February 2002

Airline MarketTrends and OutlookAirline MarketTrends and Outlook

Regional Airline MarketRegional Airline Market

Latin America & Caribbean

6%

China2%

Europe26%

Source: OAG (scheduled airline services - aircraft up to 120 seats – ASK capacity share)

North America

55%

Africa & Middle East3% Asia/

Pacific8%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1981 82 83 84 1985 86 87 88 89 1990 91 92 93 94 1995 96 97 98 99 2000

RP

MG

row

th(Y

r/Y

r%

Ch

ang

e)

Domestic ATA Regional RAA

Airline Market Evolution - USAAirline Market Evolution - USA

Source: RAA, ATA

Source: RAA, FAA

U.S. Regional Airlines% of Domestic Traffic

US Regional Enplanements IncreasingUS Regional Enplanements Increasing

PassengerEnplanements

(Millions)

19701970 19851985 20002000 2010F2010F

00

200200

400400

600600

800800

1,0001,000

3 %3 %7 %7 %

12 %12 %14%14%

Regional

Major

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1995 1996 1997 1998 1999 2000

RP

KG

row

th(Y

r/Y

r%

Cha

nge)

Intra-European AEA Regional ERAA

Airline Market Evolution- EuropeAirline Market Evolution- Europe

Source: ERAA, AEA

Industry in TransitionIndustry in Transition

5%

-3%-1% -1%

-3% -2%

0%3%

-33%

-21%

-18%

-13%

17%

9%7%

2% 2% 1%

6%

13%

-23%

-2%

5%

14%

-40%

-30%

-20%

-10%

0%

10%

20%

jan/01 Feb Mar Apr May jun/01 Jul Aug Sep Oct Nov Dec/2001

RP

MG

row

th-

Yr/

Yr

%C

han

ge

Domestic ATA Regional RAA

Commercial Airline Market - USACommercial Airline Market - USA

Source: Top Regionals, ATA

-36%

-23% -22%

-15%

-10%-13%

10%

-27%

5% 4% 5%

-4% -3%-7%

-40%

-30%

-20%

-10%

0%

10%

20%

RP

MG

row

th(Y

r/Y

r%

Cha

nge)

American Domestic American Eagle

Source: American Airlines

American Airlines TrafficAmerican Airlines Traffic

Jan-Aug/2001

Sep2001

Oct2001

Nov2001

Dec2001

Year2001

Jan2002

-32%

-17%-13%

-10%

-3%

-11%

23%

-22%

6%11%

15% 14%

4% 5%

-40%

-30%

-20%

-10%

0%

10%

20%

30%R

PM

Gro

wth

(Yr/

Yr

%C

hang

e)Continental Domestic ExpressJet

Source: Continental Airlines

Continental Airlines TrafficContinental Airlines Traffic

Jan-Aug/2001

Sep2001

Oct2001

Nov2001

Dec2001

Year2001

Jan2002

9%

6%5%

7% 6% 6%4% 4%

-3%

-13%-15%

-14%

13%

5%

7%9%

4%

7% 7%6%

1%

-7%

1%

-3%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

jan/01 Feb Mar Apr May jun/01 Jul Aug Sep Oct Nov Dec/01

RP

KG

row

th-Y

r/Y

r%

Cha

nge

Intra-European AEA Regional ERAA

Commercial Airline Market - EuropeCommercial Airline Market - Europe

Source: ERAA, AEA

Industry in Transition after Sep 11Industry in Transition after Sep 11

Capacity Management

QParked Aircraft

QDelivery schedules being re-negotiated, except for regional jets (small unit of capacity)

QRightsizing capacity vs. demand: regional jets being used in the USA to maintain presence in markets with decreased demand

QCash Management: focus on return to profitability in a low yield environment

Jet Replacement

Industry in Transition after Sep 11Industry in Transition after Sep 11Rightsizing capacity vs. demand: Routes transfered to RJs

Turboprop Replacement

Source: Back OAG (American, Continental, Delta,United, and US Airways)

Jet Replacement

Source: Back OAG Air France, Alitalia and British Airways

Turboprop Replacement

Industry in Transition after Sep 11Industry in Transition after Sep 11Rightsizing capacity vs. demand: Routes transfered to RJs

Warren Wilkiinson (Marketing VP of Indianapolis Base Chautauqua Airlines October 09, 2001)

Warren Wilkiinson (Marketing VP of Indianapolis Base Chautauqua Airlines October 09, 2001)

“Regional Jets made sense before Sept. 11 and we think they make even more

sense afterwards.”

“Regional Jets made sense before Sept. 11 and we think they make even more

sense afterwards.”

“Because our RJs are more popular with customers than our turboprops, we

will be flying the RJs as intensively as we can. We are adding RJ trips in

some new markets and converting some turboprop markets to RJ

markets.”

“Because our RJs are more popular with customers than our turboprops, we

will be flying the RJs as intensively as we can. We are adding RJ trips in

some new markets and converting some turboprop markets to RJ

markets.” Peter Bowler (President

American Eagle, October 04, 2001)

Peter Bowler (President

American Eagle, October 04, 2001)

Regional Jets – Airlines PerspectiveRegional Jets – Airlines Perspective

“Continental is … convinced of the need to continue to take all the ERJs

which are proving very effective in weak markets. The focus remains on

getting unprofitable flying out of mainline and passed down to Continental

Express.”

“Continental is … convinced of the need to continue to take all the ERJs

which are proving very effective in weak markets. The focus remains on

getting unprofitable flying out of mainline and passed down to Continental

Express.” Ted North (Director, Fleet Planning,

Continental Airlines, October 10, 2001)

Sustaining Regional GrowthSustaining Regional Growth

3. Optimization of Old and Inefficient Narrowbody Services

• adjustment aircraft size X load

factor

• long & thin routes

• new market opportunities

• profit potential

• larger, new generation RJ’s

3. Optimization of Old and Inefficient Narrowbody Services

• adjustment aircraft size X load

factor

• long & thin routes

• new market opportunities

• profit potential

• larger, new generation RJ’s

1. Turboprop Substitution

• productivity improvements

• passenger jet preference

1. Turboprop Substitution

• productivity improvements

• passenger jet preference

2. Frequency, Frequency . . .2. Frequency, Frequency . . .

Newark

Cleveland

TampaHouston

19921992

Regional Jets

Turboprops

System Avg.

0 nm

200 nm

200 nm

Continental Express NetworkContinental Express Network

Step 1: Hub & SpokeStep 1: Hub & Spoke

Turboprops 205 nm

Houston

Cleveland

Newark

System Avg.

Regional Jets 480 nm

245 nm

19961996

Step 2: Introduction of RJ’sStep 2: Introduction of RJ’s

Continental Express NetworkContinental Express Network

Turboprop 205 nm

Houston

Cleveland

Newark

20012001

Step 3: Enhancement of RJ ServiceStep 3: Enhancement of RJ Service

Continental Express NetworkContinental Express Network

Regional Jets

System Avg.

650 nm

400 nm

Mont Rose

(1490 km, 02:20)

Ixtapa (1510 km, 02:20

Houston-Milwaukee

(1585 km, 02:55)

ZurichBasel

Turboprop

Stockholm(1500 km, 02:40)

Sevilla(1570 km,

02:30)

ERJ

Crossair Network 2001Crossair Network 2001

Source: OAG BACK

Nice(1390 km, 02:40)

Oslo(1070 km, 02:00) St. Petersburg

(1030 km, 01:55)

Bucharest(930 km, 01:50)

ERJ

LOT Polish Airlines Network 2001LOT Polish Airlines Network 2001

Turboprop

Warsaw

Source: OAG BACK

Daily Departures 129 110 -22

Average 199 406 +104Sector Length (sm)

Daily ASMs (millions) 1.06 1.98 +87

Daily Departures 129 110 -22

Average 199 406 +104Sector Length (sm)

Daily ASMs (millions) 1.06 1.98 +87

1996 2001 % Diff.1996 2001 % Diff.

Source: OAG BACK

Regional Jet ProductivityContinental Express’ Newark Hub example

Regional Jet ProductivityContinental Express’ Newark Hub example

20012001

16% Turboprop

16% Turboprop

84% Jet

84% Jet

100% Turboprop100%

Turboprop

19961996

Continental’s Newark’ HubContinental’s Newark’ Hub

American Eagle at O’HareAmerican Eagle at O’Hare

Crossair at Eurocross Hub-BaselCrossair at Eurocross Hub-Basel

Jan 1995Jan 2002

Regional Jet Presence - USARegional Jet Presence - USA

Source: Back OAG (ERJ-145/140/135, CRJ-100/200, 328Jet routes)

Jan 1995Jan 2002

Regional Jet Presence - EuropeRegional Jet Presence - Europe

Source: Back OAG (ERJ-145/140/135, CRJ-100/200, 328Jet routes)

Frequency:Hourly Frequency Concept - USAFrequency:Hourly Frequency Concept - USA

Days Flight Depart Arrive Eqp Stop Duration

xSa UA 745 6:00a BOS 7:36a ORD 319 0 02:36xSu UA 1053 6:45a BOS 10:07a ORD 757 0 02:40xSaSu UA 1439 7:45a BOS 11:12a ORD 320 0 02:41xSu UA 881 8:45a BOS 11:59a ORD 319 0 02:39xSaSu UA 509 9:45a BOS 1:13p ORD 733 0 02:43xSa UA 515 11:45a BOS 2:05p ORD 735 0 02:37xSa UA 519 1:45p BOS 3:07p ORD 733 0 02:39xSu UA 525 2:45p BOS 4:07p ORD 735 0 02:39xSu UA 1551 3:45p BOS 5:10p ORD 733 0 02:43Daily UA 473 4:45p BOS 7:14p ORD 757 0 02:39xSa UA 527 5:45p BOS 8:18p ORD 320 0 02:46Daily UA 529 7:00p BOS 9:05p ORD 735 0 02:43

From Boston, Massachusetts, USA Airlines: UA

To Chicago, Illinois, USA

Date/Time2/06/2002 – 06:00a

Hourly on Secondary RoutesHourly on Secondary Routes

Days Flight Depart Arrive Eqp Stop Duration

Daily AA 535 7:05a TUL 8:18a DFW 100 0 01:13Daily AA 1215 8:35a TUL 9:52a DFW 757 0 01:17

xSaSu AA*3654 9:10a TUL 10:25a DFW ERJ 0 01:15

xSu AA 2033 10:11a TUL 11:26a DFW M80 0 01:15

xSu AA*3726 11:00a TUL 12:10p DFW ERJ 0 01:10

xSa AA*3828 1:30p TUL 2:45p DFW ERJ 0 01:15

xSa AA*3660 2:30p TUL 3:40p DFW ERJ 0 01:10

Daily AA 1821 4:32p TUL 5:45p DFW M80 0 01:13

xSa AA*3534 5:45p TUL 6:55p DFW ERJ 0 01:10

xSa AA*3736 6:20p TUL 7:35p DFW ERJ 0 01:15

From Tulsa, Oklahoma, USA Airlines: AA

To Dallas\Fort Worth, Texas, USA

Date/Time2/06/2002 – 06:00a

Days Flight Depart Arrive Eqp Stop Duration

xSaSu BD 381 8:20a MAN 9:15a EDI ER4 0 00:55

xSaSu BD 383 11:55a MAN 12:45p EDI ER4 0 00:50

xSaSu BD 385 2:40a MAN 3:30p EDI ER4 0 00:50

xSaSu BD 387 5:30p MAN 6:25p EDI ER4 0 00:55

xSa BD 389 8:20p MAN 9:10p EDI ER4 0 00:50

Frequency:RJ Frequency in EuropeFrequency:RJ Frequency in Europe

From Manchester, UK Airlines: BD

To Edinburgh, UK

Date/Time2/06/2002 – 06:00a

0

100.000

200.000

300.000

100 300 500 700 900 1100

Sector Distance (miles)

An

nu

al F

ligh

tsEvolution of Longer Stage LengthsEvolution of Longer Stage Lengths

2000

1999

1996

1997

1998

2001

Source: Back OAG

0

50.000

100.000

150.000

200.000

100 300 500 700 900 1100

Sector Distance (miles)

An

nu

al F

ligh

tsSimilar Development in EuropeEvolution of Longer Stage Lengths

Similar Development in EuropeEvolution of Longer Stage Lengths

2000

1999

1996

1997

1998

2001

Source: Back OAG

4040

00

19901990 19951995 20002000 2010F2010F

3030

2020

1010

5050

Average Seating Capacity

Source: FAA, RAA, Embraer

US Regional Aircraft Size IncreasingUS Regional Aircraft Size Increasing

Seats per Aircraft

00

1010

2020

3030

4040

5050

6060

7070

8080

19901990 19951995 20002000 2010F2010F

Average Seating Capacity

Source: ERAA, Embraer

Seats per Aircraft

European Regional Aircraft Size IncreasingEuropean Regional Aircraft Size Increasing

Seating Capacity

25 50 75 100 125 150 175+

Widening Seat Capacity Gap Widening Seat Capacity Gap

37 37 –– 70 Seats70 Seats 112 – 176+ Seats112 112 –– 176+ Seats176+ Seats

50 Seats50 Seats 109 – 182 Seats109 109 –– 182 Seats182 Seats

50 50 –– 70 Seats70 Seats 116 – 183 Seats116 116 –– 183 Seats183 Seats

37 37 –– 50 Seats50 Seats 104 – 178+ Seats104 104 –– 178+ Seats178+ Seats

44 – 50 Seats44 44 –– 50 Seats50 Seats 78 – 181+ Seats78 78 –– 181+ Seats181+ Seats

50 Seats50 Seats 97 – 183+ Seats97 97 –– 183+ Seats183+ Seats

70 to110 Seats

70 to110 Seats

Scope Clauses

250 aircraft withmore than 20 years(33% of total fleet inservice)

Fleet in Service (91-120 seat segment - Jan/2002)

Source: BACK (Fleet PC)

Market Opportunities - USAMarket Opportunities - USAQQ Ageing 100Ageing 100--seat fleet to be replacedseat fleet to be replaced

91

147 146128

74

15

161

0

20

40

60

80

100

120

140

160

180

0-5 6-10 11-15 16-20 21-25 26-30 31-35

Aircraft Age (Years)

Nu

mb

erof

Air

craf

t

Seating Capacity25 50 75 100 125 150 175+

No Artificial Constraints in Europe No Artificial Constraints in Europe

37 – 80 Seats37 37 –– 80 Seats80 Seats 103 – 270+ Seats103 103 –– 270+ Seats270+ Seats

37 – 85 Seats37 37 –– 85 Seats85 Seats 112 – 206+ Seats112 112 –– 206+ Seats206+ Seats

50 – 70 Seats50 50 –– 70 Seats70 Seats 109 – 169+ Seats109 109 –– 169+ Seats169+ Seats

44 – 66 Seats44 44 –– 66 Seats66 Seats 131 – 283+ Seats131 131 –– 283+ Seats283+ Seats

50 - 80 Seats50 50 -- 80 Seats80 Seats 108 – 189+ Seats108 108 –– 189+ Seats189+ Seats

110 – 180+ Seats110 110 –– 180+ Seats180+ Seats50 50 –– 111 Seats111 Seats

50 – 213+ Seats50 50 –– 213+ Seats213+ Seats

70 to110 Seats

70 to110 Seats

498

151

276

132 418

728

0

100

200

300

400

500

600

700

800

900

30-60 61-90 91-120 121-150

Seat Segment

Nu

mb

ero

fA

ircr

aft

Turboprop Jet

Fleet in Service (Jan/2002)

Source: BACK (Fleet PC)

Market Opportunities - EuropeMarket Opportunities - Europe

Natural Growth

EvolutionRightsizing capacity vs.

demand

120

160

Seat Capacity

Stage Length (nm)

40

80

200 400 600 800 1000 1200 1400

0

EMBRAER 170/190

30 Seat Tprops

50 Seat ERJ

Narrow Body Large Aircraft

37 - 44 Seat ERJs

Filling the Seat Capacity GapFilling the Seat Capacity Gap

Responding to Market NeedsResponding to Market Needs

37 seats

44 seats

50 seats

ERJ 145 Family Market EvolutionERJ 145 Family Market Evolution

Aug 2000

Mar 2001

Sep 2001

First Delivery Dec 1996

Dec 1999

Dec 1998

FirmBacklog

FirmBacklog

41

ERJ 145 Family OrderbookERJ 145 Family Orderbook

ERJ 135

ERJ 140

ERJ 145

Total

ERJ 135

ERJ 140

ERJ 145

Total

As of January/2002

OptionsOptions TotalTotal DeliveriesDeliveries

121121

571571

174174

866866

4747

269269

4545

361361

FirmFirm

168168

840840

219219

1,2271,227

8989

399399

2424

512512

3232

172172

150150

354354

Responding to Market NeedsResponding to Market Needs

ERJ 145 XR 2,000 nm RangeERJ 145 XR 2,000 nm Range

Continental Express: USA Launch Customer104 Firm Orders + 100 Options

Certification – Sep 2002

New Nonstop Market OpportunitiesNew Nonstop Market Opportunities

Houston

ERJ 145 XR2,000 nm

ERJ 145 XR2,000 nm

EMBRAER 17578 Seats

EMBRAER 17578 Seats

EMBRAER 17070 Seats

EMBRAER 17070 Seats

EMBRAER 19098 Seats

EMBRAER 19098 Seats

EMBRAER 195108 Seats

EMBRAER 195108 Seats

Anticipating Market NeedsAnticipating Market Needs

EMBRAER 170 First FlightEMBRAER 170 First Flight

19 Feb 2002

Q Mainline jet comfort

Q Cabin features:Q no middle seatQ large headroomQ easier access to bins and

seatsQ faster boarding and

unboarding

Q Cabin can accommodate roll-on bags up to 115% load factor

Q Superior ground service access and baggage handling

Q Highest total baggage volume and highest baggage volume per paxin its category

EMBRAER 170/190 Cabin ServiceEMBRAER 170/190 Cabin Service

Actual mockup picture

QQ Design process driven by Customer requirementsDesign process driven by Customer requirements

2nd AABFLL - USA

April

9 Airlines

3rd AABPAR - FranceSeptember

20 Airlines

1st SGSJC & LAX

October

11 Airlines

1st AABSJC - Brazil

March

7 Airlines19

99

2nd SGSJC & LAX

January

13 Airlines

4th AABFLL - USA

June

24 Airlines

3rd SGSJC - BrazilNovember

16 Airlines20

00

1st MMISJC – Brazil

April

11 Airlines

5th AABSJC - Brazil

April

27 Airlines

2nd MMIPAR - France

May

6 Airlines

3rd MMISJC - Brazil

July

11 Airlines20

01 4th MMI

SJC - BrazilSeptember

9 Airlines

Total of 27 Airlines and 154 ExpertsTotal of 27 Airlines and 154 Experts

Advisory Boards / Steering GroupsAdvisory Boards / Steering Groups

Firm Options Total

EMBRAER 170 82 130 212

EMBRAER 190 30 72 102

Total 112 202 314

Firm Options Total

EMBRAER 170 82 130 212

EMBRAER 190 30 72 102

Total 112 202 314

EMBRAER 170/190 Family OrderbookEMBRAER 170/190 Family Orderbook

As of January/2002

Market ForecastMarket Forecast

World (30-120 seat segment): 8,695 jets (US$200 Billion)World (30-120 seat segment): 8,695 jets (US$200 Billion)

SegmentSegment 2002-20112002-2011 2012-20212012-2021

30 - 6030 - 60 1,8101,810 1,7351,735

61 - 9061 - 90 1,0851,085 1,2851,285

91 - 12091 - 120 1,1901,190 1,5901,590

TotalTotal 4,0854,085 4,6104,610

Market Forecast 2002 – 2011World Deliveries by Segment - JetsMarket Forecast 2002 – 2011World Deliveries by Segment - Jets

Market Forecast 2002-2011Market Forecast 2002-2011

30-120 Seats: 4,085 Jets30-120 Seats: 4,085 Jets

AsiaPacific245

6%

AsiaPacific245

6%

Europe96024%

Europe96024%

LatinAmerica

3458%

LatinAmerica

3458%

China275

7%

China275

7%Africa &Middle East

1303%

Africa &Middle East

1303%

USA, Canada& Caribbean

2,13052%

USA, Canada& Caribbean

2,13052%

Market Forecast 2002-2011Market Forecast 2002-2011

30-60 Seats: 1,810 Jets30-60 Seats: 1,810 Jets

China105

6%

China105

6%

Europe25514%

Europe25514%

LatinAmerica

804%

LatinAmerica

804%

AsiaPacific

503%

AsiaPacific

503%

Africa &Middle East

603%

Africa &Middle East

603%

USA, Canada& Caribbean

1,26070%

USA, Canada& Caribbean

1,26070%

61-90 Seats: 1,085 Jets61-90 Seats: 1,085 Jets

Market Forecast 2002-2011Market Forecast 2002-2011

USA, Canada& Caribbean

33531%

USA, Canada& Caribbean

33531%

LatinAmerica

12511%

LatinAmerica

12511%

AsiaPacific

858%

AsiaPacific

858%

China908%

China908%Africa &

Middle East404%

Africa &Middle East

404%

Europe41038%

Europe41038%

Africa &Middle East

302%

Africa &Middle East

302%

Europe29525%

Europe29525%

LatinAmerica

14012%

LatinAmerica

14012%

AsiaPacific110

9%

AsiaPacific110

9%

China807%

China807%

USA, Canada& Caribbean

53545%

USA, Canada& Caribbean

53545%

91-120 Seats: 1,190 Jets91-120 Seats: 1,190 Jets

Market Forecast 2002-2011Market Forecast 2002-2011

Thank you!Thank you!