international mkt pri

International Market Analysis:Market Prioritization

March 2013Discussion Document

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

McKinsey & Company | 1

To develop a prioritization of international market opportunities, we leveraged a diverse set of experts, data sources, and statistics

Conduct deep dives to finalize prioritization and identify ~4 priority Cessna markets

Refine full list to countries that matter and develop initial clustering

Collect initial fleet size data and projections on all markets

12 3

Sources used

McK aviation experts 3 Asia experts 2 Latin America expert 1 Middle East expert 2 Europe expert

Global aviation experts Bus Dev Leader, global OEM

(China, India, Brazil, EU) Sales Lead, global OEM

(Africa, Australia, Middle East, Brazil)

OEM market advisor (Brazil, China, India, Russia)

Jet purchase advisor for corps HNW (EU, Brazil, India, Russia)

Experts Fleet size Historical fleet growth (%) GDP growth Corporate profits HNWI projections Airport infrastructure Credit rating Fleet penetration rates Competitor market share Jet class segmentation Market environment index

Statistics ACAS global fleet data World Economic Forum International Monetary

Fund Credit Suisse Wealth

Report S&P credit ratings OneSource corporation

data Bombardier market

forecasts JetNet market forecast Embraer market forecast IHS Global Insight Teal database

Databases

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Our approach started with the 163 countries with general aviation and focused on 9 market clusters of interest

SOURCE: ACAS; McKinsey analysis

Approach Outputs

4 Evaluated each clusters economics and general aviation environment to prioritize, e.g., GDP, HNWI population, # of corporations Current fleet size, expected growth Competitive position Aviation infrastructure, political / regulatory

support

Prioritized clusters of interest High opportunity: Brazil, C. Europe Growth options: China/HK, India,

Turkey, E. Europe, Russia/CIS, Indonesia, Saudi/UAE

Aggregated neighboring countries selected in step 2 to create market clusters (added small neighboring countries with similar economic characteristics to develop core market clusters)

3 Created 19 clusters (anchored around the 27 countries selected in the prior step, and adding in select small neighboring countries (e.g., Switzerland added to C. Europe group)

Excluded countries with 2012 low fleet size (< than 50)

2 27 countries selected, 137 markets excluded, (examples of excluded countries: Guatemala [24 business jets], Iran [19 business jets])

Start with all the countries listed in ACAS database

1 163 total countries

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19 international clusters represent >85% of near-term international sales opportunity

In the Americas, growth is expected to be dominated by Brazil

Middle East opportunity is concentrated in a few countries

Asia expected to sustain growth momentum in a few key countries

Europes growth is driven primarily by Central Europe

Other ME 36

Lebanon &Jordan 55

Saudi Arabia &UAE 122

Other Asia 227

Indonesia 120

India 194

Australia 203

China 226

Other Amer. 207

Mexico 189

Venez., Argent., Colom. 258

Canada 317

Brazil 593

Other E. Eur. 79

N. Europe 86

Turkey 109

Russia/CIS 148

S. Europe 152

CR, Pol.,& Slovak. 183

UK 218

C. Europe 652

Africa is fragmented and has limited prospectsNigeria, Kenya, & Tanz.

115

South Africa

Other Africa

94

102

77%

83%63%

95%

87%

Figures represent average annual addressable market opportunity1 in $, million

1 Proxy forecast. method: For business jets, allocated 3 regional growth forecasts to 2012 addressable base (business jets < 15 seats and light turboprops) to determine growth through 2017. Then distributed expected regional growth across countries according to each countrys absolute fleet growth as % of region total. For turboprops, took historical 5 year CAGR by country and projected forward as growth. Adjusted from expert interviews.

SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P

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Cessna may benefit from new sales approaches targeted at select high-value and high-growth markets with unique challenges

Nigeria,Kenya,Tanzania

N. Europe

Mexico

1

0

Expected market opportunity2$ millions, per annum

700650600550500450400350300

Indonesia

India

Czech Rep., Poland, & Slovakia

China & Hong Kong

Canada

C. Europe

Brazil

Australia

Environmental supportCategorization

5

250200150100

4

0

Jordan & Lebanon

S. Arabia & UAE

Venez., Arg., Colom.

UK

50

South Africa

3

2

S. Europe

Russia & CIS

Turkey

Unstable political conditions or market environment

1 =

Limited infrastructure and / or high corrup-tion, stable market

2 =

Supportive infra-structure and political support, but concerns

3 =

Good infrastructure and govt support; select inefficiencies

4 =

Environmental support

Robust infrastructure, very supportive government (e.g., US)

5 =

Bubble Size represents fleet value estimate in 20121

1 Estimated market value of existing addressable fleet per country. Addressable fleet Includes bizjets


We propose prioritizing the high value and growth option market clusters


543210

Expected market opportunity8006004002000

C. Europe

Brazil


543210


S. Arabia/UAETurkey

Russia Indonesia

India

Czech Rep

China


3210

6004002000

UK

S. Europe

Mexico

CanadaAustralia


54


32

5

10

4


Jordan, Lebanon

Venez., Argent., Colombia

Nigeria, Kenya, Tanz.

High opportunity prioritized High growth markets prioritized

Highest market opportunity ($600-650M / year)

Immense fleet base (1200+) Highly developed

infrastructure with supportive governments

Serve as anchor to other markets with lower value (e.g., N. Europe, Mexico)

Stable markets de-prioritized

Mid-sized market opportunities ($125-250M) with very high annual growth (10-20%)

Small-medium fleet base (typically 100-200)

New customers, opportunities to become established player in large future market

Very low penetration relative to US (e.g., China and India have 2-15% US corp penetration); potentially great upside

Political and infrastructure development may create opportunities for immense growth if well positioned

Mid-sized opportunities ($150-300M) with low growth (3-4%)

Large existing fleet (400-1000) All mature markets with

established competition Cessna already has leading

position in all of these markets for jets, often 35%+ share

Most markets (exception Mexico) likely similar segmentation to US

High risk markets de-prioritized

Typically small markets (


Even within groups, markets significantly differ on fleet size, market potential, Cessna position, and environment

222

Venez., Arg., Colomb. 930N. Europe 266South Africa 423S. Europe 525Mexico 916

Australia 488

United Kingdom 443Canada 1,008Turkey

Nigeria, Kenya, Tanz.

Indonesia 104

Saudi Arabia & UAE 113Russia & CIS 107Czech, Pol., & Slovak. 107India 199China & Hong Kong 136Brazil 1,391

C. Europe 1,368

Jordan & Lebanon 32

91


14

21

43

32

34

38

21

39

30

37

31

21

9

8

61

23

13

44

44

23

9

5

4

4

3

3

8

6

4

11

21

17

20

19

10

19

7

5

Environ. Support(1-5)

Addressable fleet size(# jets, props)

Cessna Share(jets %)

Forecast fleet growth (%)

78

78

17

13

25

8

17

34

15

23

25

72

29

37

8

11

60

20

13

Cessna Share (prop %)

Variation in growth scenarios

Penetration per 1,000Corps.

65

44

11

92

11

74

860

188

260

120

n/a270

n/a

534

n/an/a

1.565

133

521

Medium

Low

HighMedium

Medium

Medium

Medium

Medium

Medium

Low

Low

Low

Low

Medium

Low

Medium

Medium

Medium

Medium

4

4

2

3

2

2

3

2

3

5

4

5

4

4

4

4

1

1

1

Highest opportun.

Stable

Growth option

Low value

High risk

1 Proxy forecast. method: Allocated Bombardier, JetNet IQ, and Embraer regional growth CAGR to 2012 base to determine growth through 2017. Then distributed expected regional growth across countries according to each countrys absolute fleet growth as % of regional total. Averaged across 3 forecasts. Assumed average cost of business jet at $9.5M and average cost of turbo-prop at $3M.

2 Business jet projected fleet discounted to account for portion of jets that are large, defined as >15 seats.

55

148

183

194

226

593

652

102

258

86

94

152

189

203

218

317

109

120

122

Forecast annual growth($ mil)2

Light / Mid-size bizjets Light TPs

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C. Europe, Brazil, China, and India present large opportunities for CessnaInitial insights on priority markets

High value markets

Group Country

High growth markets

C. Europe

Brazil

Central Europe has immense fleet (~1,300), with nearly 80% in Germany, Austria, and France

Corporate and HWNI penetration only 10-20% of US, presenting growth opportunities; likely not reach US levels (competitive infra., regulatory issues)

Growth from light and mid-sized business jet purchases, to access emerging markets (e.g., Asia, Eastern Europe)

Brazil has highest penetration of HNWI and corporations due to cultural norms, lack of competitive infrastructure, and supportive reg. environment, which should support further penetration as customers increase (2x HNWI by 2017)

Business jet growth driven by companies pursuing regional expansion, and HNW families living abroad

High turboprop growth driven by HNWI ranchers, who commute to urban centers from remote ranches with private runways

China

India

Chinas relatively small fleet (140) has seen 30% growth in recent years, driven by strong economics (9% GDP, doubling of HNWI and corp profits)

Chinas regulatory environment constrain growth (corporate penetration at 2% of US): airspace restrictions, flight planning delays, and infra. limitations

Explosive growth could occur in mid- to long-term with reforms to regulatory environment and continued investment in infrastructure

Mid-sized fleet (200) has relatively high penetration (20% of US corp), due to broad geography, lack of competing infrastructure, and govt support

Globalizing companies and geographically dispersed HNWI expected to drive continued demand for business jets (12% p.a.)

While select bureaucracy may inhibit efficiency, continued government reforms (FDI openness in Sept 2012) and investment should enable growth

SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, Expert interviews

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These priority markets have significantly different demographics and customer base from US, and may require a different sales approach

India

1,241

China

1,344

Brazil

197

C. Europe

156

US

312

Country Population# millions

GDP Growth% CAGR (2013-17)

HNWI# (000s), income > $1M

Large Corps.# (000s), rev. > $100M

8%9%4%2%3%

IndiaChinaBrazilC. EuropeUS

India

158

China

1,056

Brazil

227

C. Europe

3,747

US

11,023

India

2

China

13

Brazil

3

C. Europe

14

US

35

SOURCE: World Bank, Credit Suisse, OneSource

China and India have nearly 4x US population

Brazil, China, and India have higher 1.5-3x expected GDP growth than US, from lower base

India, China, and Brazil have only 2-10% of the HNWI of the US; due to lower income (India, China) and inequal wealth distribution (Brazil)

China has similar number of corporations as US and Europe (though many state-owned enterprises)

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In addition, fleet size and penetration is generally lower than the US, which could drive market growth

1991361,3911,068

18,487


1.30.1

6.1

0.31.7


92.310.8

533.6

73.8

523.4

US C. Europe IndiaBrazil China

SOURCE: World Bank, Credit Suisse, OneSource

US leads world in fleet size; Brazil is second with only 7% of US fleet

C. Europe penetration of HNWI and corps only 10-20% of US

Brazil has highest fleet penetration of HNWI in world; corp. penetration in line with US

India HNWI penetration is ~60% of US, though corporate penetration is only ~20%; both HNWI and corps expected to double in 5 years

Chinas penetration of HNWI and corporations is lower than any peers (only 2-5% of US)

Total Fleet Size (2012)#

Fleet Penetration of HNWI# per 1,000 HNWI

Fleet Penetration of Large Corps.# per 1,000 Large Corps


Central Europe offers growth from increasing customer base and focus on emerging markets, limited by cultural and political issues

Central Europe has immense fleet base (~1,300), with nearly 80% in Germany, Austria, and France

Corporate and HWNI penetration only 10-20% of US market, presenting further growth opportunities

Growth from light and mid-sized business jet purchases, to access emerging markets (e.g., Asia, Eastern Europe)

Additional growth in customer base: corporate profits (up 30% by 2017) and HNWI (up 60% by 2017)

Likely will not reach US penetration levels due to cultural and regulatory issues (e.g., 22% tax, high fees, airspace inefficiencies)

1


Central Europe expected to see stable growth from large base, though select regulatory constraints remain


1 Based on 1-7 airport infrastructure score from World Economic Forum's Travel and Tourism Report. Factors include: overall quality of air infrastructure, airport density in the country, number of departures, and number of operating airlines

Deep dive to followPositive indicator

Negative indicatorNeutral indicator

Criteria Country assessment

Market opportunity

Supportive environment

Demand drivers

Current and forecast fleet

Govt/ Regulatory

Infra-structure

Addressable fleet size Light/med bizjets Light TP Piston engine

Forecast fleet growth Light/med bizjets Light TP

GDP growth forecast Corporate profits 5 year

growth HNWIs 5 year growth

Airport infra. rating1 Regional airport infra. MRO/FBO availability

Government stability and credit score

Airspace regulation

Tax incentives and fees

Financing availability

Large addressable fleet regional fleet nearly equivalent to Brazil

Moderate growth on large base Jet and turbo-prop growths are above GDP

Moderate GDP growth similar to developed world average Stable but increasing profits

High and growing number of HNWI

Robust airport infrastructure, but certain ATCinefficiencies and very high airport fees

High availability, but expensive higher fees than in US due to expensive land, labor, fuel, and high tax rates

Stable government

Supportive reg. within countries; inefficient handoff between country ATCs (e.g., multi-hour wait times)

High taxes and fees; no accelerated depreciation; high airspace-usage fees

Financing available

A

B

C

D

~750

Value

~500TBD

6% p.a.3% p.a.2% p.a.

30%

60%

4.5-5.5

AA- to AAA

15-25% VATTBD

HighGood

Select inefficiencies

1


Central Europe demand remains high, while Euro-crisis solvency has depressed demand in Northern and Southern Europe

Comparative view of European regions

SwitzerlandOther

BelgiumFranceAustria

Germany

N. Europe

86

S. Europe

152

UK

218

C. Europe

652

Year 1 market opportunity$, million

Credit Rating(S&P)

AA- to AAA AAA

BBB- to AAA

CCC+ to AAA

Recovering economies and significant base create opportunity

Weaker economy and Euro solven-cy concerns limit potential opportunity

Overall market drivers Pent-up demand since

financial crisis Lower corporate adoption

so far than US and lower penetration per capita provide room for growth

Robust airport infrastructure

Business jets drivers Access to Eastern

Europe, Russia/CIS, and select Asian countries will drive growth for mid-size models

Turbo-prop drivers May be used to fly to

countries with poor infrastructure (e.g., Eastern Europe)Corporations(rev. > $100M) ~15k ~10k ~4k~7k

Corp. Profits($) 2.4T ~975bn ~500bn~1.7T

SOURCE: S&P, OneSource, IHS Global Insight

1A


Select inefficiencies in the Western European aviation environment may keep it from reaching US levels of penetration

SOURCE: Expert interviews conducted by McKinsey team

Overview of BarrierBarrier

Competitive infrastructure

Most business hubs in EU are linked by direct commercial routes High speed trains (e.g., TGV) link key cities in UK, France, and Germany These alternatives reduce demand for small / mid-size jets

Cultural norms

Much lower cultural acceptance than US Jets are often portrayed as corporate misuse of funds Government actively discouraging jets to relieve congestion of airports

Higher cost / fees

Netjets estimates a 1.5-2.5x cost multiple over US flying cost Significant costs for airspace (fees >$100 / hour), airport fees, FBO

services, fuel, parking, labor (due to social taxes), etc.

Taxation / depreciation

VAT ranges from 15-25%, charged for flying within a country as well as maintenance, fuel, etc.

Typically amortize assets over 20 years, versus 5 years in the US

Inefficient ATCbetween countries

Handoffs between fragmented ATC centers cause multi-hour delays Limited access to major airports due to lower value proposition for airport Fees for flying across different airspaces based on aircrafts seats,

weight, distance traveled, countries in question, etc.

1D


Europe will likely continue along its recovery, but Euro crisis could reduce growth by ~3% per annum

Scenario

Base Scenario: Steady EU Recovery

Alt Scenario: EU Debt Crisis Occurs

Likelihood1

85-90%

10-15%

EU member countries recover as expected (1-2% GDP growth p.a. 2013-17)

Select interventions may be needed by stable EU countries (Germany) to support smaller ones (Spain, Portugal, Italy, Greece), but overall market grows

Over the next five years, corporate profits gradually increase (33%) as do HNWI (67%), enabling continued demand

5% fleet CAGR 2013-17

Description

EU debt crisis occurs, reducing government stability, financing, consumer confidence, and economic growth (-5-2% GDP growth p.a. 2013-2017)

Sovereign debt levels remain high relative to GDP and various EU countries are downgraded, affecting financing

Jet and turboprop demand falls to a similar growth rate as 2008-12 global financial crisis (1-2%)

2% fleet CAGR 2013-17182 190 199194186

4140393837

219

2017

239

2016

234

2015

229

2014

224

2013

Forecast annual growth ($ mil)2

SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P, IH Global Insight, Credit Suisse

1 Based on varied analyst projections on Euro collapse scenario.2 Business jet projected fleet discounted to account for portion of jets that are large, defined as >15 seats.

519 553 589 628 669

61159

2013

57557

2017

73465

2016

69163

2015

65061

2014

Light / Mid-size bizjetsLight TPs1


Brazil offers a political and cultural environment supportive of private aviation, and the market is enhanced by strong economic growth

Brazil has second largest fleet in the world and highest penetration of HNWI and corporations due to cultural norms, lack of competitive infrastructure, and supportive environment

Customer base increasing immensely, with HWNI and corporate profits expected to double by 2017

High turboprop growth driven by HNWI ranchers, who commute to urban centers from remote ranches with private runways

Business jet growth driven by companies pursuing regional expansion, and HNW families living abroad

Developed airport infrastructure will be maintained by continued government investment (recent $7 billion in airport infra. project)

2


Brazil is a large market opportunity for Cessna with relatively low environmental risks for doing business



Market opportunity


Demand drivers


Govt/ Regulatory

Infra-structure






Airspace regulation



Very large fleet Brazil has the second largest fleet of business jets and turbo props in the world

High fleet growth - Across both business jets and turbo-props

Strong GDP Growth - double the US / EU GDP growth Very high corporate profits expected to double

Very high 800,000 millionaires expected in 2017

Developed regional airport infrastructure robust network of regional airports; HNWI have private runways

Good MRO availability - large regional airports have MROservices; select remote regions (e.g., Amazonias) do not

High political stability high government stability (BBB rating)

Efficient regulation open airspace, easy to register aircraft

Tax incentives / fees - TBD Financing availability - TBD

A

B

C

D

~700

Value

~700TBD

5% p.a.10% p.a.4% p.a.

~100%

~100%

3.91

BBB

TBD

TBD



Good


Good


Supportive

2


As expected, the vast majority of aircraft are located in Sao Paulo and key business centers

000s

5713

75

Others

0

JetsTurboprops

Helicopters

Piston

% fleet by aircraft type

% fleet by aircraft primary use

6911

12 62

Instruction

Air TaxiPrivate Business Aviation

OthersAgriculture

SOURCE: ABAG Second Report of Brazilian Aviation (2012), EBACE (2011), team analysis

Number of aircraft registered by state (2011) 2011 fleet composition

2011 fleet composition

2A


Brazils business jet and turboprop markets have unique demand drivers that may create three specific segments

Brazilian turboprop growth from HNWIRegional trade drive business jets

SOURCE: Expert interviews, Credit Suisse Wealth Report (2012)

+17%

2017F

497

2012

227

2015142013

2

1

0201716

0.80.7 1.00.9 0.9

Light to medium jets demand by companies pursuing regional and intl expansion Jets use driven by regionally (e.g., Sao

Paulo, Rio) and international expanding (e.g., Argentina, Miami) companies

Light jets used for travel between major developed hubs (e.g., Sao Paulo and Rio)

Mid-sized jets for LatAm, US expansion Jets additionally used by HNWI commuting

to international homes Bifurcated society of extremely wealthy

families commuting for safety reasons; want discretion

Turboprops are significant focus for wealthy agriculture or ranch owners Agriculture in Brazil is a $100 billion / year

industry, and covers 400,000 sq mi, driving immense wealth in the country

Increasing turboprop demand from large ranchers and farmholders in remote areas of Brazil (e.g., Amazonias)

Ranchers often have makeshift runways to fly from their land to major cities (to meet with politicians, have social life)

Turboprops, unlike business jets, have ability to handle rougher infrastructure

Corporate profits$ million

High Net Worth Individualsthousands of millionaires

2B


Brazils government continues to support aviation and promote public and private infrastructure investments ($50-100B per year)

SOURCE: BMI, ABDIB; Team Analysis

32 43 4955 66 62

2426 34

3236 42

88

08

83

07

69

2006

56

+13% p.a.

2011

104

10

92

09

PublicPrivate

219

191

163

137

111

+18% p.a.

2016F15F14F13F2012F1

Brazil continues to increase investment in its infrastructureBrazils supportive aviation environment Developed infrastructure in cities and

relatively well developed support mechanisms Some congestion in Sao Paulo, but

not a restriction on growth Variation in degree of FBO / MRO

support at smaller regional airports; key markets supported

Supportive government promoting continued growth Relatively open airspace with

minimal restrictions on airspace Very easy to get planes certified

through Brazils regulatory body (Infraero)

Immense investments planned over next 5-10 years with increasing private partnerships

December 2012: Dilma Roussefannounced $7 bn investment to Brazilian regional airportinfrastructure and support

1 BMI industry definition of infrastructure (graph on the right) is more comprehensive than ABDIB (graph on the left)

2C


Chinas immense customer potential is artificially constrainedin short-term by government policies and infrastructure

Chinas relatively small fleet (140) has seen 30% growth in recent years, driven by strong economics

Driven continued economic growth (GDP 9%+), market drivers of HNWI and Corporate profits expected to double by 2017

Chinas political and regulatory environment constrains penetration in corporations (2% of US) and HNWI (5% of US)

Airspace restrictions, flight planning delays, and infrastructure inefficiencies may limit penetration in short-term

Explosive growth could occur in mid- to long-term with reformsto regulatory environment and investment in infrastructure

3


Chinas political environment and infrastructure are expected to continue to curtail growth of an otherwise robust economy






Market opportunity


Value

Demand drivers

B Highest long-term GDP growth in world Very high and growing corporate profits

Very high 2M millionaires expected by 2017

9% p.a.

~75%

~100%



Infra-structure

C Business jet infrastructure under developed regional airports inadequate; governmental investment expected

Limited FBO/MRO limited support at regional airports, and lack of aviation training among Chinese population

4.24

Govt/ Regulatory

D AA-

22%

Stable, military driven government stable government with strong fiscal position, but little transparency

Highly restrictive air regulation Immense airspace restriction, excessive delays on flight planning (1-6 days; no flexibility)

Very high taxes and restrictive ownership military restricts ownership and operation

Financing availability - TBD

TBD


Airspace regulation

Tax incentivesand fees



A Small/medium fleet size China has only recently begun

developing its fleet, in part due to restrictive policies

Very high growth Chinas fleet should grow significantly from low base

~100~50TBD

15% p.a.


Forecast fleet growth Light/med bizjets Light TP 25% p.a.

Poor


Limited

Restrictive

3


Regulatory and infrastructure constraints detract from theattractiveness of owning business jets in China

Regulatory landscape

Infra-structure availability

US China

Unrestricted ownership Restricted private ownership of aircraft

Approval requires 30 min Flight plan approval requires 1-6 days on average (can be 1 month) minimal flexibility to change

Deregulated airspace Airspace is highly regulated by military; aviation body (CAAC1) controlled by military

Negligible tax only High tariffs (5% import tax + 17% VAT on AC)

No restrictions Domestic flight require Chinese aviators (shortage of trained pilots who fly internationally)

Wide network of both commercial and GA airports

Business jet infrastructure under developed; commercial more robust

Lack of robust MRO services; government investment to develop

Full MRO services

Current regulatory regime will likely prevent explosive growth

Significant pent up demand from HNWI, corporations, and politicians

Some a/c based and registered outside China (especially Hong Kong, Singapore)

SOURCE: Interviews; BCA; Press; team analysis

1 General Administration of Civil Aviation of China, charged with regulating China's airspace, overseeing civil aviation operators, and commercial airline flights

3C 3D


Foreign OEMs often required to leverage local JVs, while sharing IP to establish strong position in market

SOURCE: Interviews; Press releases

Overview

Benefits

Bombardier COMAC Deal Audi A6

Deal between Bombardier and COMAC re: C-series jet, signed in 2012 that enables Bombardier to gain deeper access to China

Goal to achieve gains in product development and cost efficiencies across C-Series and C919

Joint venture between FAW Group and Volkswagen, which began in 1988

Audi locally produced a Chinese version of the A6, which enabled it to rapidly penetrate Chinas premium car market

Bombardier co-developed designs with COMAC, sharing practices and technology regarding their C-Series model to increase commonalities

Audi sold ~400,000 Audi A6s in China in 2012 (a record high), 1/4 of Audis global sales, and 1/3 of Chinese premium car market

One fifth of Audi A6 sales were to governments

Challenges

Bombardier President Hachey cited the sharing of IP in this partnership as a major issue Bombardier had to consider

Concerns remain that local companies may use the IP to compete against Bombardier later

In early 2012, government announced preference for domestic cars to clamp down on waste

Demand shifted to BYD, Guangzhou, and others chosen by local government authorities

Domestic manufacturers may be using Audis IP, discovered from its local production

23 77Bombardier share 100 33 67

Audi marketshare 100

3D


Loosening of Chinas strict regulation aviation could increase demand by up to 20% per annum

Scenario

Base Scenario: Current aviation regulations

Alt Scenario: Loosening of aviation regulations

Likelihood1

90-95%

5-10%

Current government regulation uncertainty limits corporate jet purchases

Assumes tempered market growth, closely tied to GDP

Market underpenetrated due to regulatory restrictions

Similar to 2008-2012 overall fleet CAGR of 23% 19% fleet CAGR 2013-17

Description

Government opens airspace above 20,000 feet, loosens regulations, and makes allowance for corporations to purchase airplanes

SOEs follow US corporations purchasing behavior for jets (same number of jets per unit of revenue)

Market heavily penetrated with jets due to government endorsement, open airspace, and lower flight lead-times

40% fleet CAGR 2013-17 (double 2008-12)

Forecast annual growth ($ mil)2

SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P, IH Global Insight, Credit Suisse

1 Based on interviews with experts regarding Chinas regulatory landscape.2 Business jet projected fleet discounted to account for portion of jets that are large, defined as >15 seats.3 Illustrative trajectory assuming loosening of restrictions at 2012 fleet size.

179156137120 101

80634939

2017

306204

2016

259

2015

219

2014

186

2013

158

Light / Mid-size bizjetsLight TPs

332 463 64890657

2017

1,485

1,266

219

2016

1,062157

2015

760112

2014

54480

20133

389

3D


Indias economic growth and strong environmental support should further drive demand for private aviation

Indias mid-sized fleet (200) has relatively high penetration (60% of US HNWI and 20% of US corp), due to broad geography, lack of competing infrastructure

Geographically dispersed HNW families, and globalizing companies driving demand for business jets (12% p.a.); both expected to increase 40-60% over next 5 years

Environmental drivers include government support (open skies) and developed regional airport infrastructure (built during WW2)

While select bureaucracy may inhibit efficiency, continued government reforms and investment should enable further growth

4


India has significant demand drivers expected to push growth, as well as supportive infrastructure and regulation



Market opportunity


Value

Second highest long-term GDP growth in world Very high and increasing corporate profits

Very high 240,000 millionaires expected by 2017



8% p.a.

~60%

~100%

Demand drivers

B

Well-developed infrastructure regional airports developed during WW2; government is investing $5 billion during next few years on modernizing

MRO/FBO availability variable - remote airports have little support services, though India overall has many trained pilots and engineers

4.11

Infra-structure

C

Highly stable democratic country Stable international relations and economic growth; government subsidies increasing debt

Relatively de-regulated open sky Indian government poses little restrictions, though

High taxes, but reasonable fees India taxes aircraft 26%, but airport use fees are not excessive

Financing availability - TBD


Airspace regulation



BBB-

26%TBD

Govt/ Regulatory

D

Mid-size fleet strong growth (17%) over last five years

Very high jet growth Indias fleet should grow significantly from low base, with strong (12% p.a.) jet growth; limited turboprop (~3%) growth



~100~100

TBD

12% p.a. 3% p.a.


A



Variable


Good


Supportive

4


India has five key factors driving demand for private aviation

Robust economic growth increasing individual and corporate wealth: GDP growth ~8% on average throughout past decade (second to China, making it 10th largest economy); number of millionaires expected to double by 2016

1

Rail and road infrastructure fail to link Indias immense geography: India is the 7th largest country in the world (1.2 million sqmi), but no high speed rail systems linking cities, road infrastructure density is one of lowest in world

2

Well-developed regional airports and supportive government: During WWII, the British colonials build thousands of smaller airports across India for military purposes; government investing USD billions in modernization, and relative open sky policy

3

Indian corporations shift to regional and international expansion: India corporate profits expected to double in next 5 years; global corporations (looking to expand across India and beyond; expected to drive demand for small- to mid-range aircraft

4

Geographic dispersion of HNW families expected to drive private aircraft use: Indian familiar are often geographically dispersed across the country and abroad; HNW families increasingly Owner-Users with small/mid aircraft to maintain family ties

5

4B



India has an overall supportive regulatory and infrastructure environment, with select constraints due to bureaucracy


Chennai & Kolkata Airport upgrades (2006-13)

$1.2B

Delhi & Mumbai airport modernization (2006-13)

$5.0B

35 additional airport modernizations (2006-13)

$1.6B

Various airport Investments in single year (2008)

$1.5B

Flight plan approval for intl flights requires 1 business day

More flexible for flight plan changes than China

Airspace generally deregulated; government supportive of growth in private aviation

26% tax on imported ACIndia

Variable MRO services in India, though significant pilots and trained engineers

Paved airport infrastructure allows connectivity to main hubs only

GA face same delays as commercial airlines; have to go through same processes

Regulatory landscape

Infra-structure availability

Indian government continues to invest heavily in airport infrastructure:

Also, in September 2012, Indian government announced reforms opening aviation to private investment and privatization

4C 4D


Appendix: Additional Detail on Prioritized Markets


C. Europe Market View of Business Jet and Light Turboprop Markets

Avg age: 12

173259273

354

481

3117

+7% p.a.

+6% p.a.

2017F

1,142

5 89 3282 96

168

2012

831

1 3380

127

2007

633

0 20 333 3570 102 32 535

215 209 203133 186

26024

+3% p.a.+3% p.a.

2017F

632

0 00 519 3033 82

2012

537

1 0272864

2007

467

0 00 219 2450

3190

SOURCE: ACAS; Bombardier; Embraer; JetNet

San Marino

Gibraltar

Monaco

Liechtenstein

Netherlands

Belgium

Switzerland

France

Austria

Germany

Business Jets

Light TurbopropsGermany

San Marino

Monaco

Gibraltar

Liechtenstein

Austria

Netherlands

Belgium

France

Switzerland

Avg age: 15

26

74

Heavy

Light/Medium

Business Jet Class (% of jets)

Business Jet Competitors (% of jets)

Light Turboprop Competitors (% of turbo-props)

6235813

4419

Other

Gulfstream AerospaceLearjetBombardier

Raytheon AircraftEmbraer

Dassault AviationCessna Top Model:

Citationjet

1158812

1331

13

OtherHawker BeechcraftPiperPilatusEmbraerSocataCessnaBeech Aircraft Corporation Top Model:

King Air B200

Historical and forecast growth Market characteristics

1


C. Europe Market View of Macroeconomic Growth and Drivers

0

0.5

1.0

1.5

2.0

2.5

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

5,000

4,000

3,000

2,000

1,000

00

1

0

0

0

4

6

12

15

SwitzerlandFrance

Germany

Belgium

San MarinoMonaco

GibraltarLiechtenstein

Austria N/A

Netherlands

SOURCE: IMF country database; World Economic Forum, S&P; Credit Suisse;

1 WEF Ranking Factors include: overall quality of air infrastructure, airport density in the country, number of departures, and number of operating airlines

Infrastructure Index Score1World Economic Forum Index (1-7)

Training centers# of training centers, 2012

Market GDP Growth Forecasts % growth over prior year

Credit RatingS&P rating by country

Corporate Profit Forecasts$ billions

+10% p.a.

2017

5,979

2012

3,747

HNW individuals#, thousands

Corporations#, revenues > $100M

14,478

Germany AAAFrance AA+Switzerland AAABelgium AANetherlands AAAAustria AA+Liechtenstein AAAGibraltar N/AMonaco N/ASan Marino N/A

Germany 5.48France 5.5Switzerland 5.08Belgium 4.3Netherlands 4.99Austria 4.37Liechtenstein N/AGibraltar N/AMonaco N/ASan Marino N/A

Country Macroeconomic Environment


Airport infrastructure

1


C. Europe Business jet market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

26%

9%

19%

19%

21%

8%

5%

9%

OtherEmbraerGulfstreamDassault

Bombardier

Cessna

C. Europe

3%

44%

US

2%

35%

Top-selling models

Top model: Citationjet

Top model: CL604

Top model: Falcon 50Top model: G550

Top model: Phenom 100

1.6%Dassault - Falcon 2000EX 1.8%Bombardier - Learjet 35A 1.8%Dassault - Falcon 7X 1.8%Cessna - Citation Sovere 1.8%Bombardier - Challenger 300 2.1%Cessna - Citation Bravo 2.2%Cessna - Citation II 2.2%Dassault - Falcon 2000 2.3%Cessna - Citation Excel 2.3%Cessna - CJ2+ 2.4%Cessna - Citation Mustang 2.4%Bombardier - Learjet 60 2.4%Dassault - Falcon 900EX 2.6%Dassault - Falcon 50 2.7%Cessna - Citation XLS 2.7%Bombardier - CL604

Gulfstream - G550

2.8%Cessna - CJ3 3.0%Cessna - CJ1 3.1%Cessna - CJ2 3.5%Cessna - Citationjet 5.5%

30Heavy1Light/Medium

70

Business jet segment (% of market)

1 Defined as >15 seats

53%Covered:

1


Competitive Variance

SOURCE: ACAS

11% 11%

8%

10%

12%

7%

13%

50%

36%

6%

8%

Other

Piper

Embraer

Pilatus

Cessna

Socata

Beech

C. Europe

13%

US

0%

16%

Top-selling models

Top model: King Air B200

Top model: TBM700A

Top model: CE208B

Top model: PC-12XII/45

Top model: EMB-121AA

2.8%Socata - TBM850 2.8%Reims - F406 3.4%Pilatus - PC-12 47E/NG 3.5%Socata - TBM700A 3.9%Beech - King Air C90 4.0%Beech - King Air 350 4.5%Beech - King Air C90B 4.5%Piper - PA-46-500TP Mer 5.1%Beech - King Air 200 5.5%Pilatus - PC-12XII/45 5.9%Cessna - CE208B 7.0%Beech - King Air B200 9.6%

Piaggio - P.180 1.6%Beech - King Air E90 1.7%Beech - King Air F90 1.7%Pilatus - PC-12XII/47 1.7%Cessna - CE208 2.1%

Beech - King Air C90A

2.1%Gulfstream - TurboCommander 2.1%Cessna - Conquest I

Embraer - EMB-121AA

Piaggio - P.180 Avanti 2 2.3%Socata - TBM700B 2.3%

2.2%

Top model: PA-46-500TP Mer

82%Covered:

C. Europe Business jet market share by manufacturer and model1


C. Europe Business Jets by Geography

Geneva

ParisVienna

Salzburg

Stuttgart

Zurich

>256-253-52

FranceLiechtensteinSwitzerland

Luxembourg

Belgium

Germany

Austria

1

SOURCE: AMSTAT


FranceLiechtensteinSwitzerland

Luxembourg

Belgium

Germany

Austria

Villacoublay

C. Europe Turbo-props by Geography

>256-253-52

1

SOURCE: AMSTAT


Brazil Market View of Business Jet and Light Turboprop Markets

7

93

Heavy

Light/Medium861680

299

+5% p.a.+18% p.a.

2017F20122007

1,126

711449

+10% p.a.

+10% p.a.

2017F20122007


Avg age:12

Avg age:18

Business Jets

Light Turboprops



Light Turboprop Competitors (% of turbo-props)8

2356

1517

44

OtherBombardierRaytheon AircraftDassault AviationBeech Aircraft CorporationEmbraerLearjetCessna Top Model:

Phenom 100

52337

1420

44

OtherRockwellPilatusMitsubishi Heavy IndustriesEmbraerHawker BeechcraftCessnaBeech Aircraft Corporation Top Model:

CE208B


2


Brazil Market View of Macroeconomic Growth and Drivers



Brazil: BBB Brazil 3.91





012345

2013 2014 2015 2016 2017

2012 2014 2016 2018

1,500

1,000

500

0

1BrazilCorporate Profit Forecasts$ billions

+17% p.a.

2017

497

2012

227



2,607




2


Brazil Business jet market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

29%13%

9%

5%6%

19%17%

6%

15%

OtherDassaultBeechEmbraer

Bombardier

Cessna

Brazil

44%

US

2%

35%

Top-selling models

Top model: Citation Mustang

Top model: Learjet 35A

Top model: Phenom 100Top model: Beechjet 400A

Top model: Falcon 2000

2.7%

Cessna - Citation I 3.1%Embraer - Phenom 300 3.2%Cessna - Citationjet 3.3%Cessna - Citation II 3.6%Cessna - Citation Mustang 3.9%Bombardier - Learjet 35A 4.6%Embraer - Phenom 100 8.6%

Bombardier - Learjet 31ACessna - Citation Excel

2.4%Cessna - CJ2 2.5%

Cessna - Citation XCessna - CJ1 2.4%

2.4%

Cessna - CJ3

2.6%

Cessna - CJ2+ 1.7%Cessna - Citation Bravo 1.7%Cessna - Citation VII 1.8%

2.8%Beech - Beechjet 400A

Raytheon - 125-800XP 2.0%Beech - Hawker 400XP 2.0%Cessna - Citation XLS 2.1%BAe - 125-800B 2.2%Cessna - Citation Sovere 2.3%

7Heavy1

93 Light/Medium



64%Covered:

2


Brazil Turbo-prop market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

31%

11%

3%

50%59%

3%

7%

Brazil

20%

US

0%

16%

Other

MitsubishiEmbraer

Cessna

Beech

Top-selling models

Top model: King Air C90B

Top model: CE208B

Top model: EMB-121ATop model: MU-2 Marquise

1.7%

Beech - King Air 200 1.9%

Beech - King Air B200GT 2.2%

Embraer - EMB-121A1 2.9%

Gulfstream - TurboCommander 3.1%

Beech - King Air C90A 3.2%

Beech - King Air C90GT 3.8%

Beech - King Air C90GTi 4.2%

Mitsubishi - MU-2 Marquise

4.3%


Beech - King Air F90 4.8%

Cessna - CE208 5.0%

Beech - King Air B200 6.0%

Beech - King Air C90 6.5%

Beech - King Air C90B 8.6%

Cessna - CE208B 18.5%

Embraer - EMB-121A

81%Covered:

2


Rio Grande do Sul

Rondnia

Amazonas

Roraima

Par

Amap

Tocantins

Maranho

Piau

Cear

Bahia

So Paulo

Paran

Mato Grosso do Sul

Mato Grosso

Gois

Rio Grande do Norte

Paraba

Pernambuco

Alagoas

Sergipe

Distrito FederalMinasGerais

Esprito Santo

Rio de Janeiro

Acre

Santa CatarinaOsascoSao Paulo

Belo Horizonte

Brasilia

Rio de Janeiro

>256-253-52

Brazil Business jets by geography2

SOURCE: AMSTAT


Rio Grande do Sul

Rondnia

Amazonas

Roraima

Par

Amap

Tocantins

Maranho

Piau

Cear

Bahia

So Paulo

Paran

Mato Grosso do Sul

Mato Grosso

Gois

Rio Grande do Norte

Paraba

Pernambuco

Alagoas

Sergipe

Distrito FederalMinasGerais

Esprito Santo

Rio de Janeiro

Acre

Santa Catarina

Belo Horizonte

Goiania Brasilia

OsascoSao Paulo

Brazil Turbo-props by geography

>256-253-52

2

SOURCE: AMSTAT


China & Hong Kong Market View of Business Jet and Light Turboprop Markets

Avg age: 671

13788

16

2012

+14% p.a.

+31% p.a.

2017F

171

34

2007

232 20

158104714

+27% p.a.

+28% p.a.

2017F

0

158

2012

48

2007

14


China, Hong Kong

China

Business Jets

Light Turboprops


China, Hong Kong

China

Avg age: 6

Heavy 66

Light/Medium

34


Light Turboprop Competitors (% of turbo-props)34488

OtherLearjetHawker BeechcraftDassault AviationIsrael Aircraft IndustriesCessna 13Bombardier 23Gulfstream Aerospace 35 Top Model:

G550

06

1760Cessna

Beech Aircraft Corporation17

PiaggioHawker Beechcraft

Other

Top Model:CE208B


3


China & Hong Kong Market View of Macroeconomic Growth and Drivers

China AA-China, Hong Kong AAA

China 4.24China, Hong Kong 5.1

02468

10

2013 2014 2015 2016 2017

8,000

2,000

020172016201520142013

6,000

4,000

0

4

China, Hong Kong

China







Corporate Profit Forecasts$ billions

1,056

+15% p.a.

2017

2,081

2012



12,572




3


China Business jet market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

23%13%

9%8%

19%

23%

9%

35%

8%

Other

Israel AircraftDassault

Cessna

Bombardier

Gulfstream

China

13%

US

5%

35%

Top-selling models

Top model: G550

Top model: CL605

Top model: CJ1

Top model: Falcon 7XTop model: G200

Bombardier - Global Express 1.6%Beech - Hawker 900XP 1.6%Cessna - Citation XLS 1.6%Cessna - Citation II 1.9%Beech - Hawker 4000 1.9%Bombardier - Challenger 300 2.5%Bombardier - CL604 2.5%Gulfstream - Gulfstream V 2.5%Bombardier - Global XRS 2.5%Cessna - Citation Sovere 2.9%Dassault - Falcon 7X 3.2%Gulfstream - Gulfstream IV 3.2%Cessna - CJ1 3.8%Bombardier - Global 5000 3.8%Raytheon Aircraft - 125-800XP 3.8%Bombardier - CL605 6.7%Gulfstream - G450 9.5%Israel Aircraft - G200 11.1%Gulfstream - G550 16.2%

62Heavy1

Light/Medium38



Covered: 83%

3


China Turbo-prop market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

50%

33%

32%

6% OtherPiaggio

Beech

Cessna

China0%

60%

US

2%

16%

Top-selling models

Top model: CE208B

Top model: King Air C90GTx

Top model: P.180 Avanti 2Beech - King Air 350i 1.2%

Piaggio - P.180 1.2%

Beech - King Air 350ER 2.5%

Piaggio - P.180 Avanti 2 2.5%

Beech - King Air B200 3.7%


Beech - King Air C90GTi 4.9%

Beech - King Air C90GTx 8.6%

Cessna - CE208 23.5%

Cessna - CE208B 48.1%

100%Covered:

3


>256-253-52

China Business jets by geography

Sichuan

Heilongjiang

Jilin

Liaoning

Hebei

Shandong

Fujian

Jiangxi

Anhui

Hubei

Hunan

GuangdongGuangxi

Shanghai

Henan

Shanxi

Hainan

InnerMongolia

Shaanxi

Ningxia

Gansu

Qinghai

Guizhou

Yunnan

Tibet

Xinjiang

Jiangsu

Zhejiang

Tianjin

Beijing

Chongqing

Beijing

3

SOURCE: AMSTAT


>256-253-52

ShanghaiSichuan

Heilongjiang

Jilin

Liaoning

Hebei

Shandong

Fujian

Jiangxi

Anhui

Hubei

Hunan

GuangdongGuangxi

Shanghai

Henan

Shanxi

Hainan

InnerMongolia

Shaanxi

Ningxia

Gansu

Qinghai

Guizhou

Yunnan

Tibet

Xinjiang

Jiangsu

Zhejiang

Tianjin

Beijing

Chongqing

China Turbo-props by geography3

SOURCE: AMSTAT


India Market View of Business Jet and Light Turboprop Markets

Heavy25

Light/Medium75

185

105

49

+12% p.a.

+17% p.a.

2017F20122007

1109480

+3% p.a.+3% p.a.

2017F20122007


Avg age:10

Avg age:12

Business Jets

Light Turboprops



Light Turboprop Competitors (% of turbo-props)

568

Other 14Israel Aircraft IndustriesLearjetRaytheon AircraftDassault Aviation 14Bombardier 14Hawker Beechcraft 16Cessna 23 Top Model:

Falcon 2000

0015911

OtherReimsNALPiaggioHawker BeechcraftCessnaPilatus 12Beech Aircraft Corporation 63Top Model:

King Air B200


4


India Market View of Macroeconomic Growth and Drivers



India: BBB- India: 4.11





02468

10

2013 2014 2015 2016 2017

20172016201520142013

2,000

1,500

1,000

500

0

5IndiaCorporate Profit Forecasts$ billions

242158

+9% p.a.

20172012



2,157




4


India Business jet market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

27%19%

9% 14%

6%16%

19%

21%

8%

Other

Raytheon

Dassault

Beech

Bombardier

Cessna

India

23%

US

4%

35%

Top-selling models

Top model: CJ2

Top model: CL604

Top model: Hawker 850XP

Top model: Falcon 2000

Top model: 125-800XP

1.9%Gulfstream - Gulfstream III 1.9%Dassault - Falcon 2000LX 1.9%Bombardier - Global XRS 1.9%BAe - 125-700B 2.3%Beech - Hawker 400XP 2.3%Cessna - Citation XLS 2.3%Beech - Beechjet 400 2.3%Gulfstream - Gulfstream IV-S 2.3%Cessna - CJ2+ 2.3%Cessna - Citation II 2.8%Bombardier - Challenger 300 2.8%Cessna - Citation Excel 2.8%Israel Aircraft - G200 2.8%Raytheon - Premier IA 3.3%Bombardier - CL604 3.3%Embraer - Phenom 100 3.3%

Dassault - Falcon 900EX

4.2%Raytheon - 125-800XP 4.2%Beech - Hawker 900XP

Cessna - CJ2

Beech - Hawker 850XP 6.6%Dassault - Falcon 2000 7.5%

4.2%

Heavy1 25

Light/Medium75



Covered: 70%

4


India Turbo-prop market share by manufacturer and modelCompetitive Variance

SOURCE: ACAS

24%

10%

12%

50%

71%

6% Other

Cessna

Pilatus

Beech

India

11%

US

16%

Top-selling models

Top model: King Air B200

Top model: PC-12XII/45

Beech - King Air C90GT 0.6%Cessna - CE208 0.6%Reims - F406 0.6%Beech - King Air 250 0.6%Beech - King Air 300LW 0.6%Beech - King Air C90GTi 0.6%Pilatus - PC-12 47E/NG 0.6%Beech - King Air C90GTx 1.2%NAL - Saras 1.9%Beech - King Air B200GT 1.9%Pilatus - PC-12XII/47 1.9%Beech - King Air 200C 2.5%Piaggio - P.180 Avanti 2 3.1%Beech - King Air 350 5.0%Beech - King Air C90 6.2%Cessna - CE208B 6.2%Pilatus - PC-12XII/45 6.8%Beech - King Air C90A 8.1%Beech - King Air C90B 16.1%Beech - King Air B200 34.8%

Top model: CE208B

100%Covered:

4


Andaman & Nicobar Islands

Jammu andKashmir

HimachalPradesh

PunjabChandigarh

Uttarakhand

Haryana

DelhiRajasthan

Uttar Pradesh Bihar

Sikkim

Arunachal Pradesh

NagalandManipur

MizoramTripura

Meghalaya

Assam

West Bengal

Jharkhand

Orissa

Chhattisgarh

Madhya PradeshGujarat

Maharashtra

Andhra Pradesh

Karnataka

Lakshadweep

Kerala PuducherryTamil Nadu

Goa

New Delhi

Mumbai

>256-253-52

India Business jets by geography4

SOURCE: AMSTAT


India Turbo-props by geography

New Delhi

Andaman & Nicobar Islands

Jammu andKashmir

HimachalPradesh

PunjabChandigarh

Uttarakhand

Haryana

DelhiRajasthan

Uttar Pradesh Bihar

Sikkim

Arunachal Pradesh

NagalandManipur

MizoramTripura

Meghalaya

Assam

West Bengal

Jharkhand

Orissa

Chhattisgarh

Madhya PradeshGujarat

Maharashtra

Andhra Pradesh

Karnataka

Lakshadweep

Kerala PuducherryTamil Nadu

Goa

>256-253-52

4

SOURCE: AMSTAT


Appendix: Additional industry context and select data on pistons

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Questions to be answered by worldwide segmentation

1 What are the priority international markets for Cessna to target? Which countries should Cessna target? What drivers and constraints (e.g., demographic, economic,

regulatory) can unlock or limit the market opportunity?

2 What are important customer needs within priority markets? Are foreign customers buying criteria and decision processes

significantly different than those in the US ? How can we segment customers (and size segments) to focus efforts? What is the market size and breakdown of key segments?

3 Which marketing and sales initiatives should Cessna focus on in global markets? Which initiatives will generate near-term sales opportunities? What local partners, relationships should Cessna consider in focusing

on underserved high value markets? How should Cessna prioritize and implement these new initiatives?

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CAGR(2012-17)

7%

10%

4%

7%

3%

Global installed base of business jets by geography

Strong growth in international markets will make them increasingly important to Cessnas future

79%68% 66% 62%

11%15% 15% 16%

11% 11%9%

4%3%3%

4%4% 4%

2008

4%

2003

6%4%

2012

APACME & Africa

2017F

Europe

NAM

LATAM

SOURCE: JP Morgan; ACAS aircraft database, Bombadier, JetNetIQ, Embraer

Rest of world

NAM

Forecast

Business jet market continues to shift away from NAM. Similar trend occurring in turboprops.

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In fact, Asia and Latin American regions constituted nearly 50% of the growth from 2008-12, driven by a few markets

100% = 2,317 jets2

New growth markets

Middle East & Africa

154(7%)Europe 262

(11%)

Asia 339(15%)

Latin America

741(32%)

North America

801(35%)

1 From Sept 2008 to Sept 2012 2 Pie excludes 20 jets with unknown regional origin

Business jet fleet growth by region (2008-12)1

631532

64

85

Other S. Amer.ColombiaBritish Virgin Is.ArgentinaVenezuelaMexico 138Brazil 344

48

14

14

43

48

All other Asia

Thailand

Indonesia

Australia

India

China 159

Latin America

Asia

Bus. Jet Fleet Growth# jets (2008-12)Country

Key countries driving high growth markets

SOURCE: McKinsey analysis, JP Morgan; ACAS

La

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odified 3/8/2013

1:28

PM E

aste

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rd Tim

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rinted 3/8/2013

1:29

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Some growth option clusters in particular have very low penetration and potential for dramatic economic growth, signaling upside for Cessna


16

30

102

111

116

116

124

168

174

284

317

345

439

570

574

648

788

789

Indonesia

S. Europe

United Kingdom

C. Europe

Czech R., Pol., & Slovak.Australia

N. Europe

Jordan & Lebanon

Canada

Brazil

Nigeria, Kenya, Tanzania

China & Hong Kong

Russia & CIS

India

Saudi Arabia & UAE

Turkey

1,181

1,083

United States

Mexico

Venez., Arg., Colomb.

South Africa

Fleet as a function of GDP# of planes per $1 Trillion of GDP

11

11

92

270

120

65

44

74

188

133

260

534

860

521

523

1,565

Fleet per 1,000 HNWI# planes

Fleet per 1,000 corporationsCorporations revenues >100M USD

0.1

0.6

1.3

1.3

1.1

1.0

0.3

0.3

2.3

6.1

6.5

1.7

20.2


Macroeconomic indicators are helpful to drive projections, but alone are not sufficient to understand fleet growth

01,0002,0003,0004,0005,0006,0007,0008,0009,000

0 200 400 600 800

Country GDP$ billions, 2012

Fleet Size# business jets, 2012

Russia

Japan

Austria

UKFrance Germany

Canada Mexico

China

Brazil

-2

0

2

4

6

8

10

0 5 10 15 20 25 30 35

Historical GDP GrowthPercent CAGR (2008-12)

Historical Fleet GrowthPercent CAGR (2008-12)

Saudi Arabia

Nigeria

Luxembourg

India

Turkey Hong Kong

China

Brazil


Country level insights should additionally include : Small airport

infrastructure Supportive

government policies

Political stability

Corporate profits

HNWindividuals


North American share of global piston engine deliveries is decreasing, with Europe, Asia, and LATAM taking increasing share

SOURCE: GAMA (2011), McKinsey analysis

67 68 59 53 58 50

16 1521

19 12 20

9 8 1014 16 16

9 10 1077

2012

4

2011

5

2010

6

2009

3

2008

2

2007

5 3

Piston engine deliveries by region(% of total deliveries)

Rest of worldNAM


General aviation aircraft are used for a wide array of applications

Business transpor-tation

Corporate/ executive transpor-tation

Air taxi

Aerial application in agriculture

Aerial observation

Personal/ recreational use

Individual or group use for business transportation without a paid flight crew

Individual or group business transportation with a paid flight crew

Includes fractional ownership

On-demand passenger and all cargo operations (excl. air tours, medical, scheduled service)

Refers mainly to agriculture and forestry, e.g., crop and timber production, fertilizer and pesticide application

Aerial mapping/ photo-graphy, patrol, SAR, hunting, traffic, ranching, surveillance, oil and mineral exploration, etc.

Flying for personal reasons Excludes business

transportation

Other aerial applications

External load and other work applications

Air medical services

Sightseeing and air tours

Instructional

Military/ government users

Public health sprayings, cloud seeding, firefighting including forest fires, etc.

Helicopters with external load (e.g., hauling logs)

Other work includes construction, parachuting, aerial advertising

Air ambulance services, rescue, human organ transportation, emergency medical services

Commercial sightseeing

Flying under the supervision of a flight instructor, including student pilot solo flights

Variety of missions, e.g., police observation, military pilot training, personnel transport

SOURCE: GAMA (2011); FAA GAATA survey; company Web sites; McKinsey


Within US, most GA piston aircraft usage is driven by personal, corporate, and instructive uses, whereas turboprops are used more broadly


Usage typeUS FAA categories1

GA turboprop aircraft% of active aircraft

GA piston aircraft% of active aircraft

20

132

00

201

614

121

1819

Aerial observationAgri applicationsInstructiveCorporateBusinessPersonal

On-demand air medicalAir toursAir taxiOtherAero medicalSightseeingOther work3External loadAerial other2

00110000021

81

1173

Total fleet: 9,369 aircraft in use

Total fleet: 155,418 aircraft


Cessna is one of four players that dominate the piston engine market, comprising 75% of global deliveries since 1998

Global PE aircraft deliveries, 1998 - 2011Number of aircraft

4 players comprise 75%+ of globaldeliveries


132152

311

486

487

636

731

892

1,394

2,651

3,0555,071

9,273

Liberty Aerospace

GippsAero

Daher Socata

Aviat Aircraft

Maule Air

Columbia Aircraft

Mooney

American Champion

Hawker Beechcraft

Diamond

Piper

Cirrus

Cessna


The top 10 manufacturers by performance have seen 50%+ dropoff in sales since the 2007 peak

SOURCE: GAMA 2011 Statistical Databook and Industry Outlook

050

100150200250300350400450500550600650700750800850900950

12111009080706050403020120001999

Columbia Aircraft (prev. Lancair)

Columbia Aircraft

American Champion

Hawker Beechcraft

Diamond Aircraft

Piper Aircraft

Cirrus Design Corp.

Cessna


From a global perspective, aggregate single engineand multi-engine aircraft are expected to see along-term decline

SOURCE: GAMA 2011 Statistical Databook and Industry Outlook

26252423222120191817161514131211100908070605040302012000

160,000

155,000

150,000

145,000

140,000

135,000

20,000

15,000

10,000

5,000

020323130292827

Forecast Multi engine

Historical Multi engine

Forecast Single engine

Historical Single engine

Average annual growth, %

-0.1

-0.5

McKinsey & Company | 66SOURCE: Factiva, CAAC, Lit research, Press clippings, Mckinsey anslysis

Chinas general aviation market is similarly limited by regulation,though expected to become significant force in the future

Infra-structure

By end of 2011, China had 70 GA airports and 216 temporary landing points More than 20 provinces and cities in the country had constructed aviation industrial parks Many private enterprises are exploring investment opportunities in general aviation More capital is expected to be introduced into the whole value chain construction

Regulation

Opening of low-altitude air space will proceed in three pilot phases, scheduled to complete by 2015 Jun 2012, General aviation airport construction specification released by CAAC1 , is expected to

guide and stimulate the investment of infrastructures of GA Dec 2012, CAAC and Ministry of Finance released temporary measures to regulate the specific fund

for Chinas general aviation development, which is expected to stimulate the GA and training market

China has large HNWI population with interest in flying constrained by airspace limitations according to PR of China General Aviation Association

Forecast of growth

China regulatory constrains remains a barrier to significant market growth As of 2011 China had 1,124 GA planes including 314 training tails Recreation and training market will be the key lever for GA piston markets Agriculture, aerial work and cabin transportation are three main markets for turbprops Broad GA market in China expected to reach a market value of $1 trillion at peak and become major

force in domestic economy

1. Civil Aviation Administration of China


Cessna 172 and the Chinese Yun-5 aircraft jointly dominates thepiston fleet in market, with ~60% of share

SOURCE: CAAC

11235566121313

2327333743

HaiyanCirrus SR20Piper Seminole PA 44DA-42tb200DA-40Yun-5 148Cessna 172 150

PL-12Cessna 182TCessna 152Cessna T206HCirrus SR22DA-20tb20GA-200Nong-5ALE500

Current piston engine fleet# of aircrafts

Cessna currently the dominant player (30% share), with Yun-5 capturing similar share

The proliferation of flight training schools in China presents an opportunity for the Cessna 172 or 152 due to their size

Yun-5 is a very large Chinese-made single-engine piston aircraft, that would not be used for flight training

McKinsey & Company | 68SOURCE: Airports Authority of India (AAI); press search; Chamber of Commerce India (2010); SP Aviation(Feburary 2013)

Infra-structure

Lack of aviation infrastructure for GA still most inhibiting factor - India requires 200 airports by 2020 for general aviation purposes

Indias Airports Authority has started ~$5 billion+ modernization efforts of non-metro airports in 2011 for 60 locations, out of which 35 have been started

Main infra. issues: safety concerns, lack of skilled labor (e.g., maintenance and ground services), lack of airfield information about small airports, lack of navigation aids, and limited hangar parking space

General aviation in India - trends

Regulation

Due to a nascent GA sector, regulations are airline centric current regulatory environment has many disincentives for general aviation and their operational and infrastructural needs are often ignored

Process of importing aircraft perceived to be bureaucratic, complex Financial burden on small operators due to regulatory requirements These issues are starting to receive attention in the media, and many Indian conglomerates in the

sector (e.g., Tata and Mahindra) pushing government to change regulation

Applications

The presence of global businesses as well as mining, oil, tourism applications are main drivers of increased activity in general aviation

Increasing demand for helicopter service, especially due to the oil and gas industry

Forecast of growth

In India, general aviation is still a nascent market compared to the countrys size By 2020, the Indian general aviation fleet is expected to reach 2,000, from 680 today Untapped potential - aircraft movement for general aviation comprised only 15% (including business

jets, helicopters, small a/c) of total movements as of Oct-2011


Cessna dominates the piston fleet in India, with 53% of pistonengine aircrafts, primarily the Cessna 152

SOURCE: Airports Authority of India (AAI)

3333334444556681010121517

2231

5059

113

PIPER SUPER CUB PA-1ZENITH CH 2000CESSNA 172PZENAIR STOL CH 701TRINIDAD TB20CESSNA SKYHAWK 172 SPP68CSWATI TRAINER LT-2MHANSA-3DIAMOND DA-40 CS AIRCRAFTCESSNA 172PUSHPAK MK-1CESSNA 172RCESSNA 152

ZLIN143LZENAIR STOL CH601THORP T 211DIAMOND DA42L360DIAMOND DA 40DCESSNA 172R GA AIRCRAFTSWATI TRAINER LT-1MPIPER CUB SPECIAL J3DIAMOND DA 40CESSNA 206HZLIN Z 242 L

Cessna currently the dominant player (53% share), driven primarily by the 152 and 172 small piston engines

Current piston engine fleet# of aircrafts

McKinsey & Company | 70SOURCE: Factiva (Brazil's booming general aviation sector, Aug 2012), http://www.aroundtherings.com , Brazil Gov portal

General aviation is expansive in Brazil, and infrastructure and regulatory improvements will allow further growth

Infrastructure

General aviation serves 3,500 destinations In December 2012 Brazils president announced Logistics Investment Program -- Airports, a program to

improve the infrastructure and quality of airport services and to increase access to air transportation for the Brazilian population, strengthening and expanding regional aviation through investments and incentives

Over R$ 7.3 billion in investments is planned for the expansion of regional aviation services

Regulation

Regulation to authorize public civil airports and airfields dedicated exclusively to general aviation was published on December 21, 2012, which aims to increase the supply of airport infrastructure dedicated to general aviation: Regulatory improvement for slots (times of arrivals and departures) in airports which already

operate at full capacity Authorization for airports dedicated to general aviation

Applications (medical, transport, HNWI etc.)

The economy is booming, the companies, the number of rich people and this means higher sales of aircraft - Dorieldo Luis dos Prazeres, Brazilian Civil Aviation Agency

Perception changes These aircrafts are no longer viewed as luxury in Brazil, but as a tool which makes it possible to generate more business in less time"

Forecast of growth

Brazil has the world's second largest general aviation fleet behind the United States As of 2011 it had 13,094 GA planes, Of those, 25 percent are based in Sao Paulo The sector grew 6.4 percent from 2010 to 2011 and is forecasted to grow 4.5 to 5 percent


Brazils piston-engine fleet is concentrated in Sao Paolo and comprised mostly of single-engine piston aircrafts

SOURCE: ABAG

Pistons by engine type (L1P single, L2P double)Number of piston engine aircrafts

Usage of piston aircrafts by engine typeNumber of piston engine aircrafts

Number of piston engines registered by state (2011)

Double engine

2,032 2,147

Single engine

7,6537,306

2584001,0511,074

4,870

117449471,534

Private Air Service

Intruction Agricultural Aircraft

Air Taxi Other

2011

2010

Double engine

Single engine

5% 6%

international mkt pri

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