Business Aircraft Market Overview and Update

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Business Aircraft Market Overview and Update

• Robert F. Wilke
• Director-Customer Finance
• Boeing Business Jets
• Boeing Capital Corporation

2
Commercial Aviation

• Single Industry
• Capital Intensive
• Labor Intensive
• Cyclical
• Seasonal
• Highly Competitive
• Only Choice of Two Manufacturers

3
Business Aviation

• Wealthy Individuals
• Strong Corporate Credits
• Wide Array of Industries
• Impeccably Maintained Equipment
• Excellent Remarketability
• Operating Costs Not A Major Cost Burden

4
Business Jet Market

• Current International Fleet of over 13,000
  aircraft
  
• Current U.S. Fleet of over 10,000 aircraft
• Major Manufacturers
• Bombardier
• Cessna
• Dassault
• Gulfstream
• Raytheon
• Other Manufacturers
• Airbus, Boeing, Embraer

5
New Aircraft

• Teal Group Forecast
• 6,000 new business jets deliveries
• 89 billion in the next ten years.
• Honeywell Forecast
• 8,300 new business jet deliveries
• 131 billion in the next ten years.

6
Market Share Estimates

• Gulfstream 27
• Bombardier 22
• Cessna 20
• Dassault 20
• Raytheon 9
• Others 2

7
Used Aircraft Market

• Lowest Used Inventory Since May 2001
• 13 of the Fleet (1,748 Aircraft) For Sale
• Inventory Levels Have Dropped For The Past Five
  Straight Months
  
• 80 Of For Sale Aircraft are over ten years old
• Used Aircraft Prices Increasing

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Geographic Markets

• United States Slow Sustained Growth
• Europe Also Slow But Growing
• Latin America Very Slow
• Middle-East Increasing With Oil Revenue
• Russia and the CIS Very Rapid Growth
• India and China Huge Growth

10
Market Drivers

• The Economy
• Business Profits
• Stock Market Performance
• Tax Environment
• Business Environment
• New Aircraft Models
• Innovations and New Technologies
• Regulatory Requirements
• Operating Costs
• World Events

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Lessor/Lender Environment

• Successful Customer Base Corporate and HNWI
• Strong Credits
• High Residual Value Assets
• Diverse Spectrum Of Industries
• Asset Gets The CEOs Personal Attention
• Cross-selling Door Opener
• High Average Ticket Price
• Mobile, Long-lived Remarketable Asset
• Highly Regulated Industry
• Impeccable Maintenance
• Capetown Protection Coming
• Manufacturer Support Of Outside Financing

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Conclusion

• Now Is A Great Time To Invest In Business
  Aircraft Loans and Leases
  
• Improving Economy
• Strong Collateral Values
• Diverse Credits
• Very Well Maintained Assets
• Remarketable Around The World

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Critical Success Factors

• Or How do you make money (or keep from losing
  your shirt) in business aircraft leasing and
  finance?
  
• Make a long-term commitment to the business
• Know your aircraft larger and newer are the best
  bets
  
• Know the market what percent of the target
  aircraft fleet is for sale?
  
• Buy or finance at the right price and the right
  time
  
• Use structure to off-set credit risk (Lease v.
  loan)
  
• Security deposits (5 to 10) and down payments
  (10 to 50)
  
• Require tip-to-tail maintenance if credit is in
  doubt
  
• Be careful choice of governing law, court of
  jurisdiction and location of aircraft base
  

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Critical Success Factors

• Use third-party management and snatch-back
  agreements on international transactions where
  credit/legal jurisdiction is an issue
  
• Understand VAT and Import Duty implications in
  foreign transactions
  
• Keep the cash coming in No extended AOGs
  (aircraft on ground)
  
• Inspect the asset on a regular schedule
• Employ technical professionals to assist in
  evaluation, especially if you repossess an
  aircraft
  
• Refurbish to remarket at retail rather than
  wholesale and shorten the time on the market.
  Fixer uppers sit. Like-new move quickly
  
• Make sure that records and logs are available and
  kept current
  
• Manage the portfolio buy and sell transactions
  as appropriate
  
• When the market is down, lease your way to
  prosperity by waiting for an up-turn in the
  market before you sell to recognize a gain.