Market Overview. John Griffiths Chief Economist Boeing Commercial Airplanes June Presented to: Port of Seattle

Market Overview John Griffiths Chief Economist Boeing Commercial Airplanes June 2008 Presented to: Port of Seattle

The Global Outlook: Growth Is Slowing A global economic slowdown is under way Whether or not the U.S. economy is technically in recession, the recovery path will be slow and uneven Europe faces headwinds from rising currencies, tightening credit, and house price corrections Emerging markets are better positioned than in 1997-98, but vulnerable to a China hard landing and facing inflation problems Key Issue: How much must growth slow to cap global inflation? Copyright 2008 Global Insight, Inc. 05/2008

Global Economic Growth Is Supported by Emerging Markets 8 7 6 5 4 3 2 1 0 (Real GDP, percent change) 1997 1999 2001 2003 2005 2007 2009 World Developed (OECD) Countries Emerging Markets Copyright 2008 Global Insight, Inc. 05/2008

Wide Variations in Regional Economic Growth 12 10 Real GDP Growth (%) 2007 2008 2009 2010 8 6 4 2 0 NAFTA Western Europe Japan Emerging Europe Middle East Asia-Pac (Ex. Japan) China India Source: Global Insight, May 2008 Interim Forecast Copyright 2008 Boeing. All rights reserved.

Multiple Shocks Have Hit The U.S. Economy The Worst Housing Downturn Since World War II The Worst Financial Crisis In Recent Memory The Worst Credit Crunch Since The 1990-91 Recession And Oil Prices Over $120/Barrel These May or May Not Add Up to a Technical Recession But At Best Add Up To an Extended Period of Subpar Growth Copyright 2008 Global Insight, Inc. 05/2008

Oil Prices and Volatility Remain High Updated on: 06/18/08 200 180 160 140 120 100 80 $/Barrel (Brent Crude Oil / Rotterdam Jet Fuel) Avg Ann Prices 2003 $29 2004 $38 2005 $55 2006 $65 2007 $72 2008YTD $107 Jet Fuel Futures Market Global Insight Moody s EIA IATA Mid-term oil price scenario range /Gallon 450 400 350 300 250 200 60 40 Crude Oil 150 20 2004 2005 2006 2007 2008 2009 2008 average annual oil price forecasts as of June 2008 (IATA, Global Insight, EIA) and May 2008 (Moody s) Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 7

World Traffic and Capacity Traffic Growth Slowing Updated on: 06/02/08 8% 7% 6% 5% 4% 3% 2% 1% 0% YoY Growth ASK RPK World 4.0% 3.4% J A S O N D J F M A M J J A S O N D J F M 8% 6% 4% 2% 0% -2% -4% -6% YoY Growth ASK RPK US Domestic J A S O N D J F M A M J -3.7% -5.2% J A S O N D J F M A 12% 10% 8% 6% 4% 2% 0% YoY Growth ASK RPK Europe 7.5% 3.6% J A S O N D J F M A M J J A S O N D J F M A 10% 8% 6% 4% 2% 0% YoY Growth ASK RPK Asia Pacific Int l J A S O N D J F M A M J 4.0% 2.6% J A S O N D J F M Source: ROM Associates, ATA, and AEA, airline reports, Boeing market analysis Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 13

Load Factors at Historically High Levels Updated on: 06/02/08 90% 85% 80% 75% 70% 65% 60% Load Factor World Mar: 79% 2007 2006 2008 2000 J F M A M J J A S O N D 90% 85% 80% 75% 70% 65% 60% Load Factor US Domestic Apr: 81% 2007 2006 2008 2000 J F M A M J J A S O N D 90% 85% 80% 75% 70% 65% 60% Load Factor Europe Load Factor 90% Asia Pacific Int l 85% Apr: 75.3% 80% Mar: 76.6% 2007 2008 2007 75% 2006 2006 2008 70% 2000 2000 65% 60% J F M A M J J A S O N D J F M A M J J A S O N D Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 14

Air Cargo Traffic Growth Below Long-Term Trend Updated on: 6/18/2008 12.0 Billions of RTKs 11.0 2007 10.0 2008 2006 2005 9.0 8.0 2000 7.0 J F M A M J J A S O N D Sources: U.S. Department of Commerce, AAPA, AEA, ATA and the Boeing World Cargo Forecast. Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 15

Commercial Parked Fleet Increasing Total Parked Fleet Current Generation Parked Fleet 2,500 # of Aircraft % of Fleet 15% 700 # of Aircraft % of Fleet 7% 600 6% 2,000 12% 500 5% 1,500 9% 400 4% 1,000 6% 300 3% 200 2% 500 3% 100 1% 0 May-04 May-05 May-06 May-07 May-08 0% 0 May-04 May-05 May-06 May-07 May-08 0% AC Types Included: 717, 737 Classic, 737NG, MD80/90, 757, 767, 777, 747-400, A320 Family, A330, A340 Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 16

Single-Aisle Utilization Growth Slowing Updated on: 06/02/08 9.0 Flight Hours Per Day 8.5 8.0 7.5 2008 8.0 2007 2006 7.0 2005 6.5 6.0 J F M A M J J A S O N D Source: BCA RM&T Fleet Reliability Statistics for 717, 737, 757 Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 17

Twin-Aisle Utilization Remains High Updated on: 06/02/08 11.0 Flight Hours Per Day 10.5 2008 10.3 2007 2006 10.0 2005 9.5 9.0 J F M A M J J A S O N D Source: BCA RM&T Fleet Reliability Statistics for 747, 767, 777 Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 18

Recent Fuel Price Increases Far Outpacing RASM Growth 25% YoY % Change RASM (Revenue/Available Seat Mile) 20% 15% Domestic Est. Unhedged Fuel Impact to CASM 10% 5% 0% International April 2008 Intl: +5.5% Dom: +2.9% -5% -10% 2005 2006 2007 2008 Source: ATA Domestic Revenue Series (includes Alaska, American, Continental, Delta, Northwest, United, and USAirways) Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 22

High Fuel Prices Driving Recent Airline Bankruptcies Updated on: 30 May 2008 Category Region Airline In-Service Fleet On Order Boeing Airbus Boeing Airbus Ceased Ops US Maxjet (12/07) 5 767 High fuel prices, business model Ceased Ops US Aloha (3/08) 15 737J 9 737N Ceased Ops Asia Adam Air (3/08) 4 737J 17 737C Ceased Ops US ATA (4/08) 12 737N 10 757 4 DC10 Ceased Ops Asia Far East Air Trans (5/08) 6 757 9 MD80 Safety issues - 3 months to rectify, cash injection needed to restart ops Ceased Ops US Eos (4/08) 4 757 High fuel prices/business model Ceased Ops Africa Nationwide Air (4/08) 6 737J 2 737C 1 767 Comments Mesa go! competition Key driver lost military charter contract Ceased Ops US Skybus (4/08) 11 A320 65 A320 High fuel prices/business model Chapter 11 US Frontier (4/08) 62 A320 8 A320 Credit card company increased holdback of customer receipts Ceased Ops Asia Oasis (4/08) 4 747 High fuel prices, lack of capital Safety/regulatory issues and high fuel prices High fuel prices, competition Ceased Ops Europe Silverjet 3 767 Unable to secure addt l funding Totals 108 73 0 73 Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 24

Airlines cutting capacity to reduce costs and improve yields due to high fuel prices Most cuts to older generation single aisle fleet, and RJs (US) Largest cuts in U.S. domestic market, bulk starting in fall. Yearend 2008 capacity anticipated to be down 5-10% vs. 2007 Little parked fleet impact thus far 2008 YoY Domestic Capacity Growth Airline Q1 Q2 Q3 Q4 Notes Others 27% -6% -15% -23% Bankruptcies United -6% -4% -4% -14% 94 737C, 6 747-400 American -4% -3% -4% -11% 40-45 MD80/A300 + RJ Continental -1% -1% 0% -11% 737C retirements Delta -2% -7% -9% -8% 15-20 mainline, 60-70 RJ Northwest -1% -2% -2% -4% 10 DC9s + 5-10 757/A320 USAirways -4% -2% 1% -2% 737 retirements JetBlue 8% 1% 0% -1% A320 deferrals Alaska 9% 4% 2% 0% MD80 retirements Frontier 12% 5% 0% 2% A320 sales Southwest 6% 5% 3% 3% 737 deferrals AirTran 11% 12% 8% 4% 737 deferrals Total 1% -1% -3% -7% Source: Lehman Brothers, industry reports As of 06/12/08 Some European cuts in 2008, but more anticipated in 2009 due to fuel hedge expirations and slowing traffic growth v. capacity Many Asian carriers considering cuts, but few announced to-date as economy and traffic/capacity balance still holding up Europe Asia Ryanair SAS Easyjet Aer Lingus BA Iberia Qantas Korean China Airlines China Southern Plans to ground about 20 737s (10% of fleet), mainly at Stansted and Dublin, during winter schedule. Also selling 25 737s. Cutting capacity by 11 airplanes, or 5%, in fall Accelerating the removal of less efficient airplanes from its fleet 15% cut in long-haul capacity this winter key cut: Dublin-Los Angeles Likely to cut winter season capacity, summer 2008 unaffected 15% cut within Spain for balance of 2008 (fierce competition from LCCs + new high-speed train between Madrid and Barcelona) 5% capacity reduction planned (retiring 737, A320, two 767s; canceling A321 delivery; accelerating 747-300 retirements; reducing 747-400 utilization) Temporarily suspending passenger services on five international routes and reducing frequency on several from early June to the middle of July. Planning 10% capacity reduction by cutting 100 passenger and 50 cargo frequencies. Reducing international services on up to 21 routes. Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 25

Unit Revenues and Costs Fuel Prices Outpacing Rising Fares and Productivity Updated on: 6/16/08 550 450 350 $ (billions) $/ATK Fuel Exp Non-Fuel Exp Revenues $0.60 $0.55 $0.50 Unit Revenue Unit Cost Unit Cost ex Fuel 250 $0.45 150 $0.40 50 $0.35-50 $0.30 2000 2001 2002 2003 2004 2005 2006 2007 2008F 2000 2001 2002 2003 2004 2005 2006 2007F 2008F Source: IATA, June 2008 Financial Forecast & BCA Market Analysis Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 26

IATA Profitability Outlook Sharply Higher Fuel Prices Push 2008 Forecast to Loss Updated on: 06/02/08 $10 Net Profit (Loss) Billions Percent of Revenue 10% $6 6% $2 2% ($2) 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.. -2% ($6) -6% ($10) ($14) Source: Source: IATA, June 2008 1983-2006: ICAO data for world scheduled traffic (domestic + international) 2007-8: IATA estimate for world scheduled traffic (domestic + international) -10% -14% Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 27

Airline Net Profitability by Region Updated on: 6/13/08 4 3 2006 2007 2008F 2 Net Profit (billions $) 1 0-1 -2-3 -4 N. America Europe Asia ME Africa/LA Source: IATA, June 2008 Copyright 2008 Boeing. All rights reserved. Business Strategy & Marketing 28

Order Cycle Resembles 1980s More Than 1990s Jet Orders and Cancellations 1985-2007 Units 3,500 3,000 2,500 2,000 1,500 1,000 500 Orders % Fleet 25% 20% 15% 10% 5% 0 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Net Orders Cancellations Orders as % of Fleet Single Aisle Twin Aisle COPYRIGHT 2005 THE BOEING COMPANY

Single Aisle Order Cycle Resembles 1980s More Than 1990s Single Aisle Orders and Cancellations 1985-2007 Units Orders % Fleet 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 25% 20% 15% 10% 5% 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 N e t O rd e rs C a n c e lla tio n s Orders as % of Fleet Return COPYRIGHT 2005 THE BOEING COMPANY

Twin Aisle Order Cycle Driven by New Airplanes Like 1980s But Not as Extreme Twin Aisle Orders and Cancellations 1985-2007 Units 1,200 1,000 800 600 400 200 0 Orders % Fleet 35% 30% 25% 20% 15% 10% 5% 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 N e t O rd e rs Cancellations Gross Orders as % of Fleet Return COPYRIGHT 2005 THE BOEING COMPANY

Delivery Cycle Resembles 1980s More Than 1990s Jet Deliveries 1985-2007 Units Deliveries % Fleet 1,000 12% 900 800 10% 700 600 8% 500 6% 400 300 4% 200 100 2% 0 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Deliveries Orders as % of Fleet COPYRIGHT 2005 THE BOEING COMPANY

Single-Aisle Backlog Almost Twice Previous Peaks But Similar to 1980s as % of Fleet Single Aisle Deliveries and Backlog 1985-2007 Units Backlog % Fleet 5,000 50% 4,500 45% 4,000 40% 3,500 35% 3,000 30% 2,500 25% 2,000 20% 1,500 15% 1,000 10% 500 5% 0 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Deliveries Backlog Backlog as % of Fleet COPYRIGHT 2005 THE BOEING COMPANY

Twin Aisle Backlog More Than Double Previous Peak Though Similar to 1980s as % of Fleet Twin Aisle Deliveries and Backlog 1985-2007 Units 2,500 2,000 1,500 1,000 500 Backlog % Fleet 70% 60% 50% 40% 30% 20% 10% 0 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Deliveries Backlog Backlog as % of Fleet COPYRIGHT 2005 THE BOEING COMPANY

Large, Balanced, Well-diversified Backlog from Established and New Customers Model Backlog 747 300 777 Large 8% 737 Single-Aisle 31% Intermediate Twin-Aisle 61% 767 Region Leasing & Gov't Americas $-Billions 250 200 150 $124 $174 $255 787 Middle East & Africa Europe, Russia & Central Asia South/ Southeast Asia Americas Asia Pacific China Asia & East Pacific Asia 100 50 0 $64 $70 2003 2004 2005 2006 2007 COPYRIGHT 2005 THE BOEING COMPANY

Summary Economic growth slowing in developed economies, emerging market growth at increased risk Recent era of high oil prices likely to be sustained for the foreseeable future High fuel prices are outpacing airline revenue and efficiency growth, sharply reducing airline profitability Leading to capacity reductions/slower growth, higher fares Increasing need for fuel efficient products and solutions Additional bankruptcies likely if fuel price does not moderate The airline industry is uniquely exposed the weak will get weaker, the strong will get stronger Consolidation leads to near-term reduced capacity demand, but more robust industry in longer-term COPYRIGHT 2005 THE BOEING COMPANY