CURRENT MARKET OUTLOOK Randy Tinseth Vice President, Marketing Boeing Commercial Airplanes July 2010 BOEING is a trademark of Boeing Management Company. Copyright 2010 Boeing. All rights reserved. The statements contained herein are based on good faith assumptions and provided for general information purposes only. These statements do not constitute an offer, promise, warranty or guarantee of performance. Actual results may vary depending on certain events or conditions. This document should not be used or relied upon for any purpose other than that intended by Boeing.
Agenda Current Market Outlook (CMO) Market trends and realities 20-year forecast
Long-term forecast reflects today s market realities Boeing has publicly issued its Current Market Outlook for more than 40 years. During that time, the Outlook has reflected both sizeable upturns and downturns. Our industry has faced significant market challenges, including the Asian Financial Crisis, SARS, terrorist acts, three major world recessions, two Gulf wars.all clearly with their own dynamics and their own impact on global air travel. What we have learned is that our industry, which is based on the need to transport passengers and freight via our global aviation system, is extremely resilient. Based on that perspective, as we always do, we have developed the forecast in a manner that considers today s market environment but, just as importantly, takes a long-term view of the market and the fundamentals that drive commercial aviation. These drivers include economic growth, world trade, market liberalization, new aircraft capabilities, etc. So, while acknowledging our near-term challenges, let s take a longerview look. Over the next 20-years, the basic factors underlying new airplane demand are strong.
Boeing Current Market Outlook Published since 1964 All jets 30 seats and above No turbo props No business jets Scheduled and nonscheduled flying Freighters
Entirely web-based CMO http://www.boeing.com/commercial/cmo/ Real-time Interactive Downloadable Popular (last 12 months) Visits: 710,122 Downloads: 259,971
Boeing product forecast in-line with the realities of the market 100% Large 5% Large 3% Twin-aisle 21% Twin-aisle 21% 75% Size category Large Twin-aisle Single-aisle Regional jet 50% Single-aisle 55% Single-aisle 62% 25% 0% Regional Jet 19% Boeing forecast 2000 2019 22,315 units Regional Jet 14% Airplane demand 2000 Present* 17,796 units *Deliveries 2000 thru May 14, 2010 plus backlog
Different view of the market has led to different strategies 100% Large 2% Large 4% A380 9% Twin-aisle 23% Twin-aisle 25% 75% Twin-aisle 35% Size category A380 Large Twin-aisle Single-aisle 50% Single-aisle 75% Single-aisle 71% 25% Single-aisle 55% 0% Airplane demand 2000 Present* 14,698 units Boeing forecast 2000 2019 17,318 units Airbus forecast 2000 2019 14,661 units * Deliveries 2000 thru May 14, 2010 plus backlog (passenger jets only, excluding RJs)
Agenda Current Market Outlook (CMO) Market trends and realities 20-year forecast
Single-aisle* demand exceeding expectations 10-year forecast, 2000-2009 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Growth driven by: Low Cost Carriers Emerging markets Replacement demand 0 Boeing forecast 5,228 Airbus forecast** 4,726 Airplane deliveries 6,084 *Single-aisle defined as all single-aisle aircraft >90 seats ** Airbus forecast estimated by Boeing from GMF
Air travel becoming more diverse geographically Air traffic, RPKs (billions) 14,000 12,000 10,000 Other Middle East China 8,000 6,000 4,000 Asia (excl. China) Europe 45% 2,000 0 1990 72% 58% 2009 2029 North America
Emerging business models are growing and gaining market share Air traffic, RPKs (billions) 14,000 12,000 10,000 38% Emerging business models 8,000 6,000 4,000 25% 62% Network & other 2,000 14% 86% 75% 0 1990 2009 2029 *Emerging business models include LCCs, 6 th Freedom Gulf carriers and Chinese carriers
Passengers wanting and getting more frequencies and nonstop service 1.5 Index 2000=1.00 World 1.4 1.3 1.2 Nonstop Markets Air Travel Growth Frequency Growth 1.1 1.0 0.9 Average Airplane Size 0.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 All routes August OAG
Long-range twins dominating as airlines meet the demands of their customers 2,200 2,000 1,800 1,600 1,400 1,200 1000 800 600 400 200 0 2000-2009 Deliveries 8:1 2,200 2,000 1,800 1,600 1,400 1,200 1,000 0 Twin-aisles Large Twin-aisles Large 800 600 400 200 Year-end 2009 Backlog 7:1 All jets
Volatile fuel prices impacting the industry Spot $/Barrel (Brent Crude Oil / Rotterdam Jet Fuel) 180 160 140 120 100 80 60 40 20 Average annual prices 2000 2001 2002 $29 $24 $25 2003 $29 2004 $38 2005 $55 2006 $65 2007 $72 2008 $97 2009 $62 Jet Fuel Crude Oil 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ended economic viability of small regional jets Forced airlines to Accelerate fleet renewal Improve non-fuel cost management Streamline fleet operations Encouraging development of alternative fuel sources Historical data source: EIA
Market trends and realities summary Single-aisle airplane demand stronger and more resilient than expected Emerging markets and business models creating a more diverse and balanced marketplace Passengers getting what they want-- more frequencies and nonstop service-- spurring strong demand for long-range twins Rising and volatile fuel prices will continue to change our industry
Agenda Current Market Outlook (CMO) Market trends and realities 20-year forecast
Market forecast drivers and considerations Traffic forecast Annual growth, 2009-2028 Network development WORLD 4.9 Northeast Asia Europe 4.3 4.1 North America 3.2 Oceania 5.1 Central America 5.6 South America 7.0 Middle East 6.6 CIS 5.1 Southeast Asia 6.6 Africa 5.8 Southwest Asia China 7.5 7.8 Economic growth 0 2 4 6 8 Percentage Market liberalization Airplane capabilities Fuel price Infrastructure Environment $70-90/barrel High speed rail Airline strategies & business models
World air travel has grown 5% per year since 1977 6.0 5.0 Trend 4.0 3.0 2.0 1.0 0.0 2006 2007 2008 2009 2010F 1977 1978 1979 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 RPKs (trillions) RPKs = Revenue Passenger Kilometers Sources: ICAO Scheduled Traffic
20-year forecast: strong long-term growth World economy (GDP) Airplane fleet Number of airline passengers Airline traffic (RPK) Cargo traffic (RTK) 2009 to 2029 3.2% 3.3% 4.2% 4.9% 5.3% 5.4% 5.9% 20-year traffic growth rates are higher than last year's forecast because they are calculated off a lower base year
Air travel growth has been met by increased frequencies and nonstops 3.0 Index 1988=1.00 World 2.5 2.0 Air Travel Growth Frequency Growth Nonstop Markets 1.5 1.0 Average Airplane Size 0.5 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 All routes August OAG
Airlines will need 30,900 new airplanes valued at $3.6 trillion Airplane deliveries: 30,900 2010-2029 25,000 Market value: $3.6T 2010-2029 1,800 Airplane units 20,000 1,600 15,000 10,000 5,000 Market value, $ billions 1,200 800 400 0 1,920 regional jets 6% 21,160 single-aisle 69% 7,100 twin-aisle 23% 720 large 2% 0 $60B regional jets 2% $1,680B single-aisle 47% $1,630B twin-aisle 45% $220B large 6%
Older, less efficient airplanes will be replaced with more efficient, newer generation airplanes Units 40,000 36,300 30,000 20,000 18,890 10,000 17,410 Growth 56% 13,490 Replacement 44% 30,900 0 2009 5,400 Retained fleet 2029
World fleet will nearly double by 2029 19% 2009 4% 16% 18,890 airplanes 61% 20% 2019 3% 10% 27,060 airplanes 67% 23% 2029 3% 6% 36,300 airplanes 68% Large Twin-aisle Single-aisle Regional jet
Emerging markets are driving the economic growth Annual GDP growth 2010 2029 China South Asia Asia Pacific Africa Southeast Asia 4.3 Middle East Latin America 4.0 4.0 4.4 4.6 6.1 7.3 CIS World 3.3 3.2 Oceania 2.7 North America 2.7 Europe Northeast Asia 1.4 1.9 Source: Global Insight
Air travel growth varies by market Asia Pacific* 2009 traffic Added traffic 2010-2029 Annual growth% 7.1% Within North America 2.8% Within Europe 4.1% Within China 7.9% Europe Asia Pacific 5.6% North Atlantic Middle East Asia Pacific Transpacific Within Latin America 7.5% 4.8% 7.1% 4.3% World Average Growth: 5.3% North America Latin America 5.3% Europe Latin America 4.6% Africa Europe 4.6% Within/to CIS 4.8% *includes within China 0 500 1,000 1,500 2,000 2,500 3,000 3,500 RPKs, billions
Market for new airplanes set to become considerably more geographically balanced New airplane deliveries by region Market value by region 2010 2029 2010 2029 Region Airplanes 3% 2% 7% Region $B 3% 6% 2% Asia Pacific 10,320 Asia Pacific 1,320 8% North America 7,200 34% North America 700 11% Europe 7,190 Europe 800 Middle East 2,340 30,900 Middle East 390 $3.6T Latin America 2,180 Latin America 210 C.I.S. 960 23% C.I.S. 90 22% Africa 710 Africa 80 23% World Total 30,900 World Total $3,590B 19% 37%
Integrated top-down/bottom-up freighter fleet forecast methodology World Air Cargo Forecast Projected traffic Total cargo lift Demand minus Current Market Outlook Passenger and combi airplane forecast Lower-hold lift Supply equals Freighter airplane requirement Needed freighter lift Supply
Future freighter deliveries will be led by demand for large widebodies New freighter deliveries: 740 2010 2029 Market value: $180 billion 2010 2029 600 500 70% 150 125 77% Airplane units 400 300 200 29% Market value 100 75 50 23% 100 0 520 Large More than 80 tonnes 210 Medium 40 to 80 tonnes 1% 10 Standard Less than 45 tonnes 25 0 $140B Large More than 80 tonnes $40B Medium 40 to 80 tonnes <1% $1B Standard Less than 45 tonnes
Future freight 740 new and 1,750 converted Market value: $180 billion 520 Size category Large More than 80 tonnes 250 Medium 40 to 80 tonnes Standard Less than 45 tonnes 2009 Freighters 1,750 2029 Freighters 2,980 1,040 10 2010 to 2029 freighters 2,490 430 210
European airlines business model shifts ASKs 2000 17% 2009 14% 2019 22% 3% 16% 59% 15% 14% 54% 20% 18% 48% LCC Charter/IT Broad Network Other Networks Source: Boeing CMOs
Europe air traffic growth varies by market Within Europe 2009 traffic Added traffic 2010-2029 Annual growth % 4.1% To and from North America 4.3% To and from Middle East To and from Africa To and from Southeast Asia To and from China To and from South America To and from South Asia To and from Central America To and from Northeast Asia 6.0% 4.6% 5.5% 6.0% 5.0% 7.1% 4.1% 3.7% Europe Average Growth: 4.4% Region s Average GDP Growth: 1.9% 0 200 400 600 800 1,000 1,200 1,400 1,600 RPKs, billions
European airlines will need 7,190 new airplanes Market value: $800 billion Size category Large Twin-aisle Single-aisle Regional jet Share of fleet Delivery units 2% 4% 19% 2009 Airplanes 4,300 2029 Airplanes 7,460 2010 to 2029 New airplanes 7,190 75%
A large demand for replacing older, lessefficient aircraft Units 8,000 7,460 6,000 3,160 Growth 44% 4,300 4,000 7,190 2,000 4,030 Replacement 56% 0 270 Retained fleet 2009 2029
European airlines environmental strategy means more new airplanes 100% Share of fleet 96% New airplanes 75% 50% Better for: Environment Passengers Airlines 25% 0% 2029 Airplane fleet 7,460 4% Remaining airplanes
Europe forecast vs. backlog 7,190 New Airplane Deliveries 2010 to 2029 6,000 4,800 3,600 2,400 1,200 1,314 Airplane Backlog 2010 1,000 0 310 Regional jets 4% 5,380 Single-aisle 75% 1,340 Twin-aisle 19% 160 Large 2% 1 2 3 4 750 500 250 0 26 Regional jets 2% 955 Single-aisle 73% 258 Twin-aisle 19% 75 Large 6% Source: Forecast CMO 2010 Backlog Airclaims 5/10
Market-driving products and services Full market coverage from 100-500 seats Environmentally progressive Operational commonality Long-range, fast, reliable Low operating cost Standardization Passenger experience Lifecycle solutions
Substantial, balanced backlog validates Boeing s product strategy 300 250 200 $ = Billions 174 255 Backlog $ 279 250 250 777 Twin- Aisle 60% 787 Model 747 Large 8% Single- Aisle 32% 737 767 150 Region 10 0 50 ME, Central & S. Asia Leasing & Gov't North America L. America & Africa Asia Pacific 0 2006 2007 2008 2009 1Q 2010 Russia Europe China, East & SE Asia
Unmet demand provides tremendous opportunity for the future 777 747 RJ 2% Large 6% 777 747 Large 5% RJ 2% 787 Twinaisle 45% Forecast $3.6T Singleaisle 47% 737 787 Twinaisle 44% Unsold $2.6T Singleaisle 49% 737 767 (by $ value) 767
World forecast vs. backlog 30,900 New Airplane Deliveries 2010 to 2029 25,000 20,000 15,000 10,000 7,327 Airplane Backlog 5,000 2010 5,000 Including unplaced lease content 0 1,920 Regional jets 6% 21,160 Single-aisle 69% 7,100 Twin-aisle 23% 720 Large 2% 3 4 4,000 3,000 2,000 1,000 0 378 Regional jets 5% 4,572 Single-aisle 63% 2,073 Twin-aisle 28% 304 Large 4% Source: Forecast CMO 2010 Backlog Airclaims 6/10
Things to remember Boeing CMO: long-term forecast reflecting realities of today s market Shapes our product strategy Supports our long-range business plan Provides valuable data in our airline planning process Aviation industry resilient; long-term market outlook is strong Passenger air travel will grow at 5.3%, cargo at 5.9% Airlines will need 30,900 new airplanes valued at $3.6 trillion, European airlines will need 7,190 airplanes valued at $800 billion Boeing s market-driving products and services are ideally matched to the market today and in the future
Things to remember Boeing CMO: long-term forecast reflecting realities of today s market Shapes our product strategy Supports our long-range business plan Provides valuable data in our airline planning process Aviation industry resilient; long-term market outlook is strong Passenger air travel will grow at 5.3%, cargo at 5.9% Airlines will need 30,900 new airplanes valued at $3.6 trillion Boeing s market-driving products and services are ideally matched to the market today and in the future
There are 52 weeks in a year 450 400 Airshow announcements 1,261 to 477 Airbus Boeing 1,600 1,400 Actual year-end net orders 4,234 to 4,263 Airbus Boeing 350 1,200 300 1,000 250 200 800 150 600 100 400 50 200 0 2005 Paris 2006 Farnborough 2007 Paris 2008 Farnborough 2009 Paris 0 2005 2006 2007 2008 2009 Net orders at the end of the year are what count
For more information, please visit our CMO website: http://www.boeing.com/cmo You can also visit my blog, Randy s Journal: http://boeingblogs.com/randy/ BOEING is a trademark of Boeing Management Company. Copyright 2009 Boeing. All rights reserved.