Michael Smith Sales Director
Middle East & Africa Sales
Boeing Commercial Airplanes
Cost Efficient Fleet Management
November 2005
Sun City, South Africa
Agenda
Cost Efficient Fleet
Management
Market Dynamics
Boeing Product Strategy
Aviation Is Moving From Being Highly Regulated
To A More Liberalized And Competitive Marketplace
The Underlying Dynamics of Our Industry
Economic growth
Traffic growth
Fleet Capacity Requirement
Fleet Capacity Growth
Airline Capacity Decisions
Capital intensity to adjust capacity
Utilization
Used Airplanes
New Airplanes
Parked Airplanes
High Low
Short term
Long term
Delayed
Retirement
Airlines adjust capacity
using available options
($14)
($10)
($6)
($2)
$2
$6
$10
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-14%
-10%
-6%
-2%
2%
6%
10%
..
Net Profit (Loss) Billions Percent of Revenue
Source: 1983-2004: ICAO data for world scheduled
traffic (domestic + international)
2005: IATA estimate for world scheduled
traffic (domestic + international)
Est.
Content owner:
Wendy Sowers
IATA Raises 2005 Industry Loss Forecast
There is a Large Regional Profitability Disparity Airlines Outside The U.S. Are Generally Profitable
($10,000)
($8,000)
($6,000)
($4,000)
($2,000)
$0
US Europe Asia-
Pacific
Other Total
2004 Industry Profits (Losses)
($10,000)
($8,000)
($6,000)
($4,000)
($2,000)
$0
US Europe Asia-
Pacific
Other Total
2005 Industry Forecast
Source: IATA
0
10
20
30
40
50
60
70
80
90
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
Oil Prices Remain High Prices Rising on Supply and Demand Concerns
$/Barrel
Crude Oil
Jet Fuel
2003 2004 2005
Futures Markets
¢/Gallon
200
180
160
140
120
100
80
The Price of Fuel at African Airports is
Generally Above the World Average
• Chicago Jet: $2.20 – YOY: +0.75
• West Coast Jet: $2.06 – YOY: +0.52
• Rotterdam Barge: $2.02 – YOY: +0.56
• Singapore Kero: $1.91 – YOY: +0.53
• NY Jet Barge: $2.25 – YOY: +0.75
Source: Aviation Daily
September 22, 2005
JNB: $2.10 - $2.50
MRU: $2.20 - $2.30
LOS: $2.50 - $2.70 NBO: $2.20 - $2.80
LAD: $2.70 - $2.90
Source: Industry Contacts
September 2005 prices
CAI: $2.00 - $2.10
HRE: $3.25 - $3.50
20 Year Forecast (2005 – 2024) Africa is above the world average in GDP and RPK growth
4.1
4.3
6.6
7.8
5.7
5.5
4.8
0 1 2 3 4 5 6 7 8
North America
Europe
Southwest Asia
China
Africa
Middle East
WORLD
Percentage
RPK
GDP
Source: CMO 2005
Africa Air Traffic Growth Differs by Flow
0 50 100 150 200 250 300
To and from Latin
America
To and from North
America
To and from Asia
Pacific
To and from Middle
East
To and from Europe
Within Africa
RPKs, billions
Added Traffic 2005 - 2024
6.1
2004
5.0
6.0
6.1
8.2
8.8
Annual
Growth %
Source: CMO 2005
Since 1995, All Air Travel Growth Has Been Met By Frequency Growth And New Nonstops
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Index 1995=1.00 World Frequency
Growth
Nonstop Markets
Average Airplane Size
Air Travel Growth
August OAG
Since 1990, Frequencies And Nonstops In European Markets Have Doubled
Routes: 1990
2005 vs 1990
Capacity (seats)
2.0X; 2.0X Int’l
Average airplane size
1.0X; .9X Int’l
Frequencies
2.1X; 2.2X Int’l
Nonstops (# city pairs)
2.0X; 1.7X Int’l
Average distance
1.3X; 1.0X Int’l
X = Intra-Europe
Routes Added: 1990-2005
In 1990, Only a Few Cities Had Non-stop Long-haul Service From Johannesburg
Source: August 1990 OAG
Johannesburg
Rome
Frankfurt
Lisbon
London
Zurich
• All Nonstop, Long-
Haul service was
to Europe − 28 frequencies*
− 5 city pairs
• Some European
and Middle East
flights operated
via NBO – Tel Aviv
– Athens
• Asian flights
operated via MRU – Hong Kong
– Taipei
By 2004, The Number of Long-haul City Pairs
Served Increased Over Three Times
Source: August 2004 OAG
• Additional Nonstop, Long-Haul services to Europe, Asia and the Middle East – 161 frequencies*
– 18 city pairs
• More Point-to-point frequencies using smaller aircraft
Johannesburg
Rome
Frankfurt
Lisbon
Zurich
Amsterdam
Athens
Madrid
Mumbai
Paris
Dubai
Hong Kong
Kuala Lumpur
Milan
Perth
Singapore
Sydney
Tel Aviv
London
Boeing Does Not Predict A Significant
Trend Shift In Airplane Size
140
160
180
220
240
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Airbus: +20% Size Increase
Historic Air Travel Growth: 5.8% Forecasted Air Travel Growth: ~5%
Recent History Forecast
Boeing: ~+2% Size Increase
NOTE: Excludes regional jets
• Highly regulated
• Few airplane choices
• More competition
• Many airplane choices
Bygone Era
1975 1970
• Increasing liberalization
• More airplane choices
200
2% Size Growth Over Last 10 Years
Average Seats Per Airplane
0
100
200
300
400
500
1990 2000 2010 2020
Airlines Will Continue To Meet Air Travel Growth
With More Frequencies And Nonstops
Routes over 3,000 miles
Index (1990=100)
Air Travel Growth
Frequency Growth
Nonstops
Average Airplane Size
History Forecast
20 Year Forecast Projections For The Africa Fleet Boeing Current Market Outlook
• Single-Aisle airplanes will
dominate the African Fleet
• The percentage of Twin-
Aisle airplanes will double
to better serve long-haul
and larger inter-regional
markets
• Traffic from Southern
Africa to Europe will use
Twin-Aisle and larger
airplanes
Regional jets
Single-aisle
Twin-aisle
747 and larger
Regional jets
Single-aisle
Twin-aisle
747 and larger
Percentage of fleet
0
25
50
75
100
2004 2024719 Airplanes 1,062 Airplanes
Percentage of fleet
0
25
50
75
100
2004 2024719 Airplanes 1,062 Airplanes
Bilateral Changes And New Airplane Capabilities Influence Fleet Mix
• Airlines have added
flights and more point-
to-point services to
meet passenger
demand
• More point-to-point
frequencies from JNB
using smaller aircraft – Lower percentage of 747
aircraft
– More Intermediate Twin
Aisle aircraft
0%
20%
40%
60%
80%
100%
August
1990
August
1995
August
2000
August
2005
Intermediate Twin Aisle
747
Source: OAG
Departures from Johannesburg Airport
Very Large Airplanes Will Not Reduce Airport
Congestion – London Heathrow Airport
0
50
100
150
200
250
300
100 or less 101-150 151-200 201-250 251-300 301-350 350-401 401-450 Over 450
Daily departures
Seat size category
• OAG August 2005
• All scheduled
passenger service
87% of the airplane
departures are below
300 seats
67% of the airplane
departures are below
200 seats
Nonstop Service Continues To Bypass
Mega-Hubs, Not Consolidate
Passengers prefer
more nonstops and
frequency choices
London
Heathrow
London-Heathrow
Air Canada Emirates
American Continental
London-Heathrow
New York (JFK)
London-Heathrow London-Heathrow
New York (EWR)
Delhi Toronto Dubai
Manchester Geneva Chicago
New Nonstop Flights Continue To Grow,
Not Consolidate
Airbus claims
the number of
city pairs has
stagnated
since 1996
Airbus projects
fewer airport
pairs in 2022
than served
today 5,000
6,000
7,000
8,000
9,000
10,000
11,000
1985 1990 1995 2000 2005
Airport Pairs
Data from August Schedules
NOTE: Excludes regional jets
~2,200 Airport Pairs Added
Since 1996
The Middle Of The Market Is The Biggest
And Most Demanding
A350
Passenger Airplane Deliveries Forecast
2005 – 2024 2004-2023
747-400ER 416 seats
777-300/-300ER 365 seats
777-200/-200ER/200LR 301 seats
767-400ER 245 seats
767-300ER 218 seats
767-200ER 181 seats
2,235
3,005
200 Seats
200 Seat Gap
A380-800 542 seats
A340-600 323 seats
A340-500/A340-300/A330-300 280 262 262 seats
A330-200 241 seats
1,250
2,650
1,799
450 Seats
400 Seats
300 Seats
BOEING AIRBUS
590
747 Advanced 450 seats
300
787-9 259 seats
787-8 223 seats
Market Needs Summary
Africa and the world markets are evolving
Liberalization continues to create a more competitive environment
Airline strategies are responding to passengers’ desires to save time
Airlines have accommodated air travel growth by adding more frequencies and nonstops
Boeing expects these trends to continue
The middle of the market is the biggest and most demanding
Agenda
Cost Efficient Fleet
Management
Market Dynamics
Boeing Product Strategy
Product Family Enabling More Frequent, Nonstop Service With Breakthrough Economics & Technology
Product Family Enabling More Frequent, Nonstop Service With Breakthrough Economics & Technology
• Complete Market Coverage with Operational Commonality
• Long Range, Fast, Quiet
• Reliable, Efficient, Low Operating Cost
• Passenger Experience
• E-Enabled
• Standardization
The All New 787 Dreamliner – New Opportunities
For Passengers And Airlines
Twin-Aisle Jets
200 – 300 Seats
Where they want to go, when they want to go in comfort
New levels of airplane efficiency, speed, comfort and
environmental responsibility
Single airplane family serving a wide spectrum of markets,
common operationally with the 777 family
787 Family Plan Offers Efficiency For Short, Medium And Long Haul Markets
787-9 8,300 nmi (15,400km)
259 Passengers
787-3 3,500 nmi (6,500km)
296 Passengers 787-8
8,500 nmi (15,700km)
223 Passengers
787 Breakthrough Technologies Result In Superior Design Efficiencies
Trip Fuel Consumption
787 Advantages
• Better
aerodynamics
• Better engine
integration
• Lower airplane
weights
Per
Sea
t F
uel
Co
nsu
mp
tio
n
A340
Four engine technology
A330
15 year-old technology
A350
Derivative technology
787
All new technology
Composite Manufacturing Is Changing The 2nd Century Of Powered Flight
787 Integrates Breakthrough Technologies To Improve Fuel Efficiency And Lower Cost
787-8 A350-800
Cabin Area
Seats
Range
Take-off Weight
Fuel Efficiency*
Cash Operating Cost*
*Typical mission rules
~ Same
~ Same
~Same
+27 tonnes
+7%
+8%
Base
Better Design Results In Greater Cargo Capacity For More Revenue
20 to 45% more revenue cargo volume
787 Crew Rest is overhead (fwd/aft)
5 Pallets
4 Pallets +
2 LD-3’s
8 LD-3’s
Pallet-mounted
Attendant Rest*
12 LD-3’s
Bulk
Bulk
787-8
A330-200
A350-800
Passenger Baggage
Revenue Cargo
Bulk Cargo *A330-200 uses bulk cargo attendant
rest or lower deck mobile crew rest
787 Provides A New Sensation In
Passenger Comfort
• Dramatic entryway
• Improved lighting
• Larger bins and windows
• Lower cabin altitude
• Higher humidity
• Better air quality
• Advanced temperature control
• Smoother ride
All New Architecture
More
headroom
Larger
Overhead
bins Larger
passenger
windows
Wider
cabin
787 And 777 – The Perfect Combination For The
200-400 Seat Market Segment
• True operational commonality
• Complementary sizes
• Same speed
• Similar ranges
• Common flight decks
• Highest level of passenger comfort
• Wider cabins
• Wider seats and aisles
• Best cabin environment
• Most efficient airplanes
• Lower fuel consumption
• Lower operating costs
• More capacity
• Highest environmental responsibility
• Lowest fuel emissions
• Lowest community noise
777 Attributes Advanced alloys
Flight deck features
Passenger Windows
787 Technology Advanced-technology
engines
Advanced materials
747 Advanced Design Increases capacity and range
Adds aerodynamic performance
Improves passenger appeal
Increases operational
commonality
Optimum Solution in Technology,
Function and Value
Product Development
Study
Things To Remember …
• Airlines are profitable, except for the large ones in the United States, which are severely impacted by fuel prices
• Low Cost carriers are growing as traffic rebounds
• Point to point routes and market fragmentation continues
• Airplane sizes continue to decline
• Airlines require efficient aircraft to replace portions of their current fleet
• Boeing’s long-term partnership with Africa remains strong
Thank You!