Meeting the Demand The Battle for Asia Pacific s Airspace The statements contained herein are based on good faith assumptions and are to be used for general information purposes only. These statements do not constitute an offer, promise, warranty or guarantee of performance. John Schubert Marketing Managing Director Boeing Commercial Airplanes October 2015
Agenda Recent market performance 20-year traffic and airplane forecast Product strategy
Global aviation market performance Since 2010 Global economic growth rate below average Passenger market resilient, growing Airlines managing better than ever before NOTE: Annual growth rates (%) and cumulative profit ($B)
Strong market fundamentals, some at record levels Production increasing to meet demand Traffic: +6% in 2014 Load factors: ~80% globally Utilization: +15% vs. 2003 Parked fleet: Steady at ~3% Stable values & lease rates Profits: $20 billion and growing Demand Fleet Value
Outlook and implications of low oil prices for airlines 130 120 110 100 90 80 70 60 50 40 Oil price outlook Sources: EIA, EIU, IHS, Oxford Economics, PIRA 1/1/2010 5/1/2010 9/1/2010 1/1/2011 5/1/2011 9/1/2011 1/1/2012 5/1/2012 9/1/2012 1/1/2013 5/1/2013 9/1/2013 1/1/2014 5/1/2014 9/1/2014 1/1/2015 5/1/2015 9/1/2015 1/1/2016 5/1/2016 9/1/2016 1/1/2017 5/1/2017 9/1/2017 1/1/2018 5/1/2018 3.50 3.00 2.50 2.00 1.50 1.00 US airlines fuel expenses including hedges 2Q vs. year ago -27% Brent-Oil ($/b), left Jet Fuel (cents/gal), right World: GDP effects of oil at US$54/b 18 16 14 12 10 8 15.7 Airlines, net profit (billions $) 2013 2014E 2015F 6 4 5.8 5.1 2 0-2 1.8 0.6 0.1 N. Amer Europe Asia MidEast LatinAm Africa
20-year traffic and airplane forecast
Why the Current Market Outlook (CMO)? Product strategy Long-range business plan Suppliers and airline customers
Market forecast drivers and considerations Market liberalization Airplane capabilities Environment High speed rail Fuel price Emerging markets Airline strategies & business models Infrastructure Economic growth 2015-2034 Current Market Outlook
6.0 5.0 4.0 3.0 2.0 1.0 0.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Resilient, growing market expected to continue 5% long-term growth rate SOURCE: ICAO scheduled traffic RPKs = Revenue Passenger Kilometers Above trend since 2010
20-year forecast: strong long-term growth 2014 to 2034 World economy (GDP) 3.1% Number of airline passengers 4.0% Airline traffic (RPK) 4.9% Cargo traffic (RTK) 4.7%
Emerging markets are driving the economic growth Annual GDP growth, 2014 2034 South Asia China 5.6 6.4 Southeast Asia Africa Asia Latin America Middle East World Oceania North America CIS Europe Northeast Asia 1.3 1.8 3.4 3.8 3.1 2.6 2.5 2.4 4.3 4.6 4.5 SOURCE: IHS Economics
Air travel growth has been met by increased frequencies, nonstops Market fragmentation drives growth 2.5 2.0 Air Travel Growth Frequency Growth Nonstop Markets 1.5 1.0 Average Airplane Size 0.5 SOURCE: August OAG Index 1994=1.00
787 Dreamliner opening new markets More than 75 new nonstop markets now connected with the 787 Announced In operation As of October 2, 2015
Airlines will need 38,000 new airplanes valued at $5.6 trillion Airplane deliveries: 38,050 2015-2034 New airplane deliveries by region 2015-2034 30,000 25,000 20,000 15,000 10,000 5,000 0 2,490 Regional jets 7% 26,730 Singleaisle 70% 4,770 Small wide-body 13% 3,520 Medium wide-body 9% 540 Large wide-body 1% Region Airplanes Asia 14,330 North America 7,890 Europe 7,310 Middle East 3,180 Latin America 3,020 Africa 1,170 C.I.S. 1,150 World Total 38,050 8% 19% 3% 8% 3% 38,050 21% 38%
Global fleet will double Units 45,000 43,560 40,000 35,000 30,000 25,000 21,600 20,000 15,000 10,000 21,960 Growth 58% 16,090 Replacement 42% 38,050 5,000 5,510 Retained fleet 0 2014 2034
Asia will need 675 aircraft each year for the next 20 years Europe Russia/ Central Asia North America 375 375 150 65 Asia-Pacific Growth Replacement Latin America 150 Africa 60 Middle East 675
Asia Market Outlook
Oceania will need 950 new airplanes valued at $140 billion Airplane deliveries: 950 2015-2034 800 700 600 500 400 300 200 100 0 10 Regional jets 1% 730 Singleaisle 77% 140 Small wide-body 15% 60 Medium wide-body 6% 10 Large wide-body 1% Market value: $140 billion 2015-2034 90 80 70 60 50 40 30 20 10 0 $<5B Regional jets <1% $80B Singleaisle 57% $30B Small wide-body 21% $20B Medium wide-body 14% $10B Large wide-body 7%
Southeast Asia will need 3,750 new airplanes valued at $550 billion Airplane deliveries: 3,750 2015-2034 Market value: $550 billion 2015-2034 3,500 3,000 2,500 2,000 1,500 1,000 500 0 90 Regional jets 2% 2,860 Singleaisle 76% 510 Small wide-body 14% 250 Medium wide-body 7% 40 Large wide-body 1% 350 300 250 200 150 100 50 0 $<5B Regional jets <1% $310B Singleaisle 56% $140B Small wide-body 25% $90B Medium wide-body 16% $20B Large wide-body 2%
Oceania traffic varies by market RPKs (billions) Within Oceania 2014 traffic Added traffic 2015-2034 Annual growth % 4.5% Southeast Asia 4.6% China 6.3% Middle East North America 3.5% 6.3% Oceania Traffic Growth: 4.6% Northeast Asia Africa 5.7% 4.1% Oceania GDP Growth: 2.6% South America 7.2% 0 50 100 150 200 250 300
Southeast Asia traffic varies by market RPKs (billions) Within Southeast Asia 2014 traffic Added traffic 2015-2034 Annual growth % 7.7% China 7.4% Northeast Asia 4.3% Middle East Europe South Asia Oceania North America 5.9% 5.6% 4.6% 8.9% 4.6% Southeast Asia Traffic Growth: 6.5% Southeast Asia Growth: 4.6% Africa 7.4% 0 100 200 300 400 500 600 700 800 900
Half of new deliveries to Oceania will be for replacement Units 1,000 990 900 800 700 450 Growth 47% 600 540 500 950 400 300 200 100 0 2014 500 Replacement 53% 40 Retained fleet 2034
Three-quarters of new deliveries to Southeast Asia will be for growth Units 4,500 4,000 4,120 3,500 3,000 2,500 2,000 2,850 Growth 76% 3,750 1,500 1,270 1,000 500 0 2014 900 Replacement 24% 370 Retained fleet 2034
Oceania airlines business model shifts 23% 2014 51% 33% 38% 43% 2024 2034 40% 26% 24% 22% SOURCE: Boeing CMOs LCC Charter/IT Broad Network Other Networks
Southeast Asian airlines business model shifts 29% 2014 49% 43% 34% 46% 2024 2034 31% 22% 23% 23% SOURCE: Boeing CMOs LCC Charter/IT Broad Network Other Networks
Product strategy
Exceptionally well positioned for the future Superior value, efficient market coverage 500 Current Boeing 747-8 Future Boeing 747-8 500 450 450 400 777-300ER 777-9X 400 Seats 350 300 777-200ER 787-9 777-8X 787-10 787-9 350 300 Seats 250 787-8 767-300ER 787-8 250 200 150 737-900ER 737-800 737-700 737 MAX 200 737 MAX 9 737 MAX 8 737 MAX 7 200 150 Boeing Standard Rules seat counts
737 MAX
777X
787 Dreamliner
Substantial, balanced backlog validates Boeing s product strategy Backlog by value ($B) 747 ME, Central & S. Asia Leasing, Gov't & BBJ Region Europe & Russia North America China, East & SE Asia L. America & Africa Asia Pacific Backlog = 5,689 aircraft Value = $431 billion 787 777 Large 1% Twin- Aisle 54% Model Single- Aisle 45% 737 767
Things to remember Commercial aviation will continue to be a growth industry Single-aisle fuelling forecast Boeing product strategy is right for today and the future