Market Environment
Market Environment Kostya Zolotusky Managing Director, Capital Markets Development
BOEING CAPITAL CORPORATION
20-Year Forecast: Strong Long-Term Growth RPKs (trillions)
14 Historical Future
12 10 8 6
Long-Term Growth
4
2009 - 2028 GDP = 3.1% Passenger = 4.9% Cargo = 5.4%
2 0 1970
1980
1990
2000
2010
2020
2
Airlines Will Need 29,000 New Airplanes Valued at $3.2 Trillion Airplane Deliveries: 29,000
Market Value: $3.2T
2009 - 2028
2009 - 2028
19,460
$1,510B
1,600
15,000 10,000 6,700 5,000 2,100
740
Market value, $ billions
Airplane units
20,000
$1,420B
1,200 800 400
$220B $70B
0
0 Regional jets Single-aisle 7% 67%
Twin-aisle 23%
Large 3%
Regional jets 2%
Single-aisle 44%
Twin-aisle 47%
Large 7%
3
New Aircraft Requirements (by 2028) Russia/Central Asia 1,050 aircraft $90B Europe 6,900 aircraft $800B
North America 7,690 aircraft $680B
Asia-Pacific 8,960 aircraft $1,130B
Latin America 1,640 aircraft $150B
Africa 620 aircraft $70B
Middle East 1,710 aircraft $300B
4
Air Travel Growth Varies by Market Added traffic 2009-2028
2008 traffic
Annual growth%
6.9%
Asia Pacific*
2.5%
Within North America
3.4%
Within Europe
8.6%
Within China
4.6%
North Atlantic
5.5%
Europe – Asia Pacific
4.9%
Transpacific North America – Latin America
4.7%
Within Latin America
6.4%
Europe – Latin America
4.3%
Within/to Russia & Central Asia
5.3%
Africa – Europe
5.4%
Middle East – Asia Pacific
6.3%
0 *includes within China
World Average Growth: 4.9%
500
1,000
1,500 2,000 RPKs, billions
2,500
3,000
3,500
5
Growth in middle classes spurs growth in air travel GDP/Capita and Seats/Capita annual growth rates for emerging countries – 1999-2009
20% 18%
GDP(PPP)
Average Annual Growth Rate
Seats 16% 14% 12% 10% 8% 6% World Average Seats
4% 2%
World Average GDP (PPP)
0% China
Egypt
Indonesia
India
Malaysia
Poland
Turkey
Ukraine
Vietnam
Source: GDP – Global Insight, Scheduled seats – OAG, BCA Market Analysis
6
Air travel growth has been met by increased frequencies and nonstops World Index 1988=1.00 3.0
2.5
Air Travel Growth
2.0
Frequency Growth Nonstop Markets
1.5
1.0
Average Airplane Size
09 20
07 20
05 20
03 20
01 20
99 19
97 19
95 19
93 19
91 19
19
August OAG
89
0.5 All routes
7
Uneven Global Recovery Underway 140 135 Asia-ex Japan
130 125
Middle East
120 115
LatAm World
110
US
105
EU Japan
100 95 90 2008
2009
2010
2011
2012
2013
Source: Global Insight (March 2010 Interim Forecast, world = chain-wtd)
World Worldgrowth growthover over2008 2008in in2010; 2010;EU, EU,Japan Japanrecovery recoverylagging lagging 8
Traffic Expected to Return to 2008 Levels in 2010 Passenger / Cargo Traffic Growth Forecast 1.3
Index: 2008 = 1 1.2
Passenger 1.1
Cargo 1
0.9
0.8 2008
2009
2010
2011
2012
2013
Oct09 Pax Fcst RPK (derived from ASK demand forecast) Jun09 Cargo Fcst (unchanged)
9
Premium Revenues Bottoming, Long Recovery Ahead Passenger traffic growth by ticket type
Source: IATA, March 2010 (data through January 2010)
Both premium and economy travel rose 6% in January Premium travel still 16% below early 2008 peaks; economy travel just 3% below its previous peak Fares also recovering, up 10% from mid-2009 lows Far East and South America showing the strongest upturns in premium travel Pacific and North Atlantic markets seeing some premium upturn, but are generally sluggish
10
IATA Premium Traffic January 2010 Compared to January 2009 5.3% 3.5% -7.0%
3.3%
9.7%
12.2%
15.5%
5.0%
1.8% 1.3% 25.2%
16.6% 19.0% Source: IATA – BCA Analysis
11
World Air Cargo Grew 22% in Feb 2010 Relative to Traffic Levels of Feb 2009 Year To Date Air Cargo Growth by Regional Market
18.1% 2.9% 9.9%
11.6% 18.6%
43.8%
25.2%
5.2%
30.5%
10.9%
Sources: U.S. Department of Commerce, AAPA, AEA, ATA, and the Boeing World Cargo Forecast.
World YTD YoY Comparison 2/2010 vs. 2/2009: +22.1%
12
Capacity Growth is Beginning to Recover: Single-aisle Leading Twin-aisle YoY Growth (million ASKs, weekly)
6,000
6%
4,000
4%
2,000
2%
0
0%
-2,000
-2%
-4,000
-4%
-6,000
-6%
2008 Q3 Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
2008 Q4
2009 Q1
Single Aisle
2009 Q2 Twin Aisle
2009 Q3
2009 Q4
2010 Q1
Total % change
13
Emerging Markets Driving Growth in Single-aisle Capacity YoY Growth (million ASKs, weekly)
6,000
9%
4,000
6%
2,000
3%
0
0%
-2,000
-3%
-4,000
-6%
2008 Q3
2008 Q4
North America
2009 Q1 Europe
2009 Q2 Asia
2009 Q3
2009 Q4
Emerging Markets
2010 Q1
Total Net %
Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
14
Emerging Markets Driving Growth in Twinaisle Capacity YoY Growth (million ASKs, weekly) 2,000
4%
1,000
2%
0
0%
-1,000
-2%
-2,000
-4%
-3,000
-6%
2008 Q3
2008 Q4
North America
2009 Q1 Europe
2009 Q2 Asia
2009 Q3
2009 Q4
Emerging Markets
2010 Q1
Net % Chg
Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
15
Passenger Fleet Utilization is 5% To 7% Above 2003 Levels Flight Hours Per Day (12-month moving average)
Single Aisle
Twin Aisle
8.6
12.0
8.4
11.5
8.2
Passenger
11.0
8.0 10.5 7.8 10.0
7.6
Freighter
9.5
7.4 7.2
9.0
7.0
8.5
2003
2004
2005
2006
2007
2008
Source: BCA RM&T Fleet Reliability Statistics
2009
2003
2004
2005
2006
2007
2008
2009
Updated on: 1/26/2010
Single ding Singleaisle aislestabilizing, stabilizing,twin twinaisle aisledeclining, declining,freighter freighterreboun rebounding 16
Supranational Carriers and the International Franchise Concept Airline groups that transcend national origin and borders (ownership not always required)
TACA – Peru TACA – El Salvador TACA – Honduras LACSA NICA Aviateca Air Arabia – UAE Air Arabia - Maroc Air Arabia - Egypt Thailand
LAN ARGENTINA
Indonesia
17
LCC Business Model Origin 1990: U.S. LCCs growing/emerging in E.U.
Source: Aug 1990 OAG
18
LCC Business Model Repeated Worldwide Today LCCs operating in most regions Europe Flights/week: 27,600 Miles/flight: 680
North America Flights/week: 37,800 Miles/flight: 770
Asia Flights/week: Miles/flight:
8,300 700
Middle East & Africa Flights/week: 2,400 Miles/flight: 910
South America Flights/week: 5,900 Miles/flight: 550
Oceania Flights/week: Miles/flight:
6,000 760 Source: Aug 2009 OAG and estimates
19
LCC penetration rates in many regions still low LCC Market Share - Measured in Weekly Seats
Africa
10%
Asia
10%
South America
27%
30%
US
Europe
32%
Canada
42%
0%
10%
20%
30%
40%
50%
*Asia includes: India, Ocean, SE Asia, Japan, Korea and China 20
20
Transforming Europe European Domiciled Airlines 100
ASK Share
75
68% 83% 50
87% 1/3 BA 1/3 AFA+KLM 1/3 Lufthansa
37% AFA+KLM 30% Lufthansa 33% BA+IBE
37% AFA+KLM 32% Lufthansa 30% BA+IBE
Network Leisure LCC
17%
25
13% 0 1999
11% 6%
15%
2005
2009
21
Gulf Sixth Freedom Service
22
Metamorphosis of Latin American Fleet # Airplanes in Latin America’s Fleet 1200 1000
15%
Older Generation
85%
Newer Generation
800 600
52%
400 200
48%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Airclaims, Jets, in-service passenger and cargo airplanes with >90 seats or equivalent in commercial service as of Jan 1 of each year
23
Older, less efficient airplanes will be replaced with more efficient, newer generation airplanes 40,000
35,600
30,000
16,800 Growth 58% Units
29,000
20,000
18,800
10,000
12,200 Replacement 42%
6,600 Retained Fleet 0 2008
2028
24
Environment
Pioneering Technology
Manufacturing
Operational Efficiency
Public Policy
25
Outlook for Industry CO2 Emissions
CO2 Emissions
Key drivers of emissions reductions
io uct d e r w/o
n
res asu e m
m elop dev
Using less fuel Efficient airplanes Operational efficiency
ent
y ol og n h / tec wal ons i e n s t re mis n ts flee de g veme e n o i t r p o s m i g On eca n ts / estme For v n i ATM w gro
th
Changing the fuel Sustainable biofuels
Low carbon fuels
Baseline
Carbon Neutral Timeline
2050
Presented to ICAO GIACC/3 February 2009 by Paul Steele on behalf of ACI, CANSO, IATA and ICCAIA
Low Lowcarbon carbonfuels fuelsaakey keypart partof ofemissions emissionsreduction reduction 26
Substantial, balanced backlog validates Boeing’s product strategy Model 747
Backlog, $B
Large 7%
777
279
300 255
150
TwinAisle 60%
767
787
174
Region
124
100
Leasing & Gov't ME, Central & S. Asia Russia
50 0
Europe
2005
737
250
250 200
SingleAisle 33%
2006
2007
2008
2009
North America
L. America & Africa Asia Pacific
China, East & SE Asia
27
Cycle drivers are changing
Geographic Balance
map or globe
Airline Business Model Balance
Replacement Requirements
28
How do you feel about the future of aviation business environment?
1.
Very optimistic
2.
Fairly optimistic
3.
Neutral
4.
Fairly pessimistic
5.
Very pessimistic
68%
20% 6% 1
5% 2
3
4
1% 5
29
Airline Customers
Capital Providers
Boeing
Opinion & Policy Makers
30
BOEING CAPITAL CORPORATION
20-Year Forecast: Strong Long-Term Growth RPKs (trillions)
14 Historical Future
12 10 8 6
Long-Term Growth
4
2009 - 2028 GDP = 3.1% Passenger = 4.9% Cargo = 5.4%
2 0 1970
1980
1990
2000
2010
2020
2
Airlines Will Need 29,000 New Airplanes Valued at $3.2 Trillion Airplane Deliveries: 29,000
Market Value: $3.2T
2009 - 2028
2009 - 2028
19,460
$1,510B
1,600
15,000 10,000 6,700 5,000 2,100
740
Market value, $ billions
Airplane units
20,000
$1,420B
1,200 800 400
$220B $70B
0
0 Regional jets Single-aisle 7% 67%
Twin-aisle 23%
Large 3%
Regional jets 2%
Single-aisle 44%
Twin-aisle 47%
Large 7%
3
New Aircraft Requirements (by 2028) Russia/Central Asia 1,050 aircraft $90B Europe 6,900 aircraft $800B
North America 7,690 aircraft $680B
Asia-Pacific 8,960 aircraft $1,130B
Latin America 1,640 aircraft $150B
Africa 620 aircraft $70B
Middle East 1,710 aircraft $300B
4
Air Travel Growth Varies by Market Added traffic 2009-2028
2008 traffic
Annual growth%
6.9%
Asia Pacific*
2.5%
Within North America
3.4%
Within Europe
8.6%
Within China
4.6%
North Atlantic
5.5%
Europe – Asia Pacific
4.9%
Transpacific North America – Latin America
4.7%
Within Latin America
6.4%
Europe – Latin America
4.3%
Within/to Russia & Central Asia
5.3%
Africa – Europe
5.4%
Middle East – Asia Pacific
6.3%
0 *includes within China
World Average Growth: 4.9%
500
1,000
1,500 2,000 RPKs, billions
2,500
3,000
3,500
5
Growth in middle classes spurs growth in air travel GDP/Capita and Seats/Capita annual growth rates for emerging countries – 1999-2009
20% 18%
GDP(PPP)
Average Annual Growth Rate
Seats 16% 14% 12% 10% 8% 6% World Average Seats
4% 2%
World Average GDP (PPP)
0% China
Egypt
Indonesia
India
Malaysia
Poland
Turkey
Ukraine
Vietnam
Source: GDP – Global Insight, Scheduled seats – OAG, BCA Market Analysis
6
Air travel growth has been met by increased frequencies and nonstops World Index 1988=1.00 3.0
2.5
Air Travel Growth
2.0
Frequency Growth Nonstop Markets
1.5
1.0
Average Airplane Size
09 20
07 20
05 20
03 20
01 20
99 19
97 19
95 19
93 19
91 19
19
August OAG
89
0.5 All routes
7
Uneven Global Recovery Underway 140 135 Asia-ex Japan
130 125
Middle East
120 115
LatAm World
110
US
105
EU Japan
100 95 90 2008
2009
2010
2011
2012
2013
Source: Global Insight (March 2010 Interim Forecast, world = chain-wtd)
World Worldgrowth growthover over2008 2008in in2010; 2010;EU, EU,Japan Japanrecovery recoverylagging lagging 8
Traffic Expected to Return to 2008 Levels in 2010 Passenger / Cargo Traffic Growth Forecast 1.3
Index: 2008 = 1 1.2
Passenger 1.1
Cargo 1
0.9
0.8 2008
2009
2010
2011
2012
2013
Oct09 Pax Fcst RPK (derived from ASK demand forecast) Jun09 Cargo Fcst (unchanged)
9
Premium Revenues Bottoming, Long Recovery Ahead Passenger traffic growth by ticket type
Source: IATA, March 2010 (data through January 2010)
Both premium and economy travel rose 6% in January Premium travel still 16% below early 2008 peaks; economy travel just 3% below its previous peak Fares also recovering, up 10% from mid-2009 lows Far East and South America showing the strongest upturns in premium travel Pacific and North Atlantic markets seeing some premium upturn, but are generally sluggish
10
IATA Premium Traffic January 2010 Compared to January 2009 5.3% 3.5% -7.0%
3.3%
9.7%
12.2%
15.5%
5.0%
1.8% 1.3% 25.2%
16.6% 19.0% Source: IATA – BCA Analysis
11
World Air Cargo Grew 22% in Feb 2010 Relative to Traffic Levels of Feb 2009 Year To Date Air Cargo Growth by Regional Market
18.1% 2.9% 9.9%
11.6% 18.6%
43.8%
25.2%
5.2%
30.5%
10.9%
Sources: U.S. Department of Commerce, AAPA, AEA, ATA, and the Boeing World Cargo Forecast.
World YTD YoY Comparison 2/2010 vs. 2/2009: +22.1%
12
Capacity Growth is Beginning to Recover: Single-aisle Leading Twin-aisle YoY Growth (million ASKs, weekly)
6,000
6%
4,000
4%
2,000
2%
0
0%
-2,000
-2%
-4,000
-4%
-6,000
-6%
2008 Q3 Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
2008 Q4
2009 Q1
Single Aisle
2009 Q2 Twin Aisle
2009 Q3
2009 Q4
2010 Q1
Total % change
13
Emerging Markets Driving Growth in Single-aisle Capacity YoY Growth (million ASKs, weekly)
6,000
9%
4,000
6%
2,000
3%
0
0%
-2,000
-3%
-4,000
-6%
2008 Q3
2008 Q4
North America
2009 Q1 Europe
2009 Q2 Asia
2009 Q3
2009 Q4
Emerging Markets
2010 Q1
Total Net %
Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
14
Emerging Markets Driving Growth in Twinaisle Capacity YoY Growth (million ASKs, weekly) 2,000
4%
1,000
2%
0
0%
-1,000
-2%
-2,000
-4%
-3,000
-6%
2008 Q3
2008 Q4
North America
2009 Q1 Europe
2009 Q2 Asia
2009 Q3
2009 Q4
Emerging Markets
2010 Q1
Net % Chg
Source: Innovata, 14 Jan 2010 database, commercial jets >=90 seats
15
Passenger Fleet Utilization is 5% To 7% Above 2003 Levels Flight Hours Per Day (12-month moving average)
Single Aisle
Twin Aisle
8.6
12.0
8.4
11.5
8.2
Passenger
11.0
8.0 10.5 7.8 10.0
7.6
Freighter
9.5
7.4 7.2
9.0
7.0
8.5
2003
2004
2005
2006
2007
2008
Source: BCA RM&T Fleet Reliability Statistics
2009
2003
2004
2005
2006
2007
2008
2009
Updated on: 1/26/2010
Single ding Singleaisle aislestabilizing, stabilizing,twin twinaisle aisledeclining, declining,freighter freighterreboun rebounding 16
Supranational Carriers and the International Franchise Concept Airline groups that transcend national origin and borders (ownership not always required)
TACA – Peru TACA – El Salvador TACA – Honduras LACSA NICA Aviateca Air Arabia – UAE Air Arabia - Maroc Air Arabia - Egypt Thailand
LAN ARGENTINA
Indonesia
17
LCC Business Model Origin 1990: U.S. LCCs growing/emerging in E.U.
Source: Aug 1990 OAG
18
LCC Business Model Repeated Worldwide Today LCCs operating in most regions Europe Flights/week: 27,600 Miles/flight: 680
North America Flights/week: 37,800 Miles/flight: 770
Asia Flights/week: Miles/flight:
8,300 700
Middle East & Africa Flights/week: 2,400 Miles/flight: 910
South America Flights/week: 5,900 Miles/flight: 550
Oceania Flights/week: Miles/flight:
6,000 760 Source: Aug 2009 OAG and estimates
19
LCC penetration rates in many regions still low LCC Market Share - Measured in Weekly Seats
Africa
10%
Asia
10%
South America
27%
30%
US
Europe
32%
Canada
42%
0%
10%
20%
30%
40%
50%
*Asia includes: India, Ocean, SE Asia, Japan, Korea and China 20
20
Transforming Europe European Domiciled Airlines 100
ASK Share
75
68% 83% 50
87% 1/3 BA 1/3 AFA+KLM 1/3 Lufthansa
37% AFA+KLM 30% Lufthansa 33% BA+IBE
37% AFA+KLM 32% Lufthansa 30% BA+IBE
Network Leisure LCC
17%
25
13% 0 1999
11% 6%
15%
2005
2009
21
Gulf Sixth Freedom Service
22
Metamorphosis of Latin American Fleet # Airplanes in Latin America’s Fleet 1200 1000
15%
Older Generation
85%
Newer Generation
800 600
52%
400 200
48%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Airclaims, Jets, in-service passenger and cargo airplanes with >90 seats or equivalent in commercial service as of Jan 1 of each year
23
Older, less efficient airplanes will be replaced with more efficient, newer generation airplanes 40,000
35,600
30,000
16,800 Growth 58% Units
29,000
20,000
18,800
10,000
12,200 Replacement 42%
6,600 Retained Fleet 0 2008
2028
24
Environment
Pioneering Technology
Manufacturing
Operational Efficiency
Public Policy
25
Outlook for Industry CO2 Emissions
CO2 Emissions
Key drivers of emissions reductions
io uct d e r w/o
n
res asu e m
m elop dev
Using less fuel Efficient airplanes Operational efficiency
ent
y ol og n h / tec wal ons i e n s t re mis n ts flee de g veme e n o i t r p o s m i g On eca n ts / estme For v n i ATM w gro
th
Changing the fuel Sustainable biofuels
Low carbon fuels
Baseline
Carbon Neutral Timeline
2050
Presented to ICAO GIACC/3 February 2009 by Paul Steele on behalf of ACI, CANSO, IATA and ICCAIA
Low Lowcarbon carbonfuels fuelsaakey keypart partof ofemissions emissionsreduction reduction 26
Substantial, balanced backlog validates Boeing’s product strategy Model 747
Backlog, $B
Large 7%
777
279
300 255
150
TwinAisle 60%
767
787
174
Region
124
100
Leasing & Gov't ME, Central & S. Asia Russia
50 0
Europe
2005
737
250
250 200
SingleAisle 33%
2006
2007
2008
2009
North America
L. America & Africa Asia Pacific
China, East & SE Asia
27
Cycle drivers are changing
Geographic Balance
map or globe
Airline Business Model Balance
Replacement Requirements
28
How do you feel about the future of aviation business environment?
1.
Very optimistic
2.
Fairly optimistic
3.
Neutral
4.
Fairly pessimistic
5.
Very pessimistic
68%
20% 6% 1
5% 2
3
4
1% 5
29
Airline Customers
Capital Providers
Boeing
Opinion & Policy Makers
30
