The BCA Business Environment and Future Market Strategy Nicole Piasecki Vice President Marketing & Business Strategy September 2004
2 Near Term Recovery Airplane Deliveries (2006) Airline Orders (2005) Airline Profits (2005) Capacity Requirement Traffic Growth (early 2004) Economic Growth Industry slowly recovering
3 Balancing Supply and Demand 100% 100 Change In Lease Rates As compared To 1999 Values 90% 80% 70% 60% More Than 30% 737-800 737-700 A320 # of Parked Aircraft 80 60 40 20 A320 Family 737NG 33 50% 1999 2000 2001 2002 2003 2004 Lease Rate Source: Avmark, AVN, GRA, IBA AISI Data through 1 st quarter 2004 0 S- 01 N- 01 J- 02 M- 02 Signs of recovery are evident M- 02 J- 02 S- 02 N- 02 D- 02 F- 03 A- 03 J- 03 Source: Airclaims A- 03 O- 03 D- 03 J- 04 1
4 Air Traffic Market Gulf War Crisis Present Crisis Billions RPKs 9 6 Liberalization New Business Models Technology 3 Long Term Growth 0 2004-2023 GDP 3.0% Passenger 5.2% Cargo 6.2% 1970 1980 1990 2000 2010 2020 Long-term global growth
5 Passenger Needs Safe and reliable service Non-stop service with more frequency choices Lower fares in comfortable surroundings
6 Fragmentation ASKs Frequency Growth Airport Pairs Airplane Size in Seats 1980 1985 1990 1995 2000 2005 2010 2015 2020 Airlines will continue to address passenger desires for non-stops and frequencies
7 Airline Business Models Network Carriers Aggregation through hubs Seamless service anywhere Complex yield manage ment Legacy labor agreements Passenger flexibility Asset & infrastructure complexity Low-Cost Carriers Asset and labor productivity De-emphasizing connectivity Simplification Under-served airports Stimulate de mand Minimal legacy baggage Growing Premium Niche market High margin Less hassle Customer solutions Market Share loss: 5% in Last 5 years Market Penetration: 25% N. America 15% + Europe / Australia 2% Asia New business models drive productivity Very small relative to others
8 Airline Profitability 25 20 Yields 2.5 2.0 1.5 Total Unit Operating Expense (Cents/ASM) US Average = 10.3 asm Low Cost Carrier = 7.5 asm Labor Simplification Standardization Consolidation 15 1.0 0.5 10 1983 1987 1991 1995 1999 0.0 Crew Compensation Airport Handling Fuel & oil Owni ng A/p Maint. Rev enue Mg t Other G & A Passenger Serv ices Innovation will continue to drive productivity improvements and revenue growth
9 Future Airplane Requirements and Customers Europe/Africa/ Mid East Asia Pacific Americas $2 Trillion 25,000 Airplanes over the next 20 years A340 777 A330 747 A380 Large 11% Intermediate Twin-Aisle 43% 5% Small & Intermediate Regional Jets E190 Single-Aisle 41% 717 A320 737 767 7E7 Well positioned for the future 757
10 The Right Strategy to Deliver Value Fleet Technical Services Enhancements and & Modifications Global Customer Support Maintenance and Engineering Services Preferred Airplane Family Spares Material Management & Spares Flight Operations Support Financial Services Aircraft Trading e-enabled Military Applications BBJ Point-to-point... Nonstop... Frequency Safety, Economics, Reliability, Simplicity, Connectivity and Flexibility Services and business solutions
11 7E7: A New Airplane for a New World Innovative systems technologies Breakthrough passenger cabin Advanced flight deck Large cargo capacity Advanced wing design Advanced technology engines and nacelles Composite primary structure More Standardized Airplane
12 7E7: A New Airplane for a New World Improved reliability and maintainability New passenger sensation Enhanced safety and capability More revenue potential Lower scheduled maintenance cost Short and Long Range Efficiency Faster cruise speed Breakthrough fuel efficiency Lower community noise Lower emissions Easier movement of aircraft between operators Easier financing Higher residual value
13 7E7 Structure Carbon laminate Carbon sandwich Fiberglass Aluminum Aluminum/steel/titanium pylons Using new materials technology to revolutionize flight
14 Engine Technology Delivers Outstanding Performance Engine and nacelle features: Higher bypass ratio Advanced materials and coatings No-engine-bleed systems architecture Low-noise nacelles with chevrons Common strut attachment point for all engines
15 Easy to Configure Standardization Easy to Transition Easy to Update
16 Breakthrough Fuel Efficiency Fuel consumption per Passenger 390 370 350 330 310 200 SEATS 225 SEAT S 250 SEAT S 275 SEATS 300 SEATS Current Quads 350 SEATS 400 SEAT S 450 SEAT S 500 SEATS 550 SEATS 290 270 20% Current Twins 250 7E7 230 50000 70000 90000 110000 130000 150000 170000 Fuel consumption per trip
17 Elevating the Passenger Experience Improved: A300/A330/A340 7E7 Pressure altitude Humidity Lighting Air quality Temperature The 7E7 is 35 cm (14 ) Wider 47.0 cm 54.6 cm 54.6cm Sound quality Comfort Economy seating
18 A Better View of the World 7E7 DREAMLINER A330/340
19 7E7-8 Cargo Revenue Up to 45% More Revenue Cargo Than A330-200 Revenue Cargo Passenger Baggage Crew Rest Bulk 5 pallets 465 ft 3 12 LD-3 4 pallets + 2 LD-3 A330-200 cargo layout 695 ft 3 Crew rest Revenue Cargo Comparison 8 LD-3 A330-200 4 pallets + 2 LD-3 7E7-8 5 pallets + 5 LD-3 More revenue capacity allows for more revenue and reduced risk
20 Environmental Sustainability Airport Footprints London Heathrow Airport A340 A330 767 7E7 85 dba contours 3,000 nmi mission Exceptional environmental performance leads to unconstrained operations
21 London-Heathrow Departures Daily departures 350 300 250 200 150 100 OAG August 2004 All scheduled passenger service 83% of the airplane departures are below 300 seats 68% of the airplane departures are below 200 seats 50 0 100 or less 101-150 151-200 201-250 251-300 301-350 350-401 401-450 Over 450 Seat size category Very Large Airplanes Will Not Reduce Airport Congestion
22 Creating New Nonstop Routes The 7E7 can connect more than 450 new airport pairs Possible New Airport Pairs Atlanta - Athe ns Helsinki - Shanghai Newark - Rio de Janeiro Paris - Minneapolis Vancouver - Munich Dubai - Taipei Washington, D.C. - Rome London - Fukuoka San Francisco - Milan Munich - Singapore
23 Delivers Lower Unit Costs and a Revenue Premium for Less Risk London Cost Benefits Fuel Efficiency Maintenance Costs Weight-related Costs Connection Costs Incremental Passenger Handling Costs Sharjah Revenue Benefits Non-stop Premium Cargo Benefit More Flexibility Comfort Calcutta 7E7 offers a better solution
24 Market Versatility and Broad Customer Base ~350 Cities Served by 7E7s in 2022 ~30 Cities Served by A380s in 2022 *200 Customers *20 Customers * * Addressable Market Efficient, capable small twins have more market opportunity
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