BCA 2012 Market Forecast

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    COMMERCIAL AIRCRAFT

    MARKET

    FORECAST2012-2031

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 02TABLE OF CONTENTS

    Executive Summary

    Economic Trends

    Airline Industry Trends

    The Forecast

    Conclusion

    Geographic Details

    03

    07

    16

    28

    36

    38

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 03

    EXECUTIVESUMMARY

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 04EXECUTIVE SUMMARY

    Welcome to the Bombardier

    Aerospace Commercial Aircraft

    Market Forecast, our 20-year view

    of the market for 20- to 149-seataircraft.

    World airline profitability in 2011 was estimated

    by International Air Transport Association

    (IATA) to reach $7.9 billion, the second

    consecutive year in which all regions were

    break even or profitable. This expansion

    was fueled by continuous traffic growth and

    steady increases in overall ticket prices.These positive trends were countered by

    rising oil prices, continued financial turmoil in

    the Eurozone and increased political tension

    in the Middle East and North Africa. While

    airline profitability was considered fragile,

    it was contrasted by another record year for

    aircraft orders. The growing backlog in the

    large single-aisle aircraft segment remains

    a concern, as a sharp increase in traffic demandwould be required to absorb the excess

    capacity represented by these orders. After

    even a few tough years of industry consolida-

    tion and tremendous discipline in constraining

    capacity growth, it is difficult to understand

    the rationale behind deliberately introducing

    excess capacity back into the system. As op-

    timization is always the survival instinct of the

    aviation industry, it will eventually find its wayto adapt, adjust and ascend going forward.

    MATURE MARKETS

    IHS Global Insight reduced its long term

    forecast of GDP growth from 3.4% last year

    to 3.26% in 2012. North America and Europe

    are forecast to have below-average GDP

    growth for the next 20 years. In a mature

    market, where route network and business

    models are fully established, most demand12,80020- to 149-seat total

    DELIVERY FORECAST(UNITS)

    Segments Deliveries

    20- to 59-seat 300

    60- to 99-seat 5,600

    100- to 149-seat 6,900

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 05EXECUTIVE SUMMARY

    for commercial aircraft will result in the need

    to rejuvenate an ageing fleet as it approaches

    retirement. Even though these regions are

    expected to see only small organic growth

    year over year, their significant installed bases

    will continue to require a large number of new

    aircraft for the next 20 years.

    GROWTH REGIONS

    The growth regions of Africa, Asia/Pacific,

    Latin America, Middle East and Russia & CIS,

    where long-term GDP growth is forecast

    above average, will require a significant

    number of new aircraft to support the growth

    of the aviation industry. In addition to more

    capacity, new airline business models and

    network connectivity are being tested or

    optimized by airlines and entrepreneurs.

    Aircraft in various capacities are all needed

    to help shape the development of the

    industry in these growth regions.

    OPTIMIZATION

    The financial viability of the airline industry

    is extremely dependent on the external envi-

    ronment, yet the industry is also very resilient,

    due to its relentless drive for optimization.

    The increased price of oil predicted by the

    U.S. Energy Information Administration (EIA)

    is the single most concerning factor in airline

    economics over the forecast period. Thisconcern is further amplified by the increase

    in oil price forecast, since EIA issued its

    Annual Energy Outlook last year, by nearly

    $20, reaching $126 per barrel average for

    next 20 years. While airlines successfully

    managed increasing fuel costs by raising

    ticket prices last year, the continuous pressure

    transferred from cost to ticket price will soon

    reach the tipping point of consumer price

    resistance. Aircraft with the lowest cost and

    high performance capability will thereforebe favored going forward.

    Airlines strive to optimize their fleet

    solutions to best serve their customers

    needs. Airline customers expect frequency,

    schedule, comfort and competitive fares

    while traveling on modern aircraft. New

    aircraft designs continue to focus on

    optimizing performance, lowering fuel

    consumption, reducing environmental foot-

    print and maximizing cabin comfort.

    0

    4,000

    8,000

    12,000

    16,000

    20,000

    2011 2031

    9,000

    6,800

    1,200

    20- to 59-seat

    60- to 99-seat

    100- to 149-seat

    Source: Bombardier Commercial Aircraft Market

    Forecast 2012-2031, OAG Aviation Solutions.

    Total Fleet

    Units 11,200 17,000

    TOTAL FLEET UNITS

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 06EXECUTIVE SUMMARY

    THE 20- TO 149-SEAT MARKET

    Aircraft deliveries in the 20- to 59-seat market

    will decline substantially over the next 20 years.

    This capacity will gradually shift to larger and

    more economical regional aircraft. Demand

    for new aircraft in this larger, more economical

    regional aircraft segment is expected to

    increase in the latter half of the forecast

    period, driven mainly by the anticipated

    availability of new technology. Some 300

    units will be delivered by the end of the

    forecast period. In the near and mid-terms,

    the pre-owned markets will continue to

    supply the aircraft needed in this segment.

    In particular, Russia, Africa and Latin America

    will see considerable absorption of used

    50-seat regional jets.

    Regional airlines are gradually anchoring

    their business models around large regional

    aircraft in the 60- to 99-seat segment, both

    turboprops and jets. With increased capacity,lower per-seat operating costs and a seam-

    less service offering, large regional aircraft

    connect route networks by adding new city

    pairs. This service provides connections not

    only between major airports, but also linking

    secondary and tertiary airports. With some

    5,600 units forecast for delivery, this segment

    will experience the strongest fleet growth

    over the next 20 years.

    The 100- to 149-seat aircraft segment will

    enjoy the strongest growth in terms of deliv-

    eries. This segment is currently dominated

    by ageing aircraft. Thanks to step change

    engine technology, the arrival of new aircraft

    specifically designed for this segment will

    invigorate market demand to further optimize

    airline route networks and profitability. We

    forecast deliveries of 6,900 aircraft in the 100-

    to 149-seat segment over the forecast period.

    The commercial aviation industry is an

    integral component of the global economy.

    The long-term economic outlook supports

    continuous demand for new, optimized

    capacity and more fuel efficient aircraft, with

    deliveries of 12,800 new aircraft predicted

    over the next 20 years

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 07

    ECONOMICTRENDS

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 08ECONOMIC TRENDS

    ECONOMIC AND AIR TRAVEL

    GROWTH

    The worlds recovery from the 2008 financial

    crisis began in 2009 and has continued, at

    varying paces and with varying degrees of

    success into 2012. Growth in gross domestic

    product (GDP) has reflected this variation,

    reaching 4.1% in 2010 and 2.7% in 2011. The

    recovery has slowed due to continuing eco-

    nomic concerns, notably the Eurozone crisis,

    high and volatile oil prices (as discussed

    below) and Chinas ability to sustain its

    comparatively rapid growth, the recovery

    has slowed. As a result, IHS Global Insight has

    reduced its expected rate of GDP compound

    annual growth for the 2012 2031 forecast

    period, from 3.4% (2011 2030) to 3.26%.

    The economic recovery is taking longer than

    expected in mature markets, while growth

    in emerging economies has returned to

    pre-crisis rates; whether they will be able tosustain this pace remains to be seen.

    Demand for air travel, and with it the health

    of the worlds airline industry, depends heavily

    on the strength of the economy. Most recently,

    IATA reported a 7.4% increase in international

    passenger travel (based on revenue passenger

    kilometers (RPKs)) for the month of April 2012,

    compared to April 2011. Demand for air travel

    is also reflected in orders for new aircraft. New

    aircraft order intake (encompassing 20 - 220

    seats) more than quadrupled from 2009 to

    2011. Net orders rose to 2,381 units in 2011, up

    from the 2010 tally of 1,414 units, which itself

    more than doubled the 2009 pace of 556

    aircraft orders.

    WORLD REAL GDP GROWTH %, 2011

    Source: IHS Global Insight 2012.

    Note: GDP = Gross Domestic Product

    1.8%

    World Average 2.7%

    4.2%

    1.8%

    3.44%

    4.8%

    9.2%

    6.8%

    1.3%

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 09ECONOMIC TRENDS

    The continuing recovery in demand for air

    travel is also expected to see a return to

    commercial service of some of the aircraft

    currently parked. The parked commercial

    aircraft fleet has declined by 9% year-over-

    year, to approximately 2,220 at the 2011 year

    end. This total is down from the peak of 2,496

    aircraft idled in 2009, but it remains above the

    10-year low of 1,681 aircraft parked in 2007.

    Regionally, economies outside North America

    and Europe are expected to lead the world in

    GDP growth from 2012 to 2031. According toIHS Global Insight, China is expected to grow

    at 6.6% annually, followed by Africa, at

    4.4%; Latin America, at 4.1%; Middle East,

    3.8% and Asia/Pacific at 3.4%. In contrast,

    the North American economy is expected

    to grow at 2.6%, with Europe trailing, at 2.1%.

    The overall compound annual growth rate,

    as noted, is expected to be 3.26%, with

    non-North American or European economiesaccounting for 61% of the growth.

    COMMERCIAL AIRCRAFT ORDERS AND GDP GROWTH

    Sources: Bombardier Analysis, OAG Aviation Solutions, IHS Global Insight

    3500

    3000

    2500

    2000

    1500

    1000

    500

    0

    1971 1975 1980 1985 1990 1995 2000 2005 2010

    Commercial Aircraft Orders GDP Growth

    7%

    6%

    5%

    4%

    3%

    2%

    1%

    0%

    -1%

    -2%

    -3%

    Demand for air travel

    is also reflected in orders

    for new aircraft.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 10ECONOMIC TRENDS

    North America and Europe have historically

    represented both the largest commercial

    aircraft fleets and the largest markets for

    new aircraft. This year, the Bombardier

    Commercial Aircraft Market Forecast antici-

    pates total demand for new aircraft in the

    20- to 149-seat segments to be evenly di-

    vided between mature and emerging markets.

    Although starting from much smaller base-

    lines (and assuming proportionate growth

    in aviation infrastructure), demand for new

    aircraft is expected to be particularly strong in

    emerging markets, such as China, Asia/Pacific(including India) and Latin America. Europe,

    Africa, and the Middle East are expected to

    require somewhat fewer aircraft during the

    period and North American forecast

    demand remains unchanged.

    As a countrys per capita GDP grows, so

    does its residents desire for travel, and this

    desire in turn fuels demand for aircraft. The

    Bombardier Commercial Aircraft Market

    Forecast, which anticipates long-term growth

    through the continuing economic recovery,

    presents a positive picture of commercial

    aircraft demand through the 20122031 period.

    Overall fleet growth of 52% (2.1% CAGR) and

    12,800 new aircraft deliveries approximately

    half of which will be needed to meet the

    worlds growing demand for air travel - is

    estimated over the forecast period.

    POPULATION GROWTH AND

    URBANIZATION

    The propensity for air travel is closely as-

    sociated with wealth (as represented by

    per capita GDP) and urbanization. As both

    wealth and urbanization increase, particularly

    in emerging markets, the impact on commer-

    cial aviation is expected to be profound.

    The Organization for Economic Co-operation

    and Development (OECD) estimates that

    middle-class consumer spending, as a reflec-

    tion of a regions per capita GDP, will expand

    rapidly in emerging markets. In Asia/Pacific

    (including China and India in the OECD

    analysis), middle-class consumer spending

    is expected to balloon, from $5.0 trillion in

    2009, to $32.6 trillion in 2030 on a purchasing

    Passengers originating from respective country, GDP in 2005 USD.

    Sources: IHS Global Insight 2012, MIDT data, Bombardier Analysis.

    0.01

    0.1

    1

    10

    0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

    TripsperCapita

    2011 Per Capita GDP

    PROPENSITY TO TRAVEL

    New Zealand

    Russia

    China

    India

    UnitedStates

    GermanyBrazil

    Qatar

    Italy

    Israel

    Portugal Switzerland

    Netherlands

    Hong Kong Norway

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 1 1ECONOMIC TRENDS

    power parity basis. In other emerging markets,

    the increase is expected to be substantial, if

    not spectacular. Spending in Central/South

    America is expected to grow from $1.5 trillion

    to $3.1 trillion, while the sub-Saharan Africa

    will see middle-class consumer spending

    grow from $0.8 trillion to $2.0 trillion by 2030.

    Spending in the Middle East and North Africa

    is expected to grow from $0.3 trillion to $0.8

    trillion over the same period.

    Sources: IHS Global Insight, Feb 2012, Bombardier Analysis.

    3.26%

    7.4%

    6.6%

    4.4%4.1%

    3.8%

    2.6%2.4%

    2.0%

    1%

    2%

    3%

    4%

    5%

    6%

    7%

    8%

    World India China Africa Latin

    America

    Middle

    East

    North

    America

    Asia/Pacific

    (ex. China,

    India)

    Europe

    GDP GROWTH RATES

    (2012-2031)

    $5.6 $8.1

    $1.5

    $0.3

    $0.8

    $2.0

    $0.8

    $5.0

    $5.8 $11.3 $32.6 $3.1

    MIDDLE-CLASS CONSUMER SPENDING IN TRILLIONS USD*

    Source: OECD. * On a purchasing power parity basis.

    North

    America

    Europe Asia/Pacific

    Central & South America

    Middle East & North Africa

    Sub-Saharan Africa

    2009

    $21.3

    2030

    $55.7PROJECTED

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 12ECONOMIC TRENDS

    In contrast, while middle-class consumer

    spending in mature markets is expected to

    continue growing, the increases are much

    smaller, with the result that, by 2030, Europe

    and North America together are expected to

    account for approximately 30% of the worlds

    middle-class consumer spending, compared

    to approximately 64% in 2009.

    ASIA, AFRICA AND LATIN AMERICA URBANIZATION

    Latin

    America

    Rest of

    Aisa2China India Africa Europe North

    America

    561

    1,042

    862

    494

    661

    560

    341

    Population living in urban areas

    Millions

    2025

    2009

    461

    739

    624

    356 399

    531

    285

    1Urban population according to national definitions.

    2Excluding China and India.

    Sources: United Nations Population Division Department of Economic and Social Affairs,

    World population prospects: The 2009 revision, March 2010; McKinsey Global Institute analysis.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 13ECONOMIC TRENDS

    Rapid urbanization is also a feature of many

    of these fast-growing economies and presents

    an even more dramatic picture of large-scaleglobal change. The United Nations estimates

    that the population of the worlds urban areas

    will increase by more than 1.1 billion people

    over the period from 2009 to 2025. Urbaniza-

    tion will continue in Europe, and more so in

    North America. However, approximately 92%

    of that urban growth will occur in Africa, Latin

    America, India, China, and the rest of Asia,

    leading to increased demand for air travel in

    those regions.

    CHINA EXPENDITURE ON AIR TRAVEL

    AND GROSS DOMESTIC PRODUCT

    Billions of 2005 U.S. $

    Expenditure on air travel (left scale) Gross Domestic Product (right scale)

    Source: Bombardier Analysis and IHS Global Insight.

    0

    2,000

    4,000

    6,000

    8,000

    10,000

    12,000

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    1990

    1992

    1994

    1996

    1998

    2000

    2002

    2004

    2006

    2008

    2010

    2012

    2014

    2016

    2018

    2020

    2022

    2024

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 14ECONOMIC TRENDS

    OIL PRICE AND VOLATILITY

    The outlook for consistently high oil prices

    and continued oil price volatility presents

    some of the biggest challenges for the world

    airline industry. Jet fuel which closely tracks

    the price of crude oil represents airlines

    largest single expense, now amounting to 34%

    of operating costs on average, according to

    IATA. With this large and growing influence,

    oil prices and oil price volatility are major de-

    terminants of the size and other make-up of

    the commercial aircraft fleet of the future.

    From an average price of $80 a barrel in 2010,

    oil prices rose by $20 to $100 per barrel in

    2011. In the final months of the year, the prices

    spiked higher, and continued upwards by

    8% in the first five months of 2012. Although

    peak prices have not reached the $147 per

    barrel experienced in July 2008, neither have

    they retreated to the December 2008 low of

    less than $35 per barrel. With 2011 average oilprices 25% higher than 2010, we anticipate

    that prices will remain above $100 per barrel

    through 2012 and, indeed, throughout the

    20-year forecast period. In fact, the U.S.

    Energy Information Administration (EIA)

    revised its 20-year average oil price forecast

    from $107 per barrel in 2011 to $126 per barrel

    in 2012 (Annual Energy Outlook 2012 Early

    Release), a nearly $20 increase.

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    UnitOperatingCost(CentsperAvailableSea

    tMile)

    LABOUR AND FUEL UNIT COST HISTORY

    Fuel

    Labour

    Source: Air Transport Association of America, 2012.

    1Q00

    3Q00

    1Q01

    3Q01

    1Q02

    3Q02

    1Q03

    3Q03

    1Q04

    3Q04

    1Q05

    3Q05

    1Q06

    3Q06

    1Q07

    3Q07

    1Q08

    3Q08

    1Q09

    3Q09

    1Q10

    3Q10

    1Q11

    3Q11

    Source: Energy Information Administration. Note: 1. FOB = Freight on board

    AVERAGE OF WEEKLY CUSHING AND BRENT SPOT PRICE FOB 1

    (Dollars per Barrel)

    $60

    $70

    $80

    $90

    $100

    $110

    $120

    $130

    2-10

    3-10

    4-10

    5-10

    6-10

    7-10

    8-10

    9-10

    1

    0-10

    11-10

    12-10

    1-11

    2-11

    3-11

    4-11

    5-11

    6-11

    7-11

    8-11

    9-11

    10-11

    11-11

    12-11

    1-12

    2-12

    3-12

    2011 Avg.: $103.16

    2010 Avg.: $79.72

    YTD 2012 Avg.: $110.94

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 15ECONOMIC TRENDS

    Further, as observers have noted, a continua-

    tion of the unrest in the Middle East, particu-

    larly the threatened closure of the Strait of

    Hormuz (a major oil trading passage), coulddrive oil prices to the $150 per barrel range,

    resulting in an estimated 2012 average price

    of $135 per barrel.

    While oil prices directly affect airlines profit-

    ability, they also influence fleet decisions and

    drive network optimization strategies. These

    influences are reflected in increasing demand

    for highly fuel-efficient, high-productivitysolutions, such as modern turboprop aircraft.

    Oil price volatility challenges airlines ability

    to forecast passenger volumes, airline work-

    loads and fleet replacement timing decisions,

    whether on a daily, monthly or annual basis.

    Looking ahead, we believe that oil prices

    will remain significantly above the historical

    averages from just a few years ago and that

    prices will continue to demonstrate significant

    volatility over the near term.

    Although continuing high oil prices will

    challenge airlines profitability at least

    through 2012, the arrival of new aircraft

    incorporating technological advantages

    that deliver direct operating cost reductions

    will accelerate the retirement of older, lessfuel-efficient aircraft types.

    Source: Annual Energy Outlook (AEO) by Energy Information Administration.

    0

    20

    40

    60

    80

    100

    120

    140

    160

    1

    980

    1

    982

    1

    984

    1

    986

    1

    988

    1

    990

    1

    992

    1

    994

    1

    996

    1

    998

    2

    000

    2

    002

    2

    004

    2

    006

    2

    008

    2

    010

    2

    012

    2

    014

    2

    016

    2

    018

    2

    020

    2

    022

    2

    024

    2

    026

    2

    028

    2

    030

    AEO2012 Early Release Reference

    AEO2011 Reference

    Average: $126 per barrel

    Actual Forecast

    OIL FORECAST

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 16

    AIRLINEINDUSTRY

    TRENDS

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 17AIRLINE INDUSTRY TRENDS

    FRAGILE PROFITABILITY

    The financial outlook for the worlds airlines

    remains in a state of flux as broad economic

    concerns continue to work their way through

    our deeply interconnected, interdependent

    global economic system.

    Against this backdrop, demand for air

    transportation remained strong through

    2011 and into 2012. IATA reported that total

    passenger demand increased 5.9% in 2011,

    with a 4.8% expected increase in total

    passenger kilometers flown in 2012.

    IATA data covering the first four months

    of 2012 reflected an overall 7.1% increase in

    passenger traffic, while capacity (available

    seat kilometres (ASKs)) increased 4.9%. As a

    result, passenger load factors grew to 77.5%.

    Global airline revenues have increased

    throughout the period of economic recovery,

    from a low of $476 billion in 2009, to $547

    billion in 2010, and to $597 billion in 2011,

    representing a 9.3% year-over-year increase.

    According to IATA, global airline profitability

    improved significantly, from a net loss of

    $4.6 billion in 2009 to total net profits of $15.8

    billion in 2010, before declining to $7.9 billion

    in 2011. Should the world economy slip further

    to a growth rate of just 2%, IATA observes

    that historically, this slow growth rate has

    resulted in the airlines sliding into industry-

    wide losses.

    Region 2007 2008 2009 2010 2011 2012F

    World 12.9 15.8 7.9 3.0

    North America 3.7 4.1 1.3 1.4

    Europe 6.4 0.0 1.9 0.5 -1.1

    Asia/Pacific 3.0 2.6 8.0 4.9 2.0

    Middle East 0.9 1.0 0.4

    Latin America 0.1 0.9 0.3 0.4

    Africa

    -16.0 -4.6

    -9.6 -2.7

    -4.3

    -4.7

    -0.1 -0.3 -0.6

    -1.4 -0.5

    -0.2 -0.1 -0.1 0.1 0.0 -0.1

    AIRLINE INDUSTRY NET PROFITS

    (Billions U.S. $)

    Source: International Air Transportation Association (IATA), June 2012.

    AIRLINE ECONOMICS

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 18AIRLINE INDUSTRY TRENDS

    IATAs central forecast for 2012 anticipated

    a further decline in airline profitability, to

    just $3.0 billion. Regionally, Asia/Pacific is

    expected to perform best, as per IATAs centralforecast scenario, indicating profitability of

    $2.0 billion. North America airline profitability

    is expected to be $1.4 billion, Middle East

    $0.4 billion and Latin America $0.4 billion.

    Airlines in Europe and Africa are expected

    to incur new losses of $1.1 billion and $0.1

    billion, respectively.

    In summary, the economic recovery iscontinuing and demand for air transportation

    also continues to build with it, subject to the

    challenges posed by slow growth in global

    gross domestic product and high oil prices.

    In the face of these challenges airlines have

    shown creativity and consistency, in address-

    ing their expenses a scenario in which

    operating a modern, highly fuel-efficient

    aircraft fleet remains the single most

    important strategy for business viability

    and long-term success.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 19AIRLINE INDUSTRY TRENDS

    AIRLINE BUSINESS MODELS

    Three distinct business models are present in

    the passenger segment of the airline industry:

    mainline carriers (sometimes referred to as

    network carriers), regional carriers and low-

    fare (or low-cost) carriers. Mainline carriers

    are characterized by fleets of 100-plus seat

    aircraft serving multiple cities and countries

    through hub-and-spoke networks. Due to

    cost pressures, notably high fuel prices, and

    relentless competition, mainline carriers have

    focused on the replacement of older equip-

    ment with newer, more efficient aircraft.

    Regional carriers typically operate smaller

    aircraft, such as regional jets and turboprops

    with fewer than 100 seats, on short- and

    medium-haul routes. By representing mainline

    carriers to meet passenger demand for service

    and frequencies in markets with lower volumes,

    regional carriers enable their mainline partners

    to right-size aircraft use throughout theirnetworks. This specialization strategy for

    network optimization has developed strong

    linkages between mainline and regional car-

    riers, which now account for one third of all

    commercial passenger flights worldwide.

    Low-fare carriers typically operate aircraft

    from 70 to 200 seats on point-to-point service

    connecting secondary airports. By separating

    ancillary revenue from the base fare, the

    low-fare carriers have thereby made air travel

    accessible to passengers who could not

    otherwise afford it. Low-fare carriers, which

    typically have lower cost bases than mainline

    carriers, are now present in nearly every

    part of the world and their market share has

    increased significantly, particularly in North

    America and Europe.

    Source: U.S. Bureau of Transportation Statistics, May 2012.

    *Most current available data. **Low-Cost Carriers are also referred to as Low-Fare Carriers

    U.S. AIRLINE SEGMENTATION PROFITABILITY/LOSS*

    4Q

    2008

    1Q

    2009

    2Q

    2009

    3Q

    2009

    4Q

    2009

    1Q

    2010

    2Q

    2010

    3Q

    2010

    4Q

    2010

    1Q

    2011

    2Q

    2011

    3Q

    2011

    -10.0

    -5.0

    0.0

    5.0

    10.0

    15.0

    OperatingProfit/L

    ossas%o

    fTotalOperatingCosts

    Low-Cost** Regional Mainline

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 20AIRLINE INDUSTRY TRENDS

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    1.2

    1.4

    1.6

    1.8

    2.0

    2000 2005 2010 2015 2020 2025 2030

    20- to 59-seat 60- to 99-seat 100- to 149-seat

    COMMERCIAL AIRCRAFT CAPACITY WORLDWIDE BY SEAT CATEGORY

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    Actual Forecast

    The growing importance of regional carriersin the U.S. is reflected inthe growing size of

    regional aircraft to an average size of 37 seats

    in 2000 to 50 seats in 2005 and to 56 seats

    today. Regional carrier average trip length

    has also increased over this period, from 296

    statute miles in 2000, to 464 statute miles in

    2010 and to 468 statute miles as of the first

    half of 2011. A similar pattern is recognizable

    in Europe, at least partly due to less restrictive

    scope clauses, where average regional aircraft

    size has increased from 63 seats in 2001, to 72seats in 2009 and to 78 seats today. Although

    European average regional airline stage

    lengths are shorter than their U.S. counterparts,

    these have increased from 384 statute miles

    to 390 statute miles over the same period.

    Continued turbulence in the airline industry,

    including insolvency, consolidation, outsourc-

    ing, unbundling of services and attempts by

    some mainline carriers to reinvent themselves

    by shedding legacy cost structures, hasresulted in the three established business

    models becoming less individually distinct.

    However the need to right-size aircraft to

    market needs remains paramount in control-

    ling costs, especially as commercial aircraft

    capacities range from fewer than 50 seats

    to more than 600.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 21AIRLINE INDUSTRY TRENDS

    For longer routes with less traffic, regional

    jets in the 60- to 99-seat segment present an

    optimized solution. While small, single-aisle

    jets provide longer-haul capacity up to 3,000nautical miles and routing flexibility, and

    advanced technology turboprops are best

    suited to short and medium-haul flights.

    LABOUR TRENDS

    While airline labour costs have decreased as

    a percentage of airlines total costs, largely

    due to the increase in fuel prices, they remain

    the airlines second biggest expense categoryand one of the largest sources of optimization

    opportunities.

    At the industry level, selective outsourcing of

    scheduled passenger operations to regional

    carriers has increased the mainline carriers

    access to passengers in smaller centres, who

    would otherwise be cost-prohibitive to serve

    with larger aircraft. As low-cost carriers,regional airlines can generate profits on thin

    routes that their mainline counterparts find

    too costly. One constraint on this strategy has

    been scope clauses negotiated between

    mainline carriers and their unionized flight

    crews, which restrict the use, number and

    seating capacity of regional airlines aircraft

    in mainline carriers network. Scope clauses

    are a predominantly U.S. and European

    phenomenon.

    Additional labour cost control outsourcinginitiatives have addressed catering operations,

    maintenance services and reservations, and

    have helped lower airline costs dramatically.

    Continued loosening of scope clause rules

    (to permit regional carriers to operate even

    large aircraft) as well as the development of

    new business models, will increase demand

    for air transportation. Bombardier expects

    these trends to continue.

    Source: Air Transport Association of America (ATA), 2012

    FTE: Full Time Equivalent employees, most current annual data

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    Productivity,ASKs(000)perFTE

    U.S. AIRLINE LABOUR PRODUCTIVITY

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 22AIRLINE INDUSTRY TRENDS

    TURBOPROPS AND JETS:

    OPTIMIZATION IN PRACTICE

    Aircraft and engine types are critical choices

    in optimizing airline fleets and networks. The

    greatest efficiencies are achieved by deploying

    turboprop aircraft on short- and medium-haul

    markets and jet aircraft on longer routes.

    Rising fuel prices expanded the use of

    turboprops worldwide and led aircraft

    manufacturers to increase the size and

    capability of these aircraft. These aircraft

    began operating in mainline carriers fleets in

    significant numbers in 2007. Advanced tur-

    boprops will continue to play an integral role

    in the regional airline marketplace as carriers

    confront the dual pressures of rising fuel costs

    and increasingly restrictive environmental

    regulations. The comparatively lower fuel burn

    of turboprops, compared to regional jets of

    similar size, will enable carriers to maintain

    capacity and shrink their overall environmental

    footprint. Modern 70-passenger turboprop

    aircraft represent a cost-effective replacement

    on routes previously served by 50-passenger

    jets, which are no longer in production.

    Of approximately 5,900 aircraft to be delivered

    in the 20- to 99-seat segment, Bombardiers

    Commercial Aircraft Forecast for 2012 - 2031

    anticipates based on oil at an average $126

    per barrel that 48% will be modern tur-

    boprop airliners, the first time this product

    category has achieved this degree of market

    penetration. Further, of the approximately

    2,850 turboprop aircraft to be delivered over

    88%

    55% 52%

    12%

    45% 48%

    248

    2001 Actual

    319

    Turboprop

    Regional Jet

    2012-2031 Forecast

    5,900

    2011 Actual

    Units

    Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031, Energy Information Administration 2012-2031 forecast.

    Oil @ $111 per barrelOil @ $26 per barrel Oil @ an average of$126 per barrel

    DELIVERY BY ENGINE TYPE 20- to 99-SEATSUnits, %, Actual 2001 and 2011, Forecast 2012-2031 period

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 23AIRLINE INDUSTRY TRENDS

    the period, approximately 2,700 or 95% will

    be in the 60- to 99-seat segment, which is ex-

    pected to experience substantial growth over

    the forecast period.

    The balance of the forecast deliveries in the

    20- to 99-seat segment will be larger regional

    jets, which airlines will require to optimize

    seating capacities, maintain passenger com-

    fort and accommodate traffic growth while

    reducing unit costs.

    AIRCRAFT RETIREMENTS

    Aircraft retirements and replacements are key

    product life-cycle milestones in shaping future

    aircraft deliveries and fleet composition.

    Historically, older aircraft are replaced to

    capture the financial, operating and mainte-

    nance advantages offered by newer, more

    cost effective and more fuel-efficient aircraft,

    as they become available.

    Other factors that influence aircraft retirement

    timing decisions include international and

    local airport noise and emissions regulations

    and fees; airline branding; the competitive

    environments; as well as financial and tax

    considerations (such as maintenance costs,

    depreciation and incentives), airline growthstrategies, aircraft economic structural life, the

    certification status of new aircraft development

    programs and replacement opportunity factors,

    such as delivery slots.

    This year, the number of anticipated aircraft

    retirements over the 20-year forecast period

    has been increased by a total of 300 units,

    from approximately 6,700 in our 2011 forecastto 7,000.

    Todays Fleet

    (units)

    2031 Fleet

    (units)

    4,200

    17,000

    12,800

    Deliveries

    FLEET EVOLUTION FROM

    2011 TO 203120- to 149-seat Fleet

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    Replacement

    Retained

    Fleet

    Growth

    11,200

    5,800

    (45%)

    7,000

    (55%)

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 24AIRLINE INDUSTRY TRENDS

    Much of the reason for this increase lies in oil

    prices, which have seen a $20 per barrel jump

    on average prices over last year, reaching an

    average $126 per barrel throughout the fore-cast period. A further factor in the increased

    forecast retirements is Russian regulators

    decision to ground ageing, domestically pro-

    duced aircraft. However, since the utilization

    of these aircraft is typically very low, they will

    not be replaced on a one-to-one basis.

    The increased retirements are expected

    primarily in the 20- to 59-seat segment (anincrease of 200 units, from 2,500 retirements

    to 2,700), as well as in the 60- to 99-seat

    segment (an increase of 100 units, from 1,200

    retirements to 1,300).

    Gradually rising oil prices over the forecast

    period add burden to aircraft operating

    economics. Twenty- to 59-seat aircraft are

    particularly affected due to the resulting

    higher cost per seat, and hence the increased

    retirements in this segment. This also applies

    to the 60- to 99-seat segment towards the

    end of the next decade due to the ageing

    70-seat and 90-seat aircraft that entered

    service in the early 2000s.

    Most aircraft move through a recognizable

    series of product life cycle stages. Passenger

    aircraft, when removed from commercial

    operation with front-line carriers, typically

    move into cargo operations. Some others

    move to less demanding markets and appli-

    cations, serving commercial operators with

    different utilization needs, different operating

    environments and different business models.

    As a significant number of 50-seat regional

    jet airliners reach 20 years of age, Bombardier

    expects many will be converted into freighter

    aircraft. Small freighter aircraft (with payloads

    of 5,000 to 20,000 lbs) are expected to be in

    demand to replace a large fleet of all-cargo

    aircraft currently in service around the world,

    nearly all of which are limited-range turbo-

    props averaging 29 years of age. The constant

    evolution of the regulatory environment also

    influences the pace and pattern of aircraft

    retirements and, thereby, the fleet mix. During

    the past 40 years, regulations imposed by

    the International Civil Aviation Organization,

    Committee on Aviation and Environmental

    Protection (ICAO/CAEP) led to the phase-out

    of noisier aircraft from U.S. and European

    commercial fleets. New ICAO/CAEP noise

    and emission standards will further affect

    the global aviation fleet. Most recently, the

    European Union has implemented an

    Emissions Trading Scheme that, since

    January 1, 2012, has applied to commercial

    aircraft operating in European airspace.

    IN-SERVICE AIRCRAFT 15 YEARS OF AGE OF OLDER

    Sources: OAG Aviation Solutions, Bombardier Analysis.

    500

    1000

    1500

    2000

    2500

    10- to

    19-seat

    20- to

    39-seat

    40- to

    59-seat

    60- to

    99-seat

    100- to

    149-seat

    150- to

    174-seat

    175- to

    219-seat

    220+

    seat

    Units

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 25AIRLINE INDUSTRY TRENDS

    The typical life cycle stages of aircraft use are

    also influenced by seemingly unconnected

    external events. Following the attacks of

    September 11, 2001 for example, older aircraftretirements accelerated and even some new

    model aircraft were temporarily parked. Now,

    almost 11 years later, not all of these aircraft

    have returned to active service.

    Of the current fleet of 20- to 149-seat com-

    mercial passenger aircraft, Bombardier antici-

    pates that 60% will retire by 2031. Looking in

    more detail, we expect the fewest retirements

    in the 60- to 99-seat segment, and the most

    70% of todays fleet in the 20- to 59-seat

    segment. These aircraft will be retired due to

    their comparatively higher per-seat operating

    costs and high fuel costs. Without the advent

    of new technology-advanced, in-production

    20- to 59-seat aircraft in the near-term fore-

    cast period, Bombardier expects this segment

    to decline dramatically, from 33% of todays

    20- to 149-seat fleet, to just 8% in 2031.

    In sharp contrast, the near-term period will

    see the introduction of new-generation 100-

    to 149-seat aircraft, which are expected to

    account for 53% of the total 20- to 149-seat

    fleet in 2031. The response to the arrival of op-

    timized, new generation aircraft is expected to

    result in significant retirements and deliveries,

    amounting to 3,000 retirements and 7,000new aircraft deliveries.

    More than half of the current commercial

    aircraft fleet will be replaced in the next 20

    years, a slightly greater percentage than

    expected last year, due to technical obsoles-

    cence, cost inefficiencies and age. The

    increasing pace of older aircraft retirements

    will have a positive impact on demand for

    new aircraft.

    80% retired from commercial passenger service

    COMMERCIAL AIRCRAFT GENERAL RETIREMENT PROFILE

    Standard

    Commercial Passenger Aircraft

    Retirement Curve

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 20 2 1 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 394 0 41 4 2 4 34 4 4 5

    Source: Bombardier Analysis.

    %o

    ffleetactive

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 26AIRLINE INDUSTRY TRENDS

    AIRLINES AND THE ENVIRONMENT

    Environmental issues and increasing environ-

    mental regulation will increasingly shape the

    worlds airline industry and infrastructure over

    the 2012 2031 forecast period. These issues

    can be broadly categorized as: local air

    quality, aircraft emissions and community

    noise. The aviation industry has improved

    its performance in these areas consistently

    over more than 50 years.

    Greater fuel efficiency directly boosts airline

    profitability and aircraft operations havebecome 20% more fuel efficient over the

    past 10 years alone. Modern aircraft now

    achieve fuel efficiency of 3.5 litres per 100

    passenger kilometers, roughly comparable

    to todays leading hybrid passenger cars,

    with much greater speed.

    Other environmental performance highlights:

    Todays aircraft y three times fartheron the same fuel than 30 years ago, a

    75% gain in fuel efficiency per passenger

    kilometer.

    New aircraft are 70% more fuel ecient

    than 40 years ago.

    The maximum range of commercial jet

    aircraft has increased to 15,200 km from

    5,190 km in 1960, carrying more passengers

    farther, with less fuel.

    While passenger trac (in revenue

    passenger kilometers) has increased at

    an average of 5% annually, increasingly

    efficient aircraft operations have limited

    emissions growth to about 3%.

    Todays aircraft are 50% quieter than those

    40 years ago. Current ICAO Chapter 4

    requirements are 35-40 dB quieter than

    the requirements 40 years ago.

    The aviation industry aircraft manufacturers

    and airlines are working on further improve-

    ments in aircraft environmental performance,

    with guidance from ICAO and the Air Trans-

    port Action Group (ATAG), among others.

    Bombardier, with other key stakeholders, is

    committed to moving toward carbon-neutral

    growth within the industry during the forecast

    period and achieving by 2050 a 50% reduc-

    tion in CO2emissions from 2005 levels.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 27AIRLINE INDUSTRY TRENDS

    The application of new technological devel-

    opments in new aircraft designs will be para-

    mount in meeting these commitments. IATAs

    Technology Roadmap provides a summary andassessment of technology-based opportunities

    for future aircraft, including technologies that

    will reduce, neutralize and eventually eliminate

    commercial aviations carbon footprint.

    Bombardier is also taking steps to reduce

    its own carbon and environmental impacts.

    Through our corporate responsibility activities,

    Bombardier is committed to minimizing thefootprint of its manufacturing and operating

    activities, through increased efficiency, on-site

    innovation and the creation of environmental

    synergies through engagement with our

    supply chain partners.

    In summary, the world aviation industry is

    actively addressing environmental concerns

    through the retirement of older aircraft, fleet

    modernization, application of technology, and

    improvements in operations and infrastructure.

    Growing environmental awareness and in-

    creased environmental regulation will increase

    demand for efficient new aircraft.

    Source: International Air Transport Association (IATA) Technology Roadmap 2 009.

    Riblets

    Wireless opticalconnections for IFE

    Spiroid wingtip

    Advanced fly-by-wire

    MEA architecture

    Fly by light

    Variable camber with newcontrol surfaces

    Energy harvesting devices

    Natural laminar flow

    Hybrid laminar flow control

    Engine replacements

    New engine coreconcepts

    Geared turbofan Open rotor /unducted fan

    Advanced direct drive

    Counter-rotating fan

    Biomass to fuel or biojet

    Biodiesel

    Synthetic paraffinic kerosene

    Liquefied petroleum gas

    Compressed natural gas

    Liquid methane

    Furans

    Butanol

    Transesterification fuels Liquid hydrogen

    Ethanol

    Hybrid wing body

    Cruise-efficient STOL

    Truss-braced wing

    Wireless flight control system

    PEM fuel cell

    Solid-oxide fuel cell

    Solid acid fuel cell

    Morphing materials

    Morphing airframe

    Advanced 3rd gen. core

    Active stability management

    Thermal management

    Variable cycle Adaptive cycles

    Boundary-layer ingesting inlets

    Embedded distributed multi-fan

    Adaptive / active flow control

    Ubiquitous composites

    Non-Brayton cycles

    Pulse detonation cycles

    Regenerative / recuperative cycle

    Retrofit

    Update

    New Aircraft< 2020

    New Aircraft> 2020

    All stages

    20202010 2030

    AirTrafficManagement

    AlternativeFuels

    Engine

    Airframe&System

    s

    Data link communication

    Required time of arrival

    Performance-based navigation

    Automatic dependent surveillance broadcast - OUT

    System-wide information management

    GNSS landing system via ground based augmentation system

    Automatic dependent surveillance broadcast - IN

    IATA TECHNOLOGY ROADMAP, 2009

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 28

    THE FORECAST

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 29THE FORECAST

    ASSUMPTIONS

    The Bombardier Commercial Aircraft Market

    Forecast covering the period 2012 2031 is

    based on the following principal assumptions

    and market drivers:

    Demand for air travel will be cyclical and

    directly related to economic growth and

    wealth creation over the long term

    Fleet utilization is directly related to

    economic growth

    Demand for air travel will be supported by

    aviation infrastructure. In some emerging

    markets, lagging infrastructure develop-

    ment will constrain growth in air travel and

    Increasing environmental regulation will

    affect fleet mix and encourage carriers to

    seek lower per-passenger fuel burns and

    emissions

    The following assumptions regarding

    commercial aviation also guided development

    of the forecast:

    Oil / fuel prices will aect eet mix

    Airlines will continue to focus on cost

    reduction and will prefer the advantages

    of larger capacity aircraft in each

    segment

    Contractual restrictions on airline

    operations based on aircraft size and

    engine type will ease over time and

    Airline markets will continue to be

    opened to greater competition through

    liberalization of international air

    transportation agreements

    The forecast was developed based on the

    following metrics applied to the 20-year period:

    3.26% Average economic growth in global

    GDP (down from 3.4% last year)

    $126/bbl Average oil price, according to the

    EIA (up from $107/bbl last year).

    FLEET GROWTH FORECAST

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    WORLD 2011 Fleet Deliveries Retirements 2031 Fleet

    20- to 59-seat 3,600 300 2,700 1,200

    60- to 99-seat 2,500 5,600 1,300 6,800

    100- to 149-seat 5,100 6,900 3,000 9,000

    TOTAL 11,200 12,800 7,000 17,000

    20-YEAR OUTLOOK

    Market Drivers that increase/decreaseaircraft demand

    Economic Growth

    Fuel Prices

    Fuel Volatility

    Replacement Demand

    Emerging Markets

    Environmental Regulations

    Environmental Fees

    Labour Trends

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 30THE FORECAST

    FORECAST RESULTS

    The Bombardier Commercial Aircraft Market

    Forecast anticipates the delivery of 12,800

    new 20- to 149-seat aircraft in the 2012 2031

    period. Coupled with retirements of approxi-

    mately 7,000 aircraft, the world commercial

    fleet will grow from approximately 11,200

    aircraft at the start of 2012, to approximately

    17,000 at the period end. Overall fleet growth

    will be 52%, representing a compound annual

    growth rate of 2.1%. Almost half of the new

    deliveries will be replacement aircraft, while

    the balance will be deployed for growth innew or expanding markets.

    The 20- to 59-seat segment of the market is

    expected to shrink by approximately 66% over

    the period, from approximately 3,600 aircraft

    in 2012, to just 1,200 by 2031. The 300 expect-

    ed deliveries in this segment will be more than

    offset by 2,700 expected retirements.

    The 60- to 99-seat segment is expected to

    grow 270% between between 2012 and 2031.

    From a current base of 2,500 aircraft, 5,600

    new aircraft deliveries will be countered by

    1,300 retirements, resulting in a 2031 fleet of

    6,800 aircraft.

    The 100- to 149-seat segment is expected to

    grow from a current base of approximately

    5,100 aircraft, with deliveries of 6,900 new

    aircraft and retirements of 3,000 aircraft

    resulting in a fleet of approximately 9,000

    aircraft at the forecast period end, representing

    a 2.9% (CAGR). Aircraft in this segment

    are typically employed to replacement and

    growth roles in about equal proportions.

    Overall fleet growth will

    be 52%, representing a

    compound annual growth

    rate of 2.1%.

    BOMBARDIER MARKET SEGMENT EVOLUTIONFleet, Deliveries, Retirement: 2011-2031

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    20- to 59-seat 60- to 99-seat 100- to 149-seat

    2011

    Fleet

    2031

    Fleet

    Fleet 2011: 11,200 Deliveries: 12,800 Retirements: 7,000 Deliveries: 17,000

    2011

    Fleet

    2031

    Fleet

    2011

    Fleet

    2031

    Fleet

    3,600 300 2,700

    1,200

    2,500

    5,600 1,300

    6,800

    5,100

    6,900 3,000

    9,000

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 31THE FORECAST

    REGIONAL 20-YEAR DELIVERY OUTLOOKUnits, 2012-2031

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    Africa andThe Middle East

    970

    NorthAmerica

    4,730

    LatinAmerica

    930

    China

    2,220

    Asia/Pacific

    1,710

    Europe,Russia & CIS

    2,240

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 32THE FORECAST

    GEOGRAPHIC BREAKDOWN

    Global demand for air travel and new aircraft

    continues to shift towards emerging markets,

    although not as rapidly as anticipated in pre-

    vious forecasts. Over the forecast period to

    2031, North America is expected to account

    for 37% of new aircraft deliveries, China 17%,

    Europe (including Russia & CIS) 18%, Asia/

    Pacific 13%, Latin America 7% and Africa &

    Middle East 8%.

    While total world forecast period aircraft

    deliveries in the 20- to 149-seat segments

    are expected to decline by 2.3%, compared

    to Bombardiers 2011 forecast, the reduction

    is expected primarily in European and Middle

    Eastern markets (down 200 and 80 aircraft,respectively). Demand in North America,

    China, Asia/Pacific and Latin America is

    expected to remain on par with last years

    forecast. Aircraft demand in China and Asia/

    Pacific, considered together, reflect the grow-

    ing economic strength and influence of these

    markets, which are expected to experience

    more rapid economic growth than western

    markets.

    20- TO 59-SEAT SEGMENT

    Bombardier foresees a total of 300 20- to

    59-seat new aircraft deliveries in this segment

    over the 20-year forecast period. This segment

    is the only part of the 20- to 149-seat com-

    mercial aircraft market expected to experi-

    ence a net reduction in fleet size, a reflection

    of the preference for larger aircraft sizes

    throughout the industry in response to high

    fuel prices.

    Over the last year, new aircraft deliveries in

    this segment effectively balanced the few

    retirements and maintained the fleet size

    at approximately 3,600 units. Bombardier

    expects very few deliveries annually over

    the next 15 years, with the potential of new

    aircraft offerings in this segment driving a

    potential resurgence later in the forecast

    period.

    This years forecast also anticipates an addi-

    tional 200 aircraft retirements (8%) over the20-year period, due mainly to the impact of

    high fuel prices on the competiveness of small

    regional jet aircraft in service with mainline

    carriers in developed markets. These 50-pas-

    senger class aircraft will continue to deliver

    profitable service in emerging markets, such

    as Africa, Latin America and Eastern Europe,

    where the capacity and range characteristics

    can help accelerate the development of the

    air travel industry.

    20-YEAR OUTLOOK

    GDP Distribution by Country

    (2011 and 2031)

    20,000

    40,000

    60,000

    80,000

    100,000

    120,000

    2011 2031

    North America Europe (incl: Russia & CIS)

    Asia/Pacific (ex. China) China ROW

    Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031,IHS Global Insight, February 2012.

    TotalGDP

    ($Trillion)

    39%

    61%

    50%

    50%

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 33THE FORECAST

    60- TO 99-SEAT SEGMENT

    This segment is one of the most dynamic in

    commercial aviation, as growth will be driven

    largely by the evolving relationship between

    mainline and regional carriers. The outsourcing

    of regional aircraft operations to carriers with

    appropriate, low-cost structures, namely re-

    gional airlines, continues to be the main thrust

    of network optimization efforts. Bombardier

    expects that scope clauses in North American

    and European operations will continue to

    ease, to meet growing demand in this market

    segment.

    Elsewhere, the attractive economics and

    operational flexibility of regional aircraft can

    be used to right-size aircraft capacity

    according to traffic demand.

    Since on short stage lengths turboprop

    aircraft are more economical to operate than

    jets, modern turboprops are a natural hedgingtool for air carriers against high and volatile

    fuel prices. High speed turboprops are now

    used by many airlines to replace 50-seat

    regional jets on short-haul routes, with little

    or no increase in block time or reduction in

    passenger comfort.

    More than 200 new 60- to 99-seat aircraft

    were delivered in 2011, bringing the total

    segment fleet up to 2,500 aircraft at the

    beginning of the forecast period. In compari-

    son to last years forecast, expected 20-year

    deliveries have been reduced by 200 units,

    due largely to a slower economic recovery inmature markets and a preference for larger

    capacity aircraft in emerging markets. Aircraft

    retirements have also been increased by 100

    units in this years forecast, principally 70-seat

    and 90-seat regional aircraft delivered in the

    early 2000s that are expected to go into

    retirement towards the end of the next decade.

    Of the approximately 5,900 new aircraft to

    be delivered in the 20- to 59-seat and 60- to

    99-seat segments in the forecast period to

    2031, 48% will be turboprops and virtually all

    of these deliveries are expected to be in the

    60- to 99-seat segment.

    Regional jet deliveries in this 60- to 99-seatsegment are expected to amount to approxi-

    mately 2,900 units and represent $102 billion

    in sales revenues. These aircraft will be used

    by the worlds airlines to help optimize network

    capacity. In all, this segment is expected to

    have a demand for 5,600 new aircraft, worth

    over $180 billion in sales revenue. The current

    fleet will grow 270%, to reach 6,800 aircraft

    by the end of the forecast period.

    Segment 2012 CAMF

    20- to 59-seat 150

    60- to 99-seat 2,700

    Total 2,850

    20- TO 99-SEAT

    DELIVERY PROFILE

    20-YEAR TURBOPROP FORECAST20- to 99-seat Aircraft

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    Regional Jets

    52%

    Turboprops

    48%

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 34THE FORECAST

    100- TO 149-SEAT SEGMENT

    The 100- to 149-seat segment is expected

    to achieve a 2.9% CAGR as it expands from

    approximately 5,100 aircraft in 2012, to

    approximately 9,000 units by 2031 the

    largest market growth opportunity recognized

    by the Bombardier Commercial Aircraft

    Market Forecast.

    This segment will see deliveries of approxi-

    mately 6,900 new aircraft against retirements

    of 3,000 units, or 59% of todays fleet. Many of

    these aircraft are derivatives of larger aircraftand not originally designed for this segment.

    The higher weight and greater drag of these

    current products result in higher fuel burns

    and greater CO2emissions. Such aircraft are

    daily more challenging to operate in an ultra

    cost-conscious and increasingly environmen-

    tally-aware business environment. An industry

    that requires a fundamental improvement in

    operating economics as a matter of survival

    is turning its future focus toward aircraft

    optimized for their intended segments and

    able to deliver significant improvements in

    airline profitability.

    Newly designed aircraft that deliver superior

    operating economics, through advances in

    technology, as well as operational flexibility

    and attention to passenger comfort, will

    accelerate the retirement of older aircraft.

    In fact, at the 2011 year end, the OAG Fleet

    iNet identified approximately 2,091 single-aisle

    aircraft in storage and at least temporarily

    inactive.

    Newly designed aircraft

    that deliver superior

    operating economics will

    accelerate the retirement

    of older aircraft.

    Current large single-aisle jetNew design small single-aisle jetLarge RJ

    Passenger Demand per Departure

    Profitco

    ntributionperDeparture

    Sources: U.S. Department of Transportation, Bombardier Analysis.

    RJ = Regional jet, Small single-aisle jet: 100- to 149-seats, Large single-aisle jet: 150+ seats.

    PROFIT ZONE RIGHT-SIZING AIRCRAFT FOR TRAFFIC DEMAND

    High

    Low

    60 200

    Current small single-aisle jet

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 35THE FORECAST

    This segment saw a fleet decrease of approxi-

    mately 100 units in 2011, while deliveries also

    declined, as some orders for new 130-seat

    single-aisle aircraft were converted into ordersfor larger aircraft. Total deliveries in this

    segment across the 20-year forecast period

    have been reduced by approximately 100

    units, due mainly to the slower economic

    growth. The expected rate of aircraft retire-

    ments in this segment has remained constant

    since last years forecast. While higher oil

    prices are accelerating the retirement of older

    platforms, the large majority of the aging

    aircraft in this segment, such as MD80/90,

    BAe 146 and Boeing 737 Classics would have

    exited the market by the middle of the next

    decade, even with fuel prices at 2011 levels.

    The 6,900 new aircraft destined for the

    100- to 149-seat segment over the next 20

    years will generate sales revenues of more

    than $449 billion.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 36

    CONCLUSION

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 37CONCLUSION

    The commercial aviation industry has gone

    through significant change since the recent

    global recession. The industrys unwavering

    focus on optimization and efficiency is the keyreason for its resilience. Economic growth will

    drive the demand for more aircraft. Rising oil

    prices and continued price volatility will drive

    airlines to accelerate the retirement of older,

    less efficient aircraft, thereby increasing the

    demand for new-technology and fuel-efficient

    aircraft.

    Bombardier remains optimistic in the 20- to

    149-seat aircraft market. The company pres-

    ents the most optimized capacity aircraft to

    connect not only primary and secondary, but

    also tertiary airports around the world. The

    overall fleet in this market will grow by 51%

    from 11,200 units in 2011 to 17,000 units in

    2031. New aircraft deliveries will reach 12,800

    units, generating over $630 billion in sales

    revenue over the next 20 years.

    New aircraft deliveries

    will reach 12,800 units,

    generating over $630 billion

    in sales revenue over

    the next 20 years.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 38

    GEOGRAPHICDETAILS

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 39GEOGRAPHIC DETAIL

    INTRODUCTION

    The top-level message delivered by the

    Bombardier Commercial Aircraft Market

    Forecast this year is that while airline industry

    fundamentals remain sound and attractive

    over the longer term envisioned by this

    forecast, the immediate term presents some

    important challenges that will see early-term

    deliveries of new aircraft delayed until

    somewhat later in the period.

    The first of these challenges is that the world

    economy is not recovering from the financialcrisis of 2008 as quickly or as consistently as

    we might have concluded a year ago. Europe

    continues to deal with sovereign debt crises,

    unemployment remains stubbornly high in the

    United States and political unrest present

    or imminent threatens economic stability in

    much of Africa and the Middle East.

    A second central challenge is the extent to

    which growth regions can sustain their pace

    of expansion. As the worlds economies are

    increasingly interconnected and interde-pendent, significant economic events in one

    region such as a sovereign default in Europe

    can be expected to have negative global

    implications as far away as China.

    The third challenge is that fuel prices, which

    have spiked significantly since the third quar-

    ter of 2011, have shown their potential to put a

    brake on economic recovery and growth, and

    demonstrate clearly the extent to which west-

    ern economies still rely on inexpensive energy.

    More expensive fuel is also here to stay.

    These challenges, and more, have seriously

    compromised the ability of the worlds airlines

    to operate at a profit a circumstance which

    is likely to result in continuing consolidation

    and capacity reductions, and which is certain

    to heighten carriers focus on cost reduction

    as a central strategy of day-to-day operations.

    What has not changed, despite these

    challenges, is that air travel remains a

    central building block of future prosperity

    and continuing development. Air travel links

    populations quickly and efficiently over

    distances that make other transportation

    alternatives unsatisfactory. It does so

    at reasonable financial cost and with

    environmental impacts that are already

    small and getting smaller every day.

    Modern aircraft that help their operators

    serve their customers at significantly lower

    cost, with lower fuel burns, lower emissions

    and more operational flexibility are clearly

    part of the solution and will help todays

    most enlightened, most forward-thinking

    air carriers not just survive todays challenges,

    but actively prepare themselves to prosper

    and grow in a changed world. Bombardier

    is bringing such aircraft to market.

    Air travel remains a

    central building block of

    future prosperity and

    continuing development.

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 40GEOGRAPHIC DETAIL

    NORTH AMERICA(EXCLUDING MEXICO)

    North America, the worlds largest aircraft

    market, will maintain its leadership position

    over the course of the 20 years covered by

    the Bombardier Commercial Aircraft Market

    Forecast. This market is expected to require

    more than 4,700 new commercial aircraft,

    37% of total world demand in the 20- to

    149-seat segments, which is unchanged

    from last years forecast.

    Economic growth, at just 2.6% CAGR, is

    forecast to lag most of the rest of the world,

    which will average 3.26%, as GDP generation

    leadership continues to shift to economies

    such as India and China traditionally viewed

    as emerging.

    In a further departure from global trends,

    less than half of the new aircraft required in

    North America (45% or approximately 2,150

    units) will be in the 100- to 149-seat segment.

    Instead, most of the deliveries (52% or ap-

    proximately 2,450 units) will be in the 60- to

    99-seat segment, the traditional domain of

    regional airlines.

    According to data from IATA, passenger

    air travel grew only modestly in 2011, 1.7%

    compared to 9.9% growth in 2010. IATA sees

    continuing slow growth of passenger air travel

    in 2012, at 0.5%.

    Regional airlines operating in partnership

    with mainline carriers continue to play an

    important role in North American passenger

    air travel. According to industry statistics,

    regional airlines accounted for 48% of 2010

    departures from the top 10 U.S. airports, rep-resenting approximately 24% of passengers

    enplaned and 21% of domestic airline revenues.

    Approximately 74% of U.S. airports with

    commercial airline service are served only

    by regional carriers.

    The financial arrangements for regional part-

    ners are typically based on a fixed fee-for-

    flying or capacity purchase agreement (CPA)

    that is not based on the number of passen-

    gers carried. Regional airlines operating under

    contract to their mainline partners are a vital

    part of making the air travel system function

    efficiently by enabling the mainline carriers to

    right-size the equipment offered throughout

    their networks. They also enable access to

    some small market airports that cant handle

    the mainline carriers larger aircraft.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 41GEOGRAPHIC DETAIL

    Bombardier believes that the scope clauses,

    which have constrained both the size and

    number of regional aircraft operating in the

    mainline carriers systems, will continue toease over the forecast period and that this

    will drive demand for larger capacity regional

    aircraft in greater numbers.

    North Americas large installed fleet base

    requires constant replenishment and renewal.

    As air carriers here regain financial strength

    following a period of declining passenger

    loads, financial failures, bankruptcies,

    restructurings and consolidations, their

    attention will focus on cost control strategies

    that include expanding scope clauses to

    cover larger aircraft, capacity planning andoptimizing their asset use.

    One key will be fleet renewal that delivers sig-

    nificant improvements in operating efficiency

    and flexibility. New aircraft that burn less fuel

    and deliver other operating efficiencies are

    certain to be in high demand in the coming

    cycle of fleet renewal.

    5

    10

    15

    20

    25

    30

    35

    U.S.

    $

    billion

    U.S. CARRIERS TOTAL CASH AND CASH EQUIVALENT

    Source: Bureau of Transportation Statistics, Schedule B-1.

    DEMAND DISTRIBUTION

    BY SEAT SEGMENT,

    NORTH AMERICA, 2012-2031Total: 4,730 Units

    3%

    52%

    45%

    20- to 59-seat

    60- to 99-seat

    100- to 149-seat

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    One key will be fleet

    renewal that delivers

    significant improvements

    in operating efficiency

    and flexibility.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 42GEOGRAPHIC DETAIL

    EUROPE (INCLUDING RUSSIA & CIS)

    Europe, including Russia & CIS, remains a

    strong market for aircraft in 20- to 149-seat

    segment, accounting for approximately 18%

    of expected worldwide deliveries from

    2012-2031.

    Anticipated deliveries for Europe, including

    Russia & CIS, are unchanged from Bombardiers

    2011 forecast, as a significant increase in

    expected Russian & CIS deliveries is offset

    by a projected decline in deliveries in the

    financially troubled Eurozone.

    Airline strategies have focused on cost

    reduction as well as consolidation through

    acquisition among larger airlines, which

    reduces demand for new aircraft. In addition,

    Europes population density, comparatively

    short travel distances and extensive airport

    security measures also mean that both rail

    and road provide significant competition

    to air travel.

    Tightening environmental regulations arealso increasing the pace at which older, less

    fuel-efficient aircraft are being retired.

    ...a significant increasein expected Russian & CIS

    deliveries is offset by a

    projected decline in

    deliveries in the financially

    troubled Eurozone.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 43GEOGRAPHIC DETAIL

    Overall deliveries in this region reflect the

    broader industrys shift to larger aircraft, as

    52% of the total deliveries are expected to be

    in the 100- to 149-seat segment. Deliveries ofaircraft in the 60- to 99-seat segment domi-

    nated by regional carriers are expected to

    account for 45% of deliveries, while the 20- to

    59-seat segment will make up the remaining

    3%.

    Russia & CIS are expected to grow more

    rapidly than the rest of Europe, at an average

    3.4% CAGR for the 20-year forecast period.

    It is expected that approximately 300 new air-

    craft in the 100- to 149- seat segment will be

    needed, representing 26% of total European

    demand for aircraft in this segment.

    The Russian aviation authority announced

    the grounding of a number of domestically-

    built aircraft fleets in 2011. This action has

    advanced the retirement of these alreadyageing fleets, thereby creating an immediate

    opportunity for both new and used aircraft

    for the replenishment. As a result, we revised

    our forecast to increase the demand of 60-

    to 99-seat aircraft by approximately 180 units

    from last year forecast to 320 units. This is

    considered a moderate increase, when taking

    into account the low utilization of current

    fleets, even though the grounded fleet is

    much larger.

    DEMAND DISTRIBUTION

    BY SEAT SEGMENT, EUROPE

    (INCL. RUSSIA & CIS), 2012-2031Total: 2,240 Units

    3%

    45%

    52%

    20- to 59-seat

    60- to 99-seat

    100- to 149-seat

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 44GEOGRAPHIC DETAIL

    ASIA/PACIFIC (EXCLUDING CHINA)

    Delivery expectations for Asia/Pacific,

    excluding China, remain largely unchanged

    from Bombardiers Commercial Aircraft

    Market Forecast from a year ago. Economic

    forecasts predict annual GDP growth of

    approximately 3.4%, which is close to the

    world average over the forecast period.

    This region is expected to account for

    approximately 13% of new aircraft deliveries

    over the forecast period, representing approx-

    imately 1,710 aircraft against retirement of

    790 aircraft, resulting in fleet growth of

    920 aircraft, to a total of 2,090 in 2031.

    In Asia/Pacific, connections between

    countries are expected to increase in both

    number and extent over time. Larger, longer

    range aircraft are increasingly required for

    international routes and, as in most other

    regions addressed by Bombardiers forecast

    and the industry generally, the 100- to 149-

    seat segment is expected to account for

    more than half the deliveries (57%) over the

    period. Smaller, short-haul aircraft will be

    required for growth and fleet replacement

    in domestic markets.

    SUB-REGION OF ASIA/PACIFIC

    Northeast Asia

    South Asia

    Southeast Asia

    Oceania

    In Asia/Pacific,

    connections between

    countries are expected to

    increase in both number

    and extent, over time.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 45GEOGRAPHIC DETAIL

    In India, despite the continuation of strong

    economic growth, the airline industry has

    been hard hit by the devaluation of the rupee

    and overcapacity, with the result that consoli-dation is now under way. More broadly, fa-

    vourable aviation policies continue to

    stimulate demand for regional aircraft in order

    to meet the growing desire for air travel from

    the burgeoning middle-class.

    In common with other emerging economies,

    notably China, the growth of commercial

    aviation in India is expected to be limited by

    infrastructure shortcomings. India currentlyhas four international airports operating at or

    above optimum capacity, three of which have

    identified expansion plans in place, while the

    fourth cannot be expanded, due to physical

    encroachments. Fourteen airports have been

    identified for construction, conversion or

    expansion, while an additional 35 airports

    have been identified in Indias 10th Five Year

    Plan (2002 2007), although many projects

    have been delayed due to financing or

    bureaucratic delays.

    Most of the 14 airport projects underway are

    located in southwestern India and there are

    incentives for carriers to add service, which

    could see these facilities approach optimum

    capacity utilization. More specifically, financial

    incentives for operating aircraft with fewer

    than 80 seats include waived landing fees and

    lower jet fuel taxes, which encourages the

    operation of regional aircraft.

    AIRPORT CONGESTION AND EXPANSION PLAN

    India

    49

    Existing airportsat or above optimum

    capacity

    Indias scheduledairports for expansion

    /construction

    Sources: CAPA and Bombardier anlaysis.

    LambertAzimuthalEqual AreaP rojectionBasedon2. 5 arc-minute resolutiondata

    0 200km

    BANGLADESH

    CHINA

    MYANMAR

    NEPAL

    BHUTAN

    SRILANKA

    PAKISTAN

    1

    1

    1 2

    5

    9

    1

    7

    1 1

    3

    8

    64 Persons per km2

    0

    1-5

    6-25

    26-250

    251-1,000

    1,001+

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 46GEOGRAPHIC DETAIL

    Despite fall-off in demand from many parts

    of the world following the financial crisis of

    2008 2009, Indias manufacturing sector

    has remained robust. Air travel is expected tosee a significant period of growth as the gov-

    ernment addresses substantial infrastructure

    deficits over the next five years in particular,

    with overall spending set to increase to more

    than $1 trillion. India has a large land mass and

    a very large and increasingly prosperous and

    mobile population that is set to claim an in-

    creasing share of the worlds material wealth.

    It lacks a high-speed rail network which could

    compete with the advantages of air travel.

    Forecast growth in Indias GDP appears to

    be following the pattern established by China,

    although with a five-year lag. Indias popula-

    tion growth and widespread poverty continue

    to create pressure within the countrys politi-

    cal system.

    Successful development of Indias commercial

    aviation potential will be dependent largely

    on financing to translate the growing demand

    into new aircraft, as well as the ability to sup-

    port market demands with domestic airport

    infrastructure.

    Northeast Asia, led by Japan, is recovering

    slowly from the ravages of the Fukushima

    environmental crisis and tsunami, although

    showing signs of individual and corporateresilience signs which will result in strong

    regional domestic demand and continued

    economic development.

    Growth markets linking major city pairs

    continue to develop and will be stimulated

    further by the continued loosening of regula-

    tory restraints, except those relating to air-

    craft environmental performance, which are

    expected to remain among the strictest in

    the world. Modern turboprop and jet aircraft

    which meet these standards will be well

    positioned for increased acceptance.

    DEMAND DISTRIBUTIONBY SEAT SEGMENT,

    ASIA/PACIFIC, 2012-2031Total: 1,710 Units

    2%

    41%

    57%

    20- to 59-seat

    60- to 99-seat

    100- to 149-seat

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    BOMBARDIER COMMERCIAL AIRCRAFTGEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 47GEOGRAPHIC DETAIL

    CHINA (PRC)

    Chinas emergence as an economic power-

    house drives demand for new aircraft and this

    market is now second only to North America,

    with 17% of world demand. We forecast a

    demand for approximately 2,220 aircraft over

    the 20-year forecast period, including approx-

    imately 1,400 aircraft in the 100- to 149-seat

    segment, as well as more than 800 in the

    60- to 99-seat regional aircraft segments.

    Chinas forecast economic growth of 6.6%

    CAGR significantly outpaces both the forecast

    world rate (3.26%) and the runners-up, Africa-

    Middle East (4.1%) and Latin America (4.1%).

    China has focused much of its development

    on building and supplying export markets for

    a very wide variety of goods. As the success

    of that strategy generates Chinese domestic

    financial returns, and the middle class begins

    to prosper and experience material comforts,

    some of the countrys emphasis is likely to

    shift to development for meeting domestic

    needs.

    Chinas need for domestic transportation

    is central to its economic growth plans and

    aviation is expected to play a central role.

    DEMAND DISTRIBUTION

    BY SEAT SEGMENT,

    CHINA, 2012-2031Total: 2,220 Units

    1%

    36%

    63%

    20- to 59-seat

    60- to 99-seat

    100- to 149-seat

    Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

    BOMBARDIER COMMERCIAL AIRCRAFT48GEOGRAPHIC DETAIL

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    BOMBARDIER COMMERCIAL AIRCRAFTMARKET FORECAST 2012-2031 48GEOGRAPHIC DETAIL

    In its current strategic five-year plan. China

    seeks to have more than 80% of its population

    within 100 km or 1.5 hours of air transporta-

    tion a feat which would provide air transpor-tation to 96% of its GDP base. While the air

    transportation system is developing, Chinas

    high-speed rail network can be expected to

    pursue and capture excess demand, particu-

    larly at and near major airports, and where

    the journey is less than 600 km.

    Airports and air traffic control system

    capacity are major brakes on the growth of

    commercial aviation in China. China has 15

    international airports operating at or above

    optimum capacity, and the central govern-

    ment has implemented plans to build, expand

    or convert 40 airports for commercial use,

    with a further 50 airports to be built, expanded

    or converted by 2020. Most of the 40 airport

    projects already underway are located in the

    Central, South and East regions, which reflects

    the distribution of population within China,

    although there are some initiatives to build

    aviation infrastructure in the less populated

    western provinces.

    Current commercial air space limitations,

    combined with aircrew shortages, monopo-

    listic fuel pricing and restrictive airline route

    expansion and airport usage policies, have

    favored the use (and purchase) of larger jets

    and resulted in congested

    airspace around Chinas larg-

    est urban centres.

    Accordingly, China will need

    to build aggressively and

    equip a significant number of

    new airports some to re-

    lieve air traffic congestion in

    heavily populated and trav-

    eled areas, and still more to

    develop and extend econom-

    ic and social links to more

    remote parts of the country.

    China is therefore expected

    to require a significant

    number of 60- to 99-seat

    regional aircraft to meet this

    demand, as well as the pilots

    to operate them, technicians

    to maintain them and an air

    traffic control system with

    which to operate them safely.

    Traditional market barriers to trade in China

    can be expected to lessen over time to help

    accomplish these challenges. Chinese GDP

    growth is expected to slow in the coming

    years from consisten