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3 Outlook on a Page World regions Market growth rates World regions Market value: $4,060 billion to Share of fleet Delivery units World economy (GDP) 3.3% 2% 6% Airplane fleet 3.6% 75% 22% Number of passengers 4.2% 25% 7 Airline traffic (RPK) Cargo traffic (RTK) 5.1% 5.6% 19,4 39, to 33,500 Large Twin aisle Single aisle Regional jets World regions Key indicators and new airplane markets Growth measures Regions Asia Pacific North America Middle East Latin America CIS World World economy (GDP) % Airline traffic (RPK) % Cargo traffic (RTK) % Airplane fleet % Market size Deliveries Market value ($B) Average value ($M) Unit share % Value share % 11,450 1, , , , , , ,500 4, New airplane deliveries Large Twin aisle Single aisle Regional jets Total 350 2,920 7, , ,1 5, , ,400 5, , ,1 1, , , , , ,330 23,370 1,980 33,500 Market value ( $B, catalog prices) Large Twin aisle Single aisle Regional jets Total , ,770 1, ,060 fleet Large Twin aisle Single aisle Regional jets Total 340 1,050 2, ,4 1 1,000 3,720 1,780 6, , , , , , ,640 12,0 2,900 19,4 fleet Large Twin aisle Single aisle Regional jets Total 5 3,280 9, , ,630 6, , ,560 5, , ,120 1,3 80 2,7 4 2, , , ,2 1,140 8,570 27,750 2,070 39,530 Market values above 5 have been rounded to the nearest. Copyright 2011 Boeing. All rights reserved. 3

4 Long-Term Market Overview Air travel market recovering Passenger air traffic rose 8 percent in, after declining about 2 percent in The persistent resilience of air travel is expected to sustain 6 percent growth in 2011 and keep the growth rate at or above the historical trend through the middle of the decade. Although volatile fuel costs, political upheaval in the Middle East and North, and unresolved government debt in many industrialized economies create risk of a renewed downturn, commercial aviation has weathered such shocks to the system in the past. Recovery has followed each event as the industry reliably returned to its long-term growth rate of approximately 5 percent per year. We see that same resilience come into play as airlines have skillfully managed capacity to maintain profitability in face of the variety of challenges that have beset the industry as the world economy emerges from the global recession. Purpose of the forecast The Current Market Outlook is our long-term forecast of air traffic volumes and airplane demand. Each year s forecast starts from a blank computer screen, so we can factor the current business conditions and developments into our analysis of the long-term drivers of air travel. The forecast details demand for passenger and freighter airplanes, both for fleet growth and for replacement of airplanes that retire during the forecast period. We have shared the forecast with the public since 1964 to help airlines, suppliers, and the financial community make informed decisions. The shape of the market The long-range forecast for 2011 anticipates delivery of 33,500 new airplanes over the next 20 years, valued at more than $4.0 trillion. Looking back at our forecasts over the past years reveals that our projections for long-term market growth tend to be conservative, compared to actual industry performance. We have been admirably accurate, however, on the crucial forecast of the market share that each airplane size category will capture. Single-aisle airplanes account for the majority of deliveries over the next 20 years 70 percent of the airplanes and 48 percent of the value. Rapidly expanding air service within China and other emerging economies and the spread of low-cost carrier (LCC) business models throughout the world drive this market segment. The twin-aisle market, which includes efficient long-range airplanes such as the Boeing 787 and 777, is the fastest growing segment of the market, accounting for 22 percent of the delivery units and 43 percent of the delivery dollars. High fuel costs are compelling airlines to accelerate replacement of older airplanes. In addition, the increased capabilities of the latest long-range, twin-aisle airplanes create opportunities for operators to take advantage of the ongoing liberalization of air transport markets to open new nonstop routes. Current Market Outlook 2011 in service and Size Large 770 1,140 Twin 3,640 8,570 aisle Single 12,0 27,750 aisle Regional 2,900 2,070 jets Total 19,4 39,530 Key indicators to Growth measures World economy 3.3% Gross domestic product (GDP) Airplane fleet 3.6% Number of 4.2% passengers Airline traffic 5.1% Revenue passengerkilometers (RPK) Cargo traffic 5.6% Revenue tonnekilometers (RTK) UPDATED! Randy Tinseth introduces the Asia Pacific sub regions Demand by size 2011 to New Value Size airplanes ($B) Large Twin 7,330 1,770 aisle Single 23,370 1,950 aisle Regional 1, jets Total 33,500 4,060 Demand by region 2011 to New Value Region airplanes ($B) Asia Pacific 11,450 1,5 7, North America 7, Latin America 2, Middle East 2, CIS* 1, Total 33,500 4,060 *Commonwealth of Independent States. 4 Copyright 2011 Boeing. All rights reserved.

5 Market Developments Near-term environment Recent data suggests that the global economy continues to recover, though as expected, the pace of growth has moderated compared to the strong rebound in late. Emerging economies, led by China, outpace the average world GDP growth, while the established economies of the United States,, and Japan are expanding at a more modest rate. High oil prices and price volatility resulting from the political unrest in the Middle East pose the primary threats to continued recovery. Passenger traffic rebound Mirroring the economic recovery, passenger traffic will be buoyed by growing demand in emerging markets and bolstered by low-cost carriers. These drivers will help keep worldwide demand for air transport at or above the historical 5 percent growth trend, as the effects of recent shocks subside in the second half of Air cargo recovery Air cargo traffic surged to recover prior peak volumes more quickly than expected in. Growth in air cargo will retreat toward the long-term trend in 2011 as moderating economic growth, rising fuel prices, and supply chain disruptions from the Japan earthquake work affect the industry. Airline profitability revives Airlines are managing capacity to maintain yields and profitability in the face of challenging external events, including the political upheaval in the Middle East, the earthquake in Japan, and the continued volatility of fuel cost. Although global airline profitability is expected to decline from last year s record levels, it will remain positive despite the more than 30 percent jump in fuel prices compared to last year. Currently, airlines are projected to earn US$4 billion in net profits in 2011, compared to US$18 billion earned in. Airlines in Asia are forecast to be the most profitable, driven by growing demand within the region. North American airlines will follow closely, boosted by capacity discipline in the US domestic market. Market developments Growth rates Market developments World air travel since 1990 RPKs in trillions Market developments Airline traffic growth rates World economy (GDP) to Airplane fleet Number of passengers Airline traffic (RPK) Cargo traffic (RTK) Trend 3.3% 3.6% 4.2% 5.1% 5.6% Source: ICAO, Scheduled Traffic * RPK growth rate * estimate. in percent Latin America to Middle East North America Asia Pacific Asia Pacific 8.1% 5.7% 7.2% 5.9% 5.1% 7. North America 6.4% 5.4% 7.3% 3.6% 2.3% 4.6% 4.8% 5.4% 4. Middle East 6.4% 5. Latin America % 5.1% Copyright 2011 Boeing. All rights reserved. 5

6 Forecast Summary New business models, emerging economies support airplane demand Worldwide economic activity is the most powerful driver of growth in commercial air transport and the resulting demand for airplanes. The global gross domestic product (GDP) is projected to grow at an average of 3.3 percent per year for the next 20 years. Reflecting this economic growth, worldwide passenger traffic will average 5.1 percent growth and cargo traffic will average 5.6 percent growth over the forecast period. Forecast summary Market share by business model 33,500 1% 2% 49% 22% To meet this increased demand for air transportation, the number of airplanes in the worldwide fleet will grow at an annual rate of 3.6 percent, nearly doubling from around 19,400 airplanes today to more than 39,500 airplanes in. Airplane deliveries, for fleet growth and replacement of aging airplanes, will total 33,500 over the next 20 years, with a value of US$4.0 trillion. Freight Charter and inclusive tour Low cost Intermediate network Broad network 26% Low-cost carriers expanding across all regions Commercial aviation continues to change in response to market opportunities and challenges. New airline business models and the dynamic growth of air travel in emerging economies throughout the world are diversifying the demand for airplanes. As global air travel declined in 2009, there were still many markets and business models that experienced growth. Over the next 20 years, 78 percent of demand for new airplanes will come from outside North America, with about 34 percent of deliveries going to the Asia Pacific region. The low-cost carrier (LCC) model continues to expand across all regions, with LCC fleets expected to grow at an annual rate of 5.7 percent. The Boeing forecast continues to predict that the greatest demand for new aircraft, by country, will come from the United States, followed by China. Remarkably, the United Arab Emirates, with a population of less than 9 million people, yet home to several highly competitive airlines, will be the third largest market by value. Forecast summary Passenger traffic development RPKs in trillions to Within Asia Pacific Within Asia Pacific excluding China Within North America Within Within China to Asia Pacific North Atlantic Middle East to Asia Pacific Transpacific Within Latin America North America to Latin America to Latin America Within and to CIS to Forecast summary Annual traffic growth Growth % 2.3% % 5.9% 3.6% 7.2% 5.1% 6.7% 5.4% 4.8% 4.2% 4.6% to Within Asia Pacific Within Asia Pacific excluding China Within North America Within Within China to Asia Pacific North Atlantic Middle East to Asia Pacific Transpacific Within Latin America North America to Latin America to Latin America Within and to CIS to 6 Copyright 2011 Boeing. All rights reserved.

7 Methodology Practical value Boeing uses the long-term forecast contained in the Current Market Outlook to guide product strategy and to develop long-term business planning. We have shared this information with the public since 1964 to help airlines, suppliers, and financiers make informed business decisions. Cyclicality in air travel demand Global and regional economic cycles profoundly affect air travel demand, so it is essential to take the current phase of the economic cycle into account in developing the long-term forecast. When consumer confidence and business confidence fall, as they did during the recession that began in 2008, air travel demand follows suit. But historically, air travel has proved resilient. Perturbations from the long-term trend are typically relatively short lived, lasting about a year. As confidence rises, air travel often surges, surpassing historical average growth rates to return to the long-term trend. Adjusting for the cycle is part of the forecast process. The air travel demand forecast process The air travel demand forecast is developed by constructing and matching both a top-down and a bottom-up approach. Traffic between individual countries is forecast based on economic predictions, growth momentum, historical trends, and projections of the relative openness of bilateral air services and domestic regulation. Government statistics on inbound and outbound tourism receipts help to identify and cross-check trends. We also factor in the potential positive or negative effects of specific developments peculiar to each region, such as population dynamics, shifts toward or away from other modes of transport, including high-speed rail, and emergence of new direct air services between countries. The individual countries are grouped into 11 geographical regions that generate 63 air traffic flows between and within the regions. Next we reconcile the bottom-up projection, which is constructed from country-level economic, demographic, air transport, and travel data, with the top-down projection, which is obtained by dividing top-level global data into the same regional flows, allowing for shifts in shares between regions. The regional traffic forecasts are then used to help develop the airplane demand forecast. Methodology 2011 traffic outlook Methodology Liberalization stimulates demand Methodology RPK growth trends GDP GDP Percent change Available seat-mile (ASM) EXPLORE! The methodology behind the 2011 traffic outlook Growth Percent of ASMs Source: ICAO RPKs Percent change World GDP Gross domestic product World RPKs Revenue passenger-kilometers Copyright 2011 Boeing. All rights reserved. 7

8 Methodology continued Drivers of air travel Growth in air travel, measured in revenue passenger-kilometers (RPK), has historically outpaced economic growth, represented by GDP, by approximately 1.5 to 2.0 percent. This leads us to conclude that about 60 to 80 percent of air travel growth can be attributed to economic growth, which in turn is driven, in part, by international trade. This is consistent with the observation that countries whose economies are tied to trade tend to have higher rates of air travel. Air travel revenues consistently total about 1 percent of GDP in countries around the world, regardless of the size of the national economy. Globally, air travel has historically trended toward this consistent share of GDP, such that countries that are below or above this level will generally move toward it over the long term. The remaining 20 to 40 percent of air travel growth results from the stimulation provided by the value travelers place on the speed and convenience that only air travel can offer. For example, travelers value choice of arrival and departure times, routings, nonstop flights, choice of carriers, service class, and fares. Liberalization is the primary driver enabling value creation in the global air transport network. Liberalization typically gives rise to a bump in traffic demand. Studies suggest that as the relative openness of a country s bilateral air service rises from the 20th percentile to the 70th, the resulting increase in traffic can boost air travel demand by an additional 30 percent. Often, economic growth, induced directly and indirectly by improved air services, creates a virtuous circle that leads to further air transport growth, which in turn leads to added economic growth, and so on. The percentage of air transport growth that comes from economic development compared to the percentage that comes from the value of air travel services is an indicator of the maturity of an air travel market. Although individual regions may exhibit signs of slowing due to maturing markets, other regions continue to grow vigorously. Current global percentages do not indicate that the market is nearing maturity in aggregate. Methodology Drivers of air travel Methodology World airline revenues Economic growth Fuel Environment Travel demand Global trade Capability Infrastructure Methodology Air Service Agreement Revenues Percent of GDP World GDP (gross domestic product) Additional travel demand Value of service Safe, efficient, competitive industry Airline strategies Emerging markets Market evolution Market liberalization Source: Airline Business Top 150 ICAO, Global Insight nominal GDP 2007 Source: World Economic Forum Travel & Tourism Report 2009 Index relative openess of Air Service Agreement Russia Kenya China India Vietnam Spain Australia France South Qatar UAE UK Brazil Singapore Hong Kong Mexico Japan Germany Canada USA 8 Copyright 2011 Boeing. All rights reserved.

9 Fleet Developments Fleet size will double Boeing forecasts that the fleet will grow from about 19,400 planes in to more than 39,500 by. The need to replace older, less efficient airplanes will account for 40 percent of the projected market for new airplanes. The 2011 forecast anticipates 13,360 airplanes will be replaced over the next 20 years. This reflects rising fuel prices and the increasing economic burden of using older, less capable, and less efficient airplanes. At this replacement rate, 85 percent of the fleet operating in will have been delivered after Surging demand for single-aisle aircraft Today, there are 12,0 single-aisle airplanes in operation around the world, representing 62 percent of the total jet fleet. The single-aisle fleet is forecast to more than double, reaching 27,750 airplanes or 70 percent of the total fleet by, largely reflecting the rapid expansion of air services in Asia, the rise of intraregional air travel in emerging economies, and the growth and geographic expansion of the low-cost-carrier model. The fastest growing market will be for twin-aisle airplanes. This segment is expected to grow at an average annual rate of 4.4 percent. The twin-aisle fleet will grow from 3,640 airplanes in operation today to 8,570 airplanes in. In 20 years, much of the in-service fleet will be newer aircraft, such as the Boeing 787 and 777, which offer more passenger comfort, improved efficiency, and better environmental performance than the airplanes they replace. There is expected to be modest growth in the large aircraft fleet over the long term. The number of large airplanes in the fleet will grow from about 770 today to 1,140 in. Nearly all the gain in large aircraft is coming from the freighter market. The number of large passenger airplanes in operation today is around 450. The large airplane passenger fleet will remain at approximately that level over the long term. Modest upgauging The average seat count of airplanes in the fleet will verge upward incrementally as fuel and operating cost pressures encourage airlines to go to larger seat counts within all airplane size categories. In particular, due to better economics, small regional jets will be replaced with larger regional jets and small single-aisle airplanes on short-haul routes. Introduction of the 787 and, eventually, the A350 will spur airlines to trade up as airplanes in the 767 and A330 size category begin to reach retirement age. Within the large airplane segment, airlines will look to upgauge from the to the or A380. Fleet developments 20 years in the future 75% 25% Fleet developments World fleet will double by 4% 19% 15% 62% 19,4 airplanes % 2 8% 69% 28,580 airplanes Share of fleet Airplane fleet 39,530 Fleet developments Over half of new deliveries are for growth 40,000 30,000 20,000, ,4 Delivery units 85% Better for: Environment Passengers Airlines 15% Remaining airplanes 3% 22% 5% 7 39,530 airplanes Large Twin aisle Single aisle Regional jets 20, , ,030 39,530 33,500 Fleet growth Fleet replacement Fleet retained Copyright 2011 Boeing. All rights reserved. 9

10 New Strong demand for single-aisle airplanes The short- to medium-haul market has been the fastest growing segment of the commercial aviation industry over the past decade, creating a strong demand for single-aisle airplanes. In, 830 new single-aisle airplanes were delivered the second-largest quantity in a single year. The expansion of lowcost carriers, growth in intra-china flights, and a substantial need for replacement aircraft will keep the demand for single-aisle airplanes strong into the future. Among the 33,500 airplanes to be delivered over the next 20 years, 23,370 will be single-aisle airplanes. (This is 70 percent of the total number of aircraft, and 48 percent by value.) In addition to growth in this sector of the industry, the demand for new single-aisle airplanes is due to a need to replace older aircraft, such as 737 Classics, early A320s, and MD-80s/90s. It is expected that there will be a wave of single-aisle retirements starting around 2016 as a number of airplanes become 25 years old a typical retirement age for jet aircraft. drive twin-aisle demand The imminent introduction of the Boeing 787 Dreamliner, and later of the Airbus A350, is driving the resurgent demand for twin-aisle airplanes, as these new airplanes offer significant efficiency improvements over the aircraft they are replacing. Over the next 20 years, 7,330 new twin-aisle deliveries are expected. This represents 22 percent of total deliveries, or 43 percent of total market value. About 40 percent of the demand for twin aisles will come from the Asia Pacific region. Increasing liberalization and the region s vast geography will promote the opening of new air routes between a growing number of origins and destinations. Asia leads demand for large airplanes Approximately 43 percent of large airplane deliveries over the next 20 years are expected to go to Asia, with China and Southeast Asia accounting for most of the delivery demand. The Middle East, with its already substantial backlog of aircraft in this category, accounts for another 22 percent of the large airplane market. The 820 new large airplanes (such as the Intercontinental and the A380) forecast to be delivered worldwide represent only 2 percent of total airplane deliveries. Yet with a value of US$270 billion, large airplanes account for 7 percent of the total market value. Nearly half of those airplanes are already on order. A substantial portion of large airplane demand is for freighters, due to their efficiency in serving this market. Boeing order backlog: $260B Deliveries by region New Region airplanes Asia Pacific 11,450 7,550 North America 7,530 Latin America 2,570 Middle East 2,520 CIS 1, Total 33,500 Market value: $4.0 trillion 2,000 1,500 8% 22% 8% Market value in billions to North America Latin America,, and Caribbean Asia Pacific China, East and Southeast Asia Russia and Middle East, Central and South Asia Leasing and government Delivery units 3% 2% 7% 2011 to 33,500 13% 14% 23% 16% 15% 17% 18% 34% 1, $70 Regional jets 2% $1,950 Single aisle 48% $1,770 Twin aisle 43% $270 Large 7% Copyright 2011 Boeing. All rights reserved.

11 Freighter Market Resilient demand for air cargo Air cargo traffic (based on revenue tonne-kilometers) is expected to grow at an average annual rate of 5.6 percent over the next 20 years. Growing world trade, increasing demand for transport of perishable and time-sensitive commodities, and the need to replace aging airplanes will create a requirement for 2,960 freighter deliveries over the next 20 years. About 1,990 of these will be conversions from passenger service, and 970 airplanes with a value of US$250 billion will be delivered new. The air cargo fleet will grow at an annual rate of 3.5 percent, nearly doubling from 1,760 airplanes in to 3,500 in. Standard-body freighter market favors conversions The largest segment of this market by number of airplanes is standard-body freighters, with a total requirement for 1,240 airplanes. converted from passenger to cargo have low capital costs that make them attractive for standard-body freight operations. Express carriers driving medium widebody market Of the 720 medium widebody freighters to be delivered during the forecast period, 280 will be new, purpose-built freighters. This freighter segment is largely driven by express carriers with time-sensitive cargo. The larger capacity of medium widebody versus standard-body freighters provides operating cost advantages in this market. Though large freighters hold a greater economic advantage in range and tonne-kilometers, the lower trip costs of medium widebody freighters offer greater flexibility in the scheduling and frequency of shipments. Intercontinental market favors new large freighters In the large freighter segment, more than half of the demand will be for new airplanes. The purchase price of converted large freighters is very attractive, and conversions will continue to play an important supporting role. However, the performance and reliability advantages of new, purpose-built freighters are significant for intercontinental cargo operations, where larger, heavier payloads and range are crucial. Of the 1,000 large freighter deliveries, 690 will be new airplanes. Freighter market Market value: $250 billion Share of fleet 3 75% 1,240 25% 690 Market value in billions Freighters 1,760 Freighters 3, to Freighters 2,960 Large More than 80 tonnes New Converted 250 Freighter market 970 new and 1,990 converted $200 Large More than 80 tonnes Medium 40 to 80 tonnes New Converted Freighter market Annual growth: 5.7% since Delivery units 2 $50 Medium 40 to 80 tonnes Standard Less than 45 tonnes Converted Change in cargo traffic year over year percent 2 World air cargo traffic RTKs* in billions 250 % % 50-2 Cargo traffic change Actual traffic *Revenue tonne-kilometers 0 Copyright 2011 Boeing. All rights reserved. 11

12 Global Trends Industry growth in an era of uncertainty Boeing s business analysis includes extensive study of global geopolitical dynamics that influence commercial aviation. This research focuses on current events as well as long-term trends. The analysis helps to determine risk and opportunity in the commercial aviation market as a whole, and in specific regions around the world. Recent global events, including regional political turmoil, natural disasters, and debt crises, have affected global economic growth. While growth is expected to recover, the risk of persistent high oil prices and debt contagion could have lasting effects. Economic growth also could be affected by slowing trade liberalization in some regions. Reduced liberalization could prolong the recovery period, adversely affecting the demand for air travel and new airplanes. WTO rulings and airplane finance Government subsidies for aircraft development remain a concern; however, recent World Trade Organization rulings make clear that such government support must be provided on commercial terms. In the area of export finance, the new Aircraft Sector Understanding agreement implemented in early 2011 helps to level the playing field for aircraft manufacturers and airlines. Unlike trade liberalization, the pace of air services liberalization has not slowed significantly, although some governments are resistant to further progress. Much of this is due to a reluctance to allow increased foreign ownership levels in domestic airlines. Continued aviation liberalization stimulates competition, giving passengers more choices and generally lowering ticket prices, which increases demand for air travel. Infrastructure, environment, and security The Current Market Outlook projects that the global large commercial airplane fleet will nearly double by the year. This level of growth will require a significant infrastructure investment to accommodate increased traffic. Air traffic management modernization initiatives are critical for both capacity enhancement and system efficiency. The aviation industry is addressing environmental challenges with a three-pronged strategy of designing more efficient aircraft, improving operational procedures, and developing sustainable biofuels. Moreover, governments throughout the world are aligning with the industry s strategies to reduce emissions and achieve carbon neutral growth. This approach will allow the industry to grow over the long term, despite anticipated regulatory constraints. While significant improvements in aviation security have been made globally since 9/11, constant vigilance is still required. Security concerns will continue to affect commercial aviation operations. Global trends US International Trade Commission Global trends China domestic frequencies Domestic frequencies have increased more than nineteen-fold since Total weekly 388 7,158 ASKs* Weekly 2,088 43,708 frequencies Total airport 170 1,027 pairs Airplane size (seats) *Available seat-kilometers. Global trends Central domestic frequencies Liberalization stimulates air traffic US dollars in billions Tokyo US-Israel FTA CFTA NAFTA Uruguay GDP impact of removing agreements from the US economy. Source: August OAG, Daily Service Source: August OAG, Daily Service 1990 Total weekly 358 2,174 ASKs* Weekly 2,062 7,311 frequencies Total airport 294 1,045 pairs Airplane size (seats) *Available seat-kilometers. 12 Copyright 2011 Boeing. All rights reserved.

13 Pilot and Technician Outlook Pilot and technician training requirements As the world commercial fleet expands to more than 39,500 airplanes over the next 20 years, the world s airlines will need to add 460,000 pilots and 650,000 maintenance technicians, both to fly and maintain the new airplanes and to replace current personnel who are due to retire during the period. Airplane manufacturers and the aviation industry must keep pace with technology including online and mobile computing in order to match the learning styles of tech-savvy pilots and technicians. The growing diversity of pilots and maintenance technicians in training will require instructors to have cross-cultural and cross-generational skills in addition to digital training tools and up-to-date knowledge of the airplanes. Training programs will need to be tailored to enable airplane operators to gain the optimum advantage of the innovative features offered on the latest generation of airplanes, such as the 787 Dreamliner. Pilot outlook The signs of a global pilot shortage are mounting as airlines expand their fleets and flight schedules to meet surging demand in emerging markets. Asian airlines in particular are experiencing delays and operational interruptions due to pilot scheduling constraints. The forecast doubling of the worldwide commercial fleet emphasizes the increasing need for well-trained aviation personnel. The largest projected growth in pilot demand continues to come from the Asia Pacific region, with a requirement for 183,200 pilots over the next 20 years. China s expected requirement for 72,700 pilots is the region s largest. will need 92,500 pilots, North America 82,800, Latin America 41,200, the Middle East 36,600, 14,300, and the CIS 9,900. Technician outlook The demand for trained maintenance personnel will grow in proportion to the expanding global fleet. Many emerging markets currently recruit trained personnel from outside the region to fulfill their growing need for maintenance mechanics, technicians, and managers. There will be a strong need for basic skills training in these emerging markets to develop a local source of technicians. The need for maintenance personnel will grow most rapidly in the Asia Pacific region, which will require 247,400 new personnel. China s requirement will be the region s greatest, with an expected need for 8,300 maintenance personnel. North America will need to add 134,800 maintenance personnel, 129,600, the Middle East 53,000, Latin America 52,500, 19,200, and the CIS 13,500. Pilot and technician outlook Training to support 33,000 airplane deliveries Pilot and technician outlook Demand for pilots by Supporting fleet growth and retirements 500,000 2% 3% 9% 400,000 8% 300, ,000 0, % 2011 Pilots 237,400 Pilots 470, to Pilots 460,000 Asia Pacific Latin America North America CIS Middle East Pilot and technician outlook Demand for technicians by Supporting fleet growth and retirements 400,000 2% 3% 8% 300,000 8% 200,000 0,000 NEW! Our focus is adapting and configuring our training for future generations 2 38% 0 21% 2011 Technicians 184,400 Technicians 324, to Technicians 650,000 Asia Pacific Latin America North America CIS Middle East Copyright 2011 Boeing. All rights reserved. 13

14 World Regions World regions New airplane market by region North America CIS Asia Pacific Latin America Middle East Regional distinctions Differences in the air transport markets of the various regions and the continuous evolution of airline business models cause airplane demand to vary from one region to another. As new airlines emerge, more mature airlines seek ways to preserve and increase their share of the passenger market. Market growth strategies include increasing frequency of service, expanding the number of city pairs served, offering new products, and introducing products to serve the business passenger all while staying true to the airline s brand image. The business models of mature airlines are also evolving through mergers and acquisitions; joint ventures with alliance partners; innovative long-haul products, such as Air New Zealand s Skycouch ; introduction of premium economy class products; and reassessment of short-haul services. Each region s airplane demand reflects its unique market characteristics. For example, demand in North America and concentrates on single-aisle jetliners, driven primarily by the need to replace aging airplanes. In Asia Pacific and the Middle East, on the other hand, the passenger market favors business models that rely heavily on twin-aisle airplanes, so twin-aisle jetliners account for a larger share of total airplane demand in those regions than in other regions. Globalized demand At a global level, the number of airplanes in the world fleet grows an average 3.6 percent each year. At the same time, passenger traffic, measured in revenue passenger-kilometers, grows 5.1 percent per year. Cargo traffic, measured in revenue tonne-kilometers, grows 5.6 percent a year. The increasing geographical diversity of the aviation industry underlies this expansion and significantly increases the industry s resilience to regional fluctuations. Notably, some regions were less affected than others by the recent economic crisis and a few regions even continued to grow through the global downturn. World regions Market value: $4,060 billion 75% 25% 19,4 Share of fleet Large Twin aisle Single aisle Regional jets World regions Key indicators and new airplane markets Growth measures Economy (GDP) 3.3% Traffic (RPK) 5.1% Cargo (RTK) 5.6% Airplane fleet 3.6% Market size Deliveries 33,500 Market value $4,060B Average value $120M 22% 39,530 Delivery units 2% 6% 2011 to 33,500 7 New Share airplanes by size Large 820 2% Twin aisle 7,330 22% Single aisle 23,370 7 Regional jets 1,980 6% Total 33,500 Fleet Fleet Large 770 1,140 Twin aisle 3,640 8,570 Single aisle 12,0 27,750 Regional jets 2,900 2,070 Total 19,4 39, Copyright 2011 Boeing. All rights reserved.

15 Asia Pacific Growing markets The global economic downturn did not overwhelm the vigor of this region s economies most were able to sustain growth. Recovery on the global scale and the region s intrinsic economic strength are expected to lead to rapid expansion in the coming years. The region s economy will significantly outpace the world s average growth rate, expanding at a rate of 4.7 percent per year for the next 20 years, with China and India leading the way. The region s share of the world GDP will expand from 27 percent today to 35 percent by. Asia Pacific : 11,450 China Northeast Asia Rising traffic levels During the next 20 years, approximately half of the world s air traffic growth will be driven by travel to, from, or within the Asia Pacific region. Total air traffic for the region will grow 6.7 percent per year during the period. Fueled by development of the region s national economies and the increasing accessibility of air transport services, traffic within the region will grow faster than traffic to and from the region. Short-haul flying, including domestic and international travel within the region, will grow 7.0 percent per year. Asia Pacific Market value: $1,5 billion South Asia Southeast Asia Oceania Air cargo plays a critical role in the region s economy, transporting goods over difficult terrain and vast stretches of ocean. Some of the world s largest and most efficient cargo operators are located in Asia, competing to transport high-value and time-sensitive exports to markets outside the region. Air cargo growth will total 6.3 percent per year during the next 20 years. To service this demand, carriers within the region are expected to take 360 new freighters, with an additional 5 conversions. To modernize their fleets and meet the growing demand for air transport, Asia Pacific airlines will need 11,450 new airplanes valued at $1.5 trillion over the next 20 years. The number of airplanes in the Asia Pacific fleet will nearly triple, from 4,4 airplanes in to 13,480 airplanes in. Liberalization expands markets The structure of the airline industry in Asia Pacific is changing as regulations are liberalized and carriers find innovative ways to expand beyond national boundaries to serve burgeoning demand. The impact of liberalization is particularly dramatic in the case of low-cost airlines, which are stimulating air travel by lowering fares and opening new markets. In order to compete, established airlines are forming low-cost units, further expanding the affordability and availability of air travel. Where market development has outpaced official liberalization of markets, new airlines have been launched as international joint ventures, carrying established travel brands into new markets. 75% 25% 4,4 Share of fleet Large Twin aisle Single aisle Regional jets Asia Pacific Key indicators and new airplane markets Growth measures Economy (GDP) 4.7% Traffic (RPK) 6.7% Cargo (RTK) 6.3% Airplane fleet 5.7% Market size Deliveries 11,450 Market value $1,5B Average value $130M 26% 13,480 Delivery units 3% 4% 2011 to 11,450 67% New Share airplanes by size Large 350 3% Twin aisle 2,920 26% Single aisle 7,680 67% Regional jets 500 4% Total 11,450 Fleet Fleet Large Twin aisle 1,050 3,280 Single aisle 2,860 9,180 Regional jets Total 4,4 13,480 Copyright 2011 Boeing. All rights reserved. 15

16 China China market a -year reflection China, for more than a decade, has been forecast by the Boeing Current Market Outlook to be the second largest market for new airplanes (after the United States). Its progress over the past decade attests to the region s tremendous potential. The number of passengers carried by China s airlines in was 3.5 times the total in The in-service jet fleet more than tripled to 1,750 airplanes by, up from 560 airplanes in In mainland China, the number of commercial aviation airports increased from 139 in 2000 to 175 in. Volumes of passengers, freight, and airplane arrivals and departures at airports in increased dramatically (4.2, 3.6, and 3.1 times, respectively) over 2000 levels. The domestic network of mainland carriers expanded to 1,032 city pairs in (from 624 in 2000), while their international footprint more than doubled to 258 city pairs in (from 8 in 2000). In, for the first time ever, China s Big Three and Cathay Pacific were among the world s top 15 carriers, measured in revenue passenger-kilometers; none was on the list in In addition, Beijing Capital became the second busiest passenger airport. Hong Kong airport surpassed Memphis to become the top cargo airport by tonnage, with Shanghai Pudong airport coming in third. Plans for full-spectrum expansion Looking ahead, China has articulated policies and macro plans to encourage the international expansion of its airlines and address issues regarding air traffic management and infrastructure. By 2015, China will add 55 new airports, bringing the total available for commercial aviation use to at least 230. As the nation s high-speed rail network begins full operation, the trains will connect neighboring cities and transport passengers to airports for longer haul air travel. In addition, China is developing indigenous commercial airplanes. The second largest market In retrospect, China s air travel has been sustained by strong economic growth, increased trade, rising personal income, and progress in market liberalization. At the same time, the rapid increase in air travel, combined with unparalleled connectivity, has fostered economic and social interaction within China as well as between China and the rest of the world. Over the next 20 years, China s gross domestic product is forecast to grow at an average annual rate of 7.0 percent, with the demand for air travel growing at an annual rate of 7.6 percent. As the world s second largest market, China s airlines by will need 5,000 new airplanes valued at $600 billion. China City pairs flown by mainland carriers China Market value: $600 billion 75% 25% 1,750 Share of fleet Large Twin aisle Single aisle Regional jets China Key indicators and new airplane markets Growth measures Economy (GDP) 7. Traffic (RPK) 7.6% Cargo (RTK) 6.5% Airplane fleet 6.3% Market size Deliveries 5,000 Market value $600B Average value $120M 21% 5, City pairs by carriers 2000 International Delivery units 2% 6% 2011 to 5,000 Source: OAG August Schedules ,032 Intra-China 71% New Share airplanes by size Large 1 2% Twin aisle 1,040 21% Single aisle 3,550 71% Regional jets 300 6% Total 5,000 Fleet Fleet Large Twin aisle 260 1,200 Single aisle 1,330 4,270 Regional jets Total 1,750 5, Copyright 2011 Boeing. All rights reserved.

17 Northeast Asia Modest economic growth Northeast Asia s gross domestic product is forecast to grow 1.3 percent annually for the next 20 years. This modest growth projection for the region reflects the heavy influence of Japan, which is experiencing lower birth rates and a declining working-age population. The region s economy will benefit somewhat from Korea s developing economy, which will grow at a faster rate as its industrial base broadens. In general, Northeast Asia s nations are relatively small, in terms of total area, and somewhat isolated by water. The region s air travel grew rapidly in the 1990s, but growth has dampened over the past decade. This slowdown is due to a variety of factors, including the Asian financial crisis, concerns about SARS, the sluggish performance of the economy, and, most recently, disruptions caused by earthquakes and tsunamis. Cumulative growth in air travel capacity has reached only 5 percent over the past years. Capacity between Northeast Asia and North America has dropped significantly as airlines have extended direct nonstop service into other markets in the Asia Pacific region. At the same time, capacity between Northeast Asia and other markets in the Asia Pacific region has grown by 36 percent since Easing operating restrictions Northeast Asia s air travel is forecast to grow 4.3 percent annually over the next 20 years. Operating restrictions within the region are gradually easing. Restrictions involving the United States,, China, and other Asia Pacific nations are also liberalizing, encouraging major network carriers and low-cost airlines to open new markets and to expand services in existing markets. The combined effect of liberalization and rapid economic growth is driving passenger traffic between Northeast Asia and other Asia Pacific countries to grow at a brisk pace. Airport capacity is increasing, particularly at Tokyo s Haneda and Narita airports. Improved market access; ongoing airport development; increased competition; and expansion of lowcost service to, from, and within the region will nurture the continued growth of air travel. Fleet modernization continues Northeast Asia s airlines will need 1,250 new airplanes over the next 20 years. Airlines in Japan and South Korea have wisely continued to modernize their fleets in recent years, demonstrating their focus on longer term planning. The number of regional jets, including the anticipated Mitsubishi MRJ, is forecast to grow slightly. Single-aisle airplanes for intra- and inter-regional service by major carriers and low-cost airlines will account for 46 percent of new deliveries. New twin-aisle airplanes, with compelling market economics and flexibility to serve long-range markets, will account for 40 percent of new deliveries. The number of large airplanes in the region s fleet is expected to remain relatively constant. However, their percentage share of the total fleet will decrease, due to the economic and operational advantages of midsize twin-aisle airplanes. Northeast Asia Capacity growth with Asia Pacific Northeast Asia Market value: $200 billion 75% 25% 690 Share of fleet Large Twin aisle Single aisle Regional jets Northeast Asia Key indicators and new airplane markets Growth measures Economy (GDP) 1.3% Traffic (RPK) 4.3% Cargo (RTK) 6. Airplane fleet 4. Market size Deliveries 1,250 Market value $200B Average value $160M 4 1,520 Weekly ASKs in millions 12,000,000 8,000 6,000 4,000 2, Asia Pacific Other regions Delivery units 6% 8% 2011 to 1,250 Intra NE Asia North America 46% New Share airplanes by size Large 80 6% Twin aisle Single aisle % Regional jets 0 8% Total 1,250 Fleet Fleet Large Twin aisle Single aisle Regional jets 30 1 Total 690 1,520 Copyright 2011 Boeing. All rights reserved. 17

18 South Asia Strong traffic growth Travel to, from, and within South Asia is expected to achieve an average annual growth rate of 8.1 percent over the next 20 years, significantly outpacing all other regions in this report. The economic and demographic trends driving the expansion of air travel are very strong. In, the combined population of South Asian countries totaled 1.65 billion people. Residents, on average, are relatively young by world standards. Real gross domestic product (GDP), per capita, has expanded significantly, growing at an average annual rate of 7.2 percent from 2000 to. The commercial aviation industry has been helped by liberalization in key markets, including the domestic Indian market and travel between India and the Middle East. Liberalization is allowing airlines to open more routes, add more frequencies, and experiment with new business models. Reforms have also increased competition between airlines, thereby lowering prices. As a result, air services within the region have become more convenient and less expensive. This has happened at a time when people s ability to travel has increased. India s airlines expand India s airlines suffered a period of declining traffic from mid to mid While this downturn was largely the result of the global economic downturn, difficulties were compounded by an ill-timed influx of new capacity, resulting in unsustainable price competition between airlines. But the industry has weathered these challenges, and the healthier carriers are once again expanding. Although service to the largest cities is generally strong, airlines are considering options for serving smaller cities with smaller aircraft. As this service develops, air travel will become accessible to a broader section of the Indian population, and traffic feeds into the main routes will be stronger. Indian international air traffic weathered economic hard times much better than did domestic traffic. After a brief period of declining international passenger counts in early 2009, strong growth resumed and it is expected to continue. Particularly robust traffic gains are expected for routes between India and the Middle East, which have been given a boost by the entry of low-cost carriers. Growing international trade and tourism Outside of India, South Asian airlines are preparing to meet a growing demand for service resulting from increased international trade and the increasing ability of resident populations to travel abroad. Intraregional tourism is already well established, including active routes between India, the Maldives, and Sri Lanka. As household incomes rise, vacation travel both within and outside the region is expected to grow. South Asia Regional traffic growth South Asia Market value: $170 billion 75% 25% 470 Share of fleet Large Twin aisle Single aisle Regional jets South Asia Key indicators and new airplane markets Growth measures Economy (GDP) 7.1% Traffic (RPK) 8.1% Cargo (RTK) 7.1% Airplane fleet 7.2% Market size Deliveries 1,480 Market value $170B Average value $1M 1,000 18% 1, RPKs in billions Intra South Asia Other South Asia Middle East travel South Asia South Asia Southeast Asia Delivery units Source: CMO 2011 Passenger Traffic Forecast 3% 2011 to 1,480 79% New Share airplanes by size Large 0 Twin aisle % Single aisle 1,170 79% Regional jets 40 3% Total 1,480 Fleet Fleet Large 0 Twin aisle Single aisle 350 1,5 Regional jets 40 Total 470 1, Copyright 2011 Boeing. All rights reserved.

19 Southeast Asia Airlines expand operations Airlines in Southeast Asia have emerged from the global economic downturn in a much stronger position. Low-cost carriers expanded and gained market share, and their attractive fares and new routes continue to stimulate demand. Legacy carriers restructured both their operations and their finances to grow and become more competitive. Regional markets will continue to grow rapidly as the Association of Southeast Asian Nations (ASEAN) strengthens ties for business and leisure travel, both within ASEAN and with China and Taiwan. Travelers are also increasingly likely to include multiple stops on their itineraries as low fares and integration of regional networks make this more attractive. Southeast Asian airlines have dramatically increased their orders for new airplanes in an effort to meet growing demand and open up new, direct, longer range markets. New, efficient airplanes with improved capabilities and lower operating costs are integral to the carriers business strategies. Liberalization opens routes Regulatory changes and infrastructure improvements are crucial to air travel expansion. Relaxation of market regulations among ASEAN nations, as well as in the cross-strait market between Taiwan and China, has removed many traditional barriers to growth. For example, more than 400 passenger flights per week are now scheduled between Taiwan and China, where service had previously been strictly limited to charter flights. Scheduled service will soon increase to more than 700 flights per week. Flights among ASEAN capital cities have also increased, marking an intermediate step in the path to a unified regional aviation market. Several carriers, not waiting for regulatory liberalization, are aggressively expanding into new markets by acquiring or partnering with other Southeast Asian carriers operating their fleets as extensions of their own networks. Governments and airport authorities in the region are eager to expand their aviation infrastructures and capitalize on increased trade and tourism. Twenty-seven projects to upgrade and expand airports have been completed, begun construction, or are being planned. Airlines bolster economic growth Countries in Southeast Asia continue to strengthen their economic relationships and encourage collaboration. Air transportation plays a vital role in the region s above average (4.8 percent annually over years) projected gross domestic product growth. For example, the development of more affordable air travel options has spurred growth throughout the region s services sector, including tourism and financial services. The strength of the region s air cargo operations enables the efficient shipment of manufactured goods. Overall, Southeast Asian air travel to, from, and within the region is projected to grow at an average annual rate of 6.8 percent over the next 20 years. Intraregional traffic alone is expected to grow at a rate of 7.4 percent per year. More than half of the deliveries will be single-aisle airplanes, which will be needed to serve routes within the region. Southeast Asia Frequency growth in largest markets Southeast Asia Market value: $4 billion 75% 25% 1,050 Share of fleet Large Twin aisle Single aisle Regional jets Southeast Asia Key indicators and new airplane markets Growth measures Economy (GDP) 4.4% Traffic (RPK) 6.6% Cargo (RTK) 6.1% Airplane fleet 5.6% Market size Deliveries 2,750 Market value $4B Average value $150M 3,150 Jakarta Kuala Lumpur 31% Jakarta Singapore Kuala Lumpur Singapore Manila Singapore Frequencies per week Delivery units 5% % 2011 to 2,750 Source: May OAG +19% +22% +69% +121% 62% New Share airplanes by size Large 130 5% Twin aisle % Single aisle 1,720 62% Regional jets 50 2% Total 2,750 Fleet Fleet Large Twin aisle Single aisle 600 2,030 Regional jets Total 1,050 3,150 Copyright 2011 Boeing. All rights reserved. 19

20 Oceania A thriving market Although Oceania is a region with fewer than 40 million people (0.5 percent of the world s population), it accounts for 3.2 percent of global air traffic. Traffic is forecasted to continue growing as the region establishes stronger connections with other Asia Pacific nations and the world. Traffic is expected to grow at an annual rate of 5.5 percent over the next 20 years. Most of this growth will come from flights to and from Oceania, rather than from flights within the region. Flights to Southeast Asia will increase as that region grows as an intermediate point between Oceania and the rest of the world. In addition, there will be more connecting flights to North America, the Middle East, and especially China, as trade and tourism continue to rise. Companies in China are looking to Australia for raw resources; therefore, traffic between those nations is expected to grow at a rapid pace. Airline strategies continue to change Over the past decade, Oceania s commercial aviation market has changed dramatically as airlines have redefined themselves amid economic uncertainty. Qantas, in response to the rise of low-cost carriers (LCC), has successfully introduced its own LCC, Jetstar. Virgin Blue sought to compete against Qantas by creating a spinoff airline (V Australia), but has since changed its strategy and will rebrand all of its airlines under the name Virgin Australia. Air New Zealand has continued to innovate by introducing Boeing ERs with unique economy Skycouch seats. In general, liberalization of markets is leading international carriers to compete for passengers traveling to and from Oceania. are needed Increased traffic and changing business strategies are creating a demand for new airplanes in the region. Over the next 20 years, it is expected that approximately 970 new airplanes will be delivered to airlines within Oceania, including 670 single-aisle airplanes to transport people within the region and to nearby Southeast Asia. International traffic will require about 260 additional twin-aisle airplanes and 30 large commercial airplanes. As the region becomes more interconnected with the rest of the world, the economical new 787 Dreamliner will be in demand to serve longer, thinner routes. Oceania Deregulation leads to increased competition Oceania Market value: $130 billion 75% 25% 450 Share of fleet Large Twin aisle Single aisle Regional jets Oceania Key indicators and new airplane markets Growth measures Economy (GDP) 2.8% Traffic (RPK) 5.5% Cargo (RTK) 6. Airplane fleet 4.1% % 1,000 Delivery units 3% 1% 2011 to 970 Source: August OAG Delta Air Lines V Australia Weekly seats in thousands Qantas United Airlines 69% New Share airplanes by size Large 30 3% Twin aisle % Single aisle % Regional jets 1% Total 970 Market size Deliveries 970 Market value $130B Average value $130M Fleet Fleet Large Twin aisle Single aisle Regional jets 20 Total 450 1, Copyright 2011 Boeing. All rights reserved.

21 North America Improvement continues despite short-term challenges The North American commercial aviation market in improved for the second consecutive year. While air traffic grew at a modest 3 percent, strict capacity discipline (up 1 percent) kept passenger flights relatively full, with load factors averaging 83 percent. Low-cost carriers generated the majority of growth, with passenger traffic increasing 6 percent and capacity up 3 percent. Load factors averaged 80 percent. Cost and capacity discipline led to improved financial results in, with net profits of at least US$4 billion. Due to continued fuel price volatility and economic uncertainty, however, IATA is revising its 2011 regional forecast downward, with net profits projected at around US$1 billion. Industry consolidates and strengthens alliances The region s airline industry continues to consolidate, highlighted by major mergers, including the recent acquisition of AirTran by Southwest Airlines. Once the merged carriers have been integrated, the top four US airlines (United, Delta, American, and Southwest) will have a commanding market share, controlling 80 percent of available capacity. Consolidations and increased market concentration are expected to produce a period of stability over the long term. Global airline alliances continue to grow stronger, as evidenced by the recently implemented trans-pacific joint venture between Star Alliance members, ANA, and United Airlines. Initially, coordination will include integrating the airlines networks and schedules, along with setting airfares. In 2011, the oneworld alliance is strengthening its ties through trans-atlantic network enhancements. For example, American Airlines and British Airways are jointly operating a high-frequency shuttle between New York City and London. Fleet outlook for the next 20 years The long-term outlook for North American commercial aviation is favorable. Airlines are expected to continue focusing on capacity discipline and improving financial performance. Barring a prolonged economic downturn, the airline industry is poised for long-term, moderate growth. As a result, we are increasing our demand forecast in the single-aisle category by 330 airplanes. Traffic demand within North America is expected to grow at an annual rate of 2 percent, which is below average; however, a majority of this increased growth in the single-aisle category is related to traffic traveling to and from economically dynamic regions in Central and South America. Long-haul international traffic will continue to grow at an average annual rate of approximately 4.5 percent. This growth is expected to result in demand for an additional 1,180 new fuel-efficient, twin-aisle airplanes, including the Boeing 787 Dreamliner. North America 7,530 new airplanes required over next 20 years North America Market value: $760 billion 75% 25% 6,6 Share of fleet Large Twin aisle Single aisle Regional jets North America Key indicators and new airplane markets Growth measures Economy (GDP) 2.7% Traffic (RPK) 2.9% Cargo (RTK) 4.8% Airplane fleet 1.7% Market size Deliveries 7,530 Market value $760B Average value $0M 9,330 12,000 8,000 4,000 0 (4,000) (8,000) 15% Airplane fleet Retired New Retained Delivery units 1% 11% 2011 to 7,530 73% New Share airplanes by size Large 50 1% Twin aisle 1,1 15% Single aisle 5,540 73% Regional jets % Total 7,530 Fleet Fleet Large Twin aisle 1,000 1,630 Single aisle 3,720 6,800 Regional jets 1, Total 6,6 9,330 Copyright 2011 Boeing. All rights reserved. 21

22 Economic rebound The an commercial aviation market remained strong in, despite losses from snow and volcanic ash closing airports and canceling flights. The Association of an Airlines reports that the total number of scheduled passengers carried by member airlines was up 2.7 percent in, compared to the previous year. Over the same period, members of the an Low Fares Airline Association (ELFAA) experienced a 6.1 percent increase in passengers. an airlines in acquired more than 270 new airplanes, of which 79 percent were single aisle. an GDP rebounded in, increasing by 2 percent over Sustained growth is expected to continue over the next 20 years, with an airlines forecasted to acquire a total of 7,550 new airplanes valued at US$880 billion. A majority of the incoming aircraft are expected to be single aisle, which will account for approximately 75 percent of the total fleet. is an economically diverse region, with both mature nations as well as newer, high-growth economies. Despite areas of uncertainty, s overall GDP is expected to continue to grow at an average rate of 2 percent per year. The an Union s efforts to pursue transport liberalization are contributing to this growth, with negotiations taking place with Turkey, Brazil, India, Korea, and other countries. Leading strategic change Airline operations continue to change as new ventures are launched and new business models are applied. Additional mergers and acquisitions are expected over the next 20 years, along with increased emphasis on collaboration with alliance partners around the world. There is a trend among large network airlines to shift their focus away from short-haul routes that are targeted by low-cost carriers and focus instead on longer haul routes. In, network carriers announced new routes or increased service to cities such as Buenos Aires, Quito, Guayaquil, Miami, San Juan, Haneda, Singapore, and Rio. Meanwhile, low-cost carriers have continued to add service in the short-haul markets, with ELFAA members in providing 30 percent of capacity on intra- flights. Environment an airlines are continuing to reduce their environmental impact. In part, this is being done by replacing older, less efficient airplanes with newer technology planes such as the 787 Dreamliner. By the end of our 20-year forecast period, more than 94 percent of the jetliners acquired by an airlines will have been delivered as new. Environmental strategy means more new airplanes Market value: $880 billion 75% 25% 4,380 Share of fleet Large Twin aisle Single aisle Regional jets Key indicators and new airplane markets Growth measures Economy (GDP) 2. Traffic (RPK) 4.3% Cargo (RTK) 4.7% Airplane fleet 3.1% Market size Deliveries 7,550 Market value $880B Average value $120M 19% 8,0 75% Share of fleet 25% 6% Remaining airplanes Airplane fleet 8,0 Delivery units 2% 4% 2011 to 7,550 94% Better for: Environment Passengers Airlines 75% New Share airplanes by size Large 180 2% Twin aisle 1,400 19% Single aisle 5,660 75% Regional jets 3 4% Total 7,550 Fleet Fleet Large Twin aisle 670 1,560 Single aisle 3,090 5,920 Regional jets Total 4,380 8,0 22 Copyright 2011 Boeing. All rights reserved.

23 Middle East Middle East carriers gain long-haul market share While air transport markets in the rest of the world shrank during the global economic downturn of 2009, international air travel continued to grow for Middle East carriers, demonstrating the region s prominence in global air travel. International traffic continued to grow during, rising 17.8 percent for Middle Eastern carriers far exceeding the world average of 8.2 percent growth. Strong traffic growth The civil unrest in Egypt, Bahrain, Libya, Syria, Yemen, and Tunisia has dampened the outlook for While the impact to global traffic has been relatively minor, some of the region s most important destinations have been affected. Despite the turmoil, the region s economy is forecast to grow 6 percent in 2011, outpacing the world average. The six nations of the Gulf Cooperation Council are forecast to average 7.8 percent growth as energy production expands to cover the shortfall from other oil-producing countries. Rapid capacity increase Capacity at the three carriers, Emirates, Qatar Airways, and Etihad, collectively has grown 23 percent annually over the past years. Their growth is likely to continue as the large backlog of new, efficient airplanes that the three carriers have on order will provide a competitive advantage over an and Asian rivals. Approximately half the 885 airplanes on order in the Middle East, including 72 percent of the widebodies, will go to these carriers. Strategy based on location The market strategy of the Gulf 3 airlines is based on the so-called sixth freedom, which allows an operator in one country to carry passengers or cargo from a second country to a third country via a scheduled stop in the operator s home country. Sixth freedom privileges have enabled Emirates, Qatar Airways, and Etihad to take advantage of their central location to expand their share of traffic between and Asia. This huge air travel market does not depend on the relatively small populations of the home countries. The three carriers have also expanded into new markets, offering more than 0 weekly frequencies to destinations in the Americas including Chicago, Houston, Los Angeles, New York, San Francisco, Washington, D.C., Toronto, and Sao Paulo. More than 70 weekly flights are offered in the rapidly growing China market. Newly emerged low-cost carriers are stimulating demand for travel, targeting the young local population and the large migrant workforce. Flying short- and medium-haul routes within the region and to, India, and Eastern, the low-cost carriers supply only 4 percent of the region s capacity, yet they account for more than one-third of the region s backlog of single-aisle airplanes. Middle East Large backlog, spread over the decade Middle East Market value: $450 billion 75% 25% 1,040 Share of fleet Large Twin aisle Single aisle Regional jets Middle East Key indicators and new airplane markets Growth measures Economy (GDP) 4.1% Traffic (RPK) 6.6% Cargo (RTK) 6.2% Airplane fleet 4.9% Market size Deliveries 2,520 Market value $450B Average value $180M 44% 2, Large Twin aisle Airplane orders 40 Delivery units 7% 80 3% 2011 to 2,520 Source: Airclaims Single aisle Regional jets 46% New Share airplanes by size Large 180 7% Twin aisle 1,1 44% Single aisle 1,160 46% Regional jets 70 3% Total 2,520 Fleet Fleet Large Twin aisle 440 1,120 Single aisle 480 1,3 Regional jets Total 1,040 2,7 Copyright 2011 Boeing. All rights reserved. 23

24 Latin America A bright future The region s economy is projected to grow strongly over the next 20 years, spurring Latin American air traffic growth to exceed the world average. Traffic within the region is expected to grow at a rapid pace, most quickly within South America, where growth will average 7.0 percent per year. By, South America will have the sixth largest internal traffic flow among the regions covered in the Current Market Outlook. Total traffic carried by Latin American airlines will grow 6.9 percent annually. Business developments Air travel is assuming an increasingly important role in the region s commerce as travelers switch from roads to air transportation. Rising prosperity is also creating demand for international travel. More citizens can afford to travel outside the region and more businesses seek wider economic bonds. In addition, the upcoming Olympic Games and World Cup will require a growth in airline fleets and infrastructure in South America. The region has a large number of new jets on order to meet this escalating demand, with network carriers and low-cost carriers placing 187 orders in. Airlines have been consolidating to expand their businesses across the region. During, Avianca and TACA completed their merger, and LAN and TAM announced their merger into LATAM. Opportunities may exist for further consolidation in the region over the next 20 years. These more competitive airlines will allow Latin America to have a more substantial stake in the airline market. Today, Latin American airlines account for 48 percent of the traffic to, from, or within Latin America. By, that number will grow to 61 percent. Growing fleet Projected GDP growth of 4.2 percent per year over the next 20 years will help drive the commercial fleet to grow 5.6 percent annually. By, the fleet will consist of 3,390 airplanes. Most of the fleet delivered over the next 20 years will be new singleaisle airplanes for travel within the region. About 360 twin-aisle and larger airplanes will be used for connections with the rest of the world as international commerce increases. By increasing the size of the twin-aisle fleet and using new, efficient airplanes such as the 787, airlines in Latin America will be able to serve new city pairs and give passengers more convenient routes. Latin America Incredible growth in airplane orders Latin America Market value: $250 billion 75% 25% 1,150 Share of fleet Latin America Key indicators and new airplane markets Growth measures Economy (GDP) 4.2% Traffic (RPK) 6.9% Cargo (RTK) 6.1% Airplane fleet 5.6% 3, Airplane orders Delivery units <1% 14% 2% 2011 to 2,570 Source: Ascend % Large Twin aisle Single aisle Regional jets New Share airplanes by size Large 1% Twin aisle % Single aisle 2,140 83% Regional jets 60 2% Total 2,570 Market size Deliveries 2,570 Market value $250B Average value $0M Fleet Fleet Large Twin aisle Single aisle 900 2,820 Regional jets Total 1,150 3, Copyright 2011 Boeing. All rights reserved.

25 CIS Younger, more efficient fleet The commercial aviation market in the Commonwealth of Independent States (CIS) continues to grow as the region s airlines add new airplanes to their fleets. We are forecasting that the CIS will acquire 1,080 new airplanes, valued at US$1 billion, over the next 20 years. Of that total, 32 percent of the airplanes are in current backlog and expected to be delivered in the next five years. CIS Strong backlog of 344 airplanes 0 Delivery units Source: Ascend 160 The freighter market is also growing, with 60 new airplanes as well as 130 converted airplanes needed to meet demand in the region. More than 65 percent of the new freighters will be in the large category. Economy recovering The region s economies had moderate growth in. GDP was up 4.3 percent, compared to the substantial decline of 4.1 percent in Overall, we expect the GDP to grow at an average annual rate of 3.4 percent over the next 20 years. Russia continues to be the largest driver of the economy, accounting for 70 percent of GDP in, followed by Ukraine and Kazakhstan. Passenger traffic remains strong up.1 percent in the first quarter of 2011, according to Russia s Federal Air Transport Agency. Domestic passengers account for nearly 60 percent of this traffic. Over the next 20 years, air travel is expected to grow at an annual rate of 4.2 percent. Potential for domestic growth A projected 680 new single-aisle airplanes will be needed over the next 20 years to support anticipated domestic growth. Given the diverse geography of the region, airline travel is expected to become more attractive as liberalization occurs and personal incomes increase. Market growth is being supported by government programs to upgrade airports. In Russia, there are plans to replace a runway at Moscow s Domodedovo airport in This will help the airport to reach its planned capacity of 50 million passengers. The budget travel market is especially underserved in the CIS, because low-cost carriers serve only a small percentage of the domestic market. Currently, low-cost carriers account for less than 4 percent of domestic airline seats in the CIS, which is well below market share in most regions. With only 5 percent of Russia s population using air services, there are substantial opportunities for airlines to stimulate the market and win new customers. CIS Market value: $1 billion 75% 25% 1,140 Share of fleet Large Twin aisle Single aisle Regional jets CIS Key indicators and new airplane markets Growth measures Economy (GDP) 3.4% Traffic (RPK) 4.3% Cargo (RTK) 5.4% Airplane fleet 1. Market size Deliveries 1,080 Market value $1B Average value $0M 18% 1,400 Large Twin aisle Delivery units 4% 15% 2011 to 1,080 Single aisle Regional jets 63% New Share airplanes by size Large 40 4% Twin aisle % Single aisle % Regional jets % Total 1,080 Fleet Fleet Large Twin aisle Single aisle Regional jets Total 1,140 1,400 Copyright 2011 Boeing. All rights reserved. 25

26 Rapid economic growth The World Bank forecasts that the economies of sub-saharan will grow 5.3 percent this year and 5.5 percent in North n and the Middle East economies will grow 4.3 percent this year and 4.4 percent in Commodity markets account for much of this growth, as manufacturing countries, particularly China, seek to hedge against volatility by negotiating long-term contracts with n producers of raw materials. Direct foreign investment, growing urbanization, and rising incomes will spur higher domestic demand for consumer goods and transportation. The International Monetary Fund predicts that over the next 5 years, seven of the world s fastest growing economies will be in. Air transport poised for expansion ns are turning increasingly to air travel, as road and rail infrastructure remains underdeveloped. The resulting boost in demand for airplanes has generated firm orders for jet and turboprop airframes and created a favorable climate for aircraft leasing companies. The average age of the n fleet has declined as established airlines modernize for fuel efficiency and higher capacity. More developed nations such as Nigeria and South have undertaken ambitious airport infrastructure projects to alleviate congestion and address safety concerns. The Yamoussoukro Decision on the Liberalization of Air Transport Markets in, which set out in 1999 to create a single n sky by 2002, has languished in recent years, but is now receiving renewed attention. Meeting greater competition Many state-run airlines in have given way to privately owned entities that are better able to compete with the foreign operators currently predominant in intercontinental routes. Competition has markedly increased in recent years as Middle Eastern airlines have introduced larger capacity airplanes, higher frequencies, and lower fares to markets traditionally dominated by an carriers. n airlines have responded by forming code-share agreements with foreign carriers, particularly with Asian airlines. The entry of n carriers as full or associate members into the three global airline alliances, Star Alliance, SkyTeam, and oneworld, signals even more significant progress in n aviation. The additional market reach that these alliances afford is expected to foster competition on intra- routes and create opportunities for emerging unaffiliated carriers. Growth in emerging markets Market value: $0 billion 75% 25% 680 Share of fleet Key indicators and new airplane markets Growth measures Economy (GDP) 4.4% Traffic (RPK) 5.1% Cargo (RTK) 5.2% Airplane fleet 2.9% Annual RPKs in billions Within Other 29% 1,2 Delivery units 1% - 6% 2011 to % Large Twin aisle Single aisle Regional jets New Share airplanes by size Large 1% Twin aisle % Single aisle 5 64% Regional jets 50 6% Total 800 Market size Deliveries 800 Market value $0B Average value $130M Fleet Fleet Large Twin aisle Single aisle Regional jets 1 90 Total 680 1,2 26 Copyright 2011 Boeing. All rights reserved.

27 Passenger Traffic Airline passenger traffic Growth by regional flow Regions RPKs in billions Average growth to Middle East N. America S.E. Asia C. America C. America C. America C. America N. America C. America S. America China China China China N. America China N.E. Asia China Oceania China S.E. Asia CIS CIS CIS International Middle East N. America N.E. Asia S. America S.E. Asia S. Asia Middle East Middle East Middle East N. America Middle East S.E. Asia Middle East S. Asia N. America N. America N. America N.E. Asia N. America Oceania N. America S. America N. America S.E. Asia N.E. Asia N.E. Asia N.E. Asia Oceania N.E. Asia S.E. Asia Oceania Oceania Oceania S.E. Asia S. America S. America S.E. Asia S.E. Asia S.E. Asia S. Asia S. Asia S. Asia Rest of world , , , , % 4.6% 6.4% 6.4% 7.5% 4.9% 4.4% 4.1% 7.5% 7.5% 7.4% 6.8% 7.6% 7.1% 8.3% 4.8% 3.9% % 3.6% 3.4% 5.1% 5.2% 6.8% % 6.7% % 2.7% 4.4% 7.1% 6.4% 3.3% 3.4% % 5.9% % 8.5% 9.4% 8.2% World total 3, , , , , , , , , , % RPK: Revenue passenger-kilometers. The number of fare-paying passengers multiplied by the number of kilometers they fly (i.e., airline traffic). Copyright 2011 Boeing. All rights reserved. 27

28 Required Passenger and freighter airplanes Market value and demand by region Passenger and freighter airplanes In service and future fleet Demand and value by region Region Asia Pacific North America $B 1, ,450 7,550 7,530 Total airplanes in service Size Large* Twin aisle Single aisle Regional jets Total 770 3,640 12,0 2,900 19,4 1,140 8,570 27,750 2,070 39,530 Latin America Middle East CIS World ,060 2,570 2,520 1, ,500 Passenger airplanes in service Size Large* Twin aisle Single aisle Regional jets Total 460 2,820 11,530 2,840 17, ,970 26,4 2,060 36,030 Deliveries by airplane size and region Regional Single Region jets aisle Asia Pacific North America ,680 5,660 5,540 Twin aisle 2,920 1,400 1,1 Large Total deliveries 11,450 7,550 7,530 Freighter airplanes in service Size Large* Medium widebody Standard body Total ,760 1, ,350 3,500 Latin America Middle East CIS World ,980 2,140 1, , , , ,570 2,520 1, ,500 Airplane demand Size Large* Twin aisle Single aisle Regional jets Total $B 270 1,770 1, , ,330 23,370 1,980 33,500 Market value by airplane size and region* Regional Single Region jets aisle Asia Pacific North America Twin aisle Large Total value 1, Passenger airplane demand Size Large* Twin aisle Single aisle Regional jets Total $B 180 1,6 1, , ,6 23,370 1,980 32,530 Latin America Middle East CIS World 2 2 $70B $1,950B $1,770B $270B $4,060B Freighter airplane demand Size Large* Medium widebody Standard body Total $B * $B, catalog prices. Values above have been rounded to the nearest. *Large passenger and large freighter categories differ. 28 Copyright 2011 Boeing. All rights reserved.

29 Fleet Development Passenger and freighter airplanes Market value and fleet development Market by airplane size Size Market value $B Market share value New airplane deliveries Market share units Large* 270 7% 820 2% Medium 1,090 27% 4,030 12% Small % 3,300 % Total twin aisle 2,040 8,150 24% More than 175 seats % 4,390 13% 90 to 175 seats 1,490 37% 18,980 57% Total single aisle 1,950 48% 23,370 7 Total regional jets 70 2% 1,980 6% Total fleet 4,060 33,500 Passenger fleet development Size End of year Removed from service Converted to freighter New deliveries 2011 to End of year Large* Medium 1,540 1,370 3,590 3,760 Small 1,280 1,090 3,020 3,2 Total twin aisle 3,280 2, ,180 7,560 More than 175 seats 1,480 1,0 4,390 4, to 175 seats,050 7,390 18,980 21,640 Total single aisle 11,530 8,490 1,240 23,370 26,4 Total regional jets 2,840 2,760 1,980 2,060 Total passenger fleet 17,650 14,150 1,990 32,530 36,030 Freighter fleet development Size End of year Removed from service Converted to freighter New deliveries 2011 to End of year Large* ,240 Medium widebody Standard body , ,350 Total freighter fleet 1,760 1,220 1, ,500 Total fleet Size End of year Removed from service Converted to freighter New deliveries 2011 to End of year Passenger fleet 17,650 14,150 1,990 32,530 36,030 Freighter fleet 1,760 1,220 1, ,500 Total fleet 19,4 15,370 1,990 33,500 39,530 *Large passenger and large freighter categories differ. Copyright 2011 Boeing. All rights reserved. 29

30 Flow of Airplane fleet How the fleet develops as airplanes are added and removed 17,650 Passenger fleet in + 32,530 In service Parked 14,150 Removed airplanes Used 12,160 Permanently retired 36,030 Passenger fleet in 1,990 Converted to freighter 1,760 Freighter fleet in + In service Parked New freighters Used 1,220 Removed freighters 3,500 Freighter fleet in 1,220 Permanently retired 30 Copyright 2011 Boeing. All rights reserved.

31 Fleet by Region Fleet growth By size and region Fleet by airplane size Size in service Fleet share in service Fleet share Large* 770 4% 1,140 3% Medium 1,750 9% 4,450 11% Small 1,890 % 4,120 11% Total twin aisle 4,4 23% 9,7 25% More than 175 seats 1,690 9% 5,320 13% 90 to 175 seats,4 53% 22,430 57% Total single aisle 12,0 62% 27,750 7 Total regional jets 2,900 15% 2,070 5% Total fleet 19,4 39,530 Fleet by region in Region Regional jets Single aisle Twin aisle Large Total fleet Asia Pacific 160 2,860 1, ,4 North America 1,780 3,720 1, , , ,380 Latin America ,150 Middle East ,040 CIS , World 2,900 12,0 3, ,4 Fleet by region in Region Regional jets Single aisle Twin aisle Large Total fleet Asia Pacific 5 9,180 3, ,480 North America 760 6,800 1, , ,920 1, ,0 Latin America 150 2, ,390 Middle East 80 1,3 1, ,7 CIS , ,2 World 2,070 27,750 8,570 1,140 39,530 *Large passenger and large freighter categories differ. Copyright 2011 Boeing. All rights reserved. 31

32 Major Traffic Flows Airline traffic flows By region Airline passenger growth rates to RPKs Latin America Middle East North America Asia Pacific Asia Pacific 8.1% 5.7% 7.2% 5.9% 5.1% 7. North America 6.4% 5.4% 7.3% 3.6% 2.3% 4.6% 4.8% 5.4% 4. Middle East 6.4% 5. Latin America % 5.1% Airline passenger traffic in RPKs in billions Latin America Middle East North America Asia Pacific Asia Pacific North America Middle East Latin America Airline passenger traffic in RPKs in billions Latin America Middle East North America Asia Pacific Asia Pacific ,861.1 North America , ,412.4 Middle East Latin America Bold: Share within region. 32 Copyright 2011 Boeing. All rights reserved.

33 Traffic by Region Airline traffic distribution By region Traffic in RPKs Asia Pacific North America Middle East Latin America Asia Pacific 57% 14% 16% 37% 1% 7% North America 15% 23% % 33% 4% 17% 23% 36% 3 31% 54% Middle East % 3% 8% 16% 14% Latin America 9% 7% 35% 1% 1% 1% 8% 7% 1% 2 Total traffic to and from region Traffic in RPKs Asia Pacific North America Middle East Latin America Asia Pacific 62% 18% 22% 43% 1% 11% North America 11% 39% 2 12% 32% 5% 15% 23% 32% 25% 26% 46% Middle East 11% 5% 9% 18% 17% Latin America 13% 9% 4 1% 1% 1% 8% 8% 1% 19% Total traffic to and from region Bold: Share within region. Sum data down the table only. Excludes other small flows that are not included in the summary table (less than 1% of each region). How to read the tables Read down the selected column; for example: In, traffic within North America accounted for of all the total traffic to, from, within North America. In, traffic within North America accounted for 39% of all the total traffic to, from, within North America. Copyright 2011 Boeing. All rights reserved. 33

34 Airplane Categories Passenger and freighter Airplane market sector definitions Single-aisle passenger airplanes Regional jets Antonov An-148 AVIC ARJ-700 Avro RJ70, RJ85 BAe 146-0, -200 Bombardier CRJ Dornier 328JET Embraer 170, 175 Embraer ERJ-135, -140, -145 Fokker 70, F28 Mitsubishi MRJ Sukhoi Superjet 0 Yakovlev Yak to 175 seats Boeing 717, 727 Boeing through -500 Boeing , -700, -800 Airbus A318, A319, A320 Boeing-MDC DC-9, MD-80, -90 AVIC ARJ-900 BAe , Avro RJ0 Bombardier CRJ-00 Bombardier CS0, CS300 COMAC C919 Embraer 190, 195 Fokker 0 Ilyushin IL-62 Tupolev TU-154 Yakovlev Yak-42 More than 175 seats Boeing 707, 757 Boeing ER Airbus A321 Tupolev TU-204, TU-214 Twin-aisle passenger airplanes Small Two class: 230 to 340 seats Three class: 180 to 260 seats Boeing 767, 787 Boeing-MDC DC- Airbus A300, A3 Airbus A Airbus A Lockheed L-11 Ilyushin IL-96 Medium Two class: 340 to 450 seats Three class: 260 to 370 seats Boeing 777 Boeing-MDC MD-11 Airbus A , A340 Airbus A , -00 Ilyushin IL-86 Large* Three class: more than 400 seats Boeing Airbus A380 Boeing 747 Freighter airplanes Standard body Less than 45 tonnes BAe 146 Boeing-MDC DC-8, -9 Boeing 737 Boeing 727 Tupolev TU-204 Boeing 707 Boeing-MDC MD-80 Boeing Airbus A318, A319, A320, A321 Medium widebody 40 to 80 tonnes Boeing 767 Lockheed L-11SF Boeing-MDC DC- Boeing 787 Airbus A300, A3 Airbus A330 Ilyushin IL-76TD Large* More than 80 tonnes Boeing-MDC MD-11 Boeing through -400 Boeing 777 Airbus A350 Ilyushin IL-96T Antonov An-124 Bold: in production or launched. Production and conversion (SF) models assumed for each type unless otherwise specified. *Large passenger and large freighter categories differ. 34 Copyright 2011 Boeing. All rights reserved.

35 We value your opinion Please provide your name, position, company, and address below, or attach your business card. Feedback What do you think? Send your comments to us Our contact details are below. Your perspective What will be the main factors to affect future air transport markets? Your comments Any other questions or comments? What will be the likely impact of these factors? Your feedback What do you think of web-only access to forecast information (with a PDF for you to print locally)? Website If you have used the interactive forecast database on our website, tell us what you think of it. Forecast database What areas would you like to see covered in more detail in the Current Market Outlook? Contact Michael Warner Senior Manager Market Analysis What additional data would you like us to make available? What did you find most valuable? Was there anything you disliked? Fax Address Boeing Commercial Market Analysis P.O. Box 3707, MC Seattle, WA Copyright 2011 Boeing. All rights reserved. 35

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