s u p p l ie r s
FUTURE OF AIR TRAVEL
DREW MAGILLDirector - Marketing
Boeing Commercial Airplanes
Copyright © 2008 Boeing. All rights reserved.
BOEING is a trademark of Boeing Management Company.Copyright © 2008 Boeing. All rights reserved.
Boeing Commercial AirplanesSEPTEMBER 2008
Airlines are facing unprecedented challenges"If the current pricing dynamic does not change,” he said, “our industry will be severely challenged and will continue shrinking." (NWA CEO Douglas Steenland)
“We are not on the edge but we have come to a point of no return ” warns CEO Mats JanssonWe are not on the edge, but we have come to a point of no return, warns CEO Mats Jansson(SAS Group)
"Our industry is challenged as never before by the unrelenting price of oil.” United president, chairman and chief executive Glenn Tilton.
“The simple fact is that the U.S. airline industry, as it is constituted today, was not built for $125-per-barrel oil.” American Airlines CEO Gerard Arpey
"Airlines can't cut costs sufficiently to compensate for the cost of increases that are happening in fuel." Air New Zealand Chief Executive Rob Fyfe
``Over the next 12 years, many more airlines will vanish, unable to cope with high fuel prices, or they will be swallowed g p , yup in takeovers or mergers.” Qantas CEO Geoff Dixon
"What we've seen to date is the tip of
Copyright © 2008 Boeing. All rights reserved.
What we ve seen to date is the tip of the iceberg.” Air New Zealand Chief Executive Rob Fyfe
Implications of high fuel prices will extend over many years
Shock Restructuring Recover to long-term growth rates
mid-term+1-2yr +20yrnow +4-5
yr long-term
1. Fuel price shock$2.3B industry loss projected in 2008U S i li hit fi t d h d t d t li it d h d i $ ld fl tU.S. airlines hit first and hardest due to: limited hedging, $, economy, older fleet
Airline response: higher fares, capacity reductions, parking older airplanes, bankruptcies
2. Mid-term (next several years) – fuel prices remain high and volatileDecline from current levelsOPEC actions and emerging market demand are key driversO C ac o s a d e e g g a e de a d a e ey d e s
Airline response: industry restructuring, fleet renewal, less efficient fleet remains parked
3 L t f l i d t3. Long-term – fuel prices moderateOil supply growth more balanced with demandIndustry traffic growth returns to trend
Airline response: pursue growth opportunities; emerge more efficient; new entrants
Copyright © 2008 Boeing. All rights reserved.
Airline response: pursue growth opportunities; emerge more efficient; new entrants and innovations
Strong, balanced backlog validates Boeing’s product strategy
Backlog $Backlog $ ModelModel$ - Billions 747
275255
250
300
Single-Aisle32%
Large8%777 737
174200
250
Twin-Aisle60% 767
RegionRegion124150787
70
50
100AmericasLeasing Leasing
& Gov't& Gov't
Middle China & China &
0
2004 2005 2006 2007 2Q08Europe S.E.
Middle East & Africa
Asia-Pacific
East AsiaEast Asia
Russia
Copyright © 2008 Boeing. All rights reserved.
2004 2005 2006 2007 2Q08 Asia
Liberalization is spreading globally opening the market for more new airlines
160AirlinesEntrants
900
120
140
700
EntrantsExits
800
AirlnesAirlnes Differentiate Themselves Through:Differentiate Themselves Through:
80
100
500 Airlinesper Year
Total Numberof Airlines
600 Safe,Safe,ReliableReliable
Convenient air travelConvenient air travelfor lower faresfor lower fares
40
60
200
300
400 per Yearof Airlines ..for lower fares..for lower fares…in comfortable surroundings…in comfortable surroundings
20100
200
T Atl tiUS Domestic Europe
T P ifi I t A i
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Copyright © 2008 Boeing. All rights reserved.
Trans-Atlantic
1970’s 1980’s 1990’s 2000’s
1978pTrans-Pacific Intra Asia
Convenient:Technology enables pt to pt service
777-200LRLondon to Sydney nonstop240 passengers
2006
747-4001 t **
240 passengers19.5 hours
London1990
1 stop**23 hours
747-2001975
2 stops26 hours
CalcuttaKarachiBahrain
Cairo
707-3206 t *
1965
Bangkok
Singapore
Colombo
6 stops*1.5 days
1955Super Constellation7 stops2.5 daysDarwin
Jakarta
1939
Copyright © 2008 Boeing. All rights reserved.
All flight times are approximateSource data: Qantas timetables. Qantas.com.au
Sydney
Flying Boat32 stops10 days
Air travel growth has been met by increased frequencies and nonstops
WorldIndex 1987=1.00
3 0
2.5
3.0
Air Travel Air Travel GrowthGrowth
2.0
2.5
Frequency Frequency GrowthGrowthNonstop Nonstop
1.5
ppMarketsMarkets
1.0 Average Average AirplaneAirplane
0.5
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Airplane Airplane Size Size
Copyright © 2008 Boeing. All rights reserved.
August OAG
China domestic frequencies have increased more than sixteen-fold since 1990
2 084 12 146 605 16920002000
Total ASKTotal ASK Weekly FrequenciesWeekly Frequencies Total Airport PairsTotal Airport Pairs Airplane Size (Seats)Airplane Size (Seats)391 million 2,095 170 15719901990
2,084 million 12,146 605 169200020005,449 million 33,771 836 15620072007
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Cities served at least daily shownCities served at least daily shownIncludes Hong KongAugust OAG
Copyright © 2008 Boeing. All rights reserved.
##and Macau
Infrastructure, fuel and environmental issues forcing up-gauging in “small” airplane market
Regional jetsRegional jets(below 90 seats)(below 90 seats)
SingleSingle--aisleaisle(90(90--240 seats)240 seats)
TwinTwin--aisleaisle(180(180--400 seats)400 seats)
747 & larger747 & larger(over 400 seats)(over 400 seats)450
350
400
250
300
cy (1
,000
)
150
200
ekly
Fre
quen
100
150
Wee
2027
2007
0
50
Airplane Size
Copyright © 2008 Boeing. All rights reserved.
Airplane Size
World fleet will double and adjust
2027
747 and larger747 and largerTwin-aisleSingle-aisleRegional jets
19,000airplanes
2007
19,000airplanes
35,800airplanes
Copyright © 2008 Boeing. All rights reserved.
airplanes
A large demand for replacing older, less efficient aircraft
A large demand for replacing older, less efficient aircraft
Units40,000less efficient aircraft
35,800
30,00016,900
Growth57%
16,900Growth
57%
19,00019,00020,000
29,400
12,50012,500
10,000
12,500Replacement
43%
12,500Replacement
43%
0
6,400Retained Fleet
6,400Retained Fleet
Copyright © 2008 Boeing. All rights reserved.
02007 2027
Global market implications:product strategy
Large9%
$3.2 trillion
Large Airplanes: significant, focused on replacement400 SEATS
Airplane Size
IntermediateTwin Twin Aisle (200-400 seats) is
46%
Twin Aisle (200 400 seats) is the largest market segment –nearly ½ total market value
300 SEATS
2008-202729,400 airplanes
$3 2 trillion
Small Twin
200 SEATS
Single Aisle
$3.2 trillion
43%
Single Aisle (90-200 seats) market is highly important toSingle Aisle43% market is highly important to success $1.36T
Copyright © 2008 Boeing. All rights reserved.
2% Regional JetSource: CMO 2007
RJ market is small30 SEATS
90 SEATS
Market implications
747400 SEATS
Airplane Size
Large9%
$3.2 trillion747-8467seats
IntermediateTwin
777-300ER365 seats
777
300 SEATS46%
777-200ER/LR30//310 seats
787-9280 seats
787
200 SEATS
Small Twin 787-8242 seats
2008-202729,400 airplanes$3.2 trillion
Single Aisle43%
737-900ER180 seats
737-800162 seats
737-700
$3.2 trillion
737Single Aisle43%
4%
126 seats
737-600110 seats
Copyright © 2008 Boeing. All rights reserved.
Regional Jet30 SEATS
90 SEATSSource: CMO 2007
2%
Product updateLarge9%
$3.2 trillion
400 SEATS
IntermediateTwin
777-300ER365 seats
737: 4,896 firm orders, 115 customers;737: 4,896 firm orders, 115 customers;
300 SEATS46%777-200ER/LR30//310 seats
787-9280 seats
200 SEATS
Small Twin787-8242 seats
Single Aisle43%
737-900ER180 seats
737-800162 seatsSingle Aisle43%
737-700126 seats
737-600110 seats
(June 2008)
Copyright © 2008 Boeing. All rights reserved.
90 SEATS2% Regional Jet
Product updateLarge9%
$3.2 trillion
400 SEATS
IntermediateTwin
777-300ER365 seats
787: 58 customers, 896 firm orders.787: 58 customers, 896 firm orders.
300 SEATS46%777-200ER/LR30//310 seats
787-9280 seats
200 SEATS
Small Twin787-8242 seats
Single Aisle43% Single Aisle43%
Copyright © 2008 Boeing. All rights reserved.
90 SEATS2% Regional Jet
Product updateLarge9%
$3.2 trillion
400 SEATS
IntermediateTwin
777-300ER365 seats
777: 1,084 firm orders; 726 delivered; 56 customers
777: 1,084 firm orders; 726 delivered; 56 customers
300 SEATS46%777-200ER/LR30//310 seats
787-9280 seats
200 SEATS
Small Twin787-8242 seats
Single Aisle43% Single Aisle43%
Copyright © 2008 Boeing. All rights reserved.
90 SEATS2% Regional Jet
Product updateLarge9%
$3.2 trillion
747-8467 seats
400 SEATS
IntermediateTwin
777-300ER365 seats 747-8: 105 firm orders, 11 customers
300 SEATS46%777-200ER/LR30//310 seats
787-9280 seats
200 SEATS
Small Twin787-8242 seats
Single Aisle43% Single Aisle43%
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90 SEATS2% Regional Jet
Market and Strategy SummaryAir travel is a crucial and fundamental
l di t t d d f…leading to strong demand for new airplanes
Aviation faces challenges− Economic uncertainty− Congestion, Fuel Costs, Environmental
Boeing focus: l d i ti t t tBoeing focus: lead aviation to meet strong demand and overcome challenges via technological innovations− Completing products in development− Completing products in development− Meeting strong demands for new airplanes− Collaborating with customers on the next
breakthroughs in airplanes and services
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