars
 1 oil shock
RPKs (trillions)

4.0
 1 near pandemic (SARS)
3.0
 9/11

2.0

1.0

0.0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011F
RPKs = Revenue Passenger Kilometers
Sources: ICAO Scheduled Traffic

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20-year forecast: strong long-term growth
2010 to 2030

World
economy 3.3%
(GDP)

Number
of airline 4.2%
passengers

Airline
traffic 5.1%
(RPK)

Cargo
traffic 5.6%
(RTK)

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Emerging markets are driving the
economic growth
Annual GDP growth
2011 – 2030
South
Asia 7.1
China 7.0
Asia
Pacific 4.7
Africa 4.4
Southeast
Asia 4.4
Latin
America 4.2
Middle
East 4.1
CIS 3.4

World 3.3
Oceania 2.8
North
America 2.7
Europe 2.0
Source:
Northeast
Asia 1.3 IHS Global Insight

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 Latin America Will Grow Above Average
Added traffic Annual
2010 traffic 2011-2030 growth%
Asia Pacific* 7.0%
Within North America 2.3%
Within Europe 4.0%
Within China 7.5%
Europe – Asia Pacific 5.9%
North Atlantic 3.6%
Middle East – Asia Pacific 7.2%
Transpacific 4.9% World
Average
Within Latin America 6.7% Growth:
North America – Latin America 5.4% 5.1%
Europe – Latin America 4.8%
Within / to CIS 4.2%
Africa – Europe 4.6%
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
*includes within China RPKs, billions

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Market for new airplanes set to become
considerably more geographically balanced

New airplane deliveries by region Market value by region

2011–2030 2011–2030

Region Airplanes Region $B

3% 3%
Asia Pacific 11,450 2% Asia Pacific 1,510 2%
8% 11%
Europe 7,550 Europe 880
8% 34% 6% 37%
North America 7,530 North America 760
Latin America 2,570 33,500 Latin America 250 $4.0T
Middle East 2,520 Middle East 450 19%
22%
C.I.S. 1,080 C.I.S. 110
Africa 800 23% Africa 100 22%
World Total 33,500 World Total $4,060B

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 World economic outlook
2012-22
2011 2012 CAGR
European Union 1.6% -0.3% 2.0%

United States 1.7% 1.8% 2.7%

Japan -0.7% 2.9% 1.1%

China 9.0% 7.6% 7.4%

Other Asia 4.2% 3.8% 4.2%

LatAm, ex Brazil 4.2% 3.0% 4.0%
Middle East 5.1% 4.2% 4.1%
Other Europe 3.9% 1.2% 3.0%
World Growth: 2010 4.0%
India 6.8% 7.2% 8.4%
2011 2.7%
Russia and CIS 2012 2.4% 4.3% 3.8% 3.9%
Canada 2.3% 1.9% 2.5%
Africa 1.2% 5.0% 4.7%
Based on Global Insight Monthly Interim Forecast
Brazil (December Update — Annual Real GDP) 2.9% 3.2% 4.8%
Australia/NZ
2.0% 3.1% 2.9%

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000

2010 GDP, Billions U.S. Dollars

Slow near-term global growth; EU uncertainty driving risk

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Oil and jet fuel prices
Updated on: 01/11/12
¢/Gallon
Spot $/Barrel (Brent Crude Oil / US Gulf Coast Jet Fuel)
200
Avg Ann Prices
2005 $55
Forecasts 450
180
2006 $65
400
2007 $72
160
2008 $97 Jet Fuel 350
2009 $62 PIRA
140
2010 $80 300
120 2011 $111
GI
2012YTD $112 250
100
OxEcon
200
80
150
60
Brent Crude Oil
40

20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Oil price forecasts are nominal annual average prices for 2012-15
Historical data source: EIA

Oil prices expected to remain elevated and volatile

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BOEING
BOEINGPROPRIETARY
PROPRIETARY Business Environment Overview 10
 Oil fundamentals support rising prices
over the long-term

World oil demand (mbpd) World Petroleum Reserves

120 FSU N Am
Asia 9% 5%
100 S Am
Afr 3%
15%
80 10% Eur
60 1%

40
Middle
20 East
57%
0
1995 2010 2025

Major Industrials Emerging World oil production

Incremental oil demand 2010-2025 (mbpd)

12
10
8
6
4
2
0
-2
-4
Transport Other

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Airport Congestion
• Congestion at key metro airports
• NYC, London, Tokyo
• By definition, slot controlled airports also congested
• Mainly Europe

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Air travel growth has been met by
increased frequencies and nonstops
World
Index 1990=1.00
2.5 Air Travel
Growth

Frequency
Growth
2.0 Nonstop
Markets

1.5

1.0 Average
Airplane Size

0.5

August OAG All routes

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Liberalization shapes airline strategies
Key global traffic flows and their levels of liberalization

Level of Liberalization
Intra- Inter- Sources: WEF-Travel & Tourism Competitiveness Report 2009
regional regional InterVISTAS-ga2 2006
Regulatory Transitional Liberal flow flow
WTO QASAR ALI 2008
BCA analysis (based on CMO flows)
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 Airlines will need 33,500 new airplanes
valued at $4.0 trillion

Airplane deliveries: 33,500 Market value: $4.0T

2011 - 2030 2011 - 2030

25,000 2,500

Market value, $ billions

20,000 2,000
Airplane units

15,000 1,500

10,000 1,000

5,000 500

0 0
1,980 23,370 7,330 820 $70B $1,950B $1,770B $270B
regional jets single-aisle twin-aisle large regional jets single-aisle twin-aisle large
6% 70% 22% 2% 2% 48% 43% 7%

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Fleet composition is changing

2030
2010 3%
1990 4% 5%
15% 22%
7% 13% 19%
15%
10,850 19,410 39,530
airplanes airplanes airplanes

65% 62% 70%

Large Twin-aisle Single-aisle Regional jet

Data Source: Ascend & Boeing CMO

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Latin America Region: Demographics
• Common language except for Brazil with
Portuguese
• Latin America has some of the world’s
largest cities.
• Starting to see secondary airports in some of the
largest cities.
• For the most part the region is underserved by air
travel. There are 66 cities in the region with more
than 1M people: this makes 2,144 city pair
combinations. Only 223 (~10%) of these markets
have daily service or better.
• Brazil alone has 16 cities with more than 1 M people..
• GDP per capita is growing however the
region is still home to great wealth
disparity
• Air travel becoming within reach of the rapidly
growing emerging middle class (from poverty levels).
• Access to credit and new low cost carriers is bringing
air travel to even more in the region.
• Air travel is starting to overtake busses in Mexico and
Brazil. Eg. Last year for the first time there was more
domestic travelers using air than busses in Brazil. In
Brazil, 8.7 million passengers flew for the first time in
2011.

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The Latin American market has the fourth
largest installed fleet in the world
Airplanes – 2010

0 1000 2000 3000 4000 5000 6000 7000

North America

Europe

China

Latin America

C.I.S.

SE Asia

Middle East

NE Asia
Regional Jets
Africa Single-aisle
Twin-aisle
South Asia
747 and larger
Oceania

Latin America is the fourth largest aviation market today

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Growing Latin American fleet
# Airplanes
1400
1,201
1200

1000
845
800

600

400

200

Data from Airclaims, Jets, in-service passenger and cargo airplanes

with >90 seats or equivalent in commercial service as of Jan 1 of
each year
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Latin America has seen a large increase in
airplane orders since 2005
Airplane Orders

200 187
175 162
150
150 142
136
127
125

100

75 65
58
50
24 22 26
25 18

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: ASCEND, Jets 90 seats and larger, passenger and cargo airplanes
with >90 seats or equivalent in commercial service

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Latin America’s fleet modernization has
been remarkable
Airplane
deliveries Avg Age
Jurassic
1200 Classic 24
119
In-production
161 167
1000 242 199
161
20
17.1 266 76%
295 173
394 377 359 178
800 423 312
439 179 16
208

600 230
227 10.3 12
218 211
216
235
400 235 238 8

200 4
20%
171 194 246 298 311 344 384 442 566 651 721 758 915
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: ASCEND, Jets 90 seats and larger, passenger and cargo airplanes
with >90 seats or equivalent in commercial service World Average age in 2011 was 11.7 years old

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Largest Latin American airlines are growing
market share
9 largest
0 50 100 150 200 250 300Latin American airlines

LAN/TAM In service
Other
GOL Airlines

Avianca/Taca 74% 22 years

Avg Age
6.6 years
Copa

Aerolineas
Argentinas
On order Other
Aeromexico Airlines

Azul
In Service
Volaris On Order 98%

Interjet

62 Others
316

Number of airplanes
Source: ASCEND, Boeing analysis, Jets, passenger and cargo
airplanes with >90 seats or equivalent in commercial service as of
March 2011
Avianca
COPYRIGHT includes Avianca
© 2011 THE BOEING Brazil and Synergy Group
COMPANY
 LCC Growth has taken off dramatically over
the
past five years
Index (Base = 1991)

2.60
Frequency Dramatic Growth since 2006:
Capacity (ASKs) • Economic Growth
2.40
• Access to Capital
• Low Cost Carriers
2.20

2.00
Slow Growth during this 10-year period
1.80

Varig Bankruptcy
1.60

1.40

1.20

1.00 Base Year

1991 1996 2001 2006 2011

Low Cost Carriers have stimulated demand while replacing inefficient legacy capacity with
lower costs, lower fares and superior service delivery
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Latin American participation in
industry consolidation and partnerships

w/AA

Anti-Trust Immunity
w/AA
Joint venture

• Star Alliance: Copa and Avianca-Taca

• Oneworld: Retaining LAN is critical- no other members in region

• Skyteam: Delta investing in Aeromexico and GOL (possibly Skyteam?)

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Single-aisle aircraft comprise the majority of
forecasted demand
Airplane Demand 2011-2020
for aircraft over 90 seats

< 0% 1%

16%
37%

62%
84%

1,117 Single-aisle $106 billion

Twin-aisle (2010 delivery dollars)
airplanes 747 and larger

Source: CMO 2011

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 75% of Latin America Narrowbody Capacity
is concentrated among the Top 7 Operators

Boeing 737NG (+MD) Customer

25% Airbus Customer
75% Share of Latin America Narrowbody ASKs (>90 seats)

20% 19% 19%

15% 14%

10%
8% 8%
7%
6% 5%
5%
3% 3% 3%
2% 2% 30 Others

0%

Highly Concentrated Market with airlines committing to one aircraft type

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 For longer-haul routes, current Market Share bias
toward Non-Latin Carriers; will this change?

YoY change in ASKs

• Carriers from other “mature”

markets (Europe, U.S.) adding
capacity at a faster rate
14% – European capacity up 14% driven by
5% European carriers (Iberia, Lufthansa)

• 10% growth to/from Central America

2% led by Aeromexico and Copa

• Capacity to/from North America up

only 3%
43% 1%
12%

Intra-regional
growth: +17%

Reading the chart example: N. America – S. America flow

•S.American airlines have increased capacity 1%
•N.American airlines have increased capacity 5%

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Source: Published schedules via Innovata June 2011/2010; * flights to/from and within South America
North American and European Carriers are
redirecting capacity to this fast growing region

50,000 1%

40,000

18%
30,000
2% 3%
20,000 12% 12% 6% 6%
29%
10,000 16% 32%

0
-2% -1% -7% -3%

-10,000

Three quarters of new routes long-haul opened by non-South American airlines

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Source: Published schedules via Innovata June 2011/2010; * flights to/from South America
The majority of Latin American deliveries
over next ten years will be for growth
Units

2500

+933 2,187
2000

1500 growth

1,154
replacement
1000

500
in-service

0
2010 2015 2020

The fleet is set to almost double in the next 10 years

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 For the next 20 years, Latin America airlines
will need 2,570 new airplanes valued at $250b

Airplane deliveries: 2,570 Market value: $250 billion

2011 to 2030 2011 to 2030

2,400 180

2,000 150

Market value, $ billions

1,600 120
Airplane units

1,200 90

800 60

400 30

0 0
60 2,140 360 10 $2B $160B $90B $3B
Regional jets Single-aisle Twin-aisle Large Regional jets Single-aisle Twin-aisle Large
2% 83% 14% 1% <1% 64% 36% <1%

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