1

Citation Market Update

Cyrus Sigari, jetAVIVA

+1.310.405.1439

Cyrus.Sigari@jetAVIVA.com

September 2nd 2010

Companion course

In April 2009, Doug White was riding in his King Air 200 (a nine-seat turboprop) when his pilot suddenly fell unconscious during the climb through 10,000’.

Doug had flown small Cessnas before, but never anything as large or fast as the King Air.

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Congrats to the Companions 25 ground school attendees 13 flying students over tomorrow and

Saturday Aircraft owners/pinch hitters: Stand up! If your companion couldn’t attend

groundschool or flight training, we can come to you. See Meghan in the back at next break.

We have extra checklists available. Mustang CJ1+/CJ2+/CJ3

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Schedule

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Owner's Name Student Name Aircraft Type Day Time Instructor

Lockhard, Don Lockhard, Jane Mustang Friday 8:00:00 Ben Marcus

Gregoire, Jerome Gregoire, Stephanie CJ1+ Thursday

TBD Casey Miller

Armstrong, Doug Armstrong, Liz Mustang Friday 8:00:00 Cyrus Sigari

Andersen, Jorgen Andersen, Lizzie Mustang Friday 8:00:00 Neil Singer

   

Hayes, John Quale, Jane Mustang Friday 11:30:00 Neil Singer

Boyd, Russell Boyd, Amy Mustang Friday 11:30:00 Cyrus Sigari

Gee, Thomas Gee, Anne Mustang Friday 11:30:00 Ben Marcus

   

Price, Rob Price, Susan Mustang Friday 15:00:00 Ben Marcus

Tracy, Pat Tracy, Susan Mustang Friday 15:00:00 Cyrus Sigari

   

Bretcher, Steve Ogolin, Kendra Mustang Saturday 8:00:00 Cyrus

Lunger, Brett Lunger, Caroline Mustang Saturday 8:00:00 Neil Singer

   

   

Frantz, Jim Frantz, Janet Mustang Saturday 11:30:00 Ben Marcus

Before we start

Special thanks… lots of data from: UBS Bank of America JetNet GAMA Aircraft Blue Book jetAVIVA Research Staff

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A look back at a little history

Learn from the past Let’s look at:

DJIA 11 yr Inventories Value:1996 C-525

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A history lesson

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19

99

Q2

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0.00

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10000.00

12000.00

14000.00

16000.00

Dow Jones on Left Axis

^D

JIA

Last year’s CJP conference

A history lesson

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Dow Jones on Left Axis, BizJet Inventory on Right Axis

DJIA

Jet Inventory

^D

JIA

Last year’s CJP conference

1999

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Q1

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Q2

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Dow Jones on Left Axis, BizJet inventory and Price ($1000's) on Right Axis

DJIA

'96 CE525 Pricing

Jet Inventory

^DJI

A

A history lesson

Source: JetNet, DowJones, Aircraft BlueBook, GAMA

Lag Historic

build rates

2008 – 1300 shipments/yr

Inv x 2

Last recovery

2003 – 670 shipments/yr

Lag

Last down turn, inventory doubled

DJIA ≈ 12,000 -> 7,800

+ ind

Last year’s CJP conference

UBS Survey

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Index between 0-49, incrementally weakening conditionsIndex between 50-100, incrementally strengthening conditions

Source: UBS August business jet survey

What about Europe?

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Percentage of total deliveries to Europe 2005-2010

Source: UBS August business jet survey

Strong $ = Weak EU Markets

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8/25

/09

9/5/

09

9/16

/09

9/27

/09

10/8

/09

10/1

9/09

10/3

0/09

11/1

0/09

11/2

1/09

12/2

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12/1

3/09

12/2

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1/15

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1/26

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2/6/

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2/17

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2/28

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3/11

/10

3/22

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4/2/

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4/13

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4/24

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5/5/

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5/16

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5/27

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6/7/

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6/18

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6/29

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7/10

/10

7/21

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8/1/

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8/12

/10

8/23

/10

1.15

1.2

1.25

1.3

1.35

1.4

1.45

1.5

1.55

EUR /USD

20% Reduction in Euro Value in 8 months

$5M pre-owned CJ3 = $6M to Euro buyer today

Dealer Quotes The summer season has seen a drop-off in activity levels.

Activity, including prospective consultations and RFPs, suggest the recovery may start around the end of 2010.

Our confidence level is far better than six to nine months ago, but we are still very cautious.

The market seems to be quieter in the last 45 days and may remain so until after midterm elections.

Most Buyers are ‘one-hit wonders’, meaning that they make an offer, and if you attempt to negotiate, they just vaporize.

It seems that sellers firmed up their pricing in expectation of a better market.

We sold 15 airplanes Q1-Q2. In July alone, we closed on seven. Activity has seen marked improvement, but deals are far more complex and take much longer to conclude.

Financiers are still reluctant to increase loan-to-value dynamics.

14Source: UBS August business jet survey

Translation

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Things are slower than earlier this

year, but we think it is going to get

better…

12 month outlook

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Takeoffs & Landings

“Flight activity is a leading indicator…of general market conditions.”

All biz jet cycles up 8% from last year. Citation up 5%

Citation makes up for 37% of cycles

Source: UBS August business jet survey

Source: UBS August business jet survey

Supply What drives production at OEMs?

Buy new if we can… Pre-owned aircraft markets…

• Market liquidity?• What are models trading at?

OEMS at about ½ where they were a two years ago (people, production, etc)

Source: UBS August business jet survey

Let’s focus on the pre-owned market for a bit...

MUSTANG – 525 – 525A – 525B

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Stratified Markets

Not realistic about market (or upside down), bad pedigree (once the oranges are gone)50%

Not realistic about market (or upside down), good pedigree (once the yellows are gone)20%

Realistic about market but not a good pedigree machine

(once the greens are gone)20%

Realistic about market and a good pedigree machine… (30-90 days)

10%

UPSIDE DOWN

Bank Assets

What is good pedigree?

Damage history Time on airframe/engines Program enrollments Options Operational history Ownership history Country of registry Interior condition styling Exterior condition styling

DON’T ASSUME YOU KNOW WHAT IS IMPORTANT TO A BUYER

Liquidity

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Mus-tang

CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%

% of Fleet Sold per Quarter (Q1/Q2 2010)

Mus-tang

CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.00%

4.00%

8.00%

12.00%

16.00%

20.00%% of Fleet for Sale

Mus-tang

CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.000.050.100.150.200.250.300.350.400.45

Liquidity Index Liquidity Index =% of fleet sold per quarter divided by % of fleet for sale.

Bigger the number, the better the liquidity (today).

Source: JetNet, jetAVIVA Research

Mustang

300+ units delivered Darling of light jet market Strong liquidity Factory slow down… good news

for owners Roughly two pre-owned planes are

trading per month

Mustang

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Jun

07

Aug 0

7

Oct 0

7

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 0

8

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 0

9

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

10

20

30

40

50

60

Mustang Inventory

Inventory

2007s: $2M-$2.3M2008s: $2.25M-$2.35M2009s: $2.35M-$2.6M2010s: $2.6M-$2.8M

Positions: 10Delivered planes: 20

Delivery positions

270 Mustangs built during this period… % of fleet for sale relatively constant

CitationJet/CJ1/CJ1+

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CJ/CJ1/CJ1+

27Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

10

20

30

40

50

60

70

80

CitationJet Inventory

525

CitationJets: $1.3M-$1.8M

CJ/CJ1/CJ1+

28Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

10

20

30

40

50

60

70

80

CitationJet/CJ1 Inventory

525CJ1

CitationJets: $1.3M-$1.8M CJ1s: $1.9M-$2.5M

CJ/CJ1/CJ1+

29Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

10

20

30

40

50

60

70

80

CitationJet/CJ1/CJ1+ Inventory

525CJ1CJ1+

CitationJets: $1.3M-$1.8M CJ1s: $1.9M-$2.5MCJ1+s: $3M-$3.8M

TMPE = The Mustang and Phenom 100 Effect; 470 new combined deliveries

CJ2/CJ2+

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CJ2/CJ2+

Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

5

10

15

20

25

30

35

40

45

CJ2/CJ2+ Inventory

CJ2

CJ2s: high $2Ms to mid $3Ms

CJ2/CJ2+

Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

5

10

15

20

25

30

35

40

45

CJ2/CJ2+ Inventory

CJ2CJ2+

CJ2s: high $2Ms to mid $3Ms CJ2+s: high $3Ms to low $5Ms

International: 14USA: 3

2 taking delivery of CJ4; 1 taking delivery of XLS+

CJ3

Source: JetNet, jetAVIVA research

Last year… CJ3 market

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Contract 9

/3/2009

Closed 9/2/2009

Contract 9

/3/2009

Pre-buy 9/3/2009

Source: jetAVIVA research

CJ3

Source: JetNet, jetAVIVA research

Jun

07

Aug 0

7

Oct 07

Dec 0

7

Feb 0

8

Apr 0

8

Jun

08

Aug 0

8

Oct 08

Dec 0

8

Feb 0

9

Apr 0

9

Jun

09

Aug 0

9

Oct 09

Dec 0

9

Feb 1

0

Apr 1

0

Jun

100

5

10

15

20

25

30

35

40

CJ3 Inventory

CJ3s: Mid $4Ms to Low/Mid $6Ms

72% Increase in Inventory

Last year’s CJP conference

TCJ4E

CJ4

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• Too new for there to be a resale market• SO GO GET ONE!

Summary

Strong Mustang liquidity… price it right, it will sell

Older generation (525, CJ1, CJ2) struggling

Tangible market impact due to CJ4 arrival, in particular CJ2+/CJ3 market

Last year we said:

THE PRE-OWNED RECOVERY HAS BEGUN…

SPECIFICALLY IN NEWER MARKETS

This year:

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• Recovery came and has slowed

• Europe will respond when/if Euro rebounds

• Watch for November/Year end rush for domestic buyers

• CJ3 pricing at risk

What are your options?

If you are happy with your plane – HOLD… (exception)

If you need to sell – SELL SMARTLY If you are thinking about upgrading –

NOW IS THE TIME TO ACT Straight Trades or Trade + Cash Sell now… take your hit… then go hitting

Talk to Cessna/Used market

Q & A

(Reminder: get with your instructor for keys… see Meghan for a checklist and/or more info)