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CommerCial airCraft

marketforecast

2012-2031

BomBardier CommerCial airCraft Market forecast 2012-2031 02table of contents

executive Summary

economic trends

airline industry trends

the forecast

Conclusion

Geographic details

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BomBardier CommerCial airCraft Market forecast 2012-2031 03

executivesummary

BomBardier CommerCial airCraft Market forecast 2012-2031 04executive summary

Welcome to the Bombardier Aerospace Commercial Aircraft Market Forecast, our 20-year view of the market for 20- to 149-seat aircraft.

World airline profitability in 2011 was estimated by international air transport association (iata) to reach $7.9 billion, the second consecutive year in which all regions were break even or profitable. this expansion was fueled by continuous traffic growth and steady increases in overall ticket prices. these positive trends were countered by rising oil prices, continued financial turmoil in the eurozone and increased political tension in the middle east and North africa. While airline profitability was considered fragile, it was contrasted by another record year for aircraft orders. the growing backlog in the large single-aisle aircraft segment remains a concern, as a sharp increase in traffic demand would be required to absorb the excess

capacity represented by these orders. after even a few tough years of industry consolida-tion and tremendous discipline in constraining capacity growth, it is difficult to understand the rationale behind deliberately introducing excess capacity back into the system. as op-timization is always the survival instinct of the aviation industry, it will eventually find its way to adapt, adjust and ascend going forward.

mature marketsiHS Global insight reduced its long term forecast of GdP growth from 3.4% last year to 3.26% in 2012. North america and europe are forecast to have below-average GdP growth for the next 20 years. in a mature market, where route network and business models are fully established, most demand

12,80020- to 149-seat total

DELIVERY FORECAST (UNITS)

Segments Deliveries

20- to 59-seat 300

60- to 99-seat 5,600

100- to 149-seat 6,900

Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.


for commercial aircraft will result in the need to rejuvenate an ageing fleet as it approaches retirement. even though these regions are expected to see only small organic growth year over year, their significant installed bases will continue to require a large number of new aircraft for the next 20 years.

Growth reGionsthe growth regions of africa, asia/Pacific, latin america, middle east and russia & CiS, where long-term GdP growth is forecast above average, will require a significant number of new aircraft to support the growth of the aviation industry. in addition to more capacity, new airline business models and network connectivity are being tested or optimized by airlines and entrepreneurs. aircraft in various capacities are all needed to help shape the development of the industry in these growth regions.

optimizationthe financial viability of the airline industry is extremely dependent on the external envi-ronment, yet the industry is also very resilient, due to its relentless drive for optimization. the increased price of oil predicted by the U.S. energy information administration (eia) is the single most concerning factor in airline economics over the forecast period. this concern is further amplified by the increase

in oil price forecast, since eia issued its annual energy outlook last year, by nearly $20, reaching $126 per barrel average for next 20 years. While airlines successfully managed increasing fuel costs by raising ticket prices last year, the continuous pressure transferred from cost to ticket price will soon reach the tipping point of consumer price resistance. aircraft with the lowest cost and high performance capability will therefore be favored going forward.

airlines strive to optimize their fleet solutions to best serve their customers’ needs. airline customers expect frequency, schedule, comfort and competitive fares while traveling on modern aircraft. New aircraft designs continue to focus on optimizing performance, lowering fuel consumption, reducing environmental foot-print and maximizing cabin comfort.

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20- to 59-seat60- to 99-seat100- to 149-seat

Source: Bombardier Commercial Aircraft Market Forecast 2012-2031, OAG Aviation Solutions.

Total FleetUnits 11,200 17,000

TOTAL FLEET UNITS


the 20- to 149-seat marketaircraft deliveries in the 20- to 59-seat market will decline substantially over the next 20 years. this capacity will gradually shift to larger and more economical regional aircraft. demand for new aircraft in this larger, more economical regional aircraft segment is expected to increase in the latter half of the forecast period, driven mainly by the anticipated availability of new technology. Some 300 units will be delivered by the end of the forecast period. in the near and mid-terms, the pre-owned markets will continue to supply the aircraft needed in this segment. in particular, russia, africa and latin america will see considerable absorption of used 50-seat regional jets.

regional airlines are gradually anchoring their business models around large regional aircraft in the 60- to 99-seat segment, both turboprops and jets. With increased capacity, lower per-seat operating costs and a seam-less service offering, large regional aircraft connect route networks by adding new city pairs. this service provides connections not only between major airports, but also linking secondary and tertiary airports. With some 5,600 units forecast for delivery, this segment will experience the strongest fleet growth over the next 20 years.

the 100- to 149-seat aircraft segment will enjoy the strongest growth in terms of deliv-eries. this segment is currently dominated by ageing aircraft. thanks to “step change” engine technology, the arrival of new aircraft specifically designed for this segment will invigorate market demand to further optimize airline route networks and profitability. We forecast deliveries of 6,900 aircraft in the 100- to 149-seat segment over the forecast period.

the commercial aviation industry is an integral component of the global economy. the long-term economic outlook supports continuous demand for new, optimized capacity and more fuel efficient aircraft, with deliveries of 12,800 new aircraft predicted over the next 20 years


economic trends

BomBardier CommerCial airCraft Market forecast 2012-2031 08economic trends

economic and air travel Growththe world’s recovery from the 2008 financial crisis began in 2009 and has continued, at varying paces and with varying degrees of success into 2012. Growth in gross domestic product (GdP) has reflected this variation, reaching 4.1% in 2010 and 2.7% in 2011. the recovery has slowed due to continuing eco-nomic concerns, notably the eurozone crisis, high and volatile oil prices (as discussed below) and China’s ability to sustain its comparatively rapid growth, the recovery has slowed. as a result, iHS Global insight has reduced its expected rate of GdP compound annual growth for the 2012 – 2031 forecast period, from 3.4% (2011 – 2030) to 3.26%.

the economic recovery is taking longer than expected in mature markets, while growth in emerging economies has returned to pre-crisis rates; whether they will be able to sustain this pace remains to be seen.

demand for air travel, and with it the health of the world’s airline industry, depends heavily on the strength of the economy. most recently, iata reported a 7.4% increase in international passenger travel (based on revenue passenger kilometers (rPKs)) for the month of april 2012, compared to april 2011. demand for air travel

is also reflected in orders for new aircraft. New aircraft order intake (encompassing 20 - 220 seats) more than quadrupled from 2009 to 2011. Net orders rose to 2,381 units in 2011, up from the 2010 tally of 1,414 units, which itself more than doubled the 2009 pace of 556 aircraft orders.

Section: Economic Trends - Economic and Aviation Industry GrowthChart: World Real GDP Growth

WORLD REAL GDP GROWTH %, 2011

Source: IHS Global Insight 2012. Note: GDP = Gross Domestic Product

1.8%

World Average 2.7%

4.2%

1.8%

3.44%

4.8%

9.2%

6.8%

1.3%


the continuing recovery in demand for air travel is also expected to see a return to commercial service of some of the aircraft currently parked. the parked commercial aircraft fleet has declined by 9% year-over-year, to approximately 2,220 at the 2011 year end. this total is down from the peak of 2,496 aircraft idled in 2009, but it remains above the 10-year low of 1,681 aircraft parked in 2007.

regionally, economies outside North america and europe are expected to lead the world in GdP growth from 2012 to 2031. according to iHS Global insight, China is expected to grow

at 6.6% annually, followed by africa, at 4.4%; latin america, at 4.1%; middle east, 3.8% and asia/Pacific at 3.4%. in contrast, the North american economy is expected to grow at 2.6%, with europe trailing, at 2.1%. the overall compound annual growth rate, as noted, is expected to be 3.26%, with non-North american or european economies accounting for 61% of the growth.

COMMERICAL AIRCRAFT ORDERS AND GDP GROWTH

Sources: Bombardier Analysis, OAG Aviation Solutions, IHS Global Insight

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demand for air travel is also reflected in orders

for new aircraft.


North america and europe have historically represented both the largest commercial aircraft fleets and the largest markets for new aircraft. this year, the Bombardier Commercial aircraft market forecast antici-pates total demand for new aircraft in the 20- to 149-seat segments to be evenly di-vided between mature and emerging markets. although starting from much smaller base-lines (and assuming proportionate growth in aviation infrastructure), demand for new aircraft is expected to be particularly strong in emerging markets, such as China, asia/Pacific (including india) and latin america. europe, africa, and the middle east are expected to require somewhat fewer aircraft during the period and North american forecast demand remains unchanged.

as a country’s per capita GdP grows, so does its residents’ desire for travel, and this desire in turn fuels demand for aircraft. the Bombardier Commercial aircraft market forecast, which anticipates long-term growth through the continuing economic recovery, presents a positive picture of commercial aircraft demand through the 2012–2031 period. overall fleet growth of 52% (2.1% CaGr) and 12,800 new aircraft deliveries – approximately half of which will be needed to meet the world’s growing demand for air travel - is estimated over the forecast period.

population Growth and urbanizationthe propensity for air travel is closely as-sociated with wealth (as represented by per capita GdP) and urbanization. as both wealth and urbanization increase, particularly in emerging markets, the impact on commer-cial aviation is expected to be profound.

the organization for economic Co-operation and development (oeCd) estimates that middle-class consumer spending, as a reflec-tion of a region’s per capita GdP, will expand rapidly in emerging markets. in asia/Pacific (including China and india in the oeCd analysis), middle-class consumer spending is expected to balloon, from $5.0 trillion in 2009, to $32.6 trillion in 2030 on a purchasing

Passengers originating from respective country, GDP in 2005 USD.Sources: IHS Global Insight 2012, MIDT data, Bombardier Analysis.

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BomBardier CommerCial airCraft Market forecast 2012-2031 1 1economic trends

power parity basis. in other emerging markets, the increase is expected to be substantial, if not spectacular. Spending in Central/South america is expected to grow from $1.5 trillion to $3.1 trillion, while the sub-Saharan africa will see middle-class consumer spending grow from $0.8 trillion to $2.0 trillion by 2030. Spending in the middle east and North africa is expected to grow from $0.3 trillion to $0.8 trillion over the same period.

Sources: IHS Global Insight, Feb 2012, Bombardier Analysis.

3.26%

7.4%

6.6%

4.4% 4.1% 3.8%

2.6% 2.4% 2.0%

1%

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World India China Africa LatinAmerica

MiddleEast

NorthAmerica

Asia/Pacific(ex. China,

India)

Europe

GDP GROWTH RATES(2012-2031)

$5.6 $8.1

$1.5

$0.3

$0.8

$2.0

$0.8

$5.0

$5.8 $11.3 $32.6 $3.1

MIDDLE-CLASS CONSUMER SPENDING IN TRILLIONS USD*

Source: OECD. * On a purchasing power parity basis.

NorthAmerica

Europe Asia/Pacific

Central & South America

Middle East & North Africa

Sub-Saharan Africa

2009$21.3

2030$55.7PROJECTED


in contrast, while middle-class consumer spending in mature markets is expected to continue growing, the increases are much smaller, with the result that, by 2030, europe and North america together are expected to account for approximately 30% of the world’s middle-class consumer spending, compared to approximately 64% in 2009.

ASIA, AFRICA AND LATIN AMERICA URBANIZATION

LatinAmerica

Rest of Aisa2

China India Africa Europe NorthAmerica

561

1,042

862

494

661

560

341

Population living in urban areasMillions

2025

2009

461

739624

356 399531

285

1 Urban population according to national definitions.2 Excluding China and India.

Sources: United Nations Population Division Department of Economic and Social A�airs, World population prospects: The 2009 revision, March 2010; McKinsey Global Institute analysis.


rapid urbanization is also a feature of many of these fast-growing economies and presents an even more dramatic picture of large-scale global change. the United Nations estimates that the population of the world’s urban areas will increase by more than 1.1 billion people over the period from 2009 to 2025. Urbaniza-tion will continue in europe, and more so in North america. However, approximately 92% of that urban growth will occur in africa, latin america, india, China, and the rest of asia, leading to increased demand for air travel in those regions.

CHINA EXPENDITURE ON AIR TRAVELAND GROSS DOMESTIC PRODUCT

Billions of 2005 U.S. $

Expenditure on air travel (left scale) Gross Domestic Product (right scale)

Source: Bombardier Analysis and IHS Global Insight.

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oil price and volatilitythe outlook for consistently high oil prices and continued oil price volatility presents some of the biggest challenges for the world airline industry. Jet fuel – which closely tracks the price of crude oil – represents airlines’ largest single expense, now amounting to 34% of operating costs on average, according to iata. With this large and growing influence, oil prices and oil price volatility are major de-terminants of the size and other make-up of the commercial aircraft fleet of the future.

from an average price of $80 a barrel in 2010, oil prices rose by $20 to $100 per barrel in 2011. in the final months of the year, the prices spiked higher, and continued upwards by 8% in the first five months of 2012. although peak prices have not reached the $147 per barrel experienced in July 2008, neither have they retreated to the december 2008 low of less than $35 per barrel. With 2011 average oil prices 25% higher than 2010, we anticipate that prices will remain above $100 per barrel through 2012 and, indeed, throughout the 20-year forecast period. in fact, the U.S. energy information administration (eia) revised its 20-year average oil price forecast from $107 per barrel in 2011 to $126 per barrel in 2012 (annual energy outlook 2012 early release), a nearly $20 increase.

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LABOUR AND FUEL UNIT COST HISTORY

Fuel

Labour

Source: Air Transport Association of America, 2012.1Q

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Source: Energy Information Administration. Note: 1. FOB = Freight on board

AVERAGE OF WEEKLY CUSHING AND BRENT SPOT PRICE FOB1

(Dollars per Barrel)

$60

$70

$80

$90

$100

$110

$120

$130

2-10

3-1

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2011 Avg.: $103.16

2010 Avg.: $79.72

YTD 2012 Avg.: $110.94


further, as observers have noted, a continua-tion of the unrest in the middle east, particu-larly the threatened closure of the Strait of Hormuz (a major oil trading passage), could drive oil prices to the $150 per barrel range, resulting in an estimated 2012 average price of $135 per barrel.

While oil prices directly affect airlines’ profit-ability, they also influence fleet decisions and drive network optimization strategies. these influences are reflected in increasing demand for highly fuel-efficient, high-productivity solutions, such as modern turboprop aircraft.

oil price volatility challenges airlines’ ability to forecast passenger volumes, airline work-loads and fleet replacement timing decisions, whether on a daily, monthly or annual basis.

looking ahead, we believe that oil prices will remain significantly above the historical averages from just a few years ago and that prices will continue to demonstrate significant volatility over the near term.

although continuing high oil prices will challenge airlines’ profitability at least through 2012, the arrival of new aircraft incorporating technological advantages that deliver direct operating cost reductions will accelerate the retirement of older, less fuel-efficient aircraft types.

Source: Annual Energy Outlook (AEO) by Energy Information Administration.

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AEO2012 Early Release Reference

AEO2011 Reference

Average: $126 per barrel

Actual Forecast

OIL FORECAST


airline industry trends

BomBardier CommerCial airCraft Market forecast 2012-2031 17airline industry trends

fraGile profitabilitythe financial outlook for the world’s airlines remains in a state of flux as broad economic concerns continue to work their way through our deeply interconnected, interdependent global economic system.

against this backdrop, demand for air transportation remained strong through 2011 and into 2012. iata reported that total passenger demand increased 5.9% in 2011, with a 4.8% expected increase in total passenger kilometers flown in 2012.

iata data covering the first four months of 2012 reflected an overall 7.1% increase in passenger traffic, while capacity (available seat kilometres (aSKs)) increased 4.9%. as a result, passenger load factors grew to 77.5%.

Global airline revenues have increased throughout the period of economic recovery, from a low of $476 billion in 2009, to $547 billion in 2010, and to $597 billion in 2011, representing a 9.3% year-over-year increase. according to iata, global airline profitability

improved significantly, from a net loss of $4.6 billion in 2009 to total net profits of $15.8 billion in 2010, before declining to $7.9 billion in 2011. Should the world economy slip further to a growth rate of just 2%, iata observes that historically, this slow growth rate has resulted in the airlines sliding into industry-wide losses.

Region 2007 2008 2009 2010 2011 2012F

World 12.9 15.8 7.9 3.0

North America 3.7 4.1 1.3 1.4

Europe 6.4 0.0 1.9 0.5 -1.1

Asia/Pacific 3.0 2.6 8.0 4.9 2.0

Middle East 0.9 1.0 0.4

Latin America 0.1 0.9 0.3 0.4

Africa

-16.0 -4.6

-9.6 -2.7

-4.3

-4.7

-0.1 -0.3 -0.6

-1.4 -0.5

-0.2 -0.1 -0.1 0.1 0.0 -0.1

AIRLINE INDUSTRY NET PROFITS(Billions U.S. $)

Source: International Air Transportation Association (IATA), June 2012.

airline economics


iata’s central forecast for 2012 anticipated a further decline in airline profitability, to just $3.0 billion. regionally, asia/Pacific is expected to perform best, as per iata’s central forecast scenario, indicating profitability of $2.0 billion. North america airline profitability is expected to be $1.4 billion, middle east $0.4 billion and latin america $0.4 billion. airlines in europe and africa are expected to incur new losses of $1.1 billion and $0.1 billion, respectively.

in summary, the economic recovery is continuing and demand for air transportation also continues to build with it, subject to the challenges posed by slow growth in global gross domestic product and high oil prices. in the face of these challenges airlines have shown creativity and consistency, in address-ing their expenses – a scenario in which operating a modern, highly fuel-efficient aircraft fleet remains the single most important strategy for business viability and long-term success.


airline business modelsthree distinct business models are present in the passenger segment of the airline industry: mainline carriers (sometimes referred to as network carriers), regional carriers and low-fare (or low-cost) carriers. mainline carriers are characterized by fleets of 100-plus seat aircraft serving multiple cities and countries through hub-and-spoke networks. due to cost pressures, notably high fuel prices, and relentless competition, mainline carriers have focused on the replacement of older equip-ment with newer, more efficient aircraft.

regional carriers typically operate smaller aircraft, such as regional jets and turboprops with fewer than 100 seats, on short- and medium-haul routes. By representing mainline carriers to meet passenger demand for service and frequencies in markets with lower volumes, regional carriers enable their mainline partners to right-size aircraft use throughout their networks. this specialization strategy for network optimization has developed strong linkages between mainline and regional car-riers, which now account for one third of all commercial passenger flights worldwide.

low-fare carriers typically operate aircraft from 70 to 200 seats on point-to-point service connecting secondary airports. By separating ancillary revenue from the base fare, the

low-fare carriers have thereby made air travel accessible to passengers who could not otherwise afford it. low-fare carriers, which typically have lower cost bases than mainline carriers, are now present in nearly every part of the world and their market share has increased significantly, particularly in North america and europe.

Source: U.S. Bureau of Transportation Statistics, May 2012.*Most current available data. **Low-Cost Carriers are also referred to as Low-Fare Carriers

U.S. AIRLINE SEGMENTATION PROFITABILITY/LOSS*

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COMMERCIAL AIRCRAFT CAPACITY WORLDWIDE BY SEAT CATEGORY


Actual Forecast

the growing importance of regional carriersin the U.S. is reflected inthe growing size of regional aircraft to an average size of 37 seats in 2000 to 50 seats in 2005 and to 56 seats today. regional carrier average trip length has also increased over this period, from 296 statute miles in 2000, to 464 statute miles in 2010 and to 468 statute miles as of the first half of 2011. a similar pattern is recognizable in europe, at least partly due to less restrictive scope clauses, where average regional aircraft

size has increased from 63 seats in 2001, to 72 seats in 2009 and to 78 seats today. although european average regional airline stage lengths are shorter than their U.S. counterparts, these have increased from 384 statute miles to 390 statute miles over the same period.

Continued turbulence in the airline industry, including insolvency, consolidation, outsourc-ing, unbundling of services and attempts by some mainline carriers to reinvent themselves

by shedding legacy cost structures, has resulted in the three established business models becoming less individually distinct. However the need to right-size aircraft to market needs remains paramount in control-ling costs, especially as commercial aircraftcapacities range from fewer than 50 seats to more than 600.


for longer routes with less traffic, regional jets in the 60- to 99-seat segment present an optimized solution. While small, single-aisle jets provide longer-haul capacity up to 3,000 nautical miles and routing flexibility, and advanced technology turboprops are best suited to short and medium-haul flights. labour trendsWhile airline labour costs have decreased as a percentage of airlines’ total costs, largely due to the increase in fuel prices, they remain the airlines’ second biggest expense category and one of the largest sources of optimization opportunities.

at the industry level, selective outsourcing of scheduled passenger operations to regional carriers has increased the mainline carriers’ access to passengers in smaller centres, who would otherwise be cost-prohibitive to serve with larger aircraft. as low-cost carriers, regional airlines can generate profits on thin routes that their mainline counterparts find too costly. one constraint on this strategy has been “scope clauses” negotiated between mainline carriers and their unionized flight crews, which restrict the use, number and seating capacity of regional airlines’ aircraft in mainline carriers’ network. Scope clauses are a predominantly U.S. and european phenomenon.

additional labour cost control outsourcing initiatives have addressed catering operations, maintenance services and reservations, and have helped lower airline costs dramatically.

Continued loosening of scope clause rules (to permit regional carriers to operate even large aircraft) as well as the development of new business models, will increase demand for air transportation. Bombardier expects these trends to continue.

Source: Air Transport Association of America (ATA), 2012 FTE: Full Time Equivalent employees, most current annual data

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turboprops and Jets: optimization in practiceaircraft and engine types are critical choices in optimizing airline fleets and networks. the greatest efficiencies are achieved by deploying turboprop aircraft on short- and medium-haul markets and jet aircraft on longer routes.

rising fuel prices expanded the use ofturboprops worldwide and led aircraft manufacturers to increase the size and capability of these aircraft. these aircraft

began operating in mainline carriers’ fleets in significant numbers in 2007. advanced tur-boprops will continue to play an integral role in the regional airline marketplace as carriers confront the dual pressures of rising fuel costs and increasingly restrictive environmental regulations. the comparatively lower fuel burn of turboprops, compared to regional jets of similar size, will enable carriers to maintain capacity and shrink their overall environmental footprint. modern 70-passenger turboprop aircraft represent a cost-effective replacement

on routes previously served by 50-passenger jets, which are no longer in production.

of approximately 5,900 aircraft to be delivered in the 20- to 99-seat segment, Bombardier’s Commercial aircraft forecast for 2012 - 2031 anticipates – based on oil at an average $126 per barrel – that 48% will be modern tur-boprop airliners, the first time this product category has achieved this degree of market penetration. further, of the approximately 2,850 turboprop aircraft to be delivered over

88%

55% 52%

12%

45% 48%

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2001 Actual

319

Turboprop

Regional Jet

2012-2031 Forecast

5,900

2011 Actual

Units

Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031, Energy Information Administration 2012-2031 forecast.

Oil @ $111 per barrel Oil @ $26 per barrel Oil @ an average of $126 per barrel

DELIVERY BY ENGINE TYPE 20- to 99-SEATSUnits, %, Actual 2001 and 2011, Forecast 2012-2031 period


the period, approximately 2,700 or 95% will be in the 60- to 99-seat segment, which is ex-pected to experience substantial growth over the forecast period.

the balance of the forecast deliveries in the 20- to 99-seat segment will be larger regional jets, which airlines will require to optimize seating capacities, maintain passenger com-fort and accommodate traffic growth while reducing unit costs.

aircraft retirementsaircraft retirements and replacements are key product life-cycle milestones in shaping future aircraft deliveries and fleet composition. Historically, older aircraft are replaced to capture the financial, operating and mainte-nance advantages offered by newer, more cost effective and more fuel-efficient aircraft, as they become available.

other factors that influence aircraft retirement timing decisions include international and local airport noise and emissions regulations

and fees; airline branding; the competitive environments; as well as financial and tax considerations (such as maintenance costs, depreciation and incentives), airline growth strategies, aircraft economic structural life, the certification status of new aircraft development programs and replacement opportunity factors, such as delivery slots.

this year, the number of anticipated aircraft retirements over the 20-year forecast period has been increased by a total of 300 units, from approximately 6,700 in our 2011 forecast to 7,000.

Today’s Fleet(units)

2031 Fleet(units)

4,200

17,000

12,800 Deliveries

FLEET EVOLUTION FROM2011 TO 2031

20- to 149-seat Fleet


Replacement

RetainedFleet

Growth

11,200

Today’s Fleet(units)

5,800(45%)

7,000(55%)


much of the reason for this increase lies in oil prices, which have seen a $20 per barrel jump on average prices over last year, reaching an average $126 per barrel throughout the fore-cast period. a further factor in the increased forecast retirements is russian regulators’ decision to ground ageing, domestically pro-duced aircraft. However, since the utilization of these aircraft is typically very low, they will not be replaced on a one-to-one basis.

the increased retirements are expected primarily in the 20- to 59-seat segment (an increase of 200 units, from 2,500 retirements to 2,700), as well as in the 60- to 99-seat segment (an increase of 100 units, from 1,200 retirements to 1,300).

Gradually rising oil prices over the forecast period add burden to aircraft operating economics. twenty- to 59-seat aircraft are particularly affected due to the resulting higher cost per seat, and hence the increased retirements in this segment. this also applies to the 60- to 99-seat segment towards the end of the next decade due to the ageing 70-seat and 90-seat aircraft that entered service in the early 2000s.

most aircraft move through a recognizable series of product life cycle stages. Passenger aircraft, when removed from commercial

operation with front-line carriers, typically move into cargo operations. Some others move to less demanding markets and appli-cations, serving commercial operators with different utilization needs, different operating environments and different business models.

as a significant number of 50-seat regional jet airliners reach 20 years of age, Bombardier expects many will be converted into freighter aircraft. Small freighter aircraft (with payloads of 5,000 to 20,000 lbs) are expected to be in demand to replace a large fleet of all-cargo aircraft currently in service around the world, nearly all of which are limited-range turbo-props averaging 29 years of age. the constant

evolution of the regulatory environment also influences the pace and pattern of aircraft retirements and, thereby, the fleet mix. during the past 40 years, regulations imposed by the international Civil aviation organization, Committee on aviation and environmental Protection (iCao/CaeP) led to the phase-out of noisier aircraft from U.S. and european commercial fleets. New iCao/CaeP noise and emission standards will further affect the global aviation fleet. most recently, the european Union has implemented an emissions trading Scheme that, since January 1, 2012, has applied to commercial aircraft operating in european airspace.

IN-SERVICE AIRCRAFT 15 YEARS OF AGE OF OLDER

Sources: OAG Aviation Solutions, Bombardier Analysis.

500

1000

1500

2000

2500

10- to19-seat

20- to39-seat

40- to59-seat

60- to99-seat

100- to149-seat

150- to174-seat

175- to219-seat

220+seat

Un

its


the typical life cycle stages of aircraft use are also influenced by seemingly unconnected external events. following the attacks of September 11, 2001 for example, older aircraft retirements accelerated and even some new model aircraft were temporarily parked. Now, almost 11 years later, not all of these aircraft have returned to active service. of the current fleet of 20- to 149-seat com-mercial passenger aircraft, Bombardier antici-pates that 60% will retire by 2031. looking in more detail, we expect the fewest retirements in the 60- to 99-seat segment, and the most – 70% of today’s fleet – in the 20- to 59-seat segment. these aircraft will be retired due to their comparatively higher per-seat operating costs and high fuel costs. Without the advent of new technology-advanced, in-production 20- to 59-seat aircraft in the near-term fore-cast period, Bombardier expects this segment to decline dramatically, from 33% of today’s 20- to 149-seat fleet, to just 8% in 2031. in sharp contrast, the near-term period will see the introduction of new-generation 100- to 149-seat aircraft, which are expected to account for 53% of the total 20- to 149-seat fleet in 2031. the response to the arrival of op-timized, new generation aircraft is expected to result in significant retirements and deliveries, amounting to 3,000 retirements and 7,000 new aircraft deliveries.

more than half of the current commercial aircraft fleet will be replaced in the next 20 years, a slightly greater percentage than expected last year, due to technical obsoles-cence, cost inefficiencies and age. the increasing pace of older aircraft retirements will have a positive impact on demand for new aircraft.

80% retired from commercial passenger service

COMMERCIAL AIRCRAFT GENERAL RETIREMENT PROFILE

StandardCommercial Passenger Aircraft

Retirement Curve

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

Source: Bombardier Analysis.

% o

f fl

eet

acti

ve


airlines and the environmentenvironmental issues and increasing environ-mental regulation will increasingly shape the world’s airline industry and infrastructure over the 2012 – 2031 forecast period. these issues can be broadly categorized as: local air quality, aircraft emissions and community noise. the aviation industry has improved its performance in these areas consistently over more than 50 years.

Greater fuel efficiency directly boosts airline profitability and aircraft operations have become 20% more fuel efficient over the past 10 years alone. modern aircraft now achieve fuel efficiency of 3.5 litres per 100 passenger kilometers, roughly comparable to today’s leading hybrid passenger cars, with much greater speed.

other environmental performance highlights:• Today’saircraftflythreetimesfarther on the same fuel than 30 years ago, a 75% gain in fuel efficiency per passenger

kilometer.• Newaircraftare70%morefuelefficient

than 40 years ago.• Themaximumrangeofcommercialjet

aircraft has increased to 15,200 km from 5,190 km in 1960, carrying more passengers farther, with less fuel.

• Whilepassengertraffic(inrevenuepassenger kilometers) has increased at an average of 5% annually, increasingly efficient aircraft operations have limited emissions growth to about 3%.

• Today’saircraftare50%quieterthanthose40 years ago. Current iCao Chapter 4 requirements are 35-40 dB quieter than the requirements 40 years ago.

the aviation industry – aircraft manufacturers and airlines – are working on further improve-ments in aircraft environmental performance, with guidance from iCao and the air trans-port action Group (ataG), among others. Bombardier, with other key stakeholders, is committed to moving toward carbon-neutral growth within the industry during the forecast period and achieving by 2050 a 50% reduc-tion in Co2 emissions from 2005 levels.


the application of new technological devel-opments in new aircraft designs will be para-mount in meeting these commitments. iata’s technology roadmap provides a summary and assessment of technology-based opportunities for future aircraft, including technologies that will reduce, neutralize and eventually eliminate commercial aviation’s carbon footprint.

Bombardier is also taking steps to reduce its own carbon and environmental impacts. through our corporate responsibility activities, Bombardier is committed to minimizing the footprint of its manufacturing and operating activities, through increased efficiency, on-site innovation and the creation of environmental synergies through engagement with our supply chain partners.

in summary, the world aviation industry is actively addressing environmental concerns through the retirement of older aircraft, fleet modernization, application of technology, and improvements in operations and infrastructure. Growing environmental awareness and in-creased environmental regulation will increase demand for efficient new aircraft.

Source: International Air Transport Association (IATA) Technology Roadmap 2009.

Riblets

Wireless opticalconnections for IFE

Spiroid wingtip

Advanced fly-by-wire

MEA architecture

Fly by light

Variable camber with newcontrol surfaces

Energy harvesting devices

Natural laminar flow

Hybrid laminar flow control

Engine replacements

New engine core concepts

Geared turbofan Open rotor /unducted fan

Advanced direct drive

Counter-rotating fan

Biomass to fuel or biojet

Biodiesel

Synthetic para�nic kerosene

Liquefied petroleum gas

Compressed natural gas

Liquid methane

Furans

Butanol

Transesterification fuels Liquid hydrogen

Ethanol

Hybrid wing body

Cruise-e�cient STOL

Truss-braced wing

Wireless flight control system

PEM fuel cell

Solid-oxide fuel cell

Solid acid fuel cell

Morphing materials

Morphing airframe

Advanced 3rd gen. core

Active stability management

Thermal management

Variable cycle Adaptive cycles

Boundary-layer ingesting inlets

Embedded distributed multi-fan

Adaptive / active flow control

Ubiquitous composites

Non-Brayton cycles

Pulse detonation cycles

Regenerative / recuperative cycle

Retrofit

Update

New Aircraft< 2020

New Aircraft> 2020

All stages

20202010 2030

Air

Tra

�c

Man

agem

ent

Alt

ern

ativ

e F

uel

sE

ng

ine

Air

fram

e &

Sys

tem

s

Data link communication

Required time of arrival

Performance-based navigation

Automatic dependent surveillance broadcast - OUT

System-wide information management

GNSS landing system via ground based augmentation system

Automatic dependent surveillance broadcast - IN

IATA TECHNOLOGY ROADMAP, 2009


the forecast

BomBardier CommerCial airCraft Market forecast 2012-2031 29the forecast

assumptionsthe Bombardier Commercial aircraft market forecast covering the period 2012 – 2031 is based on the following principal assumptions and market drivers:

• Demandforairtravelwillbecyclicalanddirectly related to economic growth and wealth creation over the long term

• Fleetutilizationisdirectlyrelatedto economic growth• Demandforairtravelwillbesupportedby

aviation infrastructure. in some emerging markets, lagging infrastructure develop-

ment will constrain growth in air travel and• Increasingenvironmentalregulationwill

affect fleet mix and encourage carriers to seek lower per-passenger fuel burns and emissions

the following assumptions regarding commercial aviation also guided development of the forecast:

• Oil/fuelpriceswillaffectfleetmix• Airlineswillcontinuetofocusoncost reduction and will prefer the advantages

of larger capacity aircraft in each segment • Contractualrestrictionsonairline operations – based on aircraft size and

engine type – will ease over time and• Airlinemarketswillcontinuetobe

opened to greater competition through liberalization of international air

transportation agreements

the forecast was developed based on the following metrics applied to the 20-year period:

3.26% average economic growth in global GdP (down from 3.4% last year)$126/bbl average oil price, according to the eia (up from $107/bbl last year).

FLEET GROWTH FORECAST


WORLD 2011 Fleet Deliveries Retirements 2031 Fleet

20- to 59-seat 3,600 300 2,700 1,200

60- to 99-seat 2,500 5,600 1,300 6,800

100- to 149-seat 5,100 6,900 3,000 9,000

TOTAL 11,200 12,800 7,000 17,000

20-YEAR OUTLOOK

Market Drivers that increase/decrease aircraft demand

Economic Growth

Fuel Prices

Fuel Volatility

Replacement Demand

Emerging Markets

Environmental Regulations

Environmental Fees

Labour Trends



forecast resultsthe Bombardier Commercial aircraft market forecast anticipates the delivery of 12,800 new 20- to 149-seat aircraft in the 2012 – 2031 period. Coupled with retirements of approxi-mately 7,000 aircraft, the world commercial fleet will grow from approximately 11,200 aircraft at the start of 2012, to approximately 17,000 at the period end. overall fleet growth will be 52%, representing a compound annual growth rate of 2.1%. almost half of the new deliveries will be replacement aircraft, while the balance will be deployed for growth in new or expanding markets.

the 20- to 59-seat segment of the market is expected to shrink by approximately 66% over the period, from approximately 3,600 aircraft in 2012, to just 1,200 by 2031. the 300 expect-ed deliveries in this segment will be more than offset by 2,700 expected retirements.

the 60- to 99-seat segment is expected to grow 270% between between 2012 and 2031. from a current base of 2,500 aircraft, 5,600 new aircraft deliveries will be countered by 1,300 retirements, resulting in a 2031 fleet of 6,800 aircraft.

the 100- to 149-seat segment is expected to grow from a current base of approximately 5,100 aircraft, with deliveries of 6,900 new

aircraft and retirements of 3,000 aircraft resulting in a fleet of approximately 9,000 aircraft at the forecast period end, representing a 2.9% (CaGr). aircraft in this segment are typically employed to replacement and growth roles in about equal proportions.

overall fleet growth will be 52%, representing a

compound annual growth rate of 2.1%.

BOMBARDIER MARKET SEGMENT EVOLUTIONFleet, Deliveries, Retirement: 2011-2031


20- to 59-seat 60- to 99-seat 100- to 149-seat

2011Fleet

2031 Fleet

Fleet 2011: 11,200 Deliveries: 12,800 Retirements: 7,000 Deliveries: 17,000

2011Fleet

2031 Fleet

2011Fleet

2031 Fleet

3,600 300 2,700

1,200

2,500

5,600 1,300

6,800

5,100

6,900 3,000

9,000


REGIONAL 20-YEAR DELIVERY OUTLOOKUnits, 2012-2031


Africa and The Middle East

970

NorthAmerica4,730

LatinAmerica

930

China2,220

Asia/Pacific1,710

Europe,Russia & CIS

2,240


GeoGraphic breakdownGlobal demand for air travel and new aircraft continues to shift towards emerging markets, although not as rapidly as anticipated in pre-vious forecasts. over the forecast period to 2031, North america is expected to account for 37% of new aircraft deliveries, China 17%, europe (including russia & CiS) 18%, asia/Pacific 13%, latin america 7% and africa & middle east 8%.

While total world forecast period aircraft deliveries in the 20- to 149-seat segments

are expected to decline by 2.3%, compared to Bombardier’s 2011 forecast, the reduction is expected primarily in european and middle eastern markets (down 200 and 80 aircraft, respectively). demand in North america, China, asia/Pacific and latin america is expected to remain on par with last year’s forecast. aircraft demand in China and asia/Pacific, considered together, reflect the grow-ing economic strength and influence of these markets, which are expected to experience more rapid economic growth than western markets.

20- to 59-seat seGmentBombardier foresees a total of 300 20- to 59-seat new aircraft deliveries in this segment over the 20-year forecast period. this segment is the only part of the 20- to 149-seat com-mercial aircraft market expected to experi-ence a net reduction in fleet size, a reflection of the preference for larger aircraft sizes throughout the industry in response to high fuel prices.

over the last year, new aircraft deliveries in this segment effectively balanced the few retirements and maintained the fleet size at approximately 3,600 units. Bombardier expects very few deliveries annually over the next 15 years, with the potential of new aircraft offerings in this segment driving a

potential resurgence later in the forecast period.

this year’s forecast also anticipates an addi-tional 200 aircraft retirements (8%) over the 20-year period, due mainly to the impact of high fuel prices on the competiveness of small regional jet aircraft in service with mainline carriers in developed markets. these 50-pas-senger class aircraft will continue to deliver profitable service in emerging markets, such as africa, latin america and eastern europe, where the capacity and range characteristics can help accelerate the development of the air travel industry.

20-YEAR OUTLOOK

GDP Distribution by Country(2011 and 2031)

20,000

40,000

60,000

80,000

100,000

120,000

2011 2031

North America Europe (incl: Russia & CIS)

Asia/Pacific (ex. China) China ROW

Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031, IHS Global Insight, February 2012.

Tota

l GD

P (

$Tr

illio

n)

39%

61%

50%

50%


60- to 99-seat seGmentthis segment is one of the most dynamic in commercial aviation, as growth will be driven largely by the evolving relationship between mainline and regional carriers. the outsourcing of regional aircraft operations to carriers with appropriate, low-cost structures, namely re-gional airlines, continues to be the main thrust of network optimization efforts. Bombardier expects that scope clauses in North american and european operations will continue to ease, to meet growing demand in this market segment.

elsewhere, the attractive economics and operational flexibility of regional aircraft can be used to right-size aircraft capacity according to traffic demand. Since on short stage lengths turboprop aircraft are more economical to operate than jets, modern turboprops are a natural hedging tool for air carriers against high and volatile fuel prices. High speed turboprops are now used by many airlines to replace 50-seat regional jets on short-haul routes, with little or no increase in block time or reduction in passenger comfort.

more than 200 new 60- to 99-seat aircraft were delivered in 2011, bringing the total segment fleet up to 2,500 aircraft at the

beginning of the forecast period. in compari-son to last year’s forecast, expected 20-year deliveries have been reduced by 200 units, due largely to a slower economic recovery in mature markets and a preference for larger capacity aircraft in emerging markets. aircraft retirements have also been increased by 100 units in this year’s forecast, principally 70-seat and 90-seat regional aircraft delivered in the early 2000s that are expected to go into retirement towards the end of the next decade.

of the approximately 5,900 new aircraft to be delivered in the 20- to 59-seat and 60- to 99-seat segments in the forecast period to 2031, 48% will be turboprops and virtually all

of these deliveries are expected to be in the 60- to 99-seat segment.

regional jet deliveries in this 60- to 99-seat segment are expected to amount to approxi-mately 2,900 units and represent $102 billion in sales revenues. these aircraft will be used by the world’s airlines to help optimize network capacity. in all, this segment is expected to have a demand for 5,600 new aircraft, worth over $180 billion in sales revenue. the current fleet will grow 270%, to reach 6,800 aircraft by the end of the forecast period.

Segment 2012 CAMF

20- to 59-seat 150

60- to 99-seat 2,700

Total 2,850

20- TO 99-SEAT DELIVERY PROFILE

20-YEAR TURBOPROP FORECAST20- to 99-seat Aircraft


Regional Jets52%

Turboprops48%


100- to 149-seat seGmentthe 100- to 149-seat segment is expected to achieve a 2.9% CaGr as it expands from approximately 5,100 aircraft in 2012, to approximately 9,000 units by 2031 – the largest market growth opportunity recognized by the Bombardier Commercial aircraft market forecast.

this segment will see deliveries of approxi-mately 6,900 new aircraft against retirements of 3,000 units, or 59% of today’s fleet. many of these aircraft are derivatives of larger aircraft and not originally designed for this segment.

the higher weight and greater drag of these current products result in higher fuel burns and greater Co2 emissions. Such aircraft are daily more challenging to operate in an ultra

cost-conscious and increasingly environmen-tally-aware business environment. an industry that requires a fundamental improvement in operating economics as a matter of survival is turning its future focus toward aircraft optimized for their intended segments and able to deliver significant improvements in airline profitability.

Newly designed aircraft that deliver superior operating economics, through advances in technology, as well as operational flexibility and attention to passenger comfort, will accelerate the retirement of older aircraft. in fact, at the 2011 year end, the oaG fleet iNet identified approximately 2,091 single-aisle aircraft in storage and at least temporarily inactive.

newly designed aircraft that deliver superior

operating economics will accelerate the retirement

of older aircraft.

Current large single-aisle jetNew design small single-aisle jetLarge RJ

Passenger Demand per Departure

Pro

fit

con

trib

uti

on

per

Dep

artu

re

Sources: U.S. Department of Transportation, Bombardier Analysis.RJ = Regional jet, Small single-aisle jet: 100- to 149-seats, Large single-aisle jet: 150+ seats.

PROFIT ZONE – RIGHT-SIZING AIRCRAFT FOR TRAFFIC DEMAND

High

Low

60 200

Current small single-aisle jet


this segment saw a fleet decrease of approxi-mately 100 units in 2011, while deliveries also declined, as some orders for new 130-seat single-aisle aircraft were converted into orders for larger aircraft. total deliveries in this segment across the 20-year forecast period have been reduced by approximately 100 units, due mainly to the slower economic growth. the expected rate of aircraft retire-ments in this segment has remained constant since last year’s forecast. While higher oil prices are accelerating the retirement of older platforms, the large majority of the aging aircraft in this segment, such as md80/90, Bae 146 and Boeing 737 Classics would have exited the market by the middle of the next decade, even with fuel prices at 2011 levels.

the 6,900 new aircraft destined for the 100- to 149-seat segment over the next 20 years will generate sales revenues of more than $449 billion.


conclusion

BomBardier CommerCial airCraft Market forecast 2012-2031 37conclusion

the commercial aviation industry has gone through significant change since the recent global recession. the industry’s unwavering focus on optimization and efficiency is the key reason for its resilience. economic growth will drive the demand for more aircraft. rising oil prices and continued price volatility will drive airlines to accelerate the retirement of older, less efficient aircraft, thereby increasing the demand for new-technology and fuel-efficient aircraft.

Bombardier remains optimistic in the 20- to 149-seat aircraft market. the company pres-ents the most optimized capacity aircraft to connect not only primary and secondary, but also tertiary airports around the world. the overall fleet in this market will grow by 51% from 11,200 units in 2011 to 17,000 units in 2031. New aircraft deliveries will reach 12,800 units, generating over $630 billion in sales revenue over the next 20 years.

new aircraft deliveries will reach 12,800 units,

generating over $630 billion in sales revenue over

the next 20 years.


GeoGraphic details

BomBardier CommerCial airCraft Market forecast 2012-2031 39GeoGraphic detail

introductionthe top-level message delivered by the Bombardier Commercial aircraft market forecast this year is that while airline industry fundamentals remain sound and attractive over the longer term envisioned by this forecast, the immediate term presents some important challenges that will see early-term deliveries of new aircraft delayed until somewhat later in the period.

the first of these challenges is that the world economy is not recovering from the financial crisis of 2008 as quickly or as consistently as we might have concluded a year ago. europe continues to deal with sovereign debt crises, unemployment remains stubbornly high in the United States and political unrest – present or imminent – threatens economic stability in much of africa and the middle east.

a second central challenge is the extent to which growth regions can sustain their pace of expansion. as the world’s economies are increasingly interconnected and interde-pendent, significant economic events in one region – such as a sovereign default in europe – can be expected to have negative global implications as far away as China.

the third challenge is that fuel prices, which have spiked significantly since the third quar-ter of 2011, have shown their potential to put a brake on economic recovery and growth, and demonstrate clearly the extent to which west-ern economies still rely on inexpensive energy. more expensive fuel is also here to stay.

these challenges, and more, have seriously compromised the ability of the world’s airlines to operate at a profit – a circumstance which is likely to result in continuing consolidation and capacity reductions, and which is certain to heighten carriers’ focus on cost reduction as a central strategy of day-to-day operations.

What has not changed, despite these challenges, is that air travel remains a central building block of future prosperity and continuing development. air travel links populations quickly and efficiently over distances that make other transportation alternatives unsatisfactory. it does so

at reasonable financial cost and with environmental impacts that are already small and getting smaller every day.

modern aircraft that help their operators serve their customers at significantly lower cost, with lower fuel burns, lower emissions and more operational flexibility are clearly part of the solution and will help today’s most enlightened, most forward-thinking air carriers not just survive today’s challenges, but actively prepare themselves to prosper and grow in a changed world. Bombardier is bringing such aircraft to market.

air travel remains a central building block of

future prosperity and continuing development.


north america (exClUdiNG mexiCo)

North america, the world’s largest aircraft market, will maintain its leadership position over the course of the 20 years covered by the Bombardier Commercial aircraft market forecast. this market is expected to require more than 4,700 new commercial aircraft, 37% of total world demand in the 20- to 149-seat segments, which is unchanged from last year’s forecast.

economic growth, at just 2.6% CaGr, is forecast to lag most of the rest of the world, which will average 3.26%, as GdP generation

leadership continues to shift to economies such as india and China – traditionally viewed as emerging.

in a further departure from global trends, less than half of the new aircraft required in North america (45% or approximately 2,150 units) will be in the 100- to 149-seat segment. instead, most of the deliveries (52% or ap-proximately 2,450 units) will be in the 60- to 99-seat segment, the traditional domain of regional airlines.

according to data from iata, passenger air travel grew only modestly in 2011, 1.7% compared to 9.9% growth in 2010. iata sees continuing slow growth of passenger air travel in 2012, at 0.5%.

regional airlines operating in partnership with mainline carriers continue to play an important role in North american passenger air travel. according to industry statistics, regional airlines accounted for 48% of 2010 departures from the top 10 U.S. airports, rep-resenting approximately 24% of passengers enplaned and 21% of domestic airline revenues. approximately 74% of U.S. airports with commercial airline service are served only by regional carriers.

the financial arrangements for regional part-ners are typically based on a fixed fee-for-flying or capacity purchase agreement (CPa) that is not based on the number of passen-gers carried. regional airlines operating under contract to their mainline partners are a vital part of making the air travel system function efficiently by enabling the mainline carriers to right-size the equipment offered throughout their networks. they also enable access to some small market airports that can’t handle the mainline carriers’ larger aircraft.


Bombardier believes that the scope clauses, which have constrained both the size and number of regional aircraft operating in the mainline carriers’ systems, will continue to ease over the forecast period and that this will drive demand for larger capacity regional aircraft in greater numbers.

North america’s large installed fleet base requires constant replenishment and renewal. as air carriers here regain financial strength following a period of declining passenger loads, financial failures, bankruptcies,

restructurings and consolidations, their attention will focus on cost control strategies that include expanding scope clauses to cover larger aircraft, capacity planning and optimizing their asset use.

one key will be fleet renewal that delivers sig-nificant improvements in operating efficiency and flexibility. New aircraft that burn less fuel and deliver other operating efficiencies are certain to be in high demand in the coming cycle of fleet renewal.

5

10

15

20

25

30

35

U.S

. $ b

illio

n

U.S. CARRIERS TOTAL CASH AND CASH EQUIVALENT

Source: Bureau of Transportation Statistics, Schedule B-1.

DEMAND DISTRIBUTION BY SEAT SEGMENT,

NORTH AMERICA, 2012-2031Total: 4,730 Units

3%

52%

45%

20- to 59-seat

60- to 99-seat

100- to 149-seat


one key will be fleet renewal that delivers

significant improvements in operating efficiency

and flexibility.


europe (iNClUdiNG rUSSia & CiS)

europe, including russia & CiS, remains a strong market for aircraft in 20- to 149-seat segment, accounting for approximately 18% of expected worldwide deliveries from 2012-2031.

anticipated deliveries for europe, including russia & CiS, are unchanged from Bombardier’s 2011 forecast, as a significant increase in expected russian & CiS deliveries is offset by a projected decline in deliveries in the financially troubled eurozone.

airline strategies have focused on cost reduction as well as consolidation through acquisition among larger airlines, which reduces demand for new aircraft. in addition, europe’s population density, comparatively short travel distances and extensive airport security measures also mean that both rail and road provide significant competition to air travel.

tightening environmental regulations are also increasing the pace at which older, less fuel-efficient aircraft are being retired.

...a significant increase in expected russian & cis

deliveries is offset by a projected decline in

deliveries in the financially troubled eurozone.


overall deliveries in this region reflect the broader industry’s shift to larger aircraft, as 52% of the total deliveries are expected to be in the 100- to 149-seat segment. deliveries of aircraft in the 60- to 99-seat segment domi-nated by regional carriers are expected to account for 45% of deliveries, while the 20- to 59-seat segment will make up the remaining 3%.

russia & CiS are expected to grow more rapidly than the rest of europe, at an average 3.4% CaGr for the 20-year forecast period. it is expected that approximately 300 new air-craft in the 100- to 149- seat segment will be needed, representing 26% of total european demand for aircraft in this segment.

the russian aviation authority announced the grounding of a number of domestically-built aircraft fleets in 2011. this action has advanced the retirement of these already ageing fleets, thereby creating an immediate opportunity for both new and used aircraft for the replenishment. as a result, we revised our forecast to increase the demand of 60- to 99-seat aircraft by approximately 180 units from last year forecast to 320 units. this is considered a moderate increase, when taking into account the low utilization of current fleets, even though the grounded fleet is much larger.

DEMAND DISTRIBUTION BY SEAT SEGMENT, EUROPE

(INCL. RUSSIA & CIS), 2012-2031Total: 2,240 Units

3%

45% 52%

20- to 59-seat

60- to 99-seat

100- to 149-seat



asia/pacific (exClUdiNG CHiNa)

delivery expectations for asia/Pacific, excluding China, remain largely unchanged from Bombardier’s Commercial aircraft market forecast from a year ago. economic forecasts predict annual GdP growth of approximately 3.4%, which is close to the world average over the forecast period.

this region is expected to account for approximately 13% of new aircraft deliveries over the forecast period, representing approx-imately 1,710 aircraft against retirement of 790 aircraft, resulting in fleet growth of 920 aircraft, to a total of 2,090 in 2031.

in asia/Pacific, connections between countries are expected to increase in both number and extent over time. larger, longer range aircraft are increasingly required for international routes and, as in most other regions addressed by Bombardier’s forecast and the industry generally, the 100- to 149- seat segment is expected to account for more than half the deliveries (57%) over the period. Smaller, short-haul aircraft will be required for growth and fleet replacement in domestic markets.

SUB-REGION OF ASIA/PACIFIC

Northeast Asia

South Asia

Southeast Asia

Oceania

in asia/pacific, connections between

countries are expected to increase in both number

and extent, over time.


in india, despite the continuation of strong economic growth, the airline industry has been hard hit by the devaluation of the rupee and overcapacity, with the result that consoli-dation is now under way. more broadly, fa-

vourable aviation policies continue to stimulate demand for regional aircraft in order to meet the growing desire for air travel from the burgeoning middle-class.

in common with other emerging economies, notably China, the growth of commercial aviation in india is expected to be limited by infrastructure shortcomings. india currently has four international airports operating at or above optimum capacity, three of which have identified expansion plans in place, while the fourth cannot be expanded, due to physical encroachments. fourteen airports have been identified for construction, conversion or expansion, while an additional 35 airports have been identified in india’s 10th five Year Plan (2002 – 2007), although many projects have been delayed due to financing or bureaucratic delays.

most of the 14 airport projects underway are located in southwestern india and there are incentives for carriers to add service, which could see these facilities approach optimum capacity utilization. more specifically, financial incentives for operating aircraft with fewer than 80 seats include waived landing fees and lower jet fuel taxes, which encourages the operation of regional aircraft.

AIRPORT CONGESTION AND EXPANSION PLANIndia

49

Existing airports at or above optimum capacity

India’s scheduled airports for expansion/construction

Sources: CAPA and Bombardier anlaysis.

LambertAzimuthal Equal Area ProjectionBased on 2.5 arc-minute resolution data

0 200km

BANGLADESH

CHINA

MYANMAR

NEPAL

BHUTAN

SR

ILAN

KA

PAKISTAN

1

11 2

5

9

17

1 1

3

8

64 Persons per km2

01-56-2526-250251-1,0001,001+


despite fall-off in demand from many parts of the world following the financial crisis of 2008 – 2009, india’s manufacturing sector has remained robust. air travel is expected to see a significant period of growth as the gov-ernment addresses substantial infrastructure deficits over the next five years in particular, with overall spending set to increase to more than $1 trillion. india has a large land mass and a very large and increasingly prosperous and mobile population that is set to claim an in-creasing share of the world’s material wealth. it lacks a high-speed rail network which could compete with the advantages of air travel.

forecast growth in india’s GdP appears to be following the pattern established by China, although with a five-year lag. india’s popula-tion growth and widespread poverty continue to create pressure within the country’s politi-cal system.

Successful development of india’s commercial aviation potential will be dependent largely on financing to translate the growing demand into new aircraft, as well as the ability to sup-port market demands with domestic airport infrastructure.

Northeast asia, led by Japan, is recovering slowly from the ravages of the fukushima environmental crisis and tsunami, although showing signs of individual and corporate resilience – signs which will result in strong regional domestic demand and continued economic development.

Growth markets linking major city pairs continue to develop and will be stimulated further by the continued loosening of regula-tory restraints, except those relating to air-craft environmental performance, which are expected to remain among the strictest in the world. modern turboprop and jet aircraft which meet these standards will be well positioned for increased acceptance.


ASIA/PACIFIC, 2012-2031Total: 1,710 Units

2%

41%

57%

20- to 59-seat

60- to 99-seat

100- to 149-seat



china (PrC)

China’s emergence as an economic power-house drives demand for new aircraft and this market is now second only to North america, with 17% of world demand. We forecast a demand for approximately 2,220 aircraft over the 20-year forecast period, including approx-imately 1,400 aircraft in the 100- to 149-seat segment, as well as more than 800 in the 60- to 99-seat regional aircraft segments.

China’s forecast economic growth of 6.6%CaGr significantly outpaces both the forecast world rate (3.26%) and the runners-up, africa-middle east (4.1%) and latin america (4.1%).

China has focused much of its development on building and supplying export markets for a very wide variety of goods. as the success of that strategy generates Chinese domestic

financial returns, and the middle class begins to prosper and experience material comforts, some of the country’s emphasis is likely to shift to development for meeting domestic needs.

China’s need for domestic transportation is central to its economic growth plans and aviation is expected to play a central role.

DEMAND DISTRIBUTIONBY SEAT SEGMENT,CHINA, 2012-2031

Total: 2,220 Units

1%

36%

63%

20- to 59-seat

60- to 99-seat

100- to 149-seat



in its current strategic five-year plan. China seeks to have more than 80% of its population within 100 km or 1.5 hours of air transporta-tion – a feat which would provide air transpor-tation to 96% of its GdP base. While the air transportation system is developing, China’s high-speed rail network can be expected to pursue and capture excess demand, particu-larly at and near major airports, and where the journey is less than 600 km.

airports and air traffic control system capacity are major brakes on the growth of commercial aviation in China. China has 15 international airports operating at or above optimum capacity, and the central govern-ment has implemented plans to build, expand or convert 40 airports for commercial use, with a further 50 airports to be built, expanded or converted by 2020. most of the 40 airport projects already underway are located in the Central, South and east regions, which reflects the distribution of population within China, although there are some initiatives to build aviation infrastructure in the less populated western provinces.

Current commercial air space limitations, combined with aircrew shortages, monopo-listic fuel pricing and restrictive airline route expansion and airport usage policies, have favored the use (and purchase) of larger jets

and resulted in congested airspace around China’s larg-est urban centres.

accordingly, China will need to build aggressively and equip a significant number of new airports – some to re-lieve air traffic congestion in heavily populated and trav-eled areas, and still more to develop and extend econom-ic and social links to more remote parts of the country.

China is therefore expected to require a significant number of 60- to 99-seat regional aircraft to meet this demand, as well as the pilots to operate them, technicians to maintain them and an air traffic control system with which to operate them safely.

traditional market barriers to trade in China can be expected to lessen over time to help accomplish these challenges. Chinese GdP growth is expected to slow in the coming years from consistent double-digit rates to rates more in line with mature markets and the government is being counseled to reduce

its interventions in the marketplace. instead, the government is being advised to create and maintain an environment in which mar-kets determine economic inputs and reward commercial success. according to reports by the World Bank and development research Centre, significant policy changes are required if China is to realize its potential as the world’s largest economy and a high-income country.

AIRPORT CONGESTION AND EXPANSION PLANChina (PRC)

Existing airports at or above optimum capacity 40

China’s scheduled airports for expansion/construction

1

1

1

1

11

1

1

2

2 2

2

22

2

2

2

2

2

2

5

9 17

11

1

3

3

3

3

3

3

3

3

3

3

3

3

8

6

4

4


latin america (iNClUdiNG mexiCo aNd CariBBeaN)

Bombardier forecast a demand for approxi-mately 930 new aircraft in latin america over the forecast period. We expect this region (which includes mexico and the Caribbean) to account for 7% of new aircraft deliveries over the coming 20-year forecast period, representing 930 total units. of these, 65% or 600 aircraft are expected in the 100- to 149-seat segment and 32% or 300 in the 60- to 99-seat segment.

latin american economic growth is expected to be among the highest, at an average 4.1% for the period, which should result in a medium-high growth environment for air travel and deliveries of new aircraft.

this region currently accounts for

approximately equal shares of global Gdp and world passenger

traffic (6% in each) yet is served by 11% of the

world’s airlines.


this region currently accounts for approxi-mately equal shares of global GdP and world passenger traffic (6% in each) yet is served by 11% of the world’s airlines – a circumstance that results in fierce competition and, in recent years, business failures and industry consolidation.

iata estimates that passenger traffic in latin america increased by 9.8% over 2010, which itself showed 14.5% improvement over a flat 2009. iata’s forecast traffic growth for latin america was among the strongest in both base case and oil price spike scenarios, and significantly exceeded those for North ameri-ca and europe, although starting from a much smaller base.

the latin american region is increasingly home to world-scale events, such as the 2014 fifa World Cup and the Summer olympic Games in 2016, which can be expected to boost regional economies and to energize the development of infrastructure to support air travel growth. in addition, the recent growth of low-fare air carriers is helping to make air travel much more accessible to the popula-tion, largely through the use of regional jet, turboprop and single-aisle jet aircraft.


LATIN AMERICA, 2012-2031Total: 930 Units

3%

32%

65%

20- to 59-seat

60- to 99-seat

100- to 149-seat



africa and the middle east the political uncertainty contrasts the strong economic growth in africa and the middle east. Bombardier’s forecast for new aircraft deliveries in this region remains relatively unchanged at 970 units, approximately 1% lower than last year forecast, over the forecast period. Within the region, the middle east is expected to take 420 new aircraft and africa to require 550.

economic growth is expected to be solid and slightly above the world average, at 3.8% CaGr in the middle east and 4.4% CaGr in africa. as in most other regions, new aircraft deliveries are expected to be dominated by the 100- to 149-seat class, with 61% or ap-proximately 600 aircraft, while 60- to 99-seat aircraft will amount to 36% of deliveries, or approximately 350 aircraft.

economic growth is expected to be solid

and slightly above the world average.


Both these regions face significant challenges, including political unrest, slow development of infrastructure and slow liberalization of tradi-tionally highly regulated aviation markets – all of which have slowed commercial aviation growth.

in africa, for example, the development of aviation infrastructure has focused on a com-paratively small number of showcase inter-national hub airports, rather than secondary or tertiary destinations that would help build domestic and regional air travel networks and make air travel accessible to more of the population. this pattern of surface-focused development is prevalent across africa’s many countries and in many other essential indus-tries, such as telecommunications, which vary widely between regions and countries and often lags in less developed areas.

there are signs of growing, positive change, however, in the scale of external investment from countries such as China and india. to support economic growth, india has extended $5 billion in credit to africa over three years and steadily increased its imports from africa to more than $26 billion annually. China has played a similar role, having invested more than $5 billion in sub-Saharan africa annually since 2006.

iata estimated that air passenger travel in africa shrank slightly in 2011, following very strong growth in 2010, at 15.0%. its forecast predicts a modest growth in 2012, at 4.2%.

air travel in the middle east was predicted to grow at 8% or more in 2011 and 2012, accord-ing to iata, following double-digit growth in 2010. following a period of social and politi-cal turmoil, there is some increased expecta-tion of additional growth potential germinat-ing in the aftermath of regime change and increasing political stability across the middle east.


AFRICA AND THE MIDDLE EAST, 2012-2031

Total: 970 Units

20- to 59-seat

60- to 99-seat

100- to 149-seat


2%

36%

62%

BomBardier CommerCial airCraft Market forecast 2012-2031 53forward-lookinG statements

this presentation includes forward-looking statements,

which may involve, but are not limited to: statements with

respect to our objectives, guidance, targets, goals, pri-

orities, markets and strategies, financial position, beliefs,

prospects, plans, expectations, anticipations, estimates

and intentions; general economic and business outlook,

prospects and trends of an industry; expected growth in

demand for products and services; product development,

including projected design, characteristics, capacity or

performance; expected or scheduled entry into service

of products and services, orders, deliveries, testing, lead

times, certifications and project execution in general; our

competitive position; and the expected impact of the leg-

islative and regulatory environment and legal proceedings

on our business and operations. forward-looking state-

ments generally can be identified by the use of forward-

looking terminology such as “may”, “will”, “expect”, “in-

tend”, “anticipate”, “plan”, “foresee”, “believe” , “continue”

or ”maintain”, the negative of these terms, variations of

them or similar terminology. By their nature, forward-look-

ing statements require us to make assumptions and are

subject to important known and unknown risks and uncer-

tainties, which may cause our actual results in future peri-

ods to differ materially from forecasted results. While we

consider our assumptions to be reasonable and appropri-

ate based on information currently available, there is a risk

that they may not be accurate. for additional information

with respect to the assumptions underlying the forward-

looking statements made in this presentation, refer to the

respective Guidance and forward-looking statements sec-

tions in overview, Bombardier aerospace and Bombardier

transportation sections in the management’s discussion

and analysis (“md&a”) in the Corporation’s annual report

for the fiscal year ended december 31, 2011.

Certain factors that could cause actual results to differ

materially from those anticipated in the forward-looking

statements include risks associated with general economic

conditions, risks associated with our business environment

(such as risks associated with the financial condition of the

airline industry and major rail operators), operational risks

(such as risks related to developing new products and ser-

vices; doing business with partners; product performance

warranty and casualty claim losses; regulatory and legal

proceedings; to the environment; dependence on certain

customers and suppliers; human resources; fixed-price

commitments and production and project execution), fi-

nancing risks (such as risks related to liquidity and access

to capital markets, exposure to credit risk, certain restric-

tive debt covenants, financing support provided for the

benefit of certain customers and reliance on government

support) and market risks (such as risks related to foreign

currency fluctuations, changing interest rates, decreases

in residual value and increases in commodity prices). for

more details, see the risks and uncertainties section in

other. readers are cautioned that the foregoing list of

factors that may affect future growth, results and perfor-

mance is not exhaustive and undue reliance should not be

placed on forward-looking statements. the forward-look-

ing statements set forth herein reflect our expectations as

at the date of the Corporation’s md&a and are subject to

change after such date. Unless otherwise required by ap-

plicable securities laws, we expressly disclaim any inten-

tion, and assume no obligation to update or revise any

forward-looking statements, whether as a result of new in-

formation, future events or otherwise. the forward-looking

statements contained in this presentation are expressly

qualified by this cautionary statement.

all monetary amounts are expressed in 2012 U.S. dollars, unless otherwise stated.

BomBardier CommerCial airCraft Market forecast 2012-2031 54resources

resources used in the development of the Bombardier aerospace, Commercial aircraft market forecast, 2012 – 2031 include:

aaCo – arab air Carriers organization

aaPa – association of asia/Pacific airlines

aCaS – airCraft analytic System database

aia – aerospace industries association of america

airline monitor

ata – air transport association

ataG – air transport action Group

aviation daily

Bank of america merrill lynch industry overview report

BtS – U.S. Bureau of transportation Statistics

CaaC – Civil aviation administration of China

dot – U.S. department of transportation

eia – U.S. energy information administration

eraa – european regional airline association

iata – international air transport association

iCao – international Civil aviation organization

iHS Global insight

iPCC report on aviation and Climate Change

oaG – BaCK aviation

raa – regional airline association

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