Bba 2012 market_forecast


Published on

Bombardier Aerospace is pleased to present the 2012 edition of its Business Aircraft Market Forecast. The forecast incorporates a 20-year outlook of business jet industry, Bombardier's long-term vision of the business jet market and an in-depth look at the market drivers in the major regios af the world.

Published in: Business
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Bba 2012 market_forecast

  1. 1. business Aircraftmarketforecast2012-2031
  2. 2. Bombardier business AircraftMarket forecast 2012-2031 02table of contentsExecutive SummaryHistorical Market PerformanceCurrent Market DriversThe ForecastConclusion03081 12346
  3. 3. Bombardier business AircraftMarket forecast 2012-2031 03executivesummary
  4. 4. Bombardier business AircraftMarket forecast 2012-2031 04Executive SummaryBombardier Aerospace is pleased to presentthe 2012 edition of its Business AircraftMarket Forecast. The forecast incorporates a20-year outlook of the business jet industry,Bombardier’s long-term vision of the businessjet market and an in-depth look at the marketdrivers in the major regions of the world.Bombardier continues to grow its leadershipposition in the business jet manufacturingindustry. During 2011, Bombardier againrecorded more orders than any singlecompetitor, with 191 net orders, representingapproximately 45% of industry total netorders. Bombardier also had strong deliveryperformance in 2011 with a 32% market sharebased on units and 38% market share basedon revenues.Bombardier remains confident in the stronglong-term potential for the business aircraftindustry and maintains its focus on strength-ening its market leadership position bycontinuing to invest in its developmentprograms: the Global 7000, Global 8000,Learjet 70, Learjet 75 and Learjet 85 aircraft.During Q1 2012, the first Global 6000 andGlobal 5000 aircraft equipped with theVision Flight Deck entered service.With its comprehensive product portfolio,dedication to superior customer supportand solid product-development roadmap,Bombardier is well positioned to benefit fromthe next business aircraft industry up-cycle.This forecast focuses on the three businessjet categories in which Bombardier competes:Light, Medium and Large. The Very Light andLarge Corporate Airliner categories areexcluded.Bombardier remainsconfident in the stronglong-term potential forthe business aircraftindustry.INDUSTRY ORDERS AND DELIVERIESUnits, 2002–2011Sources: Actual deliveries from GAMA. Orders estimated from competitive intelligence, OEM guidance.Excludes Very Light Jet and Large corporate airliners segments.4006008001,2001,4001,6001,8002011201020092008200720062005200420032002-1,00001,000-800-600-400-200200Total DeliveriesTotal OrdersOrderandDeliveryUnits
  5. 5. Industry Recovery ContinuesThe business jet industry is progressing wellon a prolonged and gradual recovery fromthe steep industry downturn of 2009-2010.Many market indicators continue to improve.Industry order intake grew over 2010 levelsand the industry book-to-bill ratio alsoimproved. Bombardier Business Aircraft’sbook-to-bill ratio was 1.2 for 2011.Industry deliveries were relatively flat,year-over-year. While pre-owned inventoriescontinue their gradual decline, residual valuesremain depressed and trade-ins of pre-ownedaircraft continue to be active. Aircraft utiliza-tion is increasing gradually, but remains belowpre-recession levels. The recovery in businessjet orders has been stronger in the Large cat-egory while the Light category continues tolag. Stock markets improved during 2011, butremain very volatile. Corporate profitabilityand the number of billionaires worldwide areat record levels.The U.S. economy experienced continuedgrowth in 2011 and showed signs of improvedmarket confidence, with increased businessjet orders. Certain emerging markets, notablyChina, continued to grow strongly and werevery active for business jet orders during 2011.The European economy continues to causewidespread uncertainty.Market confidence needs to be fully restoredfor industry business jet deliveries to increasesubstantially and enable the industry torealize its full potential. Industry deliveries arenot expected to improve significantly in 2012.With increasing confidence and strongereconomic growth, Bombardier believesbusiness jet deliveries will return to sustainedgrowth starting in 2013. This forecast willdetail the expected timeline and magnitudeof the business jet industry comeback.Bombardier business AircraftMarket forecast 2012-2031 05Executive SummaryFigure #2INDUSTRY NET ORDERSUnits, 2010–Q1 201273232Q1 2012784020114231912010180107Sources: Manufacturer disclosures and Bombardier estimates.Excludes Very Light Jet and Large Corporate Airlines categories.Other OEMsBombardier59%45%51%38
  6. 6. Bombardier business AircraftMarket forecast 2012-2031 06Executive SummaryBusiness Jet Value PropositionBusiness jets provide fast, flexible, safe,secure and cost-effective access to travelers’destinations of choice. In addition to the timesaving and flexibility gained when using abusiness jet, there exist other less quantifiable,but equally important benefits. These include:on-demand flight schedules, the ability todiscuss business privately during flights, moredirect access to company’s sites (which maynot be served by scheduled airlines), andreduced fatigue on a company’s frequenttravelers.Nexa Advisors has conducted studies be-tween 2009 and 2012 to evaluate the impactof business jet ownership on large, mediumand small companies, as well as governmentagencies. They found that companies usingbusiness jets are most likely to outperformnon-users on revenue growth, share pricegrowth, profitability and employee satisfac-tion. Nexa Advisors also came to the conclu-sion that business jet use among governmentagencies clearly improves taxpayer value.Noted investor Warren Buffett, CEO ofBerkshire Hathaway, stated: “Berkshire hasbeen better off by me having a plane availableto go and do deals or whatever it may be.A lot of times it doesn’t work out. But net,it’s a plus. We have done things I wouldn’thave done if we hadn’t had a plane.”In an increasingly competitive globalmarketplace, business aviation is a tool thatcontributes directly to growth.In an increasingly competitiveglobal marketplace, businessaviation is a tool thatcontributes directly to growth.
  7. 7. A long-term vision forthe industryWe believe that the long-term market driversof business jet industry growth remain solid.These market drivers include: wealth creation,increasing business jet penetration in high-growth economies, globalization of trade,replacement demand, and market accessibility.This confidence is reflected in our 20-yeardelivery forecast, which predicts 24,000business jet deliveries valued at $648 billion.We anticipate 9,800 deliveries worth $266billion from 2012 to 2021, and 14,200 deliveriesworth $382 billion from 2022 to 2031.We expect the worldwide business jet fleetto grow at a compound annual growth rate(CAGR) of 3.7% over the forecast period, from15,200 aircraft in 2011 to 31,500 aircraft by2031, net of retirements.Bombardier business AircraftMarket forecast 2012-2031 07Executive SummaryFigure #4BUSINESS JET FLEET FORECASTUnits, 2011-2031Source: Bombardier Forecast Model.3,1004,600Fleet 203131,500RetirementsDeliveries14,200Fleet 202121,900RetirementsDeliveries9,800Fleet 201115,200Source: Bombardier Forecast Model.BUSINESS JET MARKET HISTORY AND FORECASTHISTORICAL2002-2011Delivery Units 6,300Revenues $139 billionFORECAST2012-2021 2022-2031 Total (2012-2031)9,800 14,200 24,000$266 billion $382 billion $648 billion
  8. 8. Bombardier business AircraftMarket forecast 2012-2031 08HistoricalMarketPerformance
  9. 9. Bombardier business AircraftMarket forecast 2012-2031 09Historical Market PerformanceFigure #5Source: Actual deliveries from GAMA.HISTORICAL BUSINESS JET DELIVERIESUnits, 1965-20112011CAGR = 4%CAGR = 9%200820062004200270050090080060040030020010050201015020002501990350198045019705506507508509501966 1968 1972 1974 1976 1978 1982 1984 1986 1988 1992 1994 1996 1998Business Jet Deliveries1965 2011Over the past 40 years, the industry hasbeen characterized by cyclical performancein deliveries. From 1965 to 1995, business jetdeliveries increased at a 4% CAGR, wheremost of the growth occured in the primarymarket, the United States. At the end of the1990s, business jet purchases acceleratedin other regions of the world, and as a result,world deliveries increased by 9% per yearon average during that period.2004 to 2007Following the 2001-2003 downturn, the U.S.economy regained its momentum and thedemand for business jets rose significantlybetween 2004 and 2007. New markets forbusiness aircraft, such as Europe, Asia andthe Middle East, also began to generatesubstantial demand. Moreover, the launchof new, innovative aircraft spurred demandeven higher.
  10. 10. Bombardier business AircraftMarket forecast 2012-2031 10Historical Market Performance2008-2011The near-collapse of the financial markets atthe end of 2008 precipitated a sharp downturnin business aviation and new business aircraftorders. Order intake stalled in Q4 2008 andremained very low. The inventory of pre-ownedaircraft for sale increased dramatically andresidual values declined sharply.Bombardier estimates that more than 800orders were cancelled in the Light to Largecategories in 2009. That forced manufacturersto juggle order deferrals and cancellations,and led them to decrease production ratesand deliveries. The bottom of the marketin terms of demand was reached in the firsthalf of 2009.From mid-2009 until mid-2012, the markethas made progress on many fronts: creditavailability is less problematic, business jetusage is rising and gross orders are up.Moreover, cancellations are back to relativelylow levels. As of Q1-2012, pre-owned inventoryis also down significantly at 13.6%, 4.2percentage points below its mid-2009 peak.20.1 15.2 15.9 15.512.39.6 9.87.8 14.9 17.6BUSINESS JET DELIVERY REVENUES$B, 2002-2011Sources: Revenues estimated from GAMA and B&CA list prices.2003 20042002 2005 2006 2007 2008 2009 2010 2011Segments in which Bombardier competesIn 2011, marketfundamentals continued toimprove and order intakeincreased significantly.
  11. 11. Bombardier business AircraftMarket forecast 2012-2031 11CurrentMarket Drivers
  12. 12. Bombardier business AircraftMarket forecast 2012-2031 12Current Market DriversThe Bombardier Business Aircraft MarketForecast uses an econometric model basedon several market drivers. The long-termportion of the forecast is explained by boththe economic growth and the expected rateof business jet fleet penetration in eachof the forecast regions.Economic Market DriversGlobal EconomyIn 2011, multiple events slowed global GDPgrowth. Political upheavals included majorpopular uprisings that swept across theMiddle East and North Africa, while Europe’sfiscal austerity measures, sovereign debt andbanking problems also constrained globalgrowth. Emerging markets, which have beenthe engine of the world economy for years,showed signs of slowing. As a result, in 2011,the world economy grew at an annual rateof 2.7%.For 2012, the world economy is expectedto grow at an annual rate of 2.4%, and tostabilize at approximately 3.2% per year overthe longer term. Growth, however, remainsuneven. While emerging markets and mostnatural resource-exporting economies areexpanding at a rapid pace, the output inmost advanced economies is still far belowpotential.In its April 2012 Economic Outlook, theOrganization for Economic Cooperation andDevelopment (OECD) stated: “The globaleconomy is moving away from the cliff edge,with short-term prospects clearly improvingcompared to the situation in the end of 2011.”North America looks stronger, suggestingfirm growth. In the United States, consumerconfidence is strengthening, unemploymentis falling and credit growth is recoveringstrongly, driving the recovery.The World economyis to grow on averageat 3.2% per year overthe next 20 years.WORLD GDP GROWTH FORECAST% Change Year-over-Year, 2008-2014Source: IHS Global Insight, February 2012.-2.5-2.0-1.5-1.0- 3.1%2009 20102008 2011 201320121.4%2014
  13. 13. Bombardier business AircraftMarket forecast 2012-2031 13Current Market DriversActivity in Japan will remain volatile, withmoderate growth expected in the first half ofthe year. In China, recent policy decisions havebeen effective in partially offsetting externalheadwinds faced by its export sector. In Brazil,a loosening of monetary policy and a boostto investment in infrastructure and energyshould help offset economic challenges.The European economy is expected to remainfragile. Major decisions in Europe at thebeginning of 2012 have improved the outlook,reduced the risk of catastrophe, and moderatedthe severity of the recession. Nevertheless,substantial risks remain in the Eurozone: highunemployment, low confidence and weaklending activity prevent the economyfrom growing.The OECD also suggests: “The globaloutlook is still largely dependent on policyactions: in the U.S. the fiscal debt lock mustbe addressed, in the Eurozone the firewallmust be significantly strengthened, banksneed to be recapitalized.”We have stepped back from the cliff, butmore needs to be done to boost growth andsustain the recovery.
  14. 14. Bombardier business AircraftMarket forecast 2012-2031 14Current Market DriversWealth CreationWorldwide demand for business jets is highlycorrelated with wealth creation which, in turn,is largely driven by economic growth. TheMorgan Stanley Capital International (MSCI)World index is an aggregate stock marketindex, based on representative securitieslisted in major financial exchanges aroundthe world, and a good indicator of wealthcreation.Stock markets have rebounded nicely sincethe bottom in March 2009. The MSCI WorldIndex grew by 60% from March 2009 toMarch 2012. The European sovereign debtproblems continue to affect the markets.Although the MSCI World Index has increasedsince 2009, the recovery in business jetorders and deliveries has lagged.A high portion of billionaires are businessjet owners. A March 2012 report from Forbesestimated a record number of billionaires at1,226 worldwide, a 4% increase over 2011.The most significant growth in billionairesoccurred in Latin America, which saw ayear-over-year increase of 25%, followedby Asia Pacific at 15%. In their Wealth Report2012, Knight Frank and Citi Private Bankconclude: “Economic turbulence failed tocurb the rise in the number of ultra-wealthyindividuals last year.”gure #9NUMBER OF BILLIONAIRESUnits and % Change 2011-2012Sources: Forbes, March 2011 and March 2012.World 2011: 1,184World 2012: 1,226+6%+9%- 7%-6% +15%-5% +25%-11%+14%NumberofBillionairesRussiaand CISMiddleEastAfricaLatinAmericaIndiaEurope ChinaNorthAmericaAsiaPacific1614107157 107206 65450 70 4825020015010050030035040045020122011426 189 168 114 93 74 52 54MSCI WORLD INDEX2002-2012Source: MSCI World Index from Morgan Stanley.201220112010200920082007200620052004200320022003004006007008001001,5001,00050009001,1001,2001,3001,4001,6001,700
  15. 15. Bombardier business AircraftMarket forecast 2012-2031 15Current Market DriversBusiness Jet Market DriversBusiness Jet UtilizationHistorically, business jet utilization is anindication of the overall health of the industry.The Federal Aviation Administration (FAA)and Eurocontrol record the number oftake-offs and landings at U.S. and Europeanairports respectively.The busiest airports for business jet move-ments in the U.S. include Teterboro, WhitePlains and Washington-Dulles. Around theworld, Paris-Le Bourget, Geneva, Nice,London-Luton, Farnborough, Mexico City-Toluca, Moscow-Vnukovo, Johannesburg-Lanseria and Beijing-Capital are among themost significant business jet airports.In both the U.S. and Europe, business jetusage made little progress in 2011 over 2010.In its April 2011 Briefing on Business Aviationin Europe, Eurocontrol predicted that utiliza-tion wouldn’t return to pre-crisis growth ratesin the medium-term, given the relative weak-ness of European economies.Figure #10U.S. BUSINESS JET UTILIZATIONTake-offs and Landings (’000), 2009-2012Source: FAA.Q4 09 Q1 12Q4 11Q3 11Q2 11Q1 11Q4 10Q3 10Q2 10Q1 10Take-offs and Landings (’000)-1%-1%4%1%5%8%10%15%16%0%Take-offs and Landings YoY (%)EUROPEAN BUSINESS JET UTILIZATIONTake-offs and Landings (’000), 2009-2012Source: Eurocontrol.945 9601,001 1,018 1,019 1,0061,041 1,013 1,010 1,0159910513712810010813312097103-1%-3%3%7%3%5%7%6%9%0%Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12Take-offs and Landings (’000) Take-offs and Landings YoY (%)
  16. 16. Bombardier business AircraftMarket forecast 2012-2031 16Current Market DriversBacklogsBacklog refers to the total number of aircraftorders not yet delivered. Manufacturers adjusttheir production rates based on their currentbacklogs and their expectations regardingthe number of orders they can obtain in thefuture.Production rate changes are costly andcomplex, due to the expenses associatedwith hiring or laying-off employees, as wellas adjustments to the supply chain andscheduling. Manufacturers, therefore, aimto optimize deliveries, while minimizingfluctuations in production rates.We estimated the industry backlog at theend of 2011, at about 1,300 aircraft, with avalue of $44.6 billion. The Large categorymakes up the greatest portion of the backlogin value, followed by the Medium and Lightcategories respectively. We estimate that85% of the unit backlog is from traditionalcustomers, such as corporations, high networth individuals, and government agencies.The remaining 15% of the backlog are ordersfor fractional operators. Approximately 19%of the total unit backlog is comprised ofdevelopment programs – that is, aircraftwhich have not yet entered service.Moving forward, reduced near-term deliveriescombined with the progressive return topositive industry net orders should result inindustry backlogs stabilizing and growing,with the Large aircraft category leading thenext up cycle.Sources: Orders estimated from competitive intelligence, OEM guidance.INDUSTRY BACKLOGEstimated Units, 2002-20115001,0001,5002,0002,5003,0002002 2003 2004 2005 2006 2007 2008 2009 2010 2011Sources: Orders estimated from competitiveintelligence, OEM guidance, 2011 List price from B&CA.INDUSTRY BACKLOGEstimated Value ($B), Q4-2011$ 44.6BLarge:$32.0 BLight:$5.0 BMedium:$7.6 B
  17. 17. Bombardier business AircraftMarket forecast 2012-2031 17Current Market DriversThe Pre-Owned Aircraft MarketMore than 85% of new business jet ordersoriginate from existing owners, either toreplace or expand their fleet. The demand fornew aircraft is stimulated by the conditionsprevailing on the pre-owned market. Thismarket is considered healthy when residualvalues are high and when the inventory ofused aircraft for sale is low.At the end of 2007, the pre-owned inventorysat at a low of 10.5% of the business aircraftfleet. The accumulation of aircraft on thepre-owned market was a leading indicator ofthe new business aircraft market downturnthat started a year later.In early 2008, the percentage of the overallbusiness jet fleet for sale on the pre-ownedmarket started to increase rapidly. Manyowners experienced difficulties selling theiraircraft, which, in turn, made these ownersless likely to purchase new aircraft. Theinventory peaked at 17.8% in Q2 2009.Financing became very difficult for aircraftmore than 15 years old.From mid-2009 until now, sales of pre-ownedaircraft have increased and inventory hasdeclined. By Q1 2012, pre-owned inventoriescontinued to fall, to 13.6%. We expectpre-owned inventories to stabilize in therange of 11% to 13% of the fleet.As for residual values, they remained elevatedthrough the first half of 2008 due to manufac-turers’ long backlogs. Since then, residualvalues have dropped across all aircraft catego-ries. During 2009, average business jet residualvalues fell by 27 percentage points. By Q1 2012,residual values appeared to have bottomedwith the average value for a 5-year old businessjet at 63% of the original Business & CommercialAviation (B&CA) magazine list price.4Source: Aircraft inventory and fleet from Jetnet. Excludes Very Light Jet Segment.PRE-OWNED AIRCRAFT INVENTORYAS A % OF THE FLEET%, 2006-2012Q106Q206Q306Q406Q107Q207Q307Q407Q108Q208Q308Q408Q109Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q11210.5%17.8%13.6%5-YEAR RESIDUAL VALUEAS A % OF THE ORIGINAL B&CA LIST PRICE%, 2006-2012Sources: Residual values from Aircraft Bluebook Price Digest, original list price from B&CA.92%67%59%63%Q106Q206Q306Q406Q107Q207Q307Q407Q108Q208Q308Q408Q109Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112
  18. 18. Bombardier business AircraftMarket forecast 2012-2031 18Current Market DriversNew Aircraft ProgramsContinued technological improvements,notably in lower fuel consumption, avionicsand aerodynamics, allow new generationaircraft to offer more range, performance andfeatures than earlier aircraft, for a comparableprice. The availability of more capable aircraftspurs demand for replacement aircraft andfrom first-time buyers. The launch of newairplane programs reflect manufacturers’ability to incorporate the latest technologybreakthroughs in their product lines and theirconfidence in the marketplace going forward.This also reflects the industry’s constant focuson safety, making business aviation one ofthe world’s safest forms of transportation,according to the International BusinessAviation Council (IBAC).Over the last three years, several newprograms have been launched publicly,including Bombardier’s Global 7000,Global 8000, Learjet 70 and Learjet 75 jets.2012 2013 2017ENTRY INTO SERVICE OF NEW PROGRAMSBombardier Models, 2012-2017Global 6000Global 5000both equipped withVision Flight DeckLearjet 85Learjet 75Learjet 70Sources: Bombardier Aerospace.2014 2016Global 70002015Global 8000
  19. 19. Bombardier business AircraftMarket forecast 2012-2031 19Current Market DriversFractional and Branded Charter DemandFractional ownership, through which severalusers acquire ownership interests in the sameaircraft, has existed since the mid-1990s andhas accounted for an average of 10% to 15% ofbusiness jet deliveries. In the 1995-2011 period,fractional operators took delivery of morethan 1,150 business jets. Other alternatives toconventional ownership include “fractionalcard” and “jet card” programs, through whichcustomers obtain on-demand access to athird party-operated business jet.There are currently four large operators in thefractional ownership industry, including Flexjetby Bombardier. One operator, CitationAir,has announced plans to exit the fractionalownership market, but will remain in the jetcard and jet management businesses. Thefractional ownership industry went througha period of fleet rationalisation in 2009,resulting in a substantial reduction of its orderbacklog. Fractional program orders have sinceresumed growth; in particular, NetJets placedsignficant volume orders between 2010 and2012, including firm orders for 50 BombardierGlobal and 100 Bombardier Challenger aircraft.
  20. 20. Bombardier business AircraftMarket forecast 2012-2031 20Current Market DriversThe growth in the number of branded charteroperators is more recent. These operatorsoffer on-demand lift and compete on trip-specific pricing. Branded charter operators,like Vistajet or XOJET, are characterized bysophisticated operations infrastructure andgreater use of airline-style scheduling prac-tices to minimize deadhead costs. In 2008,branded charter operator orders representedapproximately 20% to 30% of total businessjet orders. In 2009, the aftermath of theeconomic downturn caused branded charteroperators to defer and cancel orders.Large fleet operators are growing again andhave placed orders for additional businessjets in 2010 and 2011.In the near-term, fractional market demandwill be mainly for fleet replacement. Fractionaloperators are expected to account forapproximately 10% of business jet deliveriesover the next 20 years.+HoursPerYear–- Personalized service +AIR-TRAVEL OPTIONSCommercial – aviation offeringLow costairlinesCommercialairlinesFirst-classcommercialairlinesAir TaxisCharters/BrandedChartersJet-cardprogramsFractionalownershipFullownershipOn-demand service Business jet ownershipBusiness jet marketSource: Bombardier Aerospace.BUSINSource: Jetnet. Includes the 4 majo2002 2003 20090080070060050040030020010007- Personalized service +AIR-TRAVEL OPTIONSion offeringialFirst-classcommercialairlinesAir TaxisCharters/BrandedChartersJet-cardprogramsFractionalownershipFullownershipOn-demand service Business jet ownershipBusiness jet marketace.BUSINESS JET FRACTIONAL FLEETUnits, 2002-2011Source: Jetnet. Includes the 4 major fractional providers: Flexjet, NetJets (all subsidiaries), CitationAir, Flight Options.2002 2003 200490080070060050040030020010002005 2007 2010 20112008 20092006Fractional operators areexpected to account forapproximately 10% ofbusiness jet deliveries overthe next 20 years.
  21. 21. Business Jet Penetration inGrowth MarketsBusiness jet penetration is a measure ofthe number of business jets in each of theforecast regions relative to the size of thatregion’s economy, as represented by grossdomestic product (GDP). To normalize fordiffering population sizes in each region,penetration rates and GDP are best comparedon a per capita basis. The penetration rate ofbusiness jets by region is highly variable. Themost established market for business jets,North America, has the world’s largest fleet,which continues to grow, but slowly. China, incontrast, has a very small number of businessjets relative to the size of its economy andits business jet fleet is now entering a rapidgrowth phase.Longer term business jet fleet growth byregion is best represented by an expectedmarket maturity curve resembling an “S”shape, with the fastest growth occurringin the early phase of market adoption andslowing growth as the market matures.Projected GDP growth can be used toforecast the likely trajectory of the businessjet penetration for each region. Realizationof fleet growth implicitly assumes expectedadoption and acceptance of business jets andthe progressive removal of barriers, notablythe lack of adequate infrastructure andregulatory limitations. As the economydevelops, the expected growth of thebusiness jet fleet in each region canreasonably be predicted over the longerterm. Once fleet sizes are netted of aircraftretirements, business jet deliveries can bederived for each region.NORTH AMERICALATIN AMERICAMIDDLE-EAST& AFRICAASIAEUROPE &RUSSIA1st drivingforce: GDPgrowth2nd drivingforce:removal ofbarriersAveragegrowth pathGDP per Capita ($, Log Scale)10,0001,000100101100 1,000 10,000 100,000PENETRATION RATES BY REGIONFleet per Capita vs. GDP per Capita, 1960-2011Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.Fleetper100MillionPopulation(LogScale)The penetration rate ofbusiness jets by region ishighly variable; each regionis at a different stage.Bombardier business AircraftMarket forecast 2012-2031 21Current Market Drivers
  22. 22. Goldman Sachs Asset Management hasintroduced the term “growth market” todefine any country outside the developedworld that is responsible for at least 1% ofglobal GDP. These economies are most likelyto “experience rising productivity coupledwith favorable demographics and, therefore,a faster growth rate than the world averagegoing forward.” These include the BRICcountries (Brazil, Russia, India and China),as well as Mexico, South Korea, Turkey andIndonesia. We expect a significant shareof business jets to be delivered in thesegrowth markets.Aircraft RetirementsAs of the end of 2011, the average age of theworldwide business jet fleet was 15.9 years,with 60% of the fleet at less than 15 years old.At the other end of the spectrum, around 200aircraft are more than 40 years old.To date, the total number of permanentretirements of business jets has been low,equivalent to about 7% of total deliveriessince 1965. However, as a result of emergingenvironmental concerns, new regulations andairspace modernization, the retirement of theoldest business jets is expected to accelerate.Environmental regulations include potentialairport restrictions on Stage 2 business jetoperations and the introduction of theEmissions Trading Scheme (ETS) in Europetaking effect in 2012. The ETS will penalizeaircraft with older technology engines thatburn more fuel and emit more greenhousegases (such as CO2). Similarly, planned air-space modernization in the United States(FAA NextGen), in Europe (Single EuropeanSky) and elsewhere will require advancedflight deck avionics technologies and it maynot be economically feasible to retrofit olderaircraft, rendering these types obsolete.These dynamics will result in a reduction ofthe business jet fleet half-life (age at which50% of aircraft have retired) from 40 yearsin 2011 to 30 years in 2031.The number of aircraft that retire within theforecast period will vary considerably byregion. Naturally, the regions having wellestablished business jet fleets and olderaircraft will experience the greatest numbersof retirements. Regions that currently haverelatively small business jet fleets, such asChina, will experience comparatively fewerretirements during the forecast period.Bombardier business AircraftMarket forecast 2012-2031 22Current Market DriversBUSINESS JET DELIVERIES AND RETIREMENTS BY AGE GROUP1965-2011Source: Ascend.Total deliveries: 16,330Total retirements: 1,130Current fleet: 15,2001-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 >403,4103,4102,8402,8402,6902,6901,3601,3651,2401,2551540 1101,4801,5201,4801,590490210200 76097069050% 0% 0% 0% 1% 3% 7%In Service Retired % Retired29%78%Aircraft Age GroupsRetiredCurrent Fleet
  23. 23. Bombardier business AircraftMarket forecast 2012-2031 23The Forecast
  24. 24. Orders, Deliveries and RevenuesWhile leading indicators for business aviationgradually improved in 2011, the disparity ineconomic recovery among regions isbecoming more apparent, with North Americaset for growth while Europe remains understrong pressure and Asia slows its expansion.Industry deliveries are expected to lag orderintake as manufacturers strive to maintainacceptable backlog levels. Business jetdeliveries for 2012 are expected to becomparable to 2011, just under 600 aircraft.Deliveries are expected to accelerate in 2013and we forecast that the industry will surpassthe 2008 delivery peak, as early as 2016.Bombardier business AircraftMarket forecast 2012-2031 24The ForecastBUSINESS JET INDUSTRY 20-YEAR DELIVERIES OUTLOOKUnits, 1992-2031Source: Bombardier Forecasting Model.1992-20013,950 units2002-20116,300 units2012-20219,800 units2022-203114,200 units7006001002004001,5003005001,0008009001,1001,2001,3001,40092 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30HISTORY FORECASTWe forecast that theindustry will surpass theprior delivery peak yearby as early as 2016.
  25. 25. Our delivery forecast anticipates demand for9,800 aircraft valued at $266 billion acrossthe three categories of business jets duringthe 2012-2021 period. In comparison, theindustry saw 6,300 deliveries valued at $139billion, from 2002 to 2011.During the 2022-2031 period, deliveries forLight, Medium and Large categories areprojected to amount to 14,200 aircraft valuedat $382 billion. By 2031, manufacturers areexpected to deliver approximately 1,500business aircraft annually.To summarize, over the 20-year forecastperiod 2012-2031, we anticipate totaldeliveries of 24,000 aircraft valued at atotal of $648 billion.Bombardier business AircraftMarket forecast 2012-2031 25The ForecastTotal deliveries of24,000 aircraft totalling$648 billion.BUSINESS JET MARKET REVENUES FORECASTConstant 2011 $B, 1992-2031Source: Bombardier Forecasting Model.1992-2001$58 B2002-2011$139 B2012-2021$266 B2022-2031$382 B20,00010,00040,00035,00030,00025,00015,0005,00092 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30HISTORY FORECAST
  26. 26. Regional detailsThe Forecast is broken down into eight geographic regions: North America, Europe, China, India, Latin America, Russia and the Commonwealth ofIndependent States (CIS), Middle East and Africa, and Asia Pacific. Deliveries for each region are presented below in the form of two proportionalbubbles according to expected delivery quantities, where the inner bubble represents deliveries in the 2012-2021 period, and the outer (larger)bubble represents deliveries in the 2022-2031 period.Bombardier business AircraftMarket forecast 2012-2031 26The ForecastIndia2012-2021: 3852022-2031: 960North America2012-2021: 4,1002022-2031: 5,400Europe2012-2021: 1,7002022-2031: 2,220Africa2012-2021: 3252022-2031: 485Latin America2012-2021: 9852022-2031: 1,300Russia and CIS2012-2021: 5252022-2031: 1,025China2012-2021: 1,0002022-2031: 1,420Asia Pacific2012-2021: 3702022-2031: 615MiddleEast2012-2021: 4102022-2031: 775Source: Bombardier forecast.INDUSTRY DELIVERIES BY REGION2012-2021 vs. 2022-2031
  27. 27. North America (United States and Canada)North America is, by far, the largest market for business jets and key to the long-termsuccess of the industry.The U.S. economy has been recovering sincemid-2009. In recent quarters, the economyhas been strengthened by the ongoingrebound in employment, stronger consumerconfidence, higher equity prices and creditgrowth. Notably, corporate profitability is atrecord levels. However, risks remain to theeconomy in terms of surging gasoline pricesdriving up inflation, sluggish worldwidegrowth impacting exports and high debtlevels. This is also a presidential electionyear, which could impact U.S. corporate andpersonal buying decisions.Canada accounts for about 4% of the businessjet demand in North America. According toIHS Global Insight, the Canadian economygrew at a rate of 2.3% in 2011 and is expectedto grow at a slower rate of around 2% in 2012.While many sectors have performed well,Canadian economic growth is being impactedby high household debt, government deficitsand associated restraint measures.Bombardier business AircraftMarket forecast 2012-2031 27The ForecastFigure #24BUSINESS JET PENETRATION FORECAST – NORTH AMERICAFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.1961197119811991200120112021203110,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  28. 28. The Canadian economy is highly reliant oncommodity exports and is therefore affectedby the economic health of its southernneighbor and the rest of the world.According to IHS Global Insight, real GDPgrowth for North America should improve thisyear over last year, with 2.1% growth in 2012,up from 1.8% in 2011. Economic growth shouldremain steady for the region over the 2012-2031 period, averaging 2.5%.Business aviation began in North America inthe 1960s by leveraging the established gen-eral aviation infrastructure. As a consequence,the business aviation industrial network,including manufacturers, suppliers, fixed baseoperators (FBOs), and dedicated airports,experienced rapid expansion. This developmentpath explains the unique shape of the historicalbusiness jet penetration curve for NorthAmerica, which is significantly higher thanother regions.North America is the world’s most maturemarket. Aircraft replacement is an importantdriver of business jet demand in NorthAmerica. Following the downturn of 2009-2010, many buyers deferred replacementdecisions.With increasing market confidence, it appearsthat replacement aircraft are now beingordered. The extension of U.S. bonusdepreciation in 2011 has been a positiveinfluence for certain buyers consideringaircraft replacement.At the end of 2011, there were 9,725 businessjets based in North America, approximately64% of the worldwide installed base.As the forecast business jet penetrationcurve shows, fleet per multiple of 100 millioninhabitants is expected to grow moderatelyfrom 3,380 aircraft to 4,179 over the next 20years. North America is forecast to receivethe greatest number of new business jetdeliveries between 2012 and 2031 with 9,500aircraft; 4,100 aircraft between 2012 and 2021;and 5,400 from 2022 to 2031. The 2011 fleetof 9,725 business jets will grow to 13,750aircraft by 2031, representing a CAGR ofapproximately 2%.Bombardier business AircraftMarket forecast 2012-2031 28The ForecastFLEET EVOLUTION FORECAST – NORTH AMERICAFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.9,725Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 20314,1002,24011,6305,4003,28013,750
  29. 29. EuropeAlthough the collapse of the Eurozone wasavoided during 2011, Europe is still sufferingfrom economic difficulties. The sovereign debtcrisis weighs heavily on consumer and businessconfidence across the region. Growth differssignificantly between the relatively healthynorthern countries, led by Germany, andstruggling southern countries.The German economy is performing welland the strength of its exports has made itthe economic engine of Europe. The Germaneconomy is likely to grow in 2012. At 5.5%, ithas one of the lowest unemployment ratesin Europe, according to the OECD, as ofDecember 2011.France is currently facing rising unemploymentand a weak economy. The new FrenchPresident, François Hollande, will thereforehave to address multiple challenges during hisfirst year. He will seek to recalibrate Frenchpolicies regarding the European Unionthrough an attempt to renegotiate theEurozone fiscal measures.Britain’s economy was weak at the beginningof 2012, affected by fiscal austerity andthe lengthened Eurozone crisis.Bombardier business AircraftMarket forecast 2012-2031 29The ForecastFigure #2619611971198119912001201120212031BUSINESS JET PENETRATION FORECAST – EUROPEFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  30. 30. A highly ambitious fiscal tightening programrequiring tax increases and significant publicspending cuts will continue to affect UK’seconomic activity in 2012. Hence, accordingto the Economist Intelligence Unit (EIU), theUK is expected to grow by a weak 0.2% in 2012.Despite the fact that Greece and its majorbondholders came to an agreement in March2012 to restructure the Greek debt, thecountry remains under intense pressure.The Greek economy is expected to contractagain in 2012 for a fifth consecutive year,according to projections from the IMF.In addition, political turmoil and economicdifficulties could still trigger a debt defaultin the near-term, forcing Greece to exit theEurozone, a scenario that is 35% likely,according to Morgan Stanley.Overall, after having its GDP decline by 4.1% in2009, the Eurozone countries rebounded with2.2% growth in 2010 and 1.9% in 2011. However,Q1 2012 economic indicators highlight thefragility of the European economy. Accordingto Deutsche Bank, the Eurozone GDP isanticipated to contract by 0.2% in 2012, aspessimism persists, especially in Greece,Spain, Portugal and Italy. From 2012 to 2031,growth is expected to average 1.9%.The growing business jet installed base inEurope will create a significant replacementmarket. Bombardier’s forecast for business jetpenetration predicts that fleet per populationof 100 million will grow from 447 to 1,147 overthe next 20 years, equivalent to 3,920 aircraftdeliveries. Europe will remain the second larg-est market of business jets with 1,700 aircraftdeliveries between 2012 and 2021 and 2,220deliveries between 2022 and 2031. The fleet willincrease at a CAGR of 5% from 1,890 aircraftin 2011 to 5,125 aircraft by the end of 2031.Bombardier business AircraftMarket forecast 2012-2031 30The ForecastFLEET EVOLUTION FORECAST – EUROPEFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.1,890Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 20311,7002203,3702,2205005,125Europe will remain thesecond largest market ofbusiness jets.
  31. 31. Bombardier business AircraftMarket forecast 2012-2031 31The ForecastChinaDuring the last recession, the Chinese economyprobably prevented the world economy fromcontracting more than it did. However, theChinese economy is starting to show somesigns of vulnerability. It is in the midst of agradual slowdown, due to the combinedimpact of lower exports to Western economiesand tighter domestic policies. Most economistsagree that China’s economy will likely avoida hard landing in the short term.Industrial value added output was up by11.4% year on year in January-February – itsslowest rate of growth in two years. Accord-ing to the Economist Intelligence Unit, GDPgrowth is expected to reach 8.2% in 2012and 8.6% in 2013. China posted double-digitgrowth during most of the past decade.Traditionally driven by export markets, Chinais determined to accelerate its transitiontoward a more domestically based economy.Taking a longer term perspective, China andIndia are expected to lead world economicgrowth. According to IHS Global Insight,China is expected to account for annualaverage GDP growth of 6.3% for the next20 years.Figure #281981 19912001201120212031BUSINESS JET PENETRATION FORECAST – CHINAFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  32. 32. Business aviation in China is in its very earlystage. Over the past years, significantbarriers have prevented the Chinese businessjet market from growing to its potential.Restrictive airspace access, high aircraft importtaxes, a shortage of airport infrastructurefor business aviation and high user fees areamong the factors which explain why Chinaonly hosts an installed base of some 210business jets for a population of 1.3 billion.Nevertheless, the number of civil airports inChina is expected to grow from 156 in 2009to 244 by 2020, according to the General Ad-ministration of Civil Aviation of China (CAAC).Aside from its buoyant economic growth,many factors suggest that China holds thepotential for rapid business aircraft marketdevelopment in the coming years. TheChinese population of billionaires has beenincreasing by 16% annually between 2008and 2012, totaling 157 individuals as of 2012,according to Forbes. China is already thesecond largest luxury goods market, and isforecast to take first place by 2015, accordingto Boston Consulting Group.This year’s Forbes Global 2000 list of thebiggest and most powerful companies in theworld include 207 Chinese companies withPetroChina and Industrial and CommercialBank of China (ICBC) ranking in the Top 10.Ultimately, we expect that the culturalacceptance of business aviation, the rapidgrowth of High Net Worth Individuals(HNWIs), the plans for new airports, and therecent improvements to flight planningregulation and airspace liberalization willallow business aviation to blossom in Chinaover the next 20 years.Demand for business jets should increaseas barriers progressively come down. Overthe forecast period, China’s business jet fleetpenetration per population of 100 million willgrow from 16 to 195, translating into 2,420deliveries over 20 years. China is the thirdlargest region for business jet deliveries in ourforecast, which predicts that 1,000 aircraft willbe delivered between 2012 and 2021 and 1,420aircraft between 2022 and 2031. The fleet of210 aircraft at the end of 2011 will increase to2,590 aircraft by the end of 2031, equivalentto a CAGR of 13%.Bombardier business AircraftMarket forecast 2012-2031 32The ForecastFLEET EVOLUTION FORECAST – CHINAFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.210Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 20311,000101,2001,420302,590China holds the potentialfor rapid business aircraftmarket development.
  33. 33. IndiaIndia’s economy has experienced significantadvancement to date and is expected tocontinue expanding at a rapid pace. Economicgrowth in India was 6.8% in 2011, comparedto 9.6% in 2010. This relative slowdown isprimarily due to the action of India’s CentralBank to restrict monetary policy to offsetinflation. Other factors contributing to thecooling included high fiscal deficit anddeceleration in investment activity. TheIndian government disclosed its budget forthe fiscal year 2012-2013, aiming to reduceits deficit to 5.1% of GDP from an estimated5.9% in 2011-2012.India’s fast-growing middle class, currentlynumbered at around 300 million people, hasmade a significant contribution to the growthof the national economy over the past twodecades. According to the October 2010“Pew Global Attitudes” survey, nine out of10 Indians declare “their country is or willeventually be one of the most powerfulnations in the world.”Bombardier business AircraftMarket forecast 2012-2031 33The Forecast19811991 2001201120212031BUSINESS JET PENETRATION FORECAST – INDIAFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  34. 34. According to the World Bank, India’s real GDPgrowth is anticipated to be 6.5% in 2012. IHSGlobal Insight predicts India to be the world’sfastest growing region from 2012 to 2031, withGDP growth averaging 7.4% per year andsurpassing China by almost 1 percentagepoint. Moreover, Forbes estimated that thenumber of billionaires in India has more thandoubled, reaching 55 in 2012, up from 23 in2006.Although the government of India hasincreased infrastructure investments underthe Eleventh Five Year Plan for 2008-2012,the lack of aviation infrastructure remainsan issue for the business aviation industry.In addition, stringent government regulations,high import taxes and duties as well as longprocedures for aircraft imports are preventingIndia’s business aviation sector from reachingits full potential. There are, however, signs ofimprovement, as the Airports Authority ofIndia (AAI) has announced plans to modernizemany airports and bring 32 currently unusedairports into operation over the next 10 years.As the installed base of business jets in Indiais small and relatively young (8.9 years oldat the end of 2011), retirements will not be amajor driver in this market.As the forecast business jet penetration curveshows, fleet per 100 million population isexpected to grow from 12 to 121 over the next20 years. Business jet sales should acceleratedue to economic growth and wealth creation.India is forecast to take delivery of 1,345business aircraft during the period from 2012to 2031, with 385 deliveries between 2012 and2021 and 960 from 2022 to 2031. The 2011fleet of 115 business jets will grow to 1,420aircraft by 2031, resulting in a CAGR ofapproximately 13%.Bombardier business AircraftMarket forecast 2012-2031 34The ForecastFLEET EVOLUTION FORECAST – INDIAFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.115Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 203138510490960301,420
  35. 35. Latin AmericaLatin America is a diverse region and, forthe purposes of the forecast, comprises allcountries between the Rio Grande and CapeHorn. Latin American economies grew at 4.2%in 2011, due to rising commodity prices andincreasing employment, which boostedexport revenue and consumption demandrespectively.To anticipate and offset the decelerationof economic growth in the region, somecountries, Brazil in particular, have alreadyadopted stimulus packages.Latin America’s largest economy, Brazil,has emerged as an important global player.Brazil’s active exports policy, abundant naturalresources and strong industrial capacity havestimulated the growth of its economy.Brazil is preparing to host the 2014 FIFAWorld Cup and the 2016 Olympics, which willbring increased international exposure.The economy of the region has traditionallybeen driven by exports of manufacturedgoods, agricultural products and natural re-sources, such as oil and minerals.Bombardier business AircraftMarket forecast 2012-2031 35The ForecastFigure #321981197119611991 20012011 20212031BUSINESS JET PENETRATION FORECAST – LATIN AMERICAFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  36. 36. The economy of Latin America’s second mostpopulous country, Mexico, has been vigorouslately, led by expanding demand from theU.S. and growing domestic consumption.Argentina’s economy also expanded stronglyin 2011. This growth was spurred by highconsumer spending, buoyant commodityprices and generally solid demand fromBrazil and China.As reported by Forbes, Latin Americagenerated the greatest increase in the numberof billionaires last year, going from 52 in 2011to 65 in 2012. Mexico is home to the world’swealthiest individual in 2012, Carlos SlimHelu. Over the 20-year forecast period,Latin America’s economy is forecast to grow,on average, by 4.1% per year, accordingto IHS Global Insight.According to the World Bank, Latin Americawill remain, in 2012, resilient to the economicchallenges faced by the U.S. and Europeancountries. The region’s prosperity, however,relies significantly on China’s economy, whichis currently showing gradual slowdown. Inaddition, challenges to sustain growth, suchas modernizing infrastructure, boostinginnovation and rebuilding political institutions,remain across the region.Business aviation has a long and wellestablished presence in Latin America, whichmost resembles North America in businessjet fleet penetration, and is therefore a relativelymature market. A high proportion of theregion’s fleet is in the Light jet category.The largest business jet fleet concentrationsare in Mexico and Brazil.At the end of 2011, the region had one of theoldest business jet fleets in the world, with anaverage age of 18 years. As a result, the regionshould account for a significant number ofreplacements.Latin American business jet fleet penetrationper population of 100 million will grow from353 to 546 over the forecast period, translat-ing into 2,285 aircraft deliveries over 20 years.This region is expected to be one of the mostimportant business jet markets, which will see985 aircraft deliveries between 2012 and 2021and 1,300 deliveries from 2022 to 2031. Thefleet of 1,650 business jets at the end of 2011will increase to 3,135 aircraft by the end of2031, equivalent to a CAGR of 3%Bombardier business AircraftMarket forecast 2012-2031 36The ForecastFLEET EVOLUTION FORECAST – LATIN AMERICAFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.1,650Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 20319853702,2651,3004303,135
  37. 37. Russia and CISThe present moderate pace of growth inRussia and CIS is expected to continue.Although Russia’s manufacturing sectordecelerated in the second half of 2011,private consumption and exports have beenflourishing. The Russian economy remainsdependent on energy export revenues todrive domestic growth; energy prices haverisen steadily since mid-2009 and are ex-pected to remain high in 2012 and 2013. Fossilfuel production from Russia and Kazakhstanis projected to remain very strong. The en-ergy sector will continue to drive the region’sexpansion in the near-to-medium term.External factors will impact Russia’s economicgrowth. The sovereign debt crisis in theEurozone and easing growth in China have anegative impact on Russian export revenues.The turmoil in international capital marketshas caused investors to move out of Russianassets and reduce their exposure to risk inemerging markets. According to the CentralBank of Russia, the country continued toexperience a net capital outflow through 2011,partially due to uncertainty about the politicalforces after the parliamentary and presidentialelections, held in December 2011 and March2012.Bombardier business AircraftMarket forecast 2012-2031 37The ForecastFigure #3419912001201120212031BUSINESS JET PENETRATION FORECAST – RUSSIA AND CISFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  38. 38. Bombardier business AircraftMarket forecast 2012-2031 38The ForecastIn the long term, growth will rely on thewillingness of the new Russian governmentto modernize and expand the manufacturingsector. Accelerated investment is the key todiversifying the Russian economy andsustaining robust development.According to Forbes, Russia and CIS had 107billionaires in March 2012. As of 2011, Moscowwas home to more billionaires than any othercity in the world, with 79. The IMF estimatesRussia’s GDP growth at 4% for 2012. Economicadvancement should remain steady for Russiaand CIS over the 2012-2031 period, withannual average growth of 3.4%, accordingto IHS Global Insight.The development of the Russian economyhas had a positive effect on regional demandfor business jets. The region’s fleet grewsignificantly from 100 aircraft in 2004 to anestimated 400 jets in 2011. Due to taxationissues, most Russian business jet ownersregister their aircraft outside of Russia.Russian customers have a strong acceptanceof business aviation. They also have to fly longdistances. Currently, the major characteristicsof the Russian business aviation market arethe dominance of foreign operators, intenseconcentration in the Moscow region and alack of clear legislation in the field. Infrastruc-ture, an issue for many years, is now improv-ing, and air traffic control is becoming moreaccustomed to working with businessaviation.Our forecast for business jet penetrationpredicts that fleet per population of 100million will grow from 155 to 727 over thenext 20 years, equivalent to 1,550 aircraftdeliveries. The Russia and CIS region isforecast to receive 525 aircraft deliveriesbetween 2012 and 2021 and 1,025 deliveriesbetween 2022 and 2031. The fleet will increaseat a CAGR of 8% from 400 aircraft in 2011 to1,800 aircraft by the end of 2031.FLEET EVOLUTION FORECAST – RUSSIA AND CISFleet, Deliveries and Retirements, 2011-2031Sources: Ascend. Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.The Russia & CIS fleet is adjusted to include aircraft registered outside of the region.400Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 2031525608651,025901,800
  39. 39. Middle East and AfricaPolitical unrest erupted in North Africa andthe Middle East in 2011. The “Arab Spring”resulted in regime changes in Tunisia, Egypt,Libya and Yemen. Revolts also affectedBahrain, while violence continues in Syria.In the four states where governments wereoverthrown, the economic and politicalsituation remains very delicate. This extremepolitical volatility has caused the economyof North Africa and the Middle East to see areduction in GDP growth from 4.4% in 2010to 2.9% in 2011.Daily life in these countries continues to bepunctuated by protests, and the main structuralproblems, such as unemployment and incomeinequality remain unresolved. Moreover,foreign investment and tourism have not fullyresumed. The IMF, in its April 2012 RegionalEconomic Outlook, remarked that socialunrest and policy uncertainty in the ArabSpring countries are likely to endure in thenear term. In Egypt, despite these difficulties,the population remains upbeat about thecourse of the nation and prospects forprogress, according to a recent Pew GlobalAttitudes survey.The Gulf countries shrugged off the regionalturmoil and maintained strong growth in 2011.Oil producing countries such as Saudi Arabiaand the United Arab Emirates have boostedproduction following the war in Libya and theembargo over Iran. The U.S. Energy Informa-tion Administration (EIA) is expecting oilprices to remain high in 2012 and over thenext several years, at $95-$115 between2012-2016.Bombardier business AircraftMarket forecast 2012-2031 39The ForecastFigure #361991 2001201120212031198119711961BUSINESS JET PENETRATION FORECAST – MIDDLE EAST AND AFRICAFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast
  40. 40. If the economic situation worsens in Europeor worldwide, demand for oil and the pros-pects for economic growth in the Gulf will becompromised. North Africa and the MiddleEast economies are expected to return to agrowth rate of 4.1% in 2012 according to IHSGlobal Insight.Sub-Saharan Africa has benefited frominvestments by booming Asian economieslooking to secure energy and food supplies.Foreign and domestic investment has beenaided by improvements in the regulatoryenvironment. According to the Doing Business2012 report, over the last year, a record 78%of the economies in Sub-Saharan Africa madechanges to their respective regulatoryenvironments to facilitate domestic firmstart-ups and operations.The resource-rich Sub-Saharan Africaneconomy grew by 4.8% in 2011, aided by highcommodity prices. Over a third of countriesin the region attained growth rates of at least6%. Rising oil output, increasingly diversifiedtrade with growing Asian economies and arebounding agricultural market will pushoutput growth higher than 5% in 2012.From 2012 to 2031, GDP growth in the MiddleEast and African economies should average3.7% per year, according to IHS Global Insight.The business jet fleet per 100 millionpopulation is expected to grow from 64 to142 over the next 20 years. Against the globalbackdrop of economic turmoil, Middle Eastand Africa remains a strong market forbusiness aviation. High prices for the region’soil exports, long distances between its majorcities, and mediocre surface transportation,all help to support the business aviationindustry, as do the scheduled airlines servicesin the region that focus more on long-haulroutes than on shorter ones. According tothe Middle East Business Aviation Association(MEBA), the next barrier to overcome in theregion is access, as there are not enoughairports designated for business aviation.Moreover, business aviation is still absent frommany African countries, while the economicdevelopment of the continent is showingmajor potential.Middle East and Africa will receive up to1,995 business jet deliveries during the 2012-2031 period, 735 deliveries between 2012 and2021, and 1,260 from 2022 to 2031. The 2011fleet of 775 business jets will grow to 2,440aircraft by 2031, representing a CAGR ofapproximately 6%.Bombardier business AircraftMarket forecast 2012-2031 40The ForecastFLEET EVOLUTION FORECAST – MIDDLE EAST AND AFRICAFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.775Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 20317351301,3801,2601202,440
  41. 41. Asia PacificAsia Pacific, with its diverse population,massive size, and vast cultural history, isone of the world’s most multifaceted andintriguing regions.The emerging economies of Asia havebeen on a path to rapid industrializationover the last 10 years, growing at an averageof 4.8% annually. Net inflows of foreign directinvestment over the last decade have beenstrong in countries such as South Korea,Indonesia, Singapore, Thailand and Vietnam.Each of these has also benefited fromgrowing trade with China and Japan.According to the IMF, trilateral trade betweenSouth Korea, China and Japan has expandedby an annual average of 17% over the 2001-2011 period.Real GDP in Asia’s emerging economies isexpected to grow by 4.2% in 2012, accordingto IHS Global Insight, consistent with 2011.Export activity is expected to soften in 2012as weakness in Europe weighs down aggre-gate demand. Emerging Asian economies’real GDP growth should average 4.1% annuallyfor the next 20 years.Bombardier business AircraftMarket forecast 2012-2031 41The ForecastFigure #421991200120112021203119811961BUSINESS JET PENETRATION FORECAST – ASIA PACIFICFleet per Capita vs. GDP per Capita, 1960-2031Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.10,0001,000100100 1,000 10,000 100,000101Fleetper100MillionPopulation(LogScale)GDP per Capita ($, Log Scale)ActualsForecast1971
  42. 42. Japan’s economy contracted by 0.9% in2011 as a result of the March earthquakeand tsunami. Buoyed by acceleratedreconstruction spending, the economy isexpected to grow by 1.8% in 2012, accordingto the May 2012 Blue Chip consensus forecast.However, with the extent of reconstructionrequired, growth is not expected to return tonormal rates before 2014. Over the 2012-2031period, Japan is expected to grow by 0.8%annually, according to IHS Global Insight.Australia’s Queensland floods and NewZealand’s Canterbury-region earthquakedamaged Oceania’s two biggest economiesin 2011. Reconstruction efforts will bringinvestment to the region. Stronger demandfor Australian coal and liquid natural gas fromAsian economies such as China, India andpost-Fukushima Japan will drive GDP in 2012.IHS Global Insight expects that Oceania’seconomy will grow by 3.1% in 2012. Over thenext 20 years, Oceania’s real GDP is expectedto grow on average by 2.7% annually.Forbes estimates that the number ofbillionaires in the Asia Pacific region has grownalmost 70%, from 63 in 2006 to 107 in 2012.As shown on the business jet penetrationcurve, fleet per 100 million population isexpected to grow from 36 to 95 over thenext 20 years. From a business aviationmarket perspective, the Japanese marketremains comparatively under developed.Despite hurdles such as high aircraft handlingcosts at airports and limited airport accessin countries like Japan, Asia Pacific’s currentbusiness jet fleet of 375 aircraft is expectedto grow at a 6% CAGR over the next 20 years,and to account for 1,170 aircraft in 2031.We expect 985 deliveries in Asia Pacific overthe next 20 years, 370 deliveries between2012 and 2021, and 615 from 2022 to 2031.Bombardier business AircraftMarket forecast 2012-2031 42The ForecastFLEET EVOLUTION FORECAST – ASIA PACIFICFleet, Deliveries and Retirements, 2011-2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.375Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 2031370606856151201,170
  43. 43. Segment DetailsThe following section presents the forecastof the business jet market broken down intothree categories (Light, Medium and Large),which are defined through a combination ofprice, range and cabin volume.In recent years, demand has improved forLarge and Medium category aircraft. Asbusiness jet purchases soared outside ofNorth America, the need for larger and morecapable aircraft increased. In North America,business jet adoption has been historicallydriven by Light aircraft sales. However, thedemand for business jets is shifting towardsemerging markets, where it is not uncommonto encounter first-time buyers who purchasein the Large category. Moreover, as aircraftproductivity increases, customers can getmore performance and cabin size at a similarprice. For all these reasons, we expect thefleet of Large and Medium category aircraft togrow at a faster pace, relative to Light aircraft.Light CategoryThe Light category comprises business jetswith B&CA magazine’s 2012 Purchase PlanningHandbook equipped prices between $9Mand $18M, offering ranges of 1,700 NM to3,100 NM and cabin volumes of 300 ft3(8.5m3) to 700 ft3(19.8 m3). Compared to otherbusiness jet categories, the Light categoryis differentiated by relatively low purchaseprices and low operating costs, combinedwith sufficient range for short distancemissions. In this category, Bombardierdelivers three types of aircraft to the market:the Learjet 40XR, the Learjet 45XR and theLearjet 60XR. In addition, Bombardier iscurrently developing the Learjet 70, theLearjet 75 and the Learjet 85 aircraft.Bombardier business AircraftMarket forecast 2012-2031 43The ForecastGlobal8000ACJ 318/319BBJ 1/2/3BUSINESS JET MARKET SEGMENTATION(1)(1) Segmentation is largely determined by a combination of cabin volume, range and price.Note: Bombardier, Learjet 40, Learjet 45, Learjet 60, Learjet 85, Learjet 70, Learjet 75, Challenger 300, Challenger 605, Challenger 850, Global 5000, Global 6000,Global 7000, Global 8000, XR and Vision Flight Deck are either registered or unregistered trademarks of Bombardier Inc. or its subsidiaries.Source: Bombardier.BombardierCessnaDassaultGulfstreamHawkerBeechcraftEmbraerOthersVery Light Jets Light Jets Medium Jets Large JetsLargeCorporateAirlinersGlobal7000Learjet40 XRLearjet45 XRChallenger300Challenger605Challenger850Global5000Global6000Learjet60 XRLearjet85F2000LX F900LXF2000S35 In production 15 In developmentLegacy600Legacy650Lineage1000Phenom100Phenom300Legacy450Legacy500Premier 1A H4000H900XPHondaJetSJ30-2F7XCitation TenLearjet70Learjet75G150 G280 G450 G550 G650G500CJ3M2Mustang CJ4 Citation XSovereignXLS+CJ2+ Latitude Longitude
  44. 44. All three aircraft development programs areprogressing on schedule and the aircraft areexpected to enter service in 2013. The Learjet70 and Learjet 75 were launched in May 2012and will feature an all-new modern designinterior, a new cabin management system,the Vision Flight Deck with a state-of-the-artavionics suite, superior aircraft performanceand low operating costs.Demand in the Light category remains softand is recovering slowly from the downturn.Residual values remain low and levels of pre-owned inventory are high (14.6% of the Lightaircraft fleet in Q1 2012). During the 20-yearperiod from 2012 to 2031, we anticipate theLight category to generate a total of 10,700deliveries, valued at $117 billion.Medium CategoryThe Medium category features aircraft withequipped prices from $18M to $45M, offeringranges from 3,100 NM to 5,000 NM and cabinvolume of 700 ft3(19.8 m3) to 1,500 ft3(42.5m3). The Medium category value propositionrelies on greater cabin comfort and superiorrange compared to the Light category.Medium category aircraft are often thebackbone of large corporations’ businessjet operations. Bombardier has successfullydeveloped the Medium category through theChallenger 600 jet series offering. Bombardiernow has three well-known products in thiscategory, the Challenger 300, Challenger 605and Challenger 850 jets.For the 2012-2031 period, our market forecastanticipates promising growth in the Mediumaircraft category. The pre-owned inventoryin this category accounts for 13.5% of thefleet, and is close to pre-recession levels.During the 20-year period from 2012 to 2031,we anticipate the Medium category togenerate a total of 7,800 deliveries, valuedat $239 billion.Bombardier business AircraftMarket forecast 2012-2031 44The Forecast40353025203029282726252423222115141312 20191817161510531$292(45%)$117(18%)$239(37%)LargeMediumLight10,700(45%)7,800(32%)5,500(23%)Total 20Yrs$648BTotal 20Yrs24,000 unitsFORECAST BY CATEGORYUnits and Revenues ($ Billion), 2012-2031Source: GAMA, Bombardier forecast. All revenues expressed in 2011 dollars.Figure #41
  45. 45. Large CategoryThe Large category features aircraft withequipped prices between $45M and $69M,offering ranges over 5,000 NM and cabinvolumes of 1,500 ft3(42.5 m3) to 3,000 ft3(85.0 m3). Large category business jetsoffer the greatest capabilities in range,speed, and cabin comfort.Bombardier currently delivers Global 5000and Global 6000 aircraft. The first Global5000 and Global 6000 jets equipped withthe Vision Flight Deck were delivered inMarch 2012. The Global 7000 and Global8000 jets will enter service in 2016 and 2017respectively. Bombardier offers the mosttechnologically advanced and the broadestproduct line in this market category. TheGlobal 7000 and Global 8000 aircraft aredesigned to offer customers more non-stopdestinations, combined with extraordinaryperformance, flexibility and comfort.In addition, for the 2012-2031 period, ourmarket forecast anticipates that the Largeaircraft category will demonstrate the fastestgrowth. This category was less affected bythe downturn than the Medium and Lightcategories. Pre-owned inventory accountsfor 6.2% of the Large category fleet.During the 20-year period from 2012 to 2031,we anticipate the Large category to generatea total of 5,500 deliveries, valued at $292billion, representing approximately 45% oftotal delivery revenues.Bombardier business AircraftMarket forecast 2012-2031 45The ForecastDeliveries in the Largecategory will generate 45% oftotal industry revenues in theperiod from 2012 to 2031.
  46. 46. Bombardier business AircraftMarket forecast 2012-2031 46conclusion
  47. 47. The business aviation market continues to makeprogress in recovering from the significantdownturn of 2009-2010. While current marketleading indicators are mixed, the overall trendis positive. As confidence returns to worldmarkets, aircraft orders and backlogs willexpand and deliveries will accelerate. Whilethe business jet industry is cyclical, it also hassignificant growth potential. The key marketdrivers such as wealth creation, globalizationof trade, replacement demand, new aircraftprograms, emerging market growth andgreater market accessibility through fractionaland branded charter demand are all showingpositive trends. Furthermore, the penetrationof business jet fleets in many emerging marketsis low, indicating significant growth potentialas these economies surge and more readilyaccept business jets as productivity tools.Manufacturers continue to anticipate marketneeds by developing and supplying more ca-pable, efficient and better designed aircraft.Bombardier business AircraftMarket forecast 2012-2031 47conclusionThe business jet marketwill generate 24,000 newaircraft deliveries, worth$648 billion over thenext 20 years.
  48. 48. The business jet market should experiencestrong growth over the 2012-2031 period with24,000 deliveries valued at $648 billion. Theworldwide business jet fleet is expected toswell from 15,200 in 2011 to 31,500 by 2031,net of retirements. The ingenuity and laborneeded to manufacture these aircraft anddeliver the revenues associated with themwill create significant economic value.The business aircraft industry will likely facenew challenges going forward. As fuel pricesand environmental awareness rise, Bombardiercontinues to address environmental concernsactively, through corporate social responsibilityinitiatives, as well as through the technologyincorporated in our products. Manufacturerswill also have to help develop the infrastructureto support the expected rapid adoption ofbusiness aviation in growth markets.As market confidence returns, so will thedemand for business jets. The long-termprospects for business aviation are solidand Bombardier is a proven visionary. Theconcept of evolution, of constant, deliberateand tangible progress, is a perfect reflectionof who we are. We see far ahead, whiledelivering today. It’s all about the evolutionof mobility.Bombardier business AircraftMarket forecast 2012-2031 48conclusionThe long-term prospectsfor business aviation aresolid and Bombardierexpects the industry toachieve new heightsin the next 20 years.It’s about the evolutionof mobility.
  49. 49. This presentation includes forward-looking statements,which may involve, but are not limited to: statements withrespect to our objectives, guidance, targets, goals, pri-orities, markets and strategies, financial position, beliefs,prospects, plans, expectations, anticipations, estimatesand intentions; general economic and business outlook,prospects and trends of an industry; expected growth indemand for products and services; product development,including projected design, characteristics, capacity orperformance; expected or scheduled entry into serviceof products and services, orders, deliveries, testing, leadtimes, certifications and project execution in general; ourcompetitive position; and the expected impact of the leg-islative and regulatory environment and legal proceedingson our business and operations. Forward-looking state-ments generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “in-tend”, “anticipate”, “plan”, “foresee”, “believe” , “continue”or ”maintain”, the negative of these terms, variations ofthem or similar terminology. By their nature, forward-look-ing statements require us to make assumptions and aresubject to important known and unknown risks and uncer-tainties, which may cause our actual results in future peri-ods to differ materially from forecasted results. While weconsider our assumptions to be reasonable and appropri-ate based on information currently available, there is a riskthat they may not be accurate. For additional informationwith respect to the assumptions underlying the forward-looking statements made in this presentation, refer to therespective Guidance and forward-looking statements sec-tions in Overview, Bombardier Aerospace and BombardierTransportation sections in the Management’s Discussionand Analysis (“MD&A”) in the Corporation’s annual reportfor the fiscal year ended December 31, 2011.Certain factors that could cause actual results to differmaterially from those anticipated in the forward-lookingstatements include risks associated with general economicconditions, risks associated with our business environment(such as risks associated with the financial condition of theairline industry and major rail operators), operational risks(such as risks related to developing new products and ser-vices; doing business with partners; product performancewarranty and casualty claim losses; regulatory and legalproceedings; to the environment; dependence on certaincustomers and suppliers; human resources; fixed-pricecommitments and production and project execution), fi-nancing risks (such as risks related to liquidity and accessto capital markets, exposure to credit risk, certain restric-tive debt covenants, financing support provided for thebenefit of certain customers and reliance on governmentsupport) and market risks (such as risks related to foreigncurrency fluctuations, changing interest rates, decreasesin residual value and increases in commodity prices). Formore details, see the Risks and uncertainties section inOther. Readers are cautioned that the foregoing list offactors that may affect future growth, results and perfor-mance is not exhaustive and undue reliance should not beplaced on forward-looking statements. The forward-look-ing statements set forth herein reflect our expectations asat the date of the Corporation’s MD&A and are subject tochange after such date. Unless otherwise required by ap-plicable securities laws, we expressly disclaim any inten-tion, and assume no obligation to update or revise anyforward-looking statements, whether as a result of new in-formation, future events or otherwise. The forward-lookingstatements contained in this presentation are expresslyqualified by this cautionary statement.All monetary amounts are expressed in 2012 U.S. dollars, unless otherwise stated.Bombardier business AircraftMarket forecast 2012-2031 49FORWARD LOOKING STATEMENTS
  50. 50. Bombardier business AircraftMarket forecast 2012-2031 50resourcesResources used in the Bombardier Business Aircraft Market Forecast:Aircraft Blue Book Price DigestAAI – Airport Authority of IndiaASCENDB&CA – Business & Commercial Aviation MagazineBlue Chip Economic ForecastBoston Consulting GroupCAAC – General Administration of Civil Aviation of ChinaCentral Bank of IndiaCentral Bank of RussiaDeutsche BankDoing BusinessEIA – U.S. Energy Information AdministrationEIU – Economist Intelligence UnitEurocontrolEurostatFAA – Federal Aviation AdministrationForbesGAMA – General Aviation Manufacturers AssociationGoldman Sachs Asset ManagementIBAC – International Business Aviation CouncilIHS Global InsightIMF – International Monetary FundJETNETKnight Frank / Citi Private Bank – The Wealth Report 2012MEBA – Middle East Business Aviation AssociationMerrill Lynch and CapgeminiMorgan StanleyMorgan Stanley Capital International (MSCI) World IndexNexa AdvisorsOECD – Organisation for Economic Co-operation and DevelopmentPew Global Attitudes SurveyUN Population projectU.S. Bureau of Economic AnalysisWorld BankNote: Bombardier, Challenger 300, Challenger 605, Challenger 850, Global 5000, Global 6000, Global 7000,Global 8000, Learjet 40, Learjet 45, Learjet 60, Learjet 70, Learjet 75, Learjet 85, XR, Vision Flight Deck are eitherregistered or unregistered trademarks of Bombardier Inc. or its subsidiaries.