Marlet Outlook

CONNECTING THE FUTURE

TurbOprOp markETfOrECasT 2016-2035

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2 3

INTrODuCTION

The regional aviation market has evolved rapidly over recent decades, both from a geographical and technological point of view and from a business model perspective.

It is not just about linking the megacities of the world, but also about revealing the potential of secondary and tertiary airports. Turboprops in particular have a key role to play in exploring and developing new routes, thus promoting local community development.

The regional market remains one of the most promising sectors in the commercial aviation market. We have taken a new approach in our forecasting methodology to best reflect the trends and, more importantly, to develop a new vision of regional networks.

“Anything that one man can imagine,another man can make real.” - Jules Verne

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EXECUTIVE SUMMARY ........................................................... P.06

REGIONAL TRAVEL TRENDS .................................................. P.14

ENVISIONING TOMORROW’S LANDSCAPE ....................... P.20

FOCUS ON REGIONS .............................................................. P.26

AFRICA & MIDDLE EAST .......................................................... P.28

ASIA PACIFIC ............................................................................. P.30

CHINA ........................................................................................ P.32

EUROPE & CIS ........................................................................... P.34

LATIN AMERICA & CARIBBEAN .............................................. P.36

NORTH AMERICA ..................................................................... P.38

FREIGHTER DEMAND ............................................................ P.40

SAFE HARBOUR STATEMENT ............................................... P.42

TabLE Of CONTENTs

4 5

ASSUMPTIONS

The following assumptions and definitions apply unless otherwise specified:

•ASK : Available Seat Kilometer – seats multiplied by distance.

• Mature markets: North America, Western Europe, Japan, South Korea, Australia, Singapore, Chinese Taipei, Hong Kong, New Zealand, South Africa.

• Turboprop in-service fleet are considered in the range of 20-80 seats in standard configuration. Those include aircraft currently in-production and launched programs.

•Network range up to 900 NM ~ 1,700 km ~1,000 mi.

•Route size considered: up to 300 daily seats each way per carrier.

•Traffic allocation to all types of existing aircraft categories from 20 to 200 seats, jet and turboprop technologies.

6 7

ExECuTIvE summary

8 9

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036

ACTUAL FORECAST

+3

.9%

TR

AFF

IC

avEraGE aNNuaL TraffIC GrOWTH

ExECUTIvE SUMMARy

TraffIC GrOWTH

+3

.0%

GD

P

+3.9%

DEL

IvER

IES

IN S

ERv

ICE

GROWTH

REPLACEMENT

STAY IN SERVICE

+86%FLEET IN SERvICE

3,900

2016 2035

TurbOprOp DEmaNDExECUTIvE SUMMARy

TurbOprOp fLEET EvOLuTION aND DELIvErIEsIn-service passenger fleet

2,800

2,100

1,80065%

35%1,000

1,100

Fleet growth is envisioned to account for 65% of turboprop deliveries in the next 20 years. Half of this growth is driven by the creation of new routes as part of airlines network development strategy. The other half relates to the expanded usage of the turboprop technology in pre-existing markets.

10 11

+3,000 POTENTIAL NEW ROUTES CREATED

+3.2% PER yEAR

GROWTH FROM ROUTE CREATION

300

400

800

600

400

500

fOCus ON rOuTE CrEaTION ExECUTIvE SUMMARy

2016-2035 pOTENTIaL NEW rOuTEs By region

ExECUTIvE SUMMARy

GrOWTH CONTrIbuTOrs

50%

TurbOprOp markET mECHaNIsmsAverage annual growth by category

Tota

l sea

ts

OF GROWTH WILL COME FROM ROUTE CREATION

Route creation

Growth of existing network

Upsizing to larger capacity

2006 2015

-2.7%

+3.2%

+2.9% -2.9%

+3.5%

+3.2%

2035

750

600450

400

300

300

AFRICA & MIDDLE EASTNORTH AMERICA

LATIN AMERICA & CARIBBEAN

EUROPE & CIS

ASIA PACIFICexcl. CHINA

CHINA

12 13

ExECUTIvE SUMMARy

GEOGrapHIC DIsTrIbuTION

2016-2035 TurbOprOp DELIvErIEs By region

61-80 seats

2,200

40-60 seats

600

ExECUTIvE SUMMARy

CapaCITy

2016-2035 TurbOprOp DELIvErIEs By seat category

21%

16% 11%

14%

27%

11%

The demand for 40-60 seat turboprop is supported by both the replacement of 20-40 seat aircraft and the creation of new routes that will serve challenging airports.

61-80 seat aircraft remains the bulk of the demand. The capability to raise traffic through frequency at competitive seat mile cost is the key driver for the continuous growth envisioned for this segment.

14 15

rEGIONaL TravEL TrENDs

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036

17

REGIONAL TRAvEL TRENDS

EmErGING ECONOmIEs DrIvE GrOWTH


maNy pEOpLE TO CONNECT

POPULATION

Early stage

Developing

Intermediate

Mature

Network development stageRoutes/M.km /M.hab2

rEGIONaL TraffIC DEmaND

+0.6%

+4.6%

EmErGING

maTurE

The quality of regional network is essential to balance economic growth.

There is a strong potential for the most populated countries to enhance their regional network and link the most remote communities.

Emerging markets’ demand has overtaken the mature markets’ capacity since 2011 in the regional sector.

The demand in emerging countries is expected to grow eight times faster than that of mature economies.

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NETWOrk DEvELOpmENT by COuNTry

UP TO +5%

UP TO +6%

UP TO +8%

+10%FLIGHTS

REGIONAL GDP

TOURISTS

GENERATE

MORE SOCIAL DEVELOPMENT

MOREEMPLOYMENTFOREIGN DIRECT

INVESTMENT

18 19


aIr CONNECTIvITy Is a DrIvEr fOr DEvELOpmENT

2006 2015


rEDuCING THE CarbON fOOTprINT Of rEGIONaL avIaTION

EmIssIONs & TurbOprOp sHarE CO2 /ASK - Turboprop share (ASK %)

-10%

+15%

25%

40%

The increased usage of turboprops on regional routes helps to reduce aviation emissions.

CO2 EMISSIONS

TURBOPROP ASK MARKET SHARE

An increase in the number of flights have a positive impact on regional GDP, tourism and investment.

By offering a combination of greater accessibility to remote airfields and lower operating costs than any other category of aircraft, turboprops have proved to be fundamental enablers for regional economic growth.

20 21

ENvIsIONING TOmOrrOW’s LaNDsCapE

TurbOprOp aCTIvITy by rEGION ASK by region

2035

TurbOprOp IN-sErvICE fLEET EvOLuTION Annual growth rate

+3.3%

+4.1%

+2.2%

+6.5%

+40.7%

+4.2%

11%

31%

9%

24%

13%

12%

11%

32%

1% 27%

10%

19%

AFRICA & MIDDLE EASTNORTH AMERICA

LATIN AMERICA & CARRIBEAN

EUROPE & CIS

ASIA PACIFICexcl. CHINA

CHINA

2015

22 23

ENvISIONING TOMORROW’S LANDSCAPE

GEOGrapHIC DIsTrIbuTIONENvISIONING TOMORROW’S LANDSCAPE

IN-sErvICE fLEET by rEGION

2035

2015

500

LATIN AmerIcA & cArIbbeAN

220

650

NOrTH AmerIcA450

420

AfrIcA & mIDDLe eAST

230 320

cHINA35

900

1,180

ASIA PAcIfIc

eurOPe & cIS540

640

fLEET IN sErvICE

The turboprop market is flourishing towards South and East, with China envisioned to lead a strong growth in the next 20 years, reshaping the current geographical distribution.


50 100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

0

50%

100%

REGIONAL JETS

TURBOPROPS

2016 @ $1.5/USGal

2011 @ $3.3/USGal

2006 @ $2.3/USGal

2006

2015

2006

2015

2006

2015

2006

2015

2006

2015

0.01

0.1

1

2006 250 Nm

260 Nm

300 Nm

2011

2016

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prOpELLEr Or faN: a maTTEr Of DIsTaNCE

Regardless of the fuel price, turboprops have extended their operational scope over jets, proving to be the preferred airline choice for short haul operations.

Growth in regional seats per capita is correlated with country’s wealth. As GDP per capita increases, the prospective for regional aviation drastically improves, especially when countries adopt regional air connectivity to accelerate economic growth.

sHarE Of fLIGHTs By distance (NM)

TurbOprOp OpEraTIONs prEfErrED up TO:

WEaLTH & aIr TraNspOrT DEvELOpmENT


rEGIONaL aIr TraNspOrT DEvELOpmENT

24 25

REGIONAL SEATS/CAPITA

GDP/CAPITA

Note: Focus on turboprops and regional jets from 40 to 80 seats in order to avoid capacity-driven choice.

26 27

fOCus ON rEGIONs

AvERAGE ANNUAL FLEET GROWTH

4.1%

34%

30%

300DELIvErIEs

TP75

TP50

400NEW rOuTEs

60240

Route creation

Replacement


36%

28 29

AIRCRAFT DELIvERy FORECAST

afrICa & mIDDLE EasT


4.2%

27%30%

43%

750DELIvErIEs

600NEW rOuTEs

Route creation

Replacement


TP75

TP50120

630

30 31


asIa paCIfIC(ExCLUDING CHINA)


40.7%

3%

19%

78%

300DELIvErIEs

800NEW rOuTEs

TP75

TP5030

270

Route creation

Replacement


32 33


CHINa


3.3%

20%

40%

41%

600DELIvErIEs

400NEW rOuTEs

TP75

TP50110

490

Route creation

Replacement


34 35


EurOpE & CIs


6.5%

33%23%

42%

400DELIvErIEs

500NEW rOuTEs

TP75

TP5080

320

Route creation

Replacement


36 37


LaTIN amErICa& CarIbbEaN

215Tp 70

DELIvErIEs


2.2%

38 39


NOrTH amErICa

450DELIvErIEs

TP50

TP75

300NEW rOuTEs

240210

5%

69%

26%

Route creation

Replacement


40 41

frEIGHTEr DEmaNDFREIGHTER MARKET

TurbOprOp frEIGHTEr fLEET EvOLuTION

CO

Nv

ERSI

ON

IN S

ERv

ICE

+35%FLEET IN SERvICE

460

2016 2035

420

340

120

300

40

More than 400 turboprop freighters are expected to be operated by 2035. The demand for these platforms increases with the adoption of e-commerce technology around the world, and the requirement of express service deliveries.In the next 20 years, the rise in demand of cargo services will be triggered by emerging economies. The current freighter fleet is 27 years old on average and requires prompt replacement in different forms: cargo-pax flexible variants and full freighter conversions.

Note: Freighter aircraft – excluding Eastern built – from 3t to 9t payload.

STAY IN SERVICE

GROWTH

REPLACEMENT

29%

71%

42 43

• The successful execution of internalperformance plans, including cost reduction and productivity efforts;• Product performance risks, as well asprogramme development and management risks;• Customer, supplier and subcontractorperformance or contract negotiations, including financing issues;• Competition and consolidation in theaerospace and defence industry;• Significant collective bargaining, labourdisputes;•Theoutcomeofpoliticalandlegalprocesses,including the availability of government financing for certain programmes and the size of defence and space procurement budgets;• Research and development costs inconnection with new products;• Legal, financial and governmental risksrelated to international transactions;• Legal and investigatory proceedings andother economic, political and technological risks and uncertainties.

Any forward-looking statement contained in this presentation/publication speaks as of the date of this presentation/publication release. ATR undertakes no obligation to publicly revise or update any forward-looking statements in light of new information,

safE HarbOur sTaTEmENT

DisclaimerThis presentation includes forward-looking statements. Words such as anticipates, believes, estimates, expects, intends, plans, projects, may, forecast and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, rampup and delivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook.By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

These factors include but are not limited to:• Changes in general economic, politicalor market conditions, including the cyclical nature of ATR business;•Significantdisruptionsinairtravel(includingas a result of terrorist attacks);• Currency exchange rate fluctuations, inparticular between the Euro and the U.S. dollar;

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Marlet Outlook