Aircraft Market Update

Aircraft Market Update Newsletter, Spring 2015 Many in the business aviation industry anticipated that 2015 would bring the longawaited recovery of the aircraft market, and while the first quarter of the year has exhibited positive indicators, challenges still remain. In what can be considered an encouraging sign, the General Aviation Manufacturers Association (GAMA) 2014 year-end report cites a 6% increase in delivered business jet units and a 5% increase in billing dollars over 2013 levels. Additionally, in March 2015, JetNet reported that the number of business jets for sale is only 9.9% of the total world-wide fleet a percentage generally signifying a healthy market and well below the low to mid-teen levels between 2009 and 2013. Is now the time to purchase a pre-owned aircraft? As a result of these positive indicators, typically, pre-owned aircraft prices would begin to see some much-needed stability or, perhaps, gradually increase. However, as the business aviation market continues to slowly recover from the economic downturn of 2008, pre-owned aircraft prices do not appear to be moving upward. The first quarter 2015 editions of both major aircraft value reference guides, Aircraft Bluebook and Aircraft Value Reference (Vref), show that the values of many mid- to ultra-long-range aircraft, at just five years old, are continuing to decrease. Change in Average Retail Price Quarterly Comparison Aircraft Bluebook Q4 2014 Q1 2015 Vref Q4 2014 Q1 2015 Global XRS Lear 45XR ($155,000) ($400,000) Cessna Sovereign ($250,000) Cessna Citation X ($443,000) ($250,000) Dassault Falcon 2000LX Dassault Falcon 7X ($1,775,000) Embraer Legacy 650 2010 Aircraft Models All dollar amounts are in US Dollars

Comparing the average asking price and inventory of a sampling of models from the Big 3 manufacturers, Gulfstream, Dassault and, from August 2014 to January 2015, a similar picture emerges. Average Asking Price $40 $35 August 2014 January 2015 $30 Average Asking Price $25 $20 $15 $10 $5 $0 Challenger 605 Global 5000 Global XRS Falcon 2000EXy Falcon 2000LX Falcon 900EXy Falcon 7X Dassault Gulfstream Aircraft Models All dollar amounts are in US Dollars, millions Source: JetNet, March 2015 Inventory 35 30 August 2014 January 2015 25 Quantity for Sale 20 15 10 5 0 Challenger 605 Global 5000 Global XRS Falcon 2000EXy Falcon 2000LX Falcon 900EXy Falcon 7X Dassault Gulfstream Aircraft Models Source: JetNet, March 2015 This data illustrates an increase of aircraft inventory at low values of the selected sample of aircraft models, 70% saw a decrease in the average asking price while, over the same period, 70% saw an increase in inventory. These models are widely considered the cream of the crop and are decreasing in price, so it is no surprise that values of older aircraft such as Challenger 604, Gulfstream GIV-SP, Cessna Citation X or Falcon 900B have not yet reached their minimum value. For all makes and model years, the March 2015 Aircraft Bluebook reported that 646 aircraft had a stable value, 396 aircraft decreased in value and 8 increased in value over last quarter, implying that now could be a good time to purchase a quality pre-owned aircraft at an astonishingly low price. 2 Aircraft Market Update Newsletter Spring 2015

Modernized Air Transportation Systems Upcoming navigational changes will affect aviation, both business and commercial, all over the world. Next Generation Air Transportation System (NextGen) is a new airspace initiative that will ultimately transform air traffic control from a ground-based to a satellite-based system. Once implemented, these sweeping changes will enable planes to fly closer together, take more direct routes and avoid delays currently caused by airport stacking as planes wait for a runway to open. GPS technology will save time and fuel, reduce traffic delays, increase capacity and permit controllers to monitor and manage aircraft with greater safety margins. While NextGen is a United States initiative, Europe has developed a parallel initiative, Single European Sky, with similar goals. In 2010, US and European authorities reached initial agreement on the interoperability of their future air traffic management systems. Other countries around the world are looking into and, in many cases, implementing similar systems. The FAA outlines NextGen to include the following aircraft systems and technologies: ADS-B Automatic Dependent Surveillance-Broadcast (Out and In) RNAV/RNP Performance-Based Routing Including Initial Tailored Arrival (ITA) CPDLC/FANS Controller Pilot Data Link Communications/ Future Air Navigation System ADS-B ADS-B is an aircraft and satellite-based transmission system that can be broken down into two primary functions, Out and In. Position data will be automatically broadcast from all ADS-B Out-equipped aircraft. Air Traffic Control (ATC) ground stations and all ADS-B In-equipped aircraft will receive this data. In addition to location data, ADS-B In will provide traffic and weather information to pilots. An aircraft equipped with ADS-B Out sends GPS-derived position and velocity data to other equipped aircraft and ground stations for purposes of air traffic control and coordination. Source: www.jatcaonline.com RNAV/RNP Both RNAV and RNP are types of performance-based navigation which allow an aircraft to fly a specific path between two points. Typically, the navigation provides a number ranging from.1 to 10 determining the navigation system s performance ability to provide position calculations within a circle designated by that number. The lower the value, the closer an aircraft can be to another. Per the example on the following page, in oceanic airspace an RNP value of 4 versus 10 will allow the lower RNP-valued system to maintain a closer separation between other aircraft. Eventually, RNP values down to.1 will permit very precise 3-D curved flight paths to be flown on approach to the airport. These improvements will ultimately translate into less time and less fuel. At this time, ADS-B Out is mandated; ADS-B In will be optional. The FAA is currently working with the International Civil Aviation Organization (ICAO) and several foreign authorities and governments to standardize equipment for aircraft capable of international travel. In Europe, new aircraft were required to be ADS-B Out capable as of January 2015 and older aircraft must be retrofitted by December 2017. The FAA mandate for all aircraft is 2020. Aircraft Market Update Newsletter Spring 2015 3

The RNP approach capability facilitates access to challenging airports and improves the efficiency of operations by saving time and fuel via shorter approach routes and reduced holding time. Conventional Routes RNAV RNP Source: Aero Magazine, Performance-Based Navigation Will Enable Efficiency-Enhancing Operations in the Future CPDLC/FANS Controller-Pilot Data Link Communication (CPDLC) is a means of communication between a controller and a pilot using data link for ATC communication. Similar to phone texting, CPDLC allows flight crews and ATC to use text messages to replace many of the voice communications previously used between flight crews and ATC. ATC to Aircraft (Uplink) Aircraft to ATC (Downlink) Source: Dassault Falcon Jet Future Air Navigation System (FANS) is a format of communication for CPDLC. FANS-1 was originally developed by Boeing; FANS-A was the work of Airbus. Merged together, they are now known as a single product named FANS-1/A. The combined benefit of CPDLC and FANS-1/A is to safely reduce the separation of aircraft. It is expected to lower lateral separation from 100 nautical miles (nm) to 30nm laterally and 30nm trailing. NextGen improvements are not optional add-ons, such as Satellite TV or High-Speed Internet. These upgrades are mandatory either now or in several years. Therefore, all private business travelers will need to have his or her aircraft outfitted. NextGen aircraft systems and technologies are not inexpensive. Installation of ADS-B Out is quoted as $78,500 by Gulfstream and $84,600 by Dassault; CPDLC with FANS 1/A is quoted at $300,000 by Gulfstream and $265,000 by Dassault; and RNAV and RNP is quoted at $145,000 by Gulfstream and $125,000 by Dassault. 4 Aircraft Market Update Newsletter Spring 2015

Although these items will be standard equipment on all new mid- to ultra-large cabin aircraft, if you are interested in purchasing a pre-owned aircraft, it is suggested to consider aircraft with these modifications already in place or, if they are not, factor in the installation costs before making an offer. For more information regarding Citi Private Bank Aircraft Finance, please contact your Private Banker. Ford von Weise Tel: (212) 559-1444 ford.vonweise@citi.com John Basileo Tel: (212) 559-1894 john.basileo@citi.com Citi Private Bank Aircraft Finance 153 East 53rd Street, 21st Floor New York, NY 10022 All dollar amounts are denominated in US Dollars. All credit products are subject to credit approval. The views expressed herein are those of Citi Private Bank Aircraft Finance and do not necessarily reflect the views of Citigroup Inc. or its affiliates. All opinions are subject to change without notice. Although information in this document has been obtained from sources believed to be reliable, neither Citigroup Inc. nor any of its affiliates guarantee its accuracy or completeness and or accept any liability for any direct or consequential losses arising from its use. Past performance information is not indicative of future performance. Citi Private Bank is a business of Citigroup Inc. ( Citigroup ), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates. Not all products and services are provided by all affiliates or are available at all locations. In Canada, Citi Private Bank is a division of Citibank Canada, a Schedule II Canadian chartered bank. Certain investment products are made available through Citibank Canada Investment Funds Limited ( CCIFL ), a wholly owned subsidiary of Citibank Canada. Investment Products are subject to investment risk, including possible loss of principal amount invested. 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