Bombardier Business Aircraft Market Forecast 2012 - SpeedNews

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Bombardier Business Aircraft Market Forecast 2012 - SpeedNews

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table of contentsBombardier business AircraftMarket forecast 2012-2031 02Executive Summary03Historical Market Performance08Current Market Drivers11The Forecast23Conclusion46


executivesummaryBombardier business AircraftMarket forecast 2012-2031 03


Executive SummaryBombardier business AircraftMarket forecast 2012-2031 04Bombardier Aerospace is pleased to presentthe 2012 edition of its Business AircraftINDUSTRY ORDERS AND DELIVERIESUnits, 2002–2011Market 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 deliveryOrder and Delivery Units1,8001,6001,4001,2001,0008006004002000-200-400performance in 2011 with a 32% market share-600based on units and 38% market share based-800on revenues.-1,0002002200320042005200620072008200920102011Bombardier remains confident in the stronglong-term potential for the business aircraftindustry and maintains its focus on strengtheningits 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 supportTotal OrdersTotal DeliveriesSources: Actual deliveries from GAMA. Orders estimated from competitive intelligence, OEM guidance.Excludes Very Light Jet and Large corporate airliners segments.and 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.


Executive SummaryBombardier business AircraftMarket forecast 2012-2031 05Industry 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 alsoFigure #2improved. 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 utilizationis increasing gradually, but remains belowpre-recession levels. The recovery in businessjet orders has been stronger in the Large categorywhile 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.180731072010INDUSTRY NET ORDERSUnits, 2010–Q1 2012Bombardier59%4232321912011Other OEMs45%783840Q1 2012Sources: Manufacturer disclosures and Bombardier estimates.Excludes Very Light Jet and Large Corporate Airlines categories.51%


Executive SummaryBombardier business AircraftMarket forecast 2012-2031 06Business 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 between2009 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 satisfaction.Nexa Advisors also came to the conclusionthat 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.


Executive SummaryBombardier business AircraftMarket forecast 2012-2031 07Figure #4BUSINESS JET MARKET HISTORY AND FORECASTHISTORICALFORECAST2002-20112012-2021 2022-2031 Total (2012-2031)Delivery Units 6,3009,800 14,200 24,000Revenues$139 billion$266 billion $382 billion $648 billionSource: Bombardier Forecast Model.A long-term vision forthe industryBUSINESS JET FLEET FORECASTUnits, 2011-2031We believe that the long-term market driversof business jet industry growth remain solid.These market drivers include: wealth creation,4,600increasing business jet penetration in highgrowtheconomies, globalization of trade,14,200replacement demand, and market accessibility.3,100This confidence is reflected in our 20-yeardelivery forecast, which predicts 24,0009,800business jet deliveries valued at $648 billion.We anticipate 9,800 deliveries worth $26631,500billion from 2012 to 2021, and 14,200 deliveriesworth $382 billion from 2022 to 2031.21,90015,200We 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.Fleet 2011 DeliveriesSource: Bombardier Forecast Model.RetirementsFleet 2021DeliveriesRetirementsFleet 2031


HistoricalMarketPerformanceBombardier business AircraftMarket forecast 2012-2031 08


Figure #5Historical Market PerformanceBombardier business AircraftMarket forecast 2012-2031 09Over 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.95090085080075070065060055050045040035030025020015010050CAGR = 4%Source: Actual deliveries from GAMA.HISTORICAL BUSINESS JET DELIVERIESUnits, 1965-2011CAGR = 9%1965 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2011Business Jet Deliveries2011


Historical Market PerformanceBombardier business AircraftMarket forecast 2012-2031 10BUSINESS JET DELIVERY REVENUES$B, 2002-20112008-2011The 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.9.6 7.8 9.8 12.3 14.9 17.6Sources: Revenues estimated from GAMA and B&CA list prices.20.1 15.2 15.9 15.52002 2003 2004 2005 2006 2007 2008 2009 2010 2011Segments in which Bombardier competesBombardier 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.In 2011, marketfundamentals continued toimprove and order intakeincreased significantly.


CurrentMarket DriversBombardier business AircraftMarket forecast 2012-2031 11


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 12The 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.4.54.03.53.02.52.01.51.00.50.0-0.5-1.0-1.5-2.0-2.51.4%Source: IHS Global Insight, February 2012.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.WORLD GDP GROWTH FORECAST% Change Year-over-Year, 2008-2014-2.2%4.1% 2.7% 2.4% 3.1%2008 2009 2010 2011 2012 20133.8%2014The World economyis to grow on averageat 3.2% per year overthe next 20 years.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 13Activity 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.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 14Wealth CreationWorldwide demand for business jets is highlycorrelated with wealth creation which, in turn,is largely driven by economic growth. Theure #9Morgan 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.”Number of Billionaires1,7001,6001,5001,4001,3001,2001,1001,00090080070060050040030020010002002450400350300250200150100500Source: MSCI World Index from Morgan Stanley.+6%NorthAmerica+9%EuropeSources: Forbes, March 2011 and March 2012.NUMBER OF BILLIONAIRESUnits and % Change 2011-2012- 7%ChinaWorld 2011: 1,184World 2012: 1,226Russiaand CIS-6% +15%AsiaPacificMiddleEast-5% +25%426 450 189 206 168 157 114 107 93 107 74 70 52 65 54 482011200320122004MSCI WORLD INDEX2002-201220052006200720082009LatinAmerica2010-11%India2011+14%14 16Africa2012


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 15Business Jet Market DriversBusiness Jet UtilizationHistorically, business jet utilization is anindication of the overall health of the industry.The Federal Aviation Administration (FAA)Figure #10and Eurocontrol record the number oftake-offs and landings at U.S. and Europeanairports respectively.The busiest airports for business jet movementsin 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 utilizationwouldn’t return to pre-crisis growth ratesin the medium-term, given the relative weaknessof European economies.U.S. BUSINESS JET UTILIZATIONTake-offs and Landings (’000), 2009-2012EUROPEAN BUSINESS JET UTILIZATIONTake-offs and Landings (’000), 2009-20120%16%15%10%8%5%4%-1%-1%1%0%9%6%7%5%3%7%3%-3%-1%945 9601,001 1,018 1,019 1,0061,0411,013 1,010 1,0151039712013310810012813710599Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12Q4 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 (%)Take-offs and Landings (’000) Take-offs and Landings YoY (%)Source: FAA.Source: Eurocontrol.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 163,000INDUSTRY BACKLOGEstimated Units, 2002-2011INDUSTRY BACKLOGEstimated Value ($B), Q4-2011$ 44.6B2,500Light:$5.0 B2,0001,500Medium:$7.6 B1,000Large:$32.0 B500BacklogsBacklog 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.2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Sources: Orders estimated from competitive intelligence, OEM guidance.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%Sources: Orders estimated from competitiveintelligence, OEM guidance, 2011 List price from B&CA.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.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 17The 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 manufacturers’long backlogs. Since then, residualvalues have dropped across all aircraft categories.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.PRE-OWNED AIRCRAFT INVENTORYAS A % OF THE FLEET%, 2006-20125-YEAR RESIDUAL VALUEAS A % OF THE ORIGINAL B&CA LIST PRICE%, 2006-201217.8%13.6%92%10.5%67%59% 63%Q106Q206Q306Q406Q107Q207Q307Q407Q108Q208Q308Q408Q109Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q106Q206Q306Q406Q107Q207Q307Q407Q108Q208Q308Q408Q109Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Source: Aircraft inventory and fleet from Jetnet. Excludes Very Light Jet Segment.Sources: Residual values from Aircraft Bluebook Price Digest, original list price from B&CA.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 18New 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.ENTRY INTO SERVICE OF NEW PROGRAMSBombardier Models, 2012-20172012 2013 2014 2015 2016 2017Global 6000Global 5000both equipped withVision Flight DeckLearjet 85Learjet 75Learjet 70Global 7000Global 8000Sources: Bombardier Aerospace.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 19Fractional and BrandedCharter 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.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 20The growth in the number of branded charteroperators is more recent. These operatorsoffer on-demand lift and compete on tripspecificpricing. Branded charter operators,like Vistajet or XOJET, are characterized bysophisticated operations infrastructure andgreater use of airline-style scheduling practicesto 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.+HoursPerYear–Commercial – aviation offeringLow costairlinesCommercialairlinesAIR-TRAVEL OPTIONSFirst-classcommercialairlinesAir TaxisOn-demand serviceCharters/BrandedChartersBusiness jet marketJet-cardprogramsBusiness jet ownershipFractionalownershipFullownership- Personalized service +9008007006005004003002001000BUSIN2002 2003 200Large fleet operators are growing again andSource: Bombardier Aerospace.Source: Jetnet. Includes the 4 majohave placed orders for additional businessjets in 2010 and 2011.AIR-TRAVEL OPTIONSIn the near-term, fractional market demandon offeringwill be mainly for fleet replacement. FractionalBusiness jet marketoperators are expected to account forapproximately On-demand 10% service of business Business jet jet deliveriesownershipover the next 20 years.900800700BUSINESS JET FRACTIONAL FLEETUnits, 2002-2011600alce.First-classcommercialairlinesFractional operators areexpected to account forFullownershipFractionalownershipJet-cardapproximately Charters 10% ofprogramsAir Taxis/BrandedChartersbusiness jet deliveries overthe next 20 years.- Personalized service +50040030020010002002 2003 20042005 2006 2007 2008 2009 2010 2011Source: Jetnet. Includes the 4 major fractional providers: Flexjet, NetJets (all subsidiaries), CitationAir, Flight Options.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 21Business Jet Penetration inGrowth MarketsPENETRATION RATES BY REGIONFleet per Capita vs. GDP per Capita, 1960-2011Business jet penetration is a measure of10,000the 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 rapidFleet per 100 Million Population (Log Scale)1,00010010MIDDLE-EAST& AFRICA1st drivingforce: GDPgrowthLATIN AMERICAASIANORTH AMERICAEUROPE &RUSSIAAveragegrowth path2nd drivingforce:removal ofbarriersgrowth 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, notably1100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.the 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.The penetration rate ofbusiness jets by region ishighly variable; each regionis at a different stage.


Current Market DriversBombardier business AircraftMarket forecast 2012-2031 22Goldman 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 theBUSINESS JET DELIVERIES AND RETIREMENTS BY AGE GROUP1965-20113,4103,410Source: Ascend.2,8402,8402,6902,690Total deliveries: 16,330Total retirements: 1,130Current fleet: 15,2001,36551,3601,255151,2401-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 >40Emissions 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 CO 2 ). Similarly, planned airspacemodernization 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 of1,520401,4800% 0% 0% 0% 1% 3% 7%Aircraft Age GroupsIn Service Retired % Retired1,5901101,48029%690200 76049078%970210RetiredCurrent Fleetthe 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.


The ForecastBombardier business AircraftMarket forecast 2012-2031 23


The ForecastBombardier business AircraftMarket forecast 2012-2031 24BUSINESS JET INDUSTRY 20-YEAR DELIVERIES OUTLOOKUnits, 1992-2031HISTORYFORECAST1,5001992-20013,950 units2002-20116,300 units2012-20219,800 units2022-203114,200 units1,4001,3001,2001,1001,00090080070060050040030020010092 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30Source: Bombardier Forecasting Model.Orders, Deliveries andRevenuesWhile 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.We forecast that theindustry will surpass theprior delivery peak yearby as early as 2016.


The ForecastBombardier business AircraftMarket forecast 2012-2031 25BUSINESS JET MARKET REVENUES FORECASTConstant 2011 $B, 1992-2031HISTORYFORECAST40,0001992-2001$58 B2002-2011$139 B2012-2021$266 B2022-2031$382 B35,00030,00025,00020,00015,00010,0005,000Our 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 2011.92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30Source: Bombardier Forecasting Model.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.Total deliveries of24,000 aircraft totalling$648 billion.


The ForecastBombardier business AircraftMarket forecast 2012-2031 26Regional 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.INDUSTRY DELIVERIES BY REGION2012-2021 vs. 2022-2031Russia and CIS2012-2021: 5252022-2031: 1,025Europe2012-2021: 1,7002022-2031: 2,220North America2012-2021: 4,1002022-2031: 5,400China2012-2021: 1,0002022-2031: 1,420Latin America2012-2021: 9852022-2031: 1,300Africa2012-2021: 3252022-2031: 485MiddleEast2012-2021: 4102022-2031: 775India2012-2021: 3852022-2031: 960Asia Pacific2012-2021: 3702022-2031: 615Source: Bombardier forecast.


igure The #24 ForecastBombardier business AircraftMarket forecast 2012-2031 27North America (United States and Canada)BUSINESS JET PENETRATION FORECAST – NORTH AMERICAFleet per Capita vs. GDP per Capita, 1960-203110,000North America is, by far, the largest marketfor business jets and key to the long-termsuccess of the industry.Fleet per 100 Million Population (Log Scale)1,0001001011961197119812001 2011 2021 20311991ActualsForecastThe 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 election100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.year, which could impact U.S. corporate and grew at a rate of 2.3% in 2011 and is expectedpersonal buying decisions.to grow at a slower rate of around 2% in 2012.While many sectors have performed well,Canada accounts for about 4% of the business Canadian economic growth is being impactedjet demand in North America. According to by high household debt, government deficitsIHS Global Insight, the Canadian economy and associated restraint measures.


The ForecastBombardier business AircraftMarket forecast 2012-2031 28The 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 generalaviation 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.FLEET EVOLUTION FORECAST – NORTH AMERICAFleet, Deliveries and Retirements, 2011-20319,7254,1002,24011,630Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.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.5,4003,28013,750As 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%.


Figure The #26 ForecastBombardier business AircraftMarket forecast 2012-2031 29EuropeBUSINESS JET PENETRATION FORECAST – EUROPEFleet per Capita vs. GDP per Capita, 1960-203110,000Although 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, andFleet per 100 Million Population (Log Scale)1,00010010119611971198120011991201120312021ActualsForecast100 1,000 10,000 100,000GDP per Capita ($, Log Scale)struggling southern countries.Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.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.


The ForecastBombardier business AircraftMarket forecast 2012-2031 30A 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.FLEET EVOLUTION FORECAST – EUROPEFleet, Deliveries and Retirements, 2011-20312,220500Despite 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.2201,7001,890Fleet 2011 Deliveries Retirements3,370Fleet 2021 Deliveries Retirements5,125Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.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 theEurope will remain thesecond largest market ofbusiness jets.fragility 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 largestmarket 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.


igure #28The ForecastBombardier business AircraftMarket forecast 2012-2031 31ChinaBUSINESS JET PENETRATION FORECAST – CHINAFleet per Capita vs. GDP per Capita, 1960-203110,000During 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 economistsFleet per 100 Million Population (Log Scale)1,0001001011981 19912001201120212031ActualsForecast100 1,000 10,000 100,000GDP per Capita ($, Log Scale)agree that China’s economy will likely avoida hard landing in the short term.Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.Industrial value added output was up by11.4% year on year in January-February – itsslowest rate of growth in two years. Accordingto 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.


The ForecastBombardier business AircraftMarket forecast 2012-2031 32Business aviation in China is in its very earlystage. Over the past years, significantFLEET EVOLUTION FORECAST – CHINAFleet, Deliveries and Retirements, 2011-2031barriers have prevented the Chinese businessjet market from growing to its potential.30Restrictive airspace access, high aircraft importtaxes, a shortage of airport infrastructurefor business aviation and high user fees are1,420among the factors which explain why Chinaonly hosts an installed base of some 210business jets for a population of 1.3 billion.10Nevertheless, the number of civil airports inChina is expected to grow from 156 in 20091,000to 244 by 2020, according to the General Administrationof Civil Aviation of China (CAAC).2101,2002,590Aside 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.Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.Ultimately, we expect that the culturaldeliveries over 20 years. China is the thirdacceptance of business aviation, the rapid largest region for business jet deliveries in ourgrowth of High Net Worth Individualsforecast, which predicts that 1,000 aircraft will(HNWIs), the plans for new airports, and the be delivered between 2012 and 2021 and 1,420recent improvements to flight planningaircraft between 2022 and 2031. The fleet ofregulation and airspace liberalization will 210 aircraft at the end of 2011 will increase toallow business aviation to blossom in China 2,590 aircraft by the end of 2031, equivalentover the next 20 years.to a CAGR of 13%.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.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 2,420China holds the potentialfor rapid business aircraftmarket development.


The ForecastBombardier business AircraftMarket forecast 2012-2031 33IndiaBUSINESS JET PENETRATION FORECAST – INDIAFleet per Capita vs. GDP per Capita, 1960-203110,000India’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.Fleet per 100 Million Population (Log Scale)1,00010010119811991 2001 2011India’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 of20212031100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.ActualsForecast10 Indians declare “their country is or willeventually be one of the most powerfulnations in the world.”


The ForecastBombardier business AircraftMarket forecast 2012-2031 34According 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.FLEET EVOLUTION FORECAST – INDIAFleet, Deliveries and Retirements, 2011-203196030Although 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.103854901,420115Fleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.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%.


Figure The #32 ForecastBombardier business AircraftMarket forecast 2012-2031 35Latin AmericaBUSINESS JET PENETRATION FORECAST – LATIN AMERICAFleet per Capita vs. GDP per Capita, 1960-203110,000Latin 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.Fleet per 100 Million Population (Log Scale)1,000100101196119711991 20011981Latin 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.201120212031100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.ActualsForecastBrazil 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 resources,such as oil and minerals.


The ForecastBombardier business AircraftMarket forecast 2012-2031 36The 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.FLEET EVOLUTION FORECAST – LATIN AMERICAFleet, Deliveries and Retirements, 2011-20319853701,300430As 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.1,650Fleet 2011 Deliveries Retirements2,265Fleet 2021 Deliveries Retirements3,135Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.Business aviation has a long and wellLatin American business jet fleet penetrationestablished presence in Latin America, which per population of 100 million will grow frommost resembles North America in business 353 to 546 over the forecast period, translatinginto 2,285 aircraft deliveries over 20 years.jet fleet penetration, and is therefore a relativelymature market. A high proportion of the This region is expected to be one of the mostregion’s fleet is in the Light jet category. important business jet markets, which will seeThe largest business jet fleet concentrations 985 aircraft deliveries between 2012 and 2021are in Mexico and Brazil.and 1,300 deliveries from 2022 to 2031. Thefleet of 1,650 business jets at the end of 2011At the end of 2011, the region had one of the will increase to 3,135 aircraft by the end ofoldest business jet fleets in the world, with an 2031, equivalent to a CAGR of 3%average age of 18 years. As a result, the regionshould account for a significant number ofreplacements.


FigureThe Forecast#34Bombardier business AircraftMarket forecast 2012-2031 37Russia and CISBUSINESS JET PENETRATION FORECAST – RUSSIA AND CISFleet per Capita vs. GDP per Capita, 1960-203110,000The 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 expectedto remain high in 2012 and 2013. Fossilfuel production from Russia and Kazakhstanis projected to remain very strong. The energysector 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.Fleet per 100 Million Population (Log Scale)1,00010010120011991The 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 2011,201120212031100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.ActualsForecastpartially due to uncertainty about the politicalforces after the parliamentary and presidentialelections, held in December 2011 and March2012.


The ForecastBombardier business AircraftMarket forecast 2012-2031 38In 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.FLEET EVOLUTION FORECAST – RUSSIA AND CISFleet, Deliveries and Retirements, 2011-20311,02590According 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 estimates60Russia’s GDP growth at 4% for 2012. Economicadvancement should remain steady for Russia525and CIS over the 2012-2031 period, withannual average growth of 3.4%, according4008651,800to 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 aFleet 2011 Deliveries Retirements Fleet 2021 Deliveries Retirements Fleet 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.lack of clear legislation in the field. Infrastructure,an issue for many years, is now improving,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.


Figure #36The ForecastBombardier business AircraftMarket forecast 2012-2031 39Middle East and AfricaBUSINESS JET PENETRATION FORECAST – MIDDLE EAST AND AFRICAFleet per Capita vs. GDP per Capita, 1960-203110,000Political 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 socialFleet per 100 Million Population (Log Scale)1,000100101196119711991 2001 20111981unrest 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 regional20212031100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.ActualsForecastturmoil 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 InformationAdministration (EIA) is expecting oilprices to remain high in 2012 and over thenext several years, at $95-$115 between2012-2016.


The ForecastBombardier business AircraftMarket forecast 2012-2031 40If the economic situation worsens in Europeor worldwide, demand for oil and the prospectsfor 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.FLEET EVOLUTION FORECAST – MIDDLE EAST AND AFRICAFleet, Deliveries and Retirements, 2011-20311,260120Sub-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.130735775Fleet 2011 Deliveries Retirements1,380Fleet 2021 Deliveries Retirements2,440Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.The business jet fleet per 100 millionregion is access, as there are not enoughpopulation is expected to grow from 64 to airports designated for business aviation.142 over the next 20 years. Against the global Moreover, business aviation is still absent frombackdrop of economic turmoil, Middle East many African countries, while the economicand Africa remains a strong market fordevelopment of the continent is showingbusiness aviation. High prices for the region’s major potential.oil exports, long distances between its majorcities, and mediocre surface transportation, Middle East and Africa will receive up toall help to support the business aviation1,995 business jet deliveries during the 2012-industry, as do the scheduled airlines services 2031 period, 735 deliveries between 2012 andin the region that focus more on long-haul 2021, and 1,260 from 2022 to 2031. The 2011routes than on shorter ones. According to fleet of 775 business jets will grow to 2,440the Middle East Business Aviation Association aircraft by 2031, representing a CAGR of(MEBA), the next barrier to overcome in the approximately 6%.


Figure The Forecast#42Bombardier business AircraftMarket forecast 2012-2031 41Asia PacificBUSINESS JET PENETRATION FORECAST – ASIA PACIFICFleet per Capita vs. GDP per Capita, 1960-203110,000Asia 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.Fleet per 100 Million Population (Log Scale)1,000100101196119711981Each 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.2001199120112021 2031100 1,000 10,000 100,000GDP per Capita ($, Log Scale)Sources: Ascend, IMF, IHS Global Insight, UN population project, Bombardier forecast. Includes Very Light Jets.ActualsForecastReal 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 aggregatedemand. Emerging Asian economies’real GDP growth should average 4.1% annuallyfor the next 20 years.


The ForecastBombardier business AircraftMarket forecast 2012-2031 42Japan’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.FLEET EVOLUTION FORECAST – ASIA PACIFICFleet, Deliveries and Retirements, 2011-203137060615120Australia’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 2012.375Fleet 2011 Deliveries Retirements685Fleet 2021 Deliveries Retirements1,170Fleet 2031Sources: Ascend, Bombardier forecast. Excludes Very Light Jets and Large Corporate Airliners.As shown on the business jet penetration in countries like Japan, Asia Pacific’s currentcurve, fleet per 100 million population isbusiness jet fleet of 375 aircraft is expectedexpected to grow from 36 to 95 over the to grow at a 6% CAGR over the next 20 years,next 20 years. From a business aviationand to account for 1,170 aircraft in 2031.market perspective, the Japanese marketremains comparatively under developed. We expect 985 deliveries in Asia Pacific overDespite hurdles such as high aircraft handling the next 20 years, 370 deliveries betweencosts at airports and limited airport access 2012 and 2021, and 615 from 2022 to 2031.


The ForecastBombardier business AircraftMarket forecast 2012-2031 43Segment DetailsBUSINESS JET MARKET SEGMENTATION (1)The 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.BombardierVery Light Jets Light Jets Medium Jets Large JetsLearjet40 XRLearjet70Learjet45 XRLearjet75Learjet60 XRLearjet85Challenger300Challenger605Challenger850Global5000Global6000Global7000Global8000LargeCorporateAirlinersIn 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 ft 3 (8.5m 3 ) to 700 ft 3 (19.8 m 3 ). Compared to otherCessnaDassaultEmbraerGulfstreamHawkerBeechcraftOthersMustang CJ2+ CJ4 XLS+ Latitude Sovereign Citation X LongitudeM2Phenom100Premier 1AHondaJetCJ3SJ30-2Phenom30035 In production 15 In developmentLegacy450(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.business 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.H900XPCitation TenF2000SLegacy500H4000F2000LXLegacy600F900LXLegacy650G150 G280 G450 G500 G550 G650F7XLineage1000ACJ 318/319BBJ 1/2/3


Figure #41The ForecastBombardier business AircraftMarket forecast 2012-2031 44All three aircraft development programs areprogressing on schedule and the aircraft areFORECAST BY CATEGORYUnits and Revenues ($ Billion), 2012-2031expected 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,Total 20Yrs$648BTotal 20Yrs24,000 units40the Vision Flight Deck with a state-of-the-artavionics suite, superior aircraft performanceand low operating costs.Large$292(45%)5,500(23%)3530Demand in the Light category remains softand is recovering slowly from the downturn.Residual values remain low and levels of preownedinventory 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 ft 3 (19.8 m 3 ) to 1,500 ft 3 (42.5m 3 ). 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. BombardierMediumLight$239(37%)$117(18%)7,800(32%)10,700(45%)12 13 14 15 16 17 18 19 20Source: GAMA, Bombardier forecast. All revenues expressed in 2011 dollars.now 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 inventory2122232425in 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.262728293031252015105


The ForecastBombardier business AircraftMarket forecast 2012-2031 45Large CategoryThe Large category features aircraft withequipped prices between $45M and $69M,offering ranges over 5,000 NM and cabinvolumes of 1,500 ft 3 (42.5 m 3 ) to 3,000 ft 3(85.0 m 3 ). 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.Deliveries in the Largecategory will generate 45% oftotal industry revenues in theperiod from 2012 to 2031.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.


conclusionBombardier business AircraftMarket forecast 2012-2031 46


conclusionBombardier business AircraftMarket forecast 2012-2031 47The 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 capable,efficient and better designed aircraft.The business jet marketwill generate 24,000 newaircraft deliveries, worth$648 billion over thenext 20 years.


conclusionBombardier business AircraftMarket forecast 2012-2031 48The 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 technologyThe long-term prospectsfor business aviation aresolid and Bombardierexpects the industry toachieve new heightsin the next 20 years.It’s about the evolutionof mobility.incorporated 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.


FORWARD LOOKING STATEMENTSBombardier business AircraftMarket forecast 2012-2031 49This presentation includes forward-looking statements,which may involve, but are not limited to: statements withrespect to our objectives, guidance, targets, goals, priorities,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 legislativeand regulatory environment and legal proceedingson our business and operations. Forward-looking statementsgenerally can be identified by the use of forwardlookingterminology such as “may”, “will”, “expect”, “intend”,“anticipate”, “plan”, “foresee”, “believe” , “continue”or ”maintain”, the negative of these terms, variations ofthem or similar terminology. By their nature, forward-lookingstatements require us to make assumptions and aresubject to important known and unknown risks and uncertainties,which may cause our actual results in future periodsto differ materially from forecasted results. While weconsider our assumptions to be reasonable and appropriatebased on information currently available, there is a riskthat they may not be accurate. For additional informationwith respect to the assumptions underlying the forwardlookingstatements made in this presentation, refer to therespective Guidance and forward-looking statements sectionsin 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 services;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), financingrisks (such as risks related to liquidity and accessto capital markets, exposure to credit risk, certain restrictivedebt 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 performanceis not exhaustive and undue reliance should not beplaced on forward-looking statements. The forward-lookingstatements 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 applicablesecurities laws, we expressly disclaim any intention,and assume no obligation to update or revise anyforward-looking statements, whether as a result of new information,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.


esourcesBombardier business AircraftMarket forecast 2012-2031 50Resources 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.

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