Ron Kent Managing Director, Northeast Asia Regional Marketing Boeing Commercial Airplanes. October 2014

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2 Executive Summary Driven by China s strong economic growth, air travel and tourism have been growing at rapid pace, and will continue to do so in the future. China is the largest domestic tourism market in the world by number of trips, and will become global tourism s biggest source market by 2020*. Domestic and regional travel market will benefit from the emerging Low Cost Carrier (LCC) segment in China. Air travelers have shown preference for enhanced connectivity : more direct and more frequent. Boeing s most comprehensive and preferred product lineup is strategically positioned to support sustainable growth of China s tourism industry. *Source: China Travel Trends 2012 by PATA, COTRI and Dragon Tail Copyright 2014 Boeing. All rights reserved. 2

3 Outline China Travel Market Outlook Air Travel Trends Boeing Airplane Product Line Strategically positioned to support China Tourism s Development Summary Copyright Boeing. All All rights rights reserved. 3

4 Air travel and tourism are highly interrelated Both driven by economic growth, promote each other Travel Market Outlook Air travel demand is directly driven by economic growth; About 48% of air travel are for leisure/tour Copyright 2014 Boeing. All rights reserved. 4

5 International travel has seen rapid growth Travel Market Outlook Number of Chinese personal international trips, millions 100 China s GDP per capita, thousand RMB GDP per capita Number of international trips Source: National Bureau of Statistics of China Copyright 2014 Boeing. All rights reserved. 5

6 Air travel should increase with Travel Market Outlook GDP per capita China is becoming the largest origin country of international outbound tourists Source: Global Insight (September 2013), ICAO, US DOT Form 41, MLIT, CAAC, MTOC, airline websites Copyright 2014 Boeing. All rights reserved. 6

7 China air traffic varies by market RPKs (billions) Travel Market Outlook Within China 2013 traffic Added traffic Annual growth % 6.6% Southeast Asia 7.5% Europe 6.1% North America 6.3% Northeast Asia Middle East Oceania South Asia Africa 5.0% 10.0% 6.6% 7.5% 7.4% China Average Growth: 6.9% China GDP Growth: 6.2% Copyright 2014 Boeing. All rights reserved. 7

8 What s trending in air travel? Travelers demand and value enhanced Connectivity Air Travel Trends More direct: Non-stop, direct flights More frequent: Increased flexibility More affordable: Value-oriented purchase decision Copyright 2014 Boeing. All rights reserved. 8

9 Air travel growth has been met by increased frequencies and nonstops World 2,5 2,0 Air Travel Trends Air Travel Growth Frequency Growth Nonstop Markets 1,5 1,0 Average Airplane Size 0,5 SOURCE: August OAG Index 1993=1.00 Copyright 2014 Boeing. All rights reserved. 9

10 10-year reflection on China s aviation market growth Passengers carried (mil) Source: CAAC Air Travel Trends Jet fleet Source: Flight Global Ascend Online Database 100% 80% 60% 40% 20% 0% City pairs flown by mainland carriers , Int l Intra- China Source: OAG August Schedules Copyright 2014 Boeing. All rights reserved Airports for commercial services Source: CAAC

China will need over 6,000 new airplanes valued at $870 billion Air Travel Trends Number of airplanes 5.000 4.000 3.000 2.000 1.000 0 200 10 Regional jets 3% 4.

11 China will need over 6,000 new airplanes valued at $870 billion Air Travel Trends Number of airplanes Regional jets 3% Singleaisle 72% Small wide-body 13% 640 Medium wide-body 11% Large wide-body 1% Value, billion $ , Copyright 2014 Boeing. All rights reserved ,620 Growth 77% 1,400 Replacement 23% 910 Retained fleet ,930 6,020

12 China LCC growth will mirror worldwide growth LCC expansion to further stimulate more air traffic demand Air Travel Trends 30% LCC capacity share of total seats World: 27.2% 25% 20% 15% 10% China: 8% 5% 0% Source: CAPA, OAG Copyright 2014 Boeing. All rights reserved. 12

13 Strong growth opportunities exist for Chinese airlines on international market Through network development and service innovation Air Travel Trends Yield/RPK, RMB cent 80,0 Chinese Carriers, 41% Foreign Carriers, 59% 70,0 60,0 26% 61,7 78,0 50,0 Chinese Carriers Foreign Carriers ASK capacity market share in China s international long-haul market: majority held by foreign carriers Average yield on international routes in/out of China: improvement opportunity Source: OAG, Sabre Copyright 2014 Boeing. All rights reserved. 13

14 Seats Seats Boeing product line-up vs. the competition Superior value, efficient market coverage 600 Airbus Boeing Product Line Boeing A X A X A A A A A321neo 737 MAX A320neo 737 MAX A319neo 737 MAX Copyright 2014 Boeing. All rights reserved. 14

Boeing product line supports China s growing tourism industry 787 Most Efficient long range family Unrivaled passenger experience Better Economics than current

twin-engine jet 737 MAX 12 more seats than A320 and lower trip cost Lower weight per seat and lower thrust MAX retains economic and range advantage over neo

15 Boeing product line supports China s growing tourism industry 787 Most Efficient long range family Unrivaled passenger experience Better Economics than current and expected alternatives Boeing Product Line 777X 12% lower fuel consumption and CO 2 compared to A350 10% lower operating costs Largest and most efficient twin-engine jet 737 MAX 12 more seats than A320 and lower trip cost Lower weight per seat and lower thrust MAX retains economic and range advantage over neo % reduction in fuel and CO 2 Lower trip cost per seat and per trip compared to A380 30% smaller noise footprint Copyright 2014 Boeing. All rights reserved. 15

16 787 Dreamliner opening new markets around the world Over 70 new 787 routes through year-end A neo A (Base) 787 has the lowest operating cost: Boeing Product Line A neo A (Base) -13% - 4% 0% -15% - 4% 0% Vancouver Calgary Toronto Boston Oakland New York San Francisco Orlando Fort Lauderdale Los Angeles Miami Punta Cana Cancun Curacao Aruba Bonaire Sao Paulo Santiago Oslo Edinburgh Stockholm Copenhagen Amsterdam Moscow London Duesseldorf Paris Milan Beijing Rome Chengdu Tokyo Doha Delhi Shanghai Osaka Tel Aviv-Yafo Dubai Jeddah Abu Dhabi Hanoi Hong Kong Hyderabad Mumbai Accra Addis Ababa Douala Chennai Lome Bangkok Malabo Kinshasa Nairobi Singapore Bandar Seri Begawan Jakarta Cairns Johannesburg Gold Coast Perth Melbourne Sydney Auckland * Seat-mile operating cost comparison for 6,000-nmi mission Copyright 2014 Boeing. All rights reserved. 16

17 777X: A great new beginning Boeing Product Line Empennage New high-span wing Fuselage Modified landing gear A new passenger experience level New advanced GE engine Systems 777-8X: open long-range market with leading flexibility and efficiency 777-9X: the most efficient twin-aisle uniquely positioned for growth ER 777-8X 777-9X 351,530 kg 351,530 kg 351,530 kg MTOW (775,000 lb) (775,000 lb) (775,000 lb) Passengers Copyright 2014 Boeing. All rights reserved. 17

18 747-8: An incredible new airplane Better efficiency, higher revenue, less risk Boeing Product Line Modern flight deck New wing Innovative interior design Advanced materials Enhanced systems 787 technology engines Strategic growth with Lower fuel burn Lower cost Passenger appeal No risk Copyright 2014 Boeing. All rights reserved. 18

MAX Efficiency: 14% Lower fuel consumption Fuel per seat comparison Boeing Product Line 61 69 737-800W

efficient -14% 68 78 A320 150 seats Uses 13% less fuel A320neo 150 seats CFM engines Typical mission

19 MAX Efficiency: 14% Lower fuel consumption Fuel per seat comparison Boeing Product Line W 162 seats Uses 14% less fuel 737 MAX seats Less efficient More efficient +7% Base -6% 8% more efficient -14% A seats Uses 13% less fuel A320neo 150 seats CFM engines Typical mission rules 800-nmi trip Two-class seating includes optional winglets Copyright 2014 Boeing. All rights reserved. 19

20 more 737s serving LCCs than A320 worldwide Boeing Product Line 737 operators (1,948) A320 operators (1,603) Copyright 2014 Boeing. All rights reserved. Source: Centre for Asia Pacific Aviation, July

21 Things to remember Driven by China s strong economic growth, both air travel and tourism will continue to grow rapidly Travelers tend to prefer and value enhanced connectivity: more non-stop flights, more frequencies and more affordable Boeing s most comprehensive and preferred product lineup is strategically positioned to support sustainable growth of China s tourism industry Copyright 2014 Boeing. All rights reserved.

13th January 2015 John Leahy Chief Operating Officer, Customers

13th January 2015 John Leahy Chief Operating Officer, Customers John Leahy Chief Operating Officer, Customers 2014 Airbus headlines 1,456 net orders (1,503 in 2013) 6,386 aircraft backlog (5,559 end 2013) A landmark year - Airbus sales total grows to 15,271 629 aircraft