the state of the business jet market 2014

THE STATE OF THE BUSINESS JET MARKET

Alasdair Whyte

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THE STATE OF THE BUSINESS JET MARKETThe state of the market

What drives business jet and VIP helicopter sales?

Why are we still in a downturn?

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FIVE YEARS OF FALLING DELIVERIES

2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200

1400

Source: GAMA and Corporate Jet Investor forecast

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DELIVERIES FALLEN BACK BY 10 YEARS

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

200

400

600

800

1000

1200

1400

Source: GAMA and Corporate Jet Investor forecast

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NET BUSINESS JET ORDERS

Source: Bombardier estimates

WHAT DRIVES THE MARKET?

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Economy

THE GOOD

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

GlobalEconomy

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BILLIONAIRES

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200

1400

1600

Source: Forbes Rich List

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WEALTH 2013: 199,235 ultra high net worth individuals (UHNWI) with a net worth of

$30 million - combined wealth of $27.8 trillion

2012: 187,380 UHNWI with a combined wealth of $25.7 trillion

There are 2,170 billionaires in the world with a total net worth of $6.5 trillion.

Source: Wealth X

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AVERAGE UHNWI Net worth of $138 million

58 years old

Male (88%)

Married (95%)

Self made (70%)

Most likely to have worked in finance, banking, investment or insurance (20%), industry (6.3%), manufacturing conglomerate (5.5%)

Has a degree (87%)

Source: Wealth X

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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NEW AIRCRAFT PROGRAMMES 2013: Falcon 2000S, Learjet 70, Learjet 75, New Citation X, Eclipse 550

2014: Challenger 350, Falcon 2000LXS, Honda Jet, Learjet 85, Legacy 500, New Citation Sovereign

2015: Citation Latitude, Legacy 450

2016: Global 7000

2017: Citation Longitude, Global 8000, PC-24

Source: Corporate Jet Investor

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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BACKLOG – CESSNA

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-130

2

4

6

8

10

12

14

16

18

$ b

illio

n

Source: Textron

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BACKLOG - GULFSTREAM

2007 2008 2009 2010 2011 2012 20130

5

10

15

20

25

$ b

illio

n

Source: General Dynamics

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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FINANCE - AVAILABLE

Source: Corporate Jet Investor

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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2012 AIRCRAFT SALES

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FLEET AND GDP

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CHINESE BUSINESS JET FLEET

2007 2008 2009 2010 2011 20120

50

100

150

200

250

300

Hong Kong China

Source: Embraer

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THERE ARE MORE BUSINESS AVIATION AIRPORTS IN TEXAS THAN:

• China

• India

• Thailand

• Malaysia

• Indonesia

• And the Philippines

Source: 2011 UVTripPlanner

Combined

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Economy

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GLOBAL ECONOMY

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US CORPORATE PROFITS

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

THE BAD

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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AGEING FLEET

2008 to 2013 2003 to 2007 1998 to 2002 1997 & Older

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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UTILISATION

Source: Wing-X

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CHARTER - TOUGH

THE UGLY

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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BUYER’S MARKET

2,565 business jets for sale

Average time to sell a jet: 509 daysSource: Amstat, September 2013

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PRE-OWNED TRANSACTIONS UP

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AIRCRAFT FLEET VS AIRCRAFT FOR SALE

September 2013

As % of Total For Sale / Lease

As % of Active Fleet

2008 to 2013 2003 to 2007 1998 to 2002 1997 & Older

Source: AMSTAT www.amstatcorp.com; Asset Insight research www.assetinsightinc.com

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MAINTENANCE EXPOSURE TO PRICE

Model ETP Ratio Model ETP Ratio Model ETP RatioFalcon 2000LX 4.0% Citation X 9.6% Citation CJ1+ 10.0%Boeing BBJ 8.7% Challenger 300 14.2% Phenom 100 12.7%Global XRS 12.6% G-200 16.1% Citation CJ2 20.2%GV 37.8% Hawker 800XP 25.5% Premier 1 35.2%GIV-SP (MSG3) 44.9% Hawker Beechjet 400A 58.7% Learjet 31 44.4%CL-601-3R 46.9% Learjet 60 69.4% Citation II 76.6%Challenger 601-1A 152.6% Learjet 55 73.3% Citation VI 86.0%G-III 253.1% Hawker Beechjet 400 87.4% Learjet 35A 100.2%

Large Jets Medium Jets Small Jets

Aircraft with ETP Ratio >40% carry excessive Maintenance Financial Exposure vs. Ask Price

Source: Asset Insight research ww.assetinsightinc.com

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Global economy

Wealth creation

New aircraft

Aircraft retirement

s

Utilisation

Pre-ownedEmerging markets

Finance

Charter/fractional

Backlogs Confidence

Global economy

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DELIVERIES TRACK S&P 500

Analysis: Dean Roberts, Rolls-Royce

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BUT THIS STOPPED WORKING

Analysis: Dean Roberts, Rolls-Royce

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CORPORATE PROFITS V JET DELIVERIES

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CASH

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CONSTANT RISKS TO RECOVERY

Brazil riots

Libya

Attacks in Egypt

North Korea/South Korea

Fukishima Nuclear Plant

Terrorism in Kenya

Golden Dawn in Greece

US government shutdown

US debt ceiling

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CONFIDENCE

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US CONSUMER CONFIDENCE

1. ‘Take this job and stuff it’ indicator (aka DoL job quits data)2. Conference Board

Analysis: Dean Roberts, Rolls-Royce

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Global economy

Wealth creation

New aircraft types

Aircraft retirement

s

Utilisation

Pre-owned

Emerging market

penetration

Finance

Charter/fractional

Backlogs Confidence

Global economy

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FUTURE IS BRIGHT

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FUTURE IS BRIGHT UNKNOWN

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Global economy

Wealth creation

New aircraft types

Aircraft retirement

s

Utilisation

Pre-owned

Emerging market

penetration

Finance

Charter/fractional

Backlogs

Confidence

Global economy

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QUESTIONS

Alasdair Whyte

Corporate Jet Investor

+44 1737 844 383

awhyte@corpjetinvestor.com