Gregg Gildemann Market Analysis Boeing Commercial Airplanes 20 February 2018 The statements contained herein are based on good faith assumptions are to be used for general information purposes only. These statements do not constitute an offer, promise, warranty or guarantee of performance.
It's tough to make predictions, especially about the future. - Yogi Berra
136-2 15 40 94 45 74 10 14 74 455 700 737NG 737 MAX 747 767 777 787 737NG 737 MAX 747 767 777 787 50 40 30 20 10 0 47 Current monthly production rates 12 0.5 2.5 5 737 747 767 777 787
Agenda Air cargo - strong recovery in 2017 Market outlook- continued growth at or above trend Freighter market and forecast
2017 air cargo up 9% Air cargo growth Growth rate in % 14% 12% 10% 8% 6% 4% Asian industry recovery Long term projected growth rate 4.2% Stronger global Ind. Prod. Europe outperforming Great peak season E-commerce Economic and trade growth 2% 0% 2014 2015 2016 2017 All regions participating -2% Source: BCA Market Analysis and IATA full year 2017 data
Key economies growing, industrial production gaining strength Synchronized upswing in global growth Industrial production recovering China, Emerging Markets adding most to GDP 8% 7% 4.0 3.5 forecast Growth rate in % 6% 5% 4% 3% Growth rate in % 3.0 2.5 2.0 1.5 2% 1.0 1% 0.5 0% EU USA China World 0.0 2015 2016 2017 2018 2019 2020 2021 2018-2023 contribution to global real GDP growth 2018 growth 5 year forward CAGR Retail sales Industrial production China: 28% Other Emerging, Devel. Markets: 37% Advanced Economies: 34% Source: BCA Market Analysis with data from IHS Markit January 2018
Air cargo volumes rebounding, driven by increase in industrial production and world trade Industrial recovery crucial for air cargo growth Weak IP & trade à air cargo weak Stronger IP & trade à strong air cargo quarters IP & trade slowdown à air cargo weak Forecast for stronger IP & trade à Recovery for air cargo growth rate y-o-y 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Industrial production (IP) Global trade World GDP growth rate y-o-y 12% 10% 8% 6% 4% 2% 0% -2% -4% RTKs 2013 RTKs 1.3% 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 2017-Q4 2018-Q1 2018-Q2 2018-Q3 2018-Q4 2014 RTKs 4.8% 2015 RTKs 1.9% 2016 RTKs 3.6% Sources: Oxford Economics, IATA, A4A, Boeing
Demand lifting prices amid supply restraint; longer term supply to limit price rise 160 Crude Oil Forecast Comparison 140 120 Constant 2016 US Dollars 100 80 60 40 20 0 2000 2000 2001 2002 2002 2003 2004 2004 2005 2006 2006 2007 2008 2008 2009 2010 2010 2011 2012 2012 2013 2014 2014 2015 2016 2016 2017 2018 2018 2019 2020 2020 2021 2022 2022 2023 2024 2024 IHS, historical IHS PIRA OXE BCA Market Analysis with data from IHS Markit, PIRA, Oxford Economics
Air cargo demand exceeding capacity growth Year-over-year RTK (traffic) and AFTK (capacity) growth 12% 11.0%11.1% Traffic growth 10% 9.3% 8.1% 8% 6.7% 6.1% 6% 4.1% 4.4% 4% 2% 5.1% 4.9% 4.9% 3.7% 3.3% 2.7% 1.3% 0.9% 1.2% 0.9% 0% -2% -1.1%-1.4% -1.6% -2.3% -3.1% -4% 1Q12 3Q12 Source: IATA Carrier Tracker 1Q13-2.3% 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Air cargo traffic resurgent, forecast for solid growth Large freighter utilization high and stable Parked freighter fleet shrinking 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Air cargo traffic growth in % Forecast 20 year growth 4.2% Forecast 2015 2016 2017 2018F 2019F 2020F 747-400F/ERF 747-8F 777F 767F/BCF/SF In service: Available: 150 6 75 0 138 0 257 0 Source: BCA Market Analysis with data from IATA, A4A, www.bts.gov, Ascend
Source: WorldACD Source: http://www.worldacd.com/uploads/files/180131%20-%20worldacd%20air%20cargo%20market%20data.pdf
Traffic changes (FTKs) from 2016 to 2017 240 32% 235 230 31% 9.0% FTKs (billions) 225 220 215 2% 5% 12% 18% 210 205 200 2016 Total Latin America Africa Middle East North America Europe Asia Pacific 2017 Total SOURCE:BCA Market Analysis with data from IATA December 2017
Forecasted to grow 15% per year through 2019 4.0 3.5 3.0 2.5 $30 $25 $20 $15 $10 $5 $0 USD (billions) Retail E-Commerce Sales Worldwide, USD (trillions) 17.8 14.3 9 5.8 6.6 3.06 0.14 1.0 0.82 1.3 2.0 2.3 3.1 3.5 2.0 2010 2011 2012 2013 2014 2015 2016 2017 Singles Day Black Friday Cyber Monday 25.3 $3.0 $2.5 $3.6 30% 25% 20% 2.0 $1.7 $2.0 15% 1.5 1.0 0.5 $1.3 6.3% 7.4% 8.6% 9.9% 11.4% 12.8% 10% 5% 0.0 2014 2015 2016E 2017F 2018F 2019F 0% Retail e-commerce sales % of total retail sales China online retail sales is the world s largest e-commerce market (2X US growth rate) Source: EMarketer
Freighters are critical to compete in air cargo markets Airlines operating freighters generate 90% of industry revenues 2016 All Cargo 10% Passenger Belly Only 10% Express Carriers Combination Carriers $33.7B $30.6B Express Carrier 42% All Cargo $8.5B Combination Carrier 38% Passenger Belly Only TOTAL $8.0B $80.8B Airlines operating freighters Sources: FlightGlobal, U.S. DOT F41, airline reports, and Boeing estimates (2016 data)
1% of world trade TONNAGE is carried by Air Cargo 35% of world trade VALUE is carried by Air Cargo 0% 50% 100% Note: Does not include trans-border tonnage that was transported by truck, rail or fixed installations such as pipelines or conveyors Source: IATA COPYRIGHT 2016 THE BOEING COMPANY
2016 Rank Airline 2016 Millions of RTKs YoY % Change Business model 1 Federal Express 15,712-0.6% Express carrier 2 Emirates 12,270 0.9% Pax belly with freighters 3 UPS Airlines 11,263 3.9% Express carrier 4 Cathay Pacific Airways 9,947 0.1% Pax belly with freighters 5 Qatar Airways 9,221 20.4% Pax belly with freighters 6 Korean Air 7,666-1.2% Pax belly with freighters 7 Lufthansa 7,384 7.2% Pax belly with freighters 8 Cargolux 6,878 9.0% Freighter only operator 9 Singapore Airlines 6,345 4.3% Pax belly with freighters 10 Air China 6,089 6.5% Pax belly with freighters 11 China Southern Airlines 5,536 3.4% Pax belly with freighters 12 China Airlines 5,273-1.3% Pax belly with freighters 13 AirBridgeCargo 4,914 18.8% Freighter only operator 14 China Eastern Airlines 4,561 0.4% Pax belly with freighters 15 Etihad Airways 4,481 1.8% Pax belly with freighters 16 All Nippon Airways 4,315 12.4% Pax belly with freighters 17 Polar Air Cargo 4,211 0.6% Freighter only operator 18 British Airways 4,117 1.5% Pax belly with freighters 19 Asiana Airlines 3,813 6.1% Pax belly with freighters 20 Turkish Airlines 3,640 42.2% Pax belly with freighters 21 KLM 3,564-0.1% Pax belly with freighters 22 United Airlines 3,534 10.2% Belly only 23 EVA Air 3,480-2.7% Pax belly with freighters 24 Air France 3,417 0.0% Pax belly with freighters 25 American Airlines 3,168 4.0% Belly only 26 Nippon Cargo Airlines 2,899-1.4% Freighter only operator 27 Delta Air Lines 2,577-9.0% Belly only 28 Japan Airlines 2,142 1.0% Belly only 29 Thai Airways 2,123 2.0% Belly only 30 Qantas Airways 1,889 0.0% Pax belly with freighters Source: IATA World Air Transport Statistics (WATS), Boeing Top 30 scheduled airlines 166,428 72% share of total traffic Total world air cargo traffic 231,466
2016 to 2036 World economy (GDP) 2.8% Airline traffic (RPK) 4.7% Cargo traffic (RTK) 4.2%
RTKs in billions Asia North America Europe-Asia Intra-Asia North America Europe North America Domestic China Europe-Latin America Latin America North America Africa-Europe South Asia Europe Middle East Europe CIS Intra-Europe 2015 RTKs 2016-2035 RTKs 5.5% 2.2% 2.4% 6.2% 3.8% 4.3% 3.8% 5.0% 3.9% 3.0% 2.2% Annual growth % 4.6% 4.6% - 30 60 90 120 150
Passenger airplane fleet only 24,000 Passenger fleet units 20,000 16,000 1,553 1,673 1,583 2,056 1,810 1,863 2,241 2,478 12,000 8,000 1,428 1,568 1,483 9,570 11,415 14,98215,706 14,136 8,714 4,000 0 1,929 2,923 2,820 2,609 2,597 2,540 2000 2005 2010 2015 Regional jet Single aisle Small twin aisle Medium/large twin aisle Source: Ascend, Boeing CMO
Freighter airplane fleet only 2,000 Freighter fleet units 1,600 1,200 800 309 555 435 639 517 583 547 583 551 555 599 624 400 1035 807 602 641 664 697 0 2000 2005 2010 2015 Source: Ascend, Boeing CMO Large Medium widebody Standard body
70 Percentage of world RTKs carried on freighters 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2035* Sources: IATA, ICAO, company reports, Boeing research * Forecast
Total air cargo traffic carried by freighters by percentage ~80% ~75% ~40%
100% Share of fleet Delivery units 80% 60% 40% 20% 0% 2016 Freighters 1,810 2036 Freighters 3,030 Large production >80 tonnes Wide-body conversions 40-120 tonnes Medium wide-body production 40-80 tonnes Standard-body conversions <45 tonnes 460 490 2,480 430 2017 to 2036 Freighters 1,100
Revenue payload tonnes (1,000-lb) 747-8F 150 (331) Large Freighters More than 80 tonnes of payload 777F 777-200ER BCF* 767-300F 767-300BCF 757-200SF 737-800BCF 737-400SF 737-300SF 737-700C 100 (220) 50 (110) 0 Medium Wide-body Freighters 40-80 tonnes of payload Standard-body Freighters Less than 45 tonnes of payload * Product Development Study
Boeing Market Analysis products Available online for all Yearly publication 20 year passenger market forecast Biennial publication 20 year cargo market forecast
World air cargo traffic rebounding strongly with trade and industrial production World air cargo traffic forecast to grow 4.2% per year through 2036 Pax capacity vital, but the majority of air cargo traffic will remain on freighters The world freighter fleet will expand to 3030 airplanes over the next 20 years
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