regional director of marketing boeing commercial airplanes ......e.g. all in-production models plus...

Market Outlook

Kevin BruceRegional Director of MarketingBoeing Commercial Airplanes

November 2002

Market Outlook

Kevin BruceRegional Director of MarketingBoeing Commercial Airplanes

November 2002

Agenda

! Current Situation

! Market Evolution

! 2002 Current Market Outlook

The Underlying Dynamics of Our Industry

Air Travel Has Become Disconnected from Economic Growth

-2.5

0

2.5

5

7.5

-5

0

5

10

15Percent change in RPKsPercent change in GDP

World GDP

World RPKs

Asian economicslump affected primarily Asian

airline traffic

Terrorism threat duringGulf War affectedworldwide traffic

Terrorism in U.S.has affected

worldwide traffic

1990 1995 2000

2002 World Outlook

$0 $2,000 $4,000 $6,000 $8,000

Eastern Europe*

Mexico*

India*

Australia

Russia*

Canada

China* (mainland)

Britain

South America*

Other Asia*

Japan

United States

Euro Area

World Growth 1.5% 2003 2.5%

GDP, Billions U.S. Dollars

SatisfactoryCautionaryMajor Concern

G

RY

0.8%""""

* All Markets based on The Economist consensus forecasts.Major markets updated monthly; emerging markets quarterly.

4.5%

-1.4%

7.8% ➡➡➡➡

4.0% ➡➡➡➡

4.8%

1.5%

1.9%

2.4%""""

-0.7%""""

1.6%

3.3%

3.8%""""

-30

-20

-10

0

10

20

30

J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N

Mo. % Change - HistoryMo. % Change - Forecast12-Mo. Avg. - History12-Mo. Avg. - ForecastLatest Estimate

Latest 12-month Average = -10.8%Long-term Forecast = 4.9%

Source: ROM Associates

Monthly Percentage

Change Over

Prior Year

1998 1999 2000 2001

World Air Traffic Recovering Slowly

2002 2003

Major World Markets, Revenue Passenger Miles

-40

-30

-20

-10

0

10

20

30

40



U.S. Domestic Traffic Remains WeakSept. shows growth over 2001; but still well below 2000

Monthly Percentage

Change Over

Prior Year


Source: ROM Associates, ATA, and Airline Reports

U.S. Domestic, Revenue Passenger Miles

1998 1999 2000 2001 2002 2003

-30

-20

-10

0

10

20

30


Mo. % Change - HistoryMo. % Change - Forecast12-Mo.Avg. - History12-Mo. Avg. - ForecastLatest Estimate

Major Airline International Revenue Passenger Miles

Source: ROM Associates, AEA, and Airline Reports


European Traffic is Slow to Improve

1998 1999 2000 2001 2002 2003

Monthly Percentage

Change Over

Prior Year

-30

-20

-10

0

10

20

30



Major Airline International Revenue Passenger Miles

Source: ROM Associates and AAPA


Asian Traffic is Improving Faster Than Expected

1998 1999 2000 2001 2002 2003

Monthly Percentage

Change Over

Prior Year

World Air Cargo Is Recovering

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1998January

1999January

2000January

2001January

2002January

M M J S N

Mo. % Change - History12-Mo. Avg. History

12-Mo. Avg. ForecastMo. % Change - Forecast

Sources: U.S. Department of Commerce, AAPA, AEA, ATA and the Boeing World Cargo Forecast.

Monthly Percentage

Change Over

Prior Year

Latest 12-Month Moving Average = -7.0%Long-Term Forecast = 6.4%

1998 1999 2000 2001 2002

About 4,000 Airplanes Are Closing Inon Retirement

Period I Period II Period III

Scrapped1,200

Parked100

Active100 Scrapped

2,000

Parked1,300

Active2,600

Parked580

Active11,600

e.g. 707, DC-8 e.g. 727, 737-100/200, 747-100/200/300, DC-9, DC-10, A300

e.g. All in-production models plus MD-11, MD-80, 737 Classic

• Three flight crew• Stage I noise• Turbojets, early turbofans• 4-engines• High fuel burn

• Two/Three flight crew• Stage II noise (later hushkits)• Early turbofans• Tri-jets, short-haul twins• ~30% lower fuel burn

• Two flight crew• Stage III noise and quieter• High-efficiency turbofans• Twinjets dominate• ~70% lower fuel burn

1,400 Airplanes 5,900 Airplanes 12,300 Airplanes

Scrapped120

Growth in Parked Fleet Has Stabilized

-500

0

500

1000

1500

2000

2500

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 9/11 12/31 1/14 2/12 3/14 4/12 5/14 6/13 7/11 8/13 9/13-5%

0%

5%

10%

15%

20%

25%Period IPeriod IIPeriod IIIWithdrawn from ServicePercent of Fleet

Number of Parked Airplanes (Worldwide)

Western-built, commercial jet fleet. Source: Airclaims Ltd. (through September 13, 2002).

1,957 Airplanes(12% of Fleet)

Percent of Fleet

Parked at Year-End

Scrapped During Year

2001 2002

Monthly Updates

Economic Growth

Traffic Growth(early 2003)

Airline Profits(late 2003)

Airplane Orders

Airplane Deliveries

Capacity Requirement

Timeline for Industry Recovery

Parked Fleet

9/11(late 2003/2004)

(2004)

Passengers Drive Airline Strategies

Air Travel Growth Has Been Met By Increased Frequencies and Nonstops

AirTravel Growth

Average Airplane Size

TotalFrequencies

Nonstop flights

Index 1980 = 100

Few Choices Prior to Liberalization

Liberalization Has Led to Market Fragmentation

777 Is Fragmenting the North PacificAs 767 Did the North Atlantic

2002 Current Market Outlook

1970 1980 1990 2000 2010 2020

Air Travel Growth Varies by Region

0 500 1,000 1,500 2,000

Europe-Mid-East

Africa - Europe

Europe - L. Amer.

No. Amer. - L. Amer.

Latin America

Transpacific

Europe - Asia

No. Atlantic

Europe

Asia-Pacific

No. America

Added traffic, 2002 - 2021

RPKs (billions)

2001 traffic2002-2021

growthAnnual

growth %3.5%

6.2

4.3

5.4

5.5

7.9

5.0

4.9

4.8

5.2

4.7

4.9% World Average

Regional Market Evolution Shapes Fleet Requirements2002 - 2021

0

500

1,000

1,500

2,000

2,500

2001 2021 2001 2021 2001 2021 2001 2021 2001 2021 2001 2021

747 and largerTwin-aisleSingle-aisleSmaller regional jets

ASKs (billions)

Asia-Europe Trans-Pacific North Atlantic EuropeAsia-Pacific North America

Long-term Demand for New AirplanesRemains Strong

8,566retained fleet

6,705 replacements

17,224growth

airplanes

0

10,000

20,000

30,000

40,000 Units

15,271

32,495

23,929

20212001

Airlines Will Need Nearly 24,000New Airplanes

Nearly 24,000 Airplanes

Smaller regional jetsSmaller regional jetsSingleSingle--aisleaisleTwinTwin--aisleaisle747 and larger747 and larger

2002-2021

4%4%

21%21%18%18%

57%57%

1.8 TrillionDelivery Dollars*

* In year 2001 dollars

42%42%

5%5%

41%41%

12%12%

European Airlines Will NeedNearly 7,400 New Airplanes

2002 - 2021

7,379Airplanes

Smaller regional jetsSmaller regional jetsSingleSingle--aisleaisleTwinTwin--aisleaisle747 and larger747 and larger

2002-2021

16%16%

64%64%

3%3%17%17%

485.3 BillionDelivery Dollars*

* In year 2001 dollars

35%35%

50%50%

9%9% 6%6%

European Market

RPK share (domiciled)

Rest of theworld

Europe

! 25% of the world’s traffic originates in Europe

! Despite the current crisis, long term traffic trends are strong

0 200 400 600 800 1000 1200

Europe-Southwest Asia

Europe-China

Europe-Middle East

Europe-Central America

Europe-South America

Europe-Northeast Asia

Europe-Southeast Asia

Europe-Africa

Europe-North America

Europe-Europe

European Air Travel Growth Varies by Region

RPKs, billions

2001 Traffic Growth in 2002-2021 4.7%

3.6%

4.7%

4.8%

5.8%

5.8%

4.2%

4.2%

5.2%

6.0%

World Growth 4.9%

Current Market Segmentation

! Network Carriers account for 78% of passengers

! Leisure Carriers accounts for 13%

! Low Fare Carriers account for 8-10%

Network Carriers

Leisure Carriers

Low Fare Carriers

European Region Passengers

0% 10% 20% 30% 40%

LowFare

Network

Leisure

Passenger growth

Low Fare Carriers Have Fastest Growth

! Low Fare growing at 30%

! Network Carriers have 5% growth

! Leisure Carriers are growing slowly at 2%

European Outlook

! Many independent Network Carriers

! Fewer Network airlines! Most in strategic global

alliances! A few niche carriers

! Consolidated Tour Organizations

! Leisure and Low Fare carriers share some markets

! From no Low Fare Carriers…

! …to a shakeout of the most successful of the Low Fare Carriers

A Safe & Efficient Global Air Transport SystemAirplanes, Services and Customer Solutions

Summary

! Economic growth will return and traffic growth will rebound to long-term trend

! Passengers’ demand for shorter trip times, nonstop flights and more frequency choices will drive airline strategies and airplane selection

! Airline fleets will reflect passengers’ demands, and almost 24,000 new airplanes will be needed

! Boeing is committed to helping our customers succeed

regional director of marketing boeing commercial airplanes ......e.g. all in-production models plus...

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