FAA Aerospace Forecast FY 2018-2038

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Table of Contents Forecast Highlights (2018–2038) ...... 1 Review of 2017 ...... 3 Glossary of Acronyms ...... 5 Acknowledgements ...... 6 FAA Aerospace Forecasts ...... 7 Economic Environment ...... 8 U.S. Airlines...... 10 Domestic Market ...... 10 International Market ...... 16 Cargo ...... 20 General Aviation ...... 22 FAA Operations ...... 27 U.S. Commercial Aircraft Fleet ...... 29 Commercial Space ...... 31 Regulatory Safety Oversight Activities of FAA ...... 32 FAA’s Operations Forecast ...... 34 Additional Factors Affecting Forecast Accuracy ...... 37 Unmanned Aircraft Systems ...... 39 Trends in Model Aircraft and Forecast ...... 39 Commercial Small UAS Forecast ...... 41 Large UAS ...... 44 Remote Pilot Forecast ...... 44 Forecast Uncertainties ...... 46 Appendix A: Alternative Forecast Scenarios ...... 50 Scenario Assumptions ...... 50 Alternative Forecasts ...... 55 Enplanements ...... 55 Revenue Passenger Miles ...... 56 Available Seat Miles ...... 56 Load Factor ...... 57 Yield ...... 58 Appendix B: FAA Forecast Accuracy ...... 63 Appendix C: Forecast Tables ...... 65 Forecast Highlights (2018–2038)

Since its deregulation in 1978, the U.S. com- world. Oil prices averaged $48 per barrel in mercial air carrier industry has been charac- 2017 rising to $51 in 2018, and our forecast terized by boom-to-bust cycles. The volatility assumes they will increase thereafter to ex- that was associated with these cycles was ceed $100 by 2030 and approach $119 by thought by many to be a structural feature of the end of the forecast period. The head- an industry that was capital intensive but winds that have buffeted the global economy cash poor. However, the great recession of during the past few years – uncertainty sur- 2007-09 marked a fundamental change in rounding “Brexit”, recession in Russia and the operations and finances of U.S Airlines. Brazil and inconsistent performance in other Since the end of the recession in 2009, U.S. emerging economies, a “hard landing” in airlines revamped their business models to China, and lack of further stimulus in the ad- minimize losses by lowering operating costs, vanced economies seem to be diminishing. eliminating unprofitable routes, and ground- The U.S. economy is showing signs of accel- ing older, less fuel-efficient aircraft. To in- erating, powered by gains in the stock mar- crease operating revenues, carriers initiated ket and should see additional stimulus in new services that customers were willing to 2018 with the passing of the tax cut bill in De- purchase and started charging separately for cember 2017. services that were historically bundled in the price of a ticket. The industry experienced System traffic in revenue passenger miles an unprecedented period of consolidation (RPMs) is projected to increase by 2.3 per- with three major mergers in five years. The cent a year between 2018 and 2038. Do- results of these efforts have been impres- mestic RPMs are forecast to grow 1.9 per- sive: 2017 marks the eighth consecutive year cent a year while International RPMs are of profitability for the U.S. airline industry. forecast to grow significantly faster at 3.2 Looking forward, there is confidence that percent a year. System capacity as meas- U.S. airlines have finally transformed from a ured by available seat miles (ASMs) is fore- capital intensive, highly cyclical industry to cast to grow in line with the increases in de- an industry that generates solid returns on mand. The number of seats per aircraft is capital and sustained profits. growing, especially in the regional jet market, where we expect the number of 50 seat re- Fundamentally, over the medium and long gional jets to fall to just a handful by 2030, term, aviation demand is driven by economic replaced by 70-90 seat aircraft. activity, and a growing U.S. and world economy provides the basis for aviation to grow Although the U.S. and global economy saw over the long run. The 2018 FAA forecast growth accelerate in 2017, a combination of calls for U.S. carrier passenger growth over higher energy prices and labor cost in- the next 20 years to average 1.9 percent per creases resulted in profits for U.S. airlines year, slightly slower than last year’s forecast. falling from 2016’s record levels. The FAA The uptick in passenger growth in 2016-17 expects U.S. carrier profitability to remain will continue into 2018 spurred on by favora- steady or increase as solid demand fed by an ble economic conditions in the U.S. and the improving economy offsets rising energy and

labor costs. Over the long term, we see a 2038, as growth in turbine, rotorcraft, and ex- competitive and profitable aviation industry perimental hours more than offset a decline characterized by increasing demand for air in fixed wing piston hours. travel and airfares growing more slowly than inflation, reflecting over the long term a grow- With increasing numbers of regional and ing U.S. and global economy. business jets in the nation’s skies, fleet mix changes, and carriers consolidating opera- The long-term outlook for general aviation is tions in their large hubs, we expect increased stable to optimistic, as growth at the high-end activity growth that has the potential to in- offsets continuing retirements at the tradi- crease controller workload. Operations at tional low end of the segment. The active FAA and contract towers are forecast to grow general aviation fleet is forecast to remain 0.9 percent a year over the forecast period relatively stable between 2018 and 2038. with commercial activity growing at five times While steady growth in both GDP and corpo- the rate of non-commercial activity. The rate profits results in continued growth of the growth in U.S. airline and business aviation turbine and rotorcraft fleets, the largest seg- activity is the primary driver. Large and me- ment of the fleet – fixed wing piston aircraft dium hubs will see much faster increases continues to shrink over the forecast. While than small and non-hub airports, largely due the fleet remains level, the number of general to the commercial nature of their operations. aviation hours flown is projected to increase an average of 0.8 percent per year through

Review of 2017

An improving economy both at home and by ultra-low cost carriers such as Spirit and abroad translated into a good year for U.S. Allegiant helped to keep a lid on fare in- aviation in 2017. Although costs increased creases despite rising energy and labor due to higher energy prices and implementa- costs as yield rose just 0.1 percent. Interna- tion of new labor contracts, the U.S. airline tional yield rose a mere 0.4 percent as strong industry remained solidly profitable as gains in the Latin region offset modest de- growth in domestic traffic pushed revenues clines in the Atlantic and Pacific regions. De- higher. The shift in the U.S. airline industry spite flat yields and rising energy and labor emphasis on market share to boosting re- costs, U.S. airlines remained solidly profita- turns on invested capital has resulted in sus- ble in FY 2017. Data for FY 2017 show that tained profitability. U.S. airlines are continu- the reporting passenger carriers had a com- ally updating strategies for capturing addi- bined operating profit of $21.6 billion (com- tional revenue streams such as charging pared to a $26.6 billion operating profit for FY fees for services that used to be included in 2016). The network carriers reported com- airfare (e.g. meal service), as well as for bined operating profits of $15.3 billion while charging for services that were not previ- the low cost carriers reported combined op- ously available (e.g. premium boarding and erating profits of $5.7 billion as all carriers fare lock fees). At the same time, the U.S. posted profits. airline industry has become nimbler in adjusting capacity to seize opportunities or min- The general aviation industry recorded an in- imize losses. The impact from these initia- crease of 4.2 percent in deliveries in 2017, tives is evident as the industry (passenger with pistons up by 9.5 percent and turbines and cargo carriers combined) posted profits about the same as the previous year. Since for the eighth consecutive year in 2017, de- the majority of increase was in the lower spite flat yields and higher costs. priced piston segment and the more expensive business jet deliveries were down by 0.2 Demand for air travel in 2017 cooled from percent, U.S. billings decreased 8.5 percent 2016’s pace despite faster economic growth to $10.6 billion. General aviation activity at in the U.S. In 2017, system traffic as meas- FAA and contract tower airports recorded a ured by revenue passenger miles (RPMs) in- 0.1 percent increase in 2017 as local activity creased 2.9 percent while system enplane- rose 0.9 percent, more than offsetting a 0.5 ments grew 2.6 percent. Domestic RPMs percent decline in itinerant operations. were up 3.0 percent while enplanements were up by 2.4 percent. International RPMs Total operations in 2017 at the 517 FAA and increased 2.6 percent despite enplanements contract towers were up 0.7 percent com- growing by 4.1 percent. The system-wide pared to 2016. This marks the first time since load factor was 83.5 percent, unchanged FY 1998-2000 that operations at FAA and from the 2016 level. funded towers have increased for three consecutive years. Air carrier activity increased Yields increased for the first time since 2014. by 4.4 percent, more than offsetting a decline In domestic markets, continued expansion in air taxi operations, while general aviation

and military activity rose slightly. Activity at and small/non-hub airport activity was up 0.8 large hubs rose by 0.1 percent, while me- percent in 2017 compared to the prior year. dium hub activity increased by 1.3 percent

Glossary of Acronyms

Acronym Term ANG FAA Office of NextGen ARP FAA Office of Airports ASMs Available Seat Miles AST FAA Office of Commercial Space Transportation ATO FAA Air Traffic Organization ATP Air Transport Pilot AUVSI Association for Unmanned Vehicle Systems International BVLOS Beyond Visual Line of Sight CBP Customs and Border Patrol CFR Code of Federal Regulations COAs Certification of Authorizations CRS Commercial Resupply Services CY Calendar Year DARPA Defense Advanced Research Projects Agency FAA Federal Aviation Administration FY Fiscal Year GA General Aviation GAMA General Aviation Manufacturers Association GDP Gross Domestic Product ICAO International Civil Aviation Organization IFR Instrument Flight Rules IMF International Monetary Fund ISS International Space Station LAANC Low Altitude Authorization and Notification Capability LCC Low Cost Carriers LSA Light Sport Aircraft NAS National Airspace System NASA National Aeronautics and Space Administration NDAA National Defense Authorization Act NPRM Notice of Public Proposed Rulemaking PCE Personal Consumption Expenditure RAC Refiners’ Acquisition Cost RLV Reusable Launch Vehicle RP Remote Pilot RPA Remote Pilot Authorization RPMs Revenue Passenger Miles RTMs Revenue Ton Miles sUAS Small Unmanned Aircraft System(s) SpaceX Space Exploration Technologies Corp. TRACON Terminal Radar Approach Control TRB Transportation Research Board TSA Transportation Security Administration UAS Unmanned Aircraft System(s) USD United States Dollar VFR Visual Flight Rules

Acknowledgements

This document was prepared by the Forecasts and Performance Analysis Division (APO-100), Office of Aviation Policy and Plans, under the direction of Mr. Roger D. Schaufele, Jr.

The following people may be contacted for further information:

Section Contact Name Phone Number Economic Environment Jonathan Corning (202) 267-8388

Commercial Air Carriers • Passenger Jonathan Corning (202) 267-8388 Li Ding (202) 267-1846

• Cargo Nick Miller (202) 267-3309

General Aviation • Forecasts H. Anna Barlett (202) 267-4070 • Survey data H. Anna Barlett (202) 267-4070

FAA Workload Measures • Forecasts Roger Schaufele (202) 267-3306 • Data Roger Schaufele (202) 267-3306

Commercial Space Thomas Marotta (202) 267-0427

Unmanned Aircraft Systems Michael Lukacs (202) 267-9641 Dipasis Bhadra (202) 267-9027

APO Websites

• Forecasts and statistical http://www.faa.gov/data_research/aviation_data_statistics/ publications • APO databases http://aspm.faa.gov

Email for APO staff First name.last [email protected]

FAA Aerospace Forecasts Fiscal Years 2018-2038

Economic Environment

In the near term, IHS Global Insight projects domestic demand and exports. In emerging that world economic growth will hold steady markets, China’s growth continues to ease, near its 2017 rate of 3.1 percent. Growth is though stabilized by the government, while projected at 3.2 percent in 2018 and 3.1 per- other countries such as Brazil and Russia cent in 2019. The U.S. economy is forecast build on 2017's momentum helped by higher to be supported by the strength of underlying commodity prices and increased demand for fundamentals while European policy remains exports. India is expected to return to growth accommodative in the face of political uncer- rates in excess of 7 percent after slowing tainty. Japan’s economic growth is projected slightly in 2017 due to policy shocks. to slow but remain relatively solid, helped by

China and India led World Economic Growth in 2017

8.0 6.8 7.0 6.5 6.0 5.0 4.0 3.1 3.0 2.5 2.2 2.0 1.8 1.6 1.0

Annual Change Percent Annual 1.0 0.0 China India Eurozone U.S. Japan Russia Brazil World

Source: IHS Global Insight

IHS Global Insight forecasts world real GDP Latin America, and Eastern Europe. Growth to grow at 2.8 percent a year between 2018 in the more mature economies (1.7 percent and 2038. Emerging markets, at 4.1 percent a year) will be lower than the global trend a year, are forecast to grow above the global with the fastest rates in the U.S. followed by average but at lower rates than in the early Europe. Growth in Japan is forecast to be 2000’s. Asia (excluding Japan), led by India very slow at 0.8 percent a year reflecting and China, is projected to have the fastest deep structural issues associated with a growth followed by Middle East and Africa, shrinking and aging population.

Asia and Africa/Middle East lead global economic growth Annual GDP % growth 2018-2038

China 4.7 M.E. & Africa 3.5 Asia ex China 3.3 Latin America 3.0 World 2.8 Emerging Europe 2.6 U.S. 2.0 Eurozone 1.4 Japan 0.8

Source: IHS Global Insight, Jan 2018 World Forecast

The average crude oil price in 2017 rose 23 years. The price of oil is projected to in- percent to about $48 per barrel, bringing an crease over the long run due to growing end to the declines seen over the past four global demand and higher costs of extrac- years. Although IHS Global Insight is pro- tion. IHS Global Insight forecasts U.S. refin- jecting little change in prices in 2018 and er's acquisition cost of crude to surpass $100 2019 due to supply growth, that pause will be per barrel in 2030 and continue to rise mod- short lived as prices rise in subsequent estly thereafter to $119 in 2038.

U.S. Refiners' Acquistion Cost $140 $120 $100 $80 $60

$ Per Barrelof Oil $40 $20 $0 2000 2005 2010 2015 2020 2025 2030 2035 Fiscal Year Source: IHS Global Insight

U.S. Airlines

Domestic Market Mainline and regional carriers1 offer domes- year. Although those average rates of tic and international passenger service be- growth since the recession are low, they con- tween the U.S. and foreign destinations, alt- ceal the fact that growth has been picking up hough regional carrier international service is over the period (4.4% a year since 2014). confined to the border markets in Canada, ASM growth has risen due to a variety of fac- Mexico, and the Caribbean. tors including upgauging and the expansion of ultra-low-cost carriers and the competitive The commercial air carrier industry in 2018 response by major carriers, driven in large will be shaped by four distinct trends: (1) eas- part by low fuel prices. Looking ahead to the ing capacity discipline; (2) steady growth of near-term, that earlier restraint in ASM seats per aircraft, whether through up-gaug- growth is likely to continue easing as some ing or reconfiguring existing aircraft; (3) in- carriers have indicated plans to open new creasing competitive pressure due to ultra- routes. As new service begins, competitors low-cost carrier expansion; and (4) continued may respond by adding their own new reliance on ancillary revenues. routes, thus further boosting ASM growth.

Following the 2007-09 recession, the U.S. The period of domestic capacity restraint airline industry underwent considerable re- since 2007 has not been shared equally be- structuring that has resulted in an unprece- tween the mainline carriers and their regional dented period of capacity discipline, espe- counterparts. In 2017, the mainline carrier cially in domestic markets. Between 1978 group provided 9 percent more capacity than and 2000, ASMs in domestic markets in- in 2007 while carrying 11.8 percent more creased at an average annual rate of 4 per- passengers. Capacity flown by the regional cent a year, recording only two years of de- group has shrunk by 2.8 percent over the cline. Even though domestic ASMs shrank same period (with passengers carried down by 6.9 percent in FY 2002, following the 5.1 percent). events of September 11, 2001, growth re- sumed and by 2007, domestic ASMs were The regional market has continued to shrink 3.6 percent above the FY 2000 level. Since as the regionals compete for even fewer con- 2009, U.S. domestic ASMs have increased tracts with the remaining dominant carriers; at an average rate of 2.1 percent per year this has meant slow growth in enplanements while RPMs have grown 2.8 percent per and yields.

1 Mainline carriers are defined as those providing service primarily via aircraft with 89 or less seats service primarily via aircraft with 90 or more and whose routes serve mainly as feeders to the seats. Regionals are defined as those providing mainline carriers.

U.S. Commercial Air Carriers Domestic Enplanements by Carrier Group 1,200

1,000 210 195 181 800 170 160 151 148 600

880 400 760 819 672 712 595 627 Enplanements (millions) 200

- 2017E 2018 2022 2026 2030 2034 2038 Fiscal Year Mainline Regional

U.S. Commercial Air Carriers Domestic Passenger Nominal Yield 25.0

20.0 20.7 19.3 ¢) 18.0 16.6 17.0 15.0 15.8 15.2 14.7 13.9 13.9 13.6 12.5 10.0 11.4 11.4 Revenue Revenue Per Mile (

5.0

- 2017E 2018 2022 2026 2030 2034 2038 Fiscal Year Mainline Regionals

The regionals have less leverage with the measure rise by more than 55 percent over mainline carriers than they have had in the the decade from 1997 to 2007. The trend past as the mainline carriers have negotiated has slowed more recently, however, as re- contracts that are more favorable for their op- gional seats per aircraft rose 26 percent over erational and financial bottom lines. Further- the ten years ending in 2017. more, the regional airlines are facing pilot shortages and tighter regulations regarding Mainline carriers have also been increasing pilot training. Their labor costs are increas- the seats per aircraft flown although the trend ing as they raise wages to combat the pilot has been accelerating – the reverse of re- shortage while their capital costs have in- gionals' behavior. From 1997-2007, mainline creased in the short-term as they continue to seats per aircraft expanded just one-half of replace their 50 seat regional jets with more one percent. Since 2007, this measure has fuel-efficient 70 seat jets. The move to the grown about 8 percent. larger aircraft will prove beneficial in the fu- Another continuing trend is that of ancillary ture, however, since their unit costs are revenues. Carriers generate ancillary reve- lower. nues by selling products and services be- Growing seats per aircraft has been a yond that of an airplane ticket to customers. longstanding trend for regionals that saw this This includes the un-bundling of services previously included in the ticket price such as

checked bags and on-board meals, and by protect market share in response to the rapid adding new services such as boarding prior- growth low cost carriers (LCC) have ity and internet access. Although U.S. pas- achieved in recent years. While mainline en- senger carriers posted record net profits in planements have increased about 12 per- 2016, profits declined in 2017 on rising fuel cent since 2007, and regionals' have shrunk and labor costs and flat yields. Nevertheless, about 5 percent, low cost carrier enplane- ancillary revenues remained a contributing ments have grown by almost 30 percent. factor to overall profitability. Airlines are also RPMs over the same period show a similar continuing to implement plans to further seg- pattern with mainline RPMs up 15 percent, ment their passengers into more discreet regional RPMs up 1 percent and LCC RPMs cost categories based on comfort amenities fully 41 percent higher. like seat pitch, leg room, and access to social media and outlets. In 2015, Delta introduced U.S. commercial air carriers’ total number of “Basic Economy” fares that provided custom- domestic departures rose in 2016 for the first ers with a main cabin experience at lower time since 2007 but then pulled back in 2017 cost, in exchange for fewer options. By the and are about 18 percent below the 2007 end of 2017 these fares were available in level. ASMs, RPMs and enplanements all 100% of Delta’s domestic network. In Feb- grew in each of the past six years; these ruary 2017 American began offering its ver- trends underlie the expanding size of aircraft 2 sion in February 2017, and had expanded to and higher load factors. In 2017, the do- the entire domestic network by September. mestic load factor came off a historic high United deployed its version of Basic Econ- reached the year before but at 84.5 percent, omy fares across its domestic network in remains near the peak for commercial air May, but quickly pulled back the scale of de- carriers. Load factor is forecast to rise and ployment across its domestic network as peak around 86.6 percent in the future due to negative revenue impacts were more than the logistical difficulties inherent in matching anticipated. supply perfectly with demand.

The offering of Basic Economy fares has been part of an effort by network carriers to

2 Commercial air carriers encompass both mainline and regional carriers.

U.S. Commercial Air Carriers Domestic Market 6.0 87.0

5.0 86.5

4.0 86.0

3.0 85.5 Load Factor 2.0 85.0 Annual Annual Percent Change 1.0 84.5

0.0 84.0 2017E 2020 2023 2026 2029 2032 2035 2038 Fiscal Year ASMs RPMs Enplanements Load Factor

System, that is the sum of domestic plus in- U.S. mainline carrier enplanement growth in ternational capacity, increased 2.9 percent to the combined domestic and international 1.144 trillion ASMs in 2017 while RPMs also market was 3.6 percent in 2017 while re- increased 2.9 percent to 955 billion. During gional carriers carried 2.1 percent fewer pas- the same period system-wide enplanements sengers. increased 2.6 percent to 840.7 million. In 2017, U.S. carriers continued to prioritize the In the domestic market, mainline enplane- domestic over the international market in ments increased for the seventh consecutive terms of allocating capacity as domestic ca- year, up 3.6 percent, marking the first time pacity increased 3.3 percent while interna- since 2000 that the industry recorded seven tional capacity was up just 2.0 percent. U.S. consecutive years of passenger growth in carriers' domestic capacity growth will ex- the domestic market. Mainline passengers in ceed their international capacity growth in international markets posted the eighth year 2018 but carriers will start expanding capac- of growth, up 4.0 percent. Domestic mainline ity in international markets faster than do- enplanement growth is forecast to remain mestic markets beginning in 2019 and this solid, increasing at about 3.4 percent during trend is projected to continue through 2038 the early part of the forecast before slowing as the domestic market continues to mature. as economic activity cools. After surging 5.2 percent in 2018, international enplanements

are forecast to grow steadily at about 3.3 per- percent over the next three years and then cent through the forecast horizon. moderate slightly through the remainder of the forecast. With relatively robust demand, industry capacity growth was up 2.9 percent in 2017 af- System load factor held steady while trip ter a 4.2 percent increase in 2016. The in- length increased 3.8 miles (0.3 percent) in creased passenger volume and traffic offset 2017, even as seats per aircraft mile in- flat yields and along with higher ancillary rev- creased by 1.9 percent; again reflecting the enues and relatively low fuel prices resulted trend towards using larger aircraft. Seats per in U.S. carriers solidly profitable in 2017. Do- aircraft mile system-wide increased to 154.3 mestic mainline capacity is expected to seats (up 2.8 seats per aircraft mile), the match the pattern of enplanements with a highest level since 1990. solid 3.4 percent growth in the near term, followed by a few years of slower growth before returning to trend. International mainline enplanements are forecast to grow at about 3.9

International Market Over most of the past decade, the interna- While factors that restrained international tional market has been the growth segment growth in recent years still largely remain, for U.S. carriers when compared to the ma- conditions have matured and some of the un- ture U.S. domestic market. In 2015 and certainty has subsided. Most importantly, 2016, growth in the domestic market surged, world economic growth and trade has picked outpacing international markets. However, up, fears of a "hard landing" in China have in 2017 enplanement growth in international lessened, oil prices, though increasing, ap- markets exceeded that in domestic markets pear to be on a steadier path, some progress – an outcome that is expected to continue has been made in defining the terms of throughout the forecast horizon. Average Brexit, and the war against ISIS has turned a annual growth rates (FY 2018-2038) of the corner. None of these constraints has disap- international market (comprised of mainline peared, of course, and security concerns and regional carriers) for enplanements, continue to loom over the world as a threat to RPMs and ASMs are forecast at 3.4, 3.3, and international travel. 3.3 percent, respectively.

U.S. Carriers - Enplanements 15.0

10.0

5.0

(5.0) Annual Annual Growth Rate (%) (10.0) 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Domestic Market International Market

U.S. Carriers - RPMs 15.0

10.0

5.0

(5.0) Annual Annual Growth Rate (%)

(10.0) 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038

Fiscal Year Domestic Market International Market

U.S. Carriers - ASMs 15.0

10.0

5.0

(5.0) Annual Annual Growth Rate (%) (10.0) 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038

Fiscal Year

Domestic International

The next five years will feature a rebuilding ments, RPMs, and ASMs, respectively. Air- of international demand by the U.S. carriers lines will continue to match capacity growth with moderate growth averaging around 3.6, with traffic growth and load factor is expected 3.7, and 3.7 percent a year for enplane- to stabilize around 81.1%. Load factors this high were last seen in 2014.

U.S. Commercial Air Carriers International Market 6.0

5.0

4.0

3.0

2.0

Annual Annual Percent Change 1.0

0.0 2017E 2020 2023 2026 2029 2032 2035 2038 Fiscal Year

ASMs RPMs Enplanements For U.S. carriers, Latin America remains the carrier enplanements and RPMs for the Pa- largest international destination despite the cific region are forecast to grow a modest 2.5 recent economic and political crises in Vene- and 2.6 percent a year, respectively. Traffic zuela and Brazil. Enplanements in 2017 growth is relatively moderate in part because grew an estimated 6.3 percent while RPMs U.S. carriers continue to have a majority of increased 3.2 percent. Growth is projected their service in the region to Japan as op- to remain strong in 2018 but then slow in posed to faster growing markets. 2019 as U.S. carriers trim capacity expansion to help stabilize yields. Enplanements After slower activity in 2016, the Atlantic re- and RPMs are forecast to increase 7.2 and gion saw an increase in enplanements of 1.9 6.4 percent, respectively, in 2018. Over the percent as well as an increase in RPMs of twenty-year period 2018-2038, Latin Amer- 1.6 percent in 2017. Demand strengthened ica enplanements are forecast to increase at with the firming European economy and as an average rate of 3.8 percent a year while the route to Brexit became slightly clearer. RPMs grow 4.1 percent a year. As conditions continue to improve, enplanement and RPM growth will strengthen further The Pacific region is the smallest in terms of in coming years. Over the twenty-year pe- enplanements despite the economic growth riod from 2018 to 2038, enplanements in the and potential of air travel to China and India. Atlantic region (including the Middle East and In 2017, U.S. carriers saw enplanements de- Africa) are forecast to grow at an average an- cline 0.8 percent from their 2016 levels while nual rate of 2.6 percent a year while RPMs traffic (RPMs) increased by 3.0 percent. Alt- grow 2.9 percent a year. While Western Eu- hough the region is forecast to have the high- rope is a mature area with moderate eco- est economic growth of any region over the nomic growth, the economically smaller Mid- next 20 years, led by China and India, U.S.

dle East and Africa areas are expanding rap- region is linked to those two areas, particu- idly with GDP growth rates more than twice larly in the second half of the forecast period. that of Europe. As a result, a larger share of the forecast aviation demand in the Atlantic

Total Passengers To/From the U.S. American and Foreign Flag Carriers 600

500 60

400 52 89 46 79 300 40 69 35 60 178 29 30 51 151 200 41 43 129 111 Millions of Passengers 96 82 87 100 141 159 110 125 79 84 96 0 2017 2018 2022 2026 2030 2034 2038 Calendar Year Atlantic* L. America Pacific Canada Transborder Source: US Customs & Border Protection data processed and released by Department of Commerce; data also received from Transport Canada * Per past practice, the Mid-East region and Africa are included in the Atlantic category.

Total passengers (including Foreign Flag growth averaging 2.9 percent a year over the carriers) between the United States and the next 20 years (2018-2038) is the foundation rest of the world increased an estimated 5.4 for the forecast growth of international pas- percent in 2017 (231.9 million) as all regions sengers of 3.5 percent a year, as levels dou- posted gains led by a 6.4 percent increase in ble from 244 million to 486 million. the Atlantic region. The Latin American region is the largest in- FAA projects total passenger growth of 5.2 ternational market and is projected to grow at percent in 2018 as global economic growth the fastest rate (3.7 percent a year) of any accelerates with the highest growth expected region over the forecast period. Within the in the Latin region. Stable global economic region, Mexico and Dominican Republic are

the two largest markets and are expected to or Pacific regions. The Atlantic region is fore- post average annual growth rates of 3.4 per- cast to grow at an average rate of 3.3 percent cent and 4.3 percent, respectively. a year as an increasing share of the passengers in this region come from the Middle East Powered by economic growth and rising in- and Africa markets. Though sizable and comes in China and South Korea, total pas- comparable to Mexico in passenger traffic, sengers in the Pacific region are forecast to the Canadian transborder market is consid- more than double to 88 million by 2038. erably smaller than the Atlantic region. With From 2018 to 2038, passengers between the solid North American economic growth, Can- United States and the Pacific region are fore- ada transborder passengers are forecast to cast to grow 3.7 percent a year. grow at an annual average of 3.4 percent a Both the Atlantic and Canada regions are year over the next 20 years. more mature markets and are projected to have somewhat slower growth than the Latin

Cargo Air cargo traffic contains both domestic and lantic, Latin, Pacific, and ‘Other Interna- international freight/express and mail. The tional.’ Total international RTMs in 2017 in- demand for air cargo is a derived demand re- creased 9.7 percent to 24.5 billion, with all sulting from economic activity. Cargo moves regions posting gains. in the bellies of passenger aircraft and in dedicated all-cargo aircraft on both sched- Historically, air cargo activity tracks with uled and nonscheduled service. Cargo car- GDP. Other factors that affect air cargo riers face price competition from alternative growth are fuel price volatility, movement of shipping modes such as trucks, container real yields, and globalization. In addition, a ships, and rail cars. number of significant structural changes have occurred in the air cargo industry since U.S. air carriers flew 39.2 billion revenue ton 2000. These include air cargo security regu- miles (RTMs) in 2017, up 9.6 percent from lations by the FAA and TSA, maturation of 2016 with domestic cargo RTMs increasing the domestic express market, a shift from air 9.5 percent to 14.6 billion while international to other modes (especially truck), use of all- RTMs rose 9.7 percent to 24.5 billion. Air cargo carriers (e.g., FedEx) by the U.S. cargo RTMs flown by all-cargo carriers com- Postal Service to transport mail, and the in- prised 80.4 percent of total RTMs in 2017, creased use of mail substitutes (e.g. e-mail, with passenger carriers flying the remainder. cloud-based services). Total RTMs flown by the all-cargo carriers increased 9.9 percent in 2017 while total RTMs The forecasts of Revenue Ton Miles (RTMs) flown by passenger carriers grew by 8.4 per- are based on several assumptions specific to cent. the cargo industry. First, security restrictions on air cargo transportation will remain in U.S. carrier international air cargo traffic can place. Second, most of the shift from air to be divided into four regions consisting of At- ground transportation has occurred. Finally,

long-term cargo activity is driven by eco- 89.0 percent of domestic cargo RTMs. The nomic growth. all-cargo share is forecast to grow to 90.6 percent by 2038 based on increases in ca- The forecasts of RTMs are based on models pacity for all-cargo carriers and ongoing se- that link cargo activity to GDP. Forecasts of curity considerations. domestic cargo RTMs use real U.S. GDP as the primary driver of activity. Projections of International cargo RTMs rose 9.7 percent in international cargo RTMs are based on 2017 after posting a 1.4 percent decline in growth in world and regional GDP, adjusted 2016. Faster economic growth in the U.S. for inflation. The distribution of RTMs be- and Europe helped to fuel a pickup in world- tween passenger and all-cargo carriers is wide trade. Growth in international RTMs re- forecast based on an analysis of historic main strong in 2018 at 9.2 percent as global trends in shares, changes in industry struc- trade growth continues to be robust. For the ture, and market assumptions. forecast period (2017-2038) international cargo RTMs are forecast to increase an av- After increasing by 9.6 percent in 2017, total erage of 4.7 percent a year based on pro- RTMs are forecast to grow 8.7 percent in jected growth in world GDP with the Other In- 2018. Driven by steady U.S. and world eco- ternational region having the fastest growth, nomic growth, total RTMs are projected to in- followed by the Pacific, Atlantic, and Latin re- crease at an average annual rate of 3.8 per- gions, respectively. cent for the balance of the forecast period. The share of international cargo RTMs flown Following a 9.5 percent increase in 2017, do- by all-cargo carriers increased from 49.3 per- mestic cargo RTMs are forecast to grow 7.9 cent in 2000 to 71.6 percent in 2017. Con- percent in 2018 as the U.S. economic recov- tinuing the trend experienced over the past ery accelerates, stimulated in part by the re- decade, the all-cargo share of international cently passed tax cuts. Between 2017 and RTMs flown is forecast to increase modestly 2038, domestic cargo RTMs are forecast to to 77.9 percent by 2038. increase at an average annual rate of 1.9 percent. In 2017, all-cargo carriers carried

General Aviation

The FAA uses estimates of fleet size, hours of the 2010 Rule for Re-Registration and Re- flown, and utilization rates from the General newal of Aircraft Registration, which re- Aviation and Part 135 Activity Survey (GA moved cancelled, expired or revoked records Survey) as baseline figures to forecast the from the Registry. In 2014, the GA fleet rec- GA fleet and activity. Forecasts of new air- orded its first increase since 2008, and the craft deliveries, which use the data from Gen- 2016 Survey results showed continuing in- eral Aviation Manufacturers Association crease for one more year. The active GA (GAMA), together with assumptions of retire- fleet was estimated as 211,793 aircraft in ment rates, produce growth rates of the fleet 2016 (up 0.8 percent from 2015), with by aircraft categories, which are applied to 24.8 million hours flown (up 2.9 percent from the GA Survey fleet estimates. The forecasts 2015). are carried out for “active aircraft,”3 not total aircraft. The FAA’s general aviation forecasts In 2017, the previous slow decline in deliver- also rely on discussions with the industry ex- ies of the general aviation industry reversed perts conducted at industry meetings, includ- course with increases in the piston segment. ing Transportation Research Board (TRB) Single engine piston deliveries by U.S. man- meetings of Business Aviation and Civil Heli- ufacturers were up 8.8 percent, while the copter Subcommittees conducted twice a year smaller category of multi-engine piston deliv- in May and January. eries went up by 24.2 percent. Business jet deliveries were about the same as the previ- The results of the 2016 GA Survey, the latest ous year, marginally down by 0.2 percent. available, were consistent with the results of Turboprop deliveries were also slightly down surveys conducted since 2004 improve- by 0.5 percent. Based on figures released ments to the survey methodology. The esti- by GAMA, U.S. manufacturers of general mate of the GA active fleet was in decline be- aviation aircraft delivered 1,596 aircraft in CY tween 2007 and 2013, especially between 2017, 4.2 percent more than CY 2016. Over- 2011 and 2013, primarily due to the impact all piston deliveries were up 9.5 percent while turbine shipments were down by 0.4 percent.

3 An active aircraft is one that flies at least one hour during the year.

General Aviation U.S. Manufacturers Shipments and Billings Shipments Billings ($B) 3,500 $16

3,000 $14 $12 2,500 $10 2,000 $8 1,500 $6 1,000 $4

500 $2

- $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Calendar Year

Source: GAMA Shipments Billings ($ Billion)

GAMA and industry experts also reported 2.2 percent a year. The growth in U.S. GDP continuing decrease in rotorcraft deliveries and corporate profits are catalysts for the has started to stabilize in 2017, as low oil growth in the turbine fleet. prices began gradually to increase. The largest segment of the fleet, fixed wing Against these current conditions, the long- piston aircraft, is predicted to shrink over the term outlook for general aviation, driven by forecast period by 22,350 aircraft (an aver- turbine aircraft activity, remains stable. The age annual rate of -0.8 percent). Unfavora- active general aviation fleet is projected to re- ble pilot demographics, overall increasing main around its current level, with the de- cost of aircraft ownership, coupled with new clines in the fixed-wing piston fleet being off- aircraft deliveries not keeping pace with re- set by increases in the turbine, experimental, tirements of the aging fleet are the drivers of and light sport fleets. The total active general the decline. aviation fleet changes from an estimated 213,050 in 2017 to 214,090 aircraft by 2038. On the other hand, the smallest category, light-sport-aircraft, (created in 2005), is fore- The more expensive and sophisticated tur- cast to grow by 3.6 percent annually, adding bine-powered fleet (including rotorcraft) is about 2,850 new aircraft by 2038, more than projected to grow by 15,255 aircraft -- an av- doubling its 2016 fleet size. erage rate of 2.0 percent a year over the forecast period, with the turbojet fleet increasing

Active General Aviation Aircraft 250,000

200,000

150,000

100,000

50,000

0 2008 2018 2028 2038 Calendar Year

Fixed Wing Piston Fixed Wing Turbine Rotorcraft LSA Experimental and Other

Although the total active general aviation turbine aircraft (including rotorcraft) are fore- fleet is projected to remain stable, the num- cast to increase 2.4 percent yearly over the ber of general aviation hours flown is forecast forecast period. Jet aircraft are expected to to increase an average of 0.8 percent per account for most of the increase, with hours year through 2038 from 24.8 million in 2016 flown increasing at an average annual rate of to 30.2 million, as the newer aircraft fly more 2.7 percent over the forecast period. The hours each year. Fixed wing piston hours large increases in jet hours result mainly from are forecast to decrease by 1.0 percent, the increasing size of the business jet fleet, slightly faster than the fleet decline of 0.9 per- along with estimated increases in utilization cent. Countering this trend, hours flown by rates.

General Aviation Hours Flown (in thousands) 35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 2008 2018 2028 2038 Calendar Year

Fixed Wing Piston Fixed Wing Turbine Rotorcraft LSA Experimental and Other

Rotorcraft activity, which was not as heavily active pilots certificated by FAA at the end of impacted by the previous economic down- 2017. All pilot categories, with the exception turn as other aircraft and rebounded earlier, of rotorcraft only certificates, continued to in- faces the challenges brought by lower oil crease. The number of student pilot certifi- prices, a trend which has now started to sta- cates has been affected by two recent regu- bilize. The low oil prices impacted utilization latory changes; first, the 2010 rule that in- rates and new aircraft orders both directly creased the duration of validity for student pi- through decreasing activity in oil exploration, lot certificates for pilots under the age of 40 and also through a slowdown in related eco- from 36 months to 60 months. The second nomic activity. Rotorcraft hours are pro- one, which went into effect in April 2016 re- jected to grow by 2.2 percent annually over moved the expiration date on the new stu- the forecast period. dent pilot certificates. The number of student pilots increased from 72,280 in 2009 to Lastly, the light sport aircraft category is fore- 119,119 in 2010. By 2016 they totaled casted to see an increase of 4.4 percent a 128,501 and with no expiration of certificates year in hours flown, primarily driven by jumped to 149,121 by the end of 2017. growth in the fleet. Commercial and air transport pilot (ATP) cer- The FAA also conducts a forecast of pilots by tificates have been impacted by a legislative certification categories, using the data com- change as well. The Airline Safety and Fed- piled by the Administration’s Mike Monroney eral Aviation Administration Extension Act of Aeronautical Center. There were 609,306 2010 mandated that all part 121 (scheduled

airline) flight crew members would hold an category of sport pilots are predicted to in- ATP certificate by August 2013. Airline pilots crease by 3.3 percent annually over the fore- holding a commercial pilot certificate and cast period. On the other hand, both private mostly serving at Second in Command posi- and commercial pilot certificates are pro- tions at the regional airlines could no longer jected to decrease at an average annual rate operate with only a commercial pilot certifi- of 0.8 and 0.5 percent, respectively until cate after that date, and the FAA data 2038. showed a faster decline in commercial pilot numbers, accompanied by a higher rate of Student pilot forecast is currently suspended increase in ATP certificates. because of the April 2016 rule change that the new student pilot certificates do not ex- The number of active general aviation pilots pire. This change generates a cumulative in- (excluding students and ATPs) is projected crease in the certificate numbers and breaks to decrease about 22,600 (down 0.4 percent the link between student pilot and advanced yearly) over the forecast period. The ATP certificate levels of private pilot or higher. category is forecast to increase by 22,600 There is not sufficient data currently to per- (up 0.7 percent annually). The much smaller form a reliable forecast for the student pilots.

Active Pilots by Type of Certificate 600,000

500,000

400,000

300,000

200,000

100,000

0 2007 2017 2027 2038 Calendar Year

Sport Pilot Private Pilot Commercial Pilot Air Transport Pilots Rotorcraft only

FAA Operations

The growth in air travel demand and the busi- FAA & Contract Tower ness aviation fleet will drive growth in opera- Operations tions at FAA facilities over the forecast pe- 70,000 riod. Activity at FAA and Contract towers is 60,000 forecast to increase at an average rate of 0.9 50,000 percent a year between 2018 and 2038. 40,000 Commercial operations4 at these facilities 30,000 are forecast to increase 1.5 percent a year, 20,000

five times faster than non-commercial opera- Operations (000) tions. The growth in commercial operations 10,000 is less than the growth in U.S. airline passen- 0 gers (1.5 percent vs. 1.9 percent) over the 2008 2018 2028 2038 forecast period due primarily to larger aircraft Fiscal Year (seats per aircraft mile) and higher load fac- Commercial Non Commercial tors. Both of these trends allow U.S. airlines to accommodate more passengers without FAA Tracon (Terminal Radar Approach Con- increasing the number of flights. General trol) Operations5 are forecast to grow slightly aviation operations (which accounted for faster than at towered facilities. This is in 50.8% of operations in 2017) are forecast to part a reflection of the different mix of activity increase an average of 0.3 percent a year as at Tracons. Tracon operations are forecast increases in turbine powered activity more to increase an average of 1.0 percent a year than offset declines in piston activity. between 2018 and 2038. Commercial operations accounted for approximately 59 percent of Tracon operations in 2017 and are projected to grow 1.5 percent a year over the forecast period. General aviation activity at these facilities is projected to grow only 0.4 percent a year over the forecast.

The number of IFR aircraft handled is the measure of FAA En-Route Center activity. In 2017, aircraft handled at FAA En-Route Cen- ters increased 1.4 percent, led by increases

4 Sum of air carrier and commuter/air taxi cate- (VFR) arrivals and departures at all airports in the gories. domain of the Tracon as well as IFR and VFR 5 Tracon operations consist of itinerant Instru- overflights. ment Flight Rules (IFR) and Visual Flight Rules

in the Air Taxi and General Aviation catego- En-Route Center ries. Growth in airline traffic and business Aircraft Handled aviation is expected to lead to increases in 70,000 activity at En-Route centers. Over the fore- 60,000 cast period, aircraft handled at En-Route 50,000 centers are forecast to increase at an aver- 40,000 age rate of 1.4 percent a year as increases in Air Carrier and General Aviation activity 30,000 offset declines in Air Taxi activity. Activity at 20,000 AC HandledAC (000) En-Route centers is forecast to grow faster 10,000 than activity at towered airports because 0 more of the activity at En-Route centers is 2008 2018 2028 2038 from the faster growing commercial sector Fiscal Year and high-end (mainly turbine) general aviation flying. Much of the general aviation ac- Commercial Non Commercial tivity at towered airports, which is growing more slowly, is local in nature, and does not impact the centers.

U.S. Commercial Aircraft Fleet

The number of aircraft in the U.S. commer- 2038 as the fleet shrinks by 10.5 percent cial fleet is forecast to increase from 7,141 in (202 aircraft) between 2017 and 2028. Car- 2017 to 8,290 in 2038, an average annual riers remove 50 seat regional jets and retire growth rate of 0.7 percent a year. Increased older small turboprop and piston aircraft, demand for air travel and growth in air cargo while adding 70-90 seat jets, especially the is expected to fuel increases in both the pas- E-2 family after 2020. By 2030 only a handful senger and cargo fleets. of 50 seat regional jets remain in the fleet. By 2038, the number of jets in the regional car- Between 2017 and 2038 the number of jets rier fleet totals 1,910, up from 1,644 in 2017. in the U.S. mainline carrier fleet is forecast to The turboprop/piston fleet is forecast to grow from 4,155 to 5,101, a net average of shrink by 79% from 487 in 2017 to 101 by 45 aircraft a year as carriers continue to re- 2038. These aircraft account for just 5.0 per- move older, less fuel efficient narrow body cent of the fleet in 2038, down from 22.9 per- aircraft. The narrow body fleet (including E- cent in 2017. series aircraft at JetBlue and C-series at Delta) is projected to grow 27 aircraft a year The cargo carrier large jet aircraft fleet is as carriers replace the 757 fleet and current forecast to increase from 855 aircraft in 2017 technology 737 and A320 family aircraft with to 1,178 aircraft in 2038 driven by the growth the next generation MAX and Neo families. in freight RTMs. The narrow-body cargo jet The wide-body fleet grows by an average of fleet is projected to increase by less than 1 15 aircraft a year as carriers add 777-8/9, aircraft a year as 757’s and 737’s are con- 787’s, A350’s to the fleet while retiring 767- verted from passenger use to cargo service. 300 and 777-200 aircraft. In total the U.S. The wide body cargo fleet is forecast to in- passenger carrier wide-body fleet increases crease 15 aircraft a year as new 747-800, by 61 percent over the forecast period. 777-200, and new and converted 767-300 aircraft are added to the fleet, replacing older The regional carrier fleet is forecast to de- MD-11, A300/310, and 767-200 freighters. cline from 2,131 aircraft in 2017 to 2,011 in

U.S. Carrier Fleet 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 2017 2027 2038 Calendar Year

Mainline NB Mainline WB Cargo Jet Regionals

Commercial Space

The FAA’s Office of Commercial Space To accomplish its mission, the FAA performs Transportation (AST) licenses and regulates the following major functions: U.S. commercial space launch activities including launch and reentry of vehicles and • Maintains an effective regulatory framework for commercial space operation of non-federal launch and reentry transportation activities by develop- sites authorized by Executive Order 12465 ing regulations and guidance, and Title 51 U.S. Code, Subtitle V, Chapter 509 (formerly the Commercial Space Launch • Provides guidance to prospective Act). Notably, AST’s purview does not ex- commercial operators on how to com- tend to military or civilian government [e.g., ply with regulatory requirements for National Aeronautics and Space Administra- obtaining an authorization and oper- tion (NASA)] launches. Title 51 and the Ex- ating safely, ecutive Order also direct the U.S. Depart- • Evaluates applications for licenses, ment of Transportation to encourage, facili- experimental permits, and safety ap- tate, and promote U.S. commercial provals for launch and reentry opera- launches. The FFA’s mission is to license tions and related commercial space and regulate commercial launch and reentry activities, operations and non-federal launch sites to protect public health and safety, the safety of • Evaluates applications for licenses property, and the national security and for- for launch and reentry site operations, eign policy interests of the United States.

With its dual mission of regulating and also • Monitors and enforces regulatory promoting the emerging commercial space compliance through safety inspec- transportation industry, FAA faces unique tions of launches, reentries, sites, challenges. and other regulated commercial space activities, The FAA licenses launches or reentries carried out by U.S. persons inside or outside the • Provides U.S. Government oversight United States. The FAA does not license of investigations associated with the launches or reentries the U.S. Government mishap of an FAA authorized launch carries out for the Government (such as or reentry,

those operated for and by NASA or the De- • Facilitates the integration of commer- partment of Defense). FAA does not license cial space launch and reentry opera- or grant permits for amateur-class rockets tions into the National Airspace Sys- which are unmanned rockets that have less tem (NAS) by coordinating airspace than 200,000 pound-seconds of total impulse use and regulatory oversight with air and cannot reach an altitude greater than traffic management and Federal 150 kilometers above the Earth’s surface. launch ranges,

• Coordinates research into the safety, environmental, and operational impli- cations of new technologies and the

evolving commercial space transpor- Regulatory Safety Oversight Activities of tation industry, FAA

• Conducts outreach to the commercial The business cycle from the time a firm first space industry by hosting working contacts FAA until the last launch of a li- groups and conferences, censed operation can be several years. There are many important activities per- • Collaborates with Government part- formed by FAA during this cycle. The most ners, such as NASA, Defense Ad- notable activities are described here. vanced Research Projects Agency (DARPA), and the U.S. Air Force to Pre-Application Consultation for Licenses, assure consistent approaches to reg- Experimental Permits and Safety Approvals ulation, policy, and standards, and Pr ospective applicants seeking commercial

space transportation licenses, experimental • Conducts outreach to international counterparts to promote a balanced permits, or safety approvals are required by and consistent regulatory framework regulation to consult with FAA before sub- across the world. mitting their applications. During this period, FAA assists them in identifying potential ob- In addition to FAA headquarters offices in stacles to authorization issuance and deter- Washington, D.C., AST maintains field of- mining potential approaches to regulatory fices near active launch ranges to facilitate compliance. The growth in both the number communication with space launch operators of commercial space operators and the num- and to implement FAA’s regulatory respon- ber of operations will likely increase FAA’s sibilities more efficiently. AST personnel are pre-application consultation workload over currently assigned to four field offices in the next five years. Furthermore, many new close proximity to: Kennedy Space Center in operators are seeking to incorporate new Florida; Johnson Space Center in Texas; technologies, vehicle types, or operational and, Vandenberg Air Force Base and the models that create challenges for FAA in de- Mojave Air and Space Port in California. Due termining the applicable regulations or ap- to industry expansion, FAA is considering proach to regulatory compliance. additional field offices to accommodate the anticipated increase in launch and reentry Li censes, Permits and Safety Approvals operations in other parts of the United An increasing number of applicants for li- States. FAA also directly supports NASA’s censes, permits, safety approvals, and re- commercial space initiatives by providing newals has a direct impact on the number of on-site staff at both the Johnson Space Cen- launches and reentries at some uncertain ter and Kennedy Space Center to coordinate point in the future. Though many licenses au- the FAA’s regulatory and enforcement activ- thorize multiple launches (for mature launch ities with NASA’s development and opera- systems), the need remains for FAA to also tional requirements for commercial space. issue individual launch licenses for systems that are still maturing, especially those systems for human space flight missions. Fur- thermore, with the dynamic commercial

space industry, FAA often evaluates launch and reentry systems and operations that are

evolving and changing, which may ultimately evaluates, and issues safety approvals to require license modifications or issuance of support the continued introduction of new new licenses. safety systems, safety operations applications, and safety approval renewal applica- Inherent in the review process is the require- tions. ment to conduct policy reviews and payload reviews. When conducting a policy review, Safety Analyses FAA determines whether the proposed FAA conducts flight safety, system safety, launch, reentry, or site operation presents maximum probable loss, and explosive any issues that would jeopardize public safety analyses to support the evaluation and health and safety or the safety of property, issuance of licenses and permits. FAA also adversely affect U.S. national security or for- evaluates and analyzes the performance and eign policy interests, or be inconsistent with capabilities of space flight crews to deter- international obligations of the United States. mine how human factors affect overall public If not otherwise exempt from review, FAA re- safety risk. As commercial firms become views a payload proposed for launch or more involved with human space flight ac- reentry to determine whether the payload tivity, FAA will evaluate, analyze, and deter- would jeopardize public health and safety, mine the health risks to the space flight par- the safety of property, U.S. national security ticipants (crew and “passengers”) due to nat- or foreign policy interests, or the international ural and flight-induced launch and reentry obligations of the United States. The policy environments, as well as any hazardous or payload determination becomes part of ground operations directly associated with the licensing record on which FAA’s licensing the flight. FAA will also need to evaluate the determination is based. safety of ground operations at “spaceports” and exclusive-use sites. FAA also reviews and issues launch and reentry site operator licenses and license re- I nspections and Enforcement newals. FAA also reviews and evaluates FAA currently conducts as many as 400 pre- launch site license applications for launch flight/ reentry, flight/ reentry, and post-flight/ sites located in foreign countries but operat- reentry safety inspections per year, often ing with U.S.-licensed launch or reentry sys- conducting several inspections simultane- tems. FAA coordinates range planning ously, at any of the approximately 20 U.S. among Federal, state, and local govern- and international commercial space launch ments and with the commercial range opera- sites. The establishment of non-federal tors or users. As part of the evaluation of ap- launch sites requires additional inspections plications for launch licenses, reentry li- in areas such as ground safety that have tra- censes, and site operator licenses, FAA also ditionally been overseen by the U.S. Air conducts environmental reviews consistent Force at Federal ranges. At spaceports and with its responsibilities under the National launch sites with high launch rates (e.g., Environmental Policy Act. Cape Canaveral Air Force Station, Vanden- berg Air Force Base, the Mid-Atlantic Re- FAA anticipates issuing a growing number of gional Spaceport, and Spaceport America), safety approvals for space launch systems at least 85 percent of the inspections must be equipment, processes, technicians, training conducted by locally-based field inspectors and other supporting activities. FAA reviews, in order to respond to a dynamic operational

tempo, minimize cost, and increase efficiency. FAA’s Operations Forecast Mishap Investigations To improve its workforce planning process, Multiple mishap events in 2015 demon- in 2014, FAA adopted an approach to esti- strated that FAA must have the capacity to mate its future staffing needs based on the investigate at least two space launch or ratio of regulatory safety oversight staff to a reentry mishaps or accidents simultaneously forecast of launch and reentry operations anywhere in the world, and to lead as many within the purview of the FAA mission. Alt- as six investigations during a single year. hough it was a modest improvement, this FAA must have the capabilities and re- change set the groundwork for FAA to imple- sources to safely perform the investigations ment a more objective and transparent pro- lasting as long as 16 weeks at remote sites cess for projecting staffing requirements and with no infrastructure or facilities. FAA must also necessitated development of credible op- have the capability and resources to effi- erations forecasts. Since 2014, FAA has ciently review all applicant mishap plans and made several important improvements to its accident investigation procedures as part of operations forecast: the license and permit evaluation process. • In 2015, FAA began using planned NAg S Inte ration launch and reentry data collected AST works in partnership with all FAA lines- from operators and prospective appli- of-business, notably the Air Traffic Organiza- cants as the starting point for its tion (ATO) and Office of Airports (ARP) to launch and reentry forecasts. This support the safe and efficient integration of change enabled FAA to simplify and improve its forecasting methodology commercial launch and reentry operations by tying launch and reentry forecasts into the NAS and its system of airports and directly to anticipated operations by air traffic managed by the ATO. AST expects commercial space transportation firms an increased level of interaction with the known to FAA, rather than to aggre- ATO, ARP, and the FAA Office of NextGen gate industry demand. (ANG). This includes an increased presence at the Air Traffic Control System Command • Because commercial spaceflight is a Center and other locations to assist in the highly dynamic and rapidly evolving industry, it was quickly determined strategic and tactical planning of launch and that operator-provided data alone reentry operations, as well as to provide sup- were not a reliable indicator of future port during these operations. Further, AST activity. There is a natural, inherent will continue the development of technolo- bias by industry to be optimistic gies to facilitate safe and efficient integration about their business prospects. Con- of commercial launch and reentry operations sequently, FAA adopts a cautionary into the NAS, in partnership with ANG and view of what industry representatives say will happen versus what may ATO, including technologies to improve the reasonably be expected to happen. integration of launch and reentry data into A primary pillar of FAA’s forecasting FAA air traffic control systems and technolo- methodology is to err on the side of gies to improve the timely and accurate de- caution and take a conservative view velopment and distribution of notices of air- of industry growth. Therefore, in craft hazard areas.

2016, FAA further refined its forecast- For example, the number of firms actively ing methodology by using observa- communicating with FAA increased from 14 tions about historical launch activity in August of 2014 to 46 three years later, an to establish better forecasting param- increase of more than 300%. New technolo- eters for both new applicants and existing operators. gies [e.g., reusable launch vehicles (RLVs)] allow a faster operational tempo, and at the Based on proprietary information available same time, early use of these technologies to FAA, an increase in launch and reentry ac- can increase the probability of a mishap. A tivities expected in the coming years. There mishap can derail launch plans for one or are several factors that magnify the chal- more firms. Investigations and subsequent lenges associated with predicting the num- “return to flight” for firms impacted by a mis- ber of launches and reentries to expect in a hap can take months to years. Taking these given year. They include: factors into account, the following table and graph provide historical activity and FAA’s • the list of firms intending to launch or forecast through calendar year 2020. actually launch is dynamic, • the continued development of new technologies, and • mishaps.

AST Licensed and Per- Fiscal Year Actual/Forecast mitted Operations 2013 Actual 20

2014 Actual 20

2015 Actual 14

2016 Actual 17

2017 Actual 22

2018 Forecast 27 – 38

2019 Forecast 43 – 48

2020 Forecast 39 – 61

Notes: 1. Forecast entries represent the Low to High estimate. 2. Six mishaps in 2015 caused the number of launch and reentry operations to fall significantly from the previous year rather than increase as expected.

It is important to note that the operations in- launch and reentry sites, and some firms are cluded in the forecast will occur at a variety seeking to establish launch sites for their ex- of locations throughout the National Airspace clusive use. This added launch capacity sets System (NAS). That is, not all launch and the stage for simultaneous operations and an reentry activity occurs at one location, for ex- increase in the number operations per year. ample, at Cape Canaveral, Florida. In the past year, FAA licensed launches and reen- New Markets for Commercial Space Trans- tries throughout the NAS and beyond, includ- portation are Emerging ing multiple reentries in the Pacific Ocean T he continuing development of commercial and one licensed launch from New Zealand. space transportation technology has spurred Furthermore, the forecast above only deals new markets for commercial space transpor- with launches and reentries licensed by FAA. tation services. As private industry continues It does not include launch activity for the rest to develop and test new vehicles capable of of the world, and it is not tied exclusively to taking space flight participants on suborbital satellite demand. and orbital flights, companies and organizations are proposing to offer human space flight training and several organizations have already begun to provide this service. States Additional Factors Affecting Forecast and municipalities have sought to open new Accuracy spaceports to attract commercial space Commercial space transportation is a rapidly transportation and associated high-tech evolving industry. The industry’s growth firms and create business hubs for research through technological innovation and the de- and development. Since 2008, the NASA velopment of new markets increases the has managed the Commercial Resupply Ser- challenges associated with forecasting com- vices (CRS) program, which acquires trans- mercial space transportation operations. portation services from commercial providers to deliver cargo to and from the International New Commercial Launch Technologies and Space Station (ISS). NASA is also working Operations are Emerging on an Accelerated with commercial companies under its Com- Basis mercial Crew Transportation Capabilities The commercial space transportation indus- contract to develop vehicles that will provide try is exploring a variety of new technologies transportation for astronauts and interna- and new approaches to space launch and tional partners to and from the ISS. These reentry. In late 2015, both Blue Origin and vehicles are expected to commence test Space Exploration Technologies Corp. flights and subsequent operational missions (SpaceX) successfully demonstrated the re- within the next five years. The commercial usability of their rockets, a development that vehicles used by NASA for cargro and c ew could significantly reduce the cost of opera- transportation will have other commercial ap- tions and lead to an increase in the number plications that increase the capabilities of the of launch and reentry operations per year. commercial space transportation industry as Several other U.S. commercial entities are a whole. also pursuing the development of reusable launch vehicles (RLVs). At the same time, state and local governments are joining with commercial firms to promote additional

Looking further afield, there are several com- determine how these unprecedented companies in the regulatory pipeline seeking au- mercial space ventures will impact public thority to land commercial vehicles on the safety and U.S. national interests. Moon, establish private-sector space sta- tions, service satellites on-orbit, and establish launch sites using non-traditional technologies like railguns and tube launchers. Extensive FAA resources will be needed to

Unmanned Aircraft Systems

From its infancy, just a few years ago, un- weighing more than 0.55 pounds (250 manned aircraft systems (UAS) have been grams) and less than 55 pounds to be regis- experiencing robust growth in the United tered using a new on-line system States and throughout the world. A UAS is an (https://www.faa.gov/uas/get- unmanned aircraft and its associated com- ting_started/registration/) or using the exist- munication links and control components re- ing (paper-based) aircraft registration pro- quired for the safe and efficient operation of cess. However, the U.S. Court of Appeals is- the unmanned aircraft in the national air- sued an order suspending the registration re- space system (NAS). While the introduction quirement for model aircraft owners on May of UAS into the NAS has opened up numer- 19, 2017. On December 12, 2017, the Presi- ous possibilities, it has also created unique dent signed the 2018 National Defense Au- operational challenges. Despite these chal- thorization Act (NDAA), which reinstated the lenges, the UAS sector holds enormous po- registration requirement for all model aircraft. tential, with commercial applications ranging from aerial photography to package delivery. By the end of May 2017, more than 772,000 owners had already registered with the FAA. This section covers trends across the broad While mandatory registration was in effect landscape of the established and emerging until the last week of May 2017, the trend UAS industry, from model to non-model air- was one of slowing growth over time. On av- craft6 . Using these trends and insights from erage, weekly registration ranged from industry, the FAA has produced a number of 4,000-5,000 from January-May, 2017, with forecasts. The forecasts reported in this sec- some expected peaks during the holiday tion are driven primarily by the assumption of season. Following the Court Order, the on- the continuing evolution of the regulatory en- line registry continued to accept voluntary vironment, the commercial ingenuity of man- registrations from modelers. However, the ufacturers and operators, and underlying de- registration data from the second half of mand, including business models. These 2017 may not reflect an accurate trend for drivers will continue to advance safe integra- model aircraft growth. tion of UAS into the NAS. Trends in UAS and Forecast FAA’s online registration system went into effect on Dec. 21, 2015. This required all UAS

6 These are also called, interchangeably, hobby notes including other documents of the Agency, and non-hobby UAS, respectively. In previous these terms are often interchanged.

be used for model flying, and the safety im- plications of the gradual integration of the UAS fleet into the NAS. The Agency has also engaged outside consulting firms to aid forecasting efforts for both the model and non- model UAS fleet.

Prior to undertaking the forecast, the first task was to extrapolate the trends of model ownership registration beyond May 2017 for Model registration and thus ownership of the entire year, using data from earlier years small model UAS is distributed across the and industry information. This introduces country. A spatial distribution of ownership considerable uncertainty in the forecast, par- demonstrates that sUAS are distributed ticularly for model aircraft. Thus, the FAA throughout the country with denser owner- continues to recognize, as in earlier years, ship mapping closely against the population that uncertainty abounds in projections for centers of the country. both the model and non-model UAS fleet. Hence, we provide a forecast base (i.e. likely) with high (or optimistic) and low ranges in the following table for the model UAS fleet.

With over 873,000 modelers registered as of December 31, 2017 (extrapolated from June- December), we project that there are around 1.1 million sUAS identified distinctly as model aircraft. In contrast to last year’s pro- jection of 1.1 million units, the actual number of model aircraft was around 788,570 for Registration does not translate to aircraft in 2016 – 28% lower than what we projected. A the system, the primary focus of the Agency. comparison of last year’s data with this year’s Unlike registration for non-model aircraft, the (2017) shows the compound annual growth registration rule does not require modelers to rate to be around 40%. This is still a substan- register each individual aircraft; owners may tial growth rate, as anticipated from the intro- register once and apply their registration duction of drones as a hobby, facilitated by number to multiple model aircraft. For each falling equipment prices, improved technol- registration, therefore, one or more aircraft ogy such as built-in cameras, and the relative are possibly owned (with few exceptions of ease of maneuvering. However, the trend is no equipment being owned as well). likely to slow as the pace of falling prices slow and early adopters begin to experience Under the sponsorship of the UAS Imple- limits to their experiments. Given the trend mentation Plan, the FAA has launched vari- observed in the number of registrations, ex- ous research activities to understand the pert opinions collected in Transportation Re- possible magnitude of the UAS sector, impli- search Board (TRB) annual workshops, re- cations on the spectrum of aircraft that may

view of available industry forecasts, and mar- ucts such as cell phones and video game- ket/industry research, we forecast that the consoles, and prior to that, video cameras model fleet will likely (i.e. base scenario) and video players. more than double in size over the next 5 years, from the present 1.1 million units to Total Model Fleet over 2.4 million units. The high/optimistic (Million sUAS Units) scenario suggests this growth may be as year Low Base High high as 3.17 million units, while the low sce- 2017 1.10 1.10 1.10 nario shows it could be as low as 1.96 million 2018 1.50 1.60 1.73 units. The growth rates underlying these 2019 1.76 2.00 2.35 numbers are fairly steady in the initial years 2020 1.87 2.20 2.73 but more modest in the last 2 years. The 2021 1.92 2.30 2.94 gradual market saturation that is projected in 2022 1.96 2.40 3.17 5 years and beyond in the model aircraft fleet parallels other consumer technology prod-

Commercial UAS Forecast The online registration system for the non- model fleet went into effect on April 1, 2016. Unlike the rules for model ownership, non- model owners must register each individual UAS. Since the launch of on-line registration, more than 110,000 commercial operators had registered their equipment by the end of 2017. Information contained here shows the trend in the total fleet size since the time when registration began in the 2nd quarter of 2016. For each week the registration has been available, over 1,000 aircraft have been registered. As in the case of model UAS ownership, non-model UAS are distributed across

the country. A spatial distribution of unit reg- The forecast of non-model UAS does not fun- istration (using data for October 2017) damentally change from the growth path laid demonstrates that non-model UAS are dis- out last year. Similar to last year, we project tributed throughout the country, with denser the non-model sUAS sector will be over activities correlating closely with the eco- 450,000 in 2022. nomic or commercial activities of the country. We divide the non-model sector into two The non-model sector is primarily commer- types of UAS aircraft: consumer grade and cial in nature. It is very dynamic and appears professional grade. The consumer grade to be at an early stage of growth. Unlike the non-model aircraft have a wide price range, model sector, we anticipate that the growth below US $10,000 with an average unit price rate in this sector will continue to accelerate of around $2,500. The professional grade is over the next few years. Additional commer- typically priced above $10,000, with a unit cial uses will likely result from both the clarity price assumed to be around $25,000. Cur- that Part 107 has provided and the possibili- rently, the consumer grade dominates the ties for waivers, which will likely facilitate fur- non-model sector, with a market share ap- ther growth in the sector. proaching 98%. However, as the sector ma- tures and the industry begins to consolidate, the share of consumer grade non-model aircraft is likely to decline but remain dominant. By 2022, FAA projects this sub-sector will have less than a 90% share of the overall consumer grade non-model UAS sector.

Starting from a low base of around 3,000 aircraft in 2017, professional grade non-model UAS stand to expand rapidly over time, es- Last year, we forecasted that the non-model pecially as newer and more sophisticated sector would comprise approximately uses are identified, designed, and planned. 108,000 aircraft in 2017, a growth rate ex- If, for example, professional grade UAS meet ceeding 150% from the base of 42,000 in feasibility criteria of operations, safety, regu- 2016. Actual data indicate there were lations, and economics/business, and they 110,604 UAS registered at the end of 2017. enter into the logistics chain via delivery of Considering the trend observed in the regis- small packages, the growth in this sector will trations, expert opinions provided during the likely be phenomenal. In a similar vein, the TRB workshops, review of available industry Low Altitude Authorization and Notification forecasts, internal research, and market/industry research, we project that the non- model fleet by 2022 will likely (i.e. base scenario) be four times larger than the current number of non-model aircraft. As the present base (i.e. cumulative total) gets larger, we anticipate the growth rate of the sector will slow down over time as well.

Capability (LAANC)7, which began testing in Total non-Model Fleet 2017 and is planned to be rolled out nation- (no. of units) ally over this year, is designed to allow con- year Base High siderable flexibility in UAS operations and fa- 2017 110,604 110,604 cilitate non-modelers’ use of the NAS. While 2018 158,900 168,339 most of the near-term growth in non-model 2019 229,400 268,937 UAS will still come from operations with con- 2020 312,100 410,862 sumer grade UAS (over 90%), we anticipate 2021 407,400 604,550 the remainder will come from professional 2022 451,800 717,895 grade non-model UAS. Non-model UAS are presently used for nu- Unlike the model counterpart, it is extremely merous purposes. A review of market anal- difficult to put a lower bound on the growth of yses and industry information reveals their the non-model sector due to its composition present uses (following chart) have not (i.e. consumer vs. professional grades) and changed much from last year: the varying business opportunities and growth paths. As non-model aircraft become operationally more efficient and safe, battery life expands, and regulatory constraints are reduced, new business models will begin to develop, thus enhancing robust supply-side responses. These responses, in turn, will pull demand forces (e.g. consumer response to receiving commercial packages, routine blood delivery to hospitals, etc.) that are presently latent. As a result, we provide a likely or base scenario together with the Non-model UAS are primarily used for aerial enormous potential embodied in the “high” imaging and data collection, including real scenario, representing cumulative annual estate photography (48%), industrial and util- growth rates of 33% and 46%, respectively. ity inspection (28%), and agricultural applica-

tions (17%), including crop inspection. In- creasingly, state and local governments are using UAS for emergency services, including search and rescue operations, and presently employ around 3% of all non-model UAS. As the sector grows, there will be many more non-model UAS in use.

7 Through LAANC, the FAA will grant real-time time) of the authorization requests. It is likely to authorizations for operations complying with Part reduce any distractions of controllers at the Tow- 107 via speeding up processing time (i.e., real- ers.

were for operation in class D airspace (i.e., One way of identifying early trends of non- smaller airports with control towers), waivers model UAS uses is to analyze the waiver ap- for operation in other classes were also re- plications granted to non-model UAS opera- quested and approved. tors. Both the magnitude and relative composition of waiver types may indicate the direction of the non-model UAS sector as a whole. A breakdown of the waiver requests granted is shown in the chart below:

Large UAS

According to FAA rules, UAS weighing more than 55 pounds must be registered using the existing aircraft registration process (14 CFR part 47). Many of these aircraft are operated within the NAS by federal agencies, state Beyond what is presently allowed under Part and local governments, and national re- 107, expanding non-model applications research organizations. While many of these quires waivers for night operations (86% of organizations require certificates of waiver or all waivers granted), operation of multiple un- authorization (COAs) to fly, others have their manned aircraft by one pilot (1.5%), and op- own procedures for authorizations, e.g. Mili- erations above current altitude limits (1.3%). tary, Customs and Border Patrol (CBP), etc. Many of these waivers include combinations While the FAA has a great deal of experience of multiple waived provisions, and hence, to- enabling operations with this class of UAS taling waivers granted by provision (more within the NAS, we do not have the equiva- than 1,600 in December 2017) exceeds lent level of understanding of the fleet num- 100%. The Agency issues these waivers to bers and trends in the growth of these types facilitate expanded commercial activities by of UAS. Further examination and research non-model UAS on a case-by-case basis, may lead us to better identify trends and while it develops additional regulations to en- eventually develop a forecast in the future. able more advanced operations on a routine basis. Analysis of these waiver applications allows us to understand the industry trends, Remote Pilot Forecast one of many metrics essential for understanding and projecting the trajectory, course An important final metric in non-model sUAS corrections, and growth trends of the sector. is the trend in remote pilot certifications (RPCs). RPCs are issued in accordance with Finally, almost 13,000 airspace authoriza- part 107 and are used primarily to facilitate tions and waivers were approved for UAS op- non-model sUAS flights for commercial activ- erations in controlled airspaces by the end of ities. As of December 2017, more than December 2017. While over half of them

73,000 RPCs were issued. Over 90% of indi- Combining these assumptions with the base viduals who took the required aeronautical scenario of non-model sUAS forecast, we knowledge exam passed and obtained an project RPCs in the above graph. As evident, RPC. The RPC forecasts presented are RPCs are set to experience tremendous based on two data sources: (a) trends in growth following the growth trends of the RPCs issued; and (b) trends in non-model non-model sUAS sector. Starting from the sUAS registration and fleet forecasts. For base of 73,673 RPCs in 2017, non-model ac- projecting RPCs, we assume that one pilot is tivities may require over 300,000 new remote likely to handle 1.5 units of non-model sUAS. pilots in 5 years, providing tremendous opportunities for growth in employment associated with commercial activities of the UAS.

Forecast Uncertainties

The forecasts in this document are forecasts International Monetary Fund (IMF) also sees of aviation demand, driven by models built on oil prices increasing at more moderate rates forecasts of economic activity. There are than the FAA’s base forecast. In its July many assumptions in both the economic 2017 release, the IMF forecast had oil prices forecasts and in the FAA models that could increasing from $49 per barrel in 2017 to only affect the degree to which these forecasts $54.80 per barrel by 2022. Over the long are realized. This year’s forecast is powered, run, lower oil prices give consumers an im- at least in the short-term, by a number of fac- petus for additional spending, including air tors including the strength of the U.S. and travel, and should enhance industry profita- global economies. Shifting international dy- bility. namics and impacts resulting from the U.S. administration’s economic policies could The baseline forecast incorporates the De- drive further changes. Also, as numerous in- cember 2017 U.S. tax cuts and some addi- cidents in the past few years remind us, ter- tional infrastructure spending in 2018 and rorism remains among the greatest world- beyond. However, there is considerable un- wide risks to aviation growth. Any terrorist certainty as to the magnitude, timing, and na- incident aimed at aviation could have an im- ture of these programs that ultimately deter- mediate and significant impact on the de- mines the impact on the future growth of the mand for aviation services that could be U.S. economy. In addition, how the U.S. will greater than its impact on overall economic engage with the rest of the global economy activity. over the next several years continues to be evolve. Under the right conditions, a period Although oil prices remained below $50 per of sustained high and more inclusive growth barrel for most of 2017, the recent volatility along with increased financial stability could reminds us there is still considerable uncer- occur but there is also the possibility of an tainty as to the future direction of oil prices. outcome that leads to greater global eco- The FAA’s baseline forecast (derived from nomic fragmentation, slower growth, and in- economic assumptions in IHS Global In- creased financial instability. sight’s January 2018 U.S. macro forecast and 30-Year Focus released during the The baseline forecast assumes that global fourth quarter of 2017) calls for oil prices to economic growth will accelerate after 2017, increase to $54 per barrel in 2018 and rise but weakness in certain regions may steadily after 2020. By 2030 oil prices ex- threaten the strength and sustainability of the ceed $100 per barrel and approach $120 per expansion. The baseline forecast assumes barrel by the end of the forecast period in that China and India will be growth engines 2038. Some forecasters are calling for a for emerging economies as China success- more gradual rebound in the price of oil. In fully transitions the economy from reliance October 2017, the World Bank released its on heavy manufacturing and resource indus- latest commodity price forecast. The fore- tries to one more oriented towards the ser- cast calls for oil prices to rise to $56 per bar- vices and technology sectors and India con- rel in 2018, remaining below $65 until 2025, tinues to implement reforms to make its and reaching $70 per barrel by 2030. The economy more competitive. While economic

growth appears to be accelerating in the The forecast assumes the addition of sizable U.S., there are concerns about the strength numbers of large regional jets (70 to 90 of demand in Japan and in the European Un- seats) into the fleet of regional carriers. How- ion as these areas continue to be con- ever, network carrier consolidation and new strained by structural economic problems rules on pilot training have left regional carri- (high debt, slow population growth, weak ers saddled with either excess capacity or a public finances for example) and the out- lack of pilots. Although air travel demand come of political elections. Furthermore, the continues to recover, the bankruptcy filing of actions taken to stabilize the global economy Republic Airlines in February 2016 is a re- during the Great Recession continue to ham- minder that financial pressures on regional per economic policy makers. There are con- operators have not abated. Network carriers cerns that central banks may not raise inter- continue to adjust the size and breadth of est rates in time to contain asset bubbles and their networks. In many cases there are not inflationary expectations or raise rates too opportunities for regional carriers to backfill fast and undermine the recovery. In ad- the loss of the mainline service. Delta is well vanced economies, governments need to along in its plans to reduce its small (read 50 shore up their finances and recent actions seat) regional jet fleet and plans to retire an- have many analysts concerned that policy other 50 to bring its total to just 125 by 2018, makers will not take the steps needed. There down from almost 500 at the end of 2009. exists a non-trivial possibility that authorities United has reduced the number of small re- will either act prematurely or be excessively gional jets flown by its partners from an esti- timid and late in taking necessary steps to mated 380 in 2012 to 256 by the end of 2017. maintain a healthy global economy. The cur- However, it plans to add 40 more small re- rent forecasts assume strong passenger gional jets to its fleet in 2018 as part of its growth for travel between the United States latest expansion plan. Meanwhile American and other world regions. Any slowing of has trimmed its small regional jet fleet by 90 worldwide economic activity could seriously aircraft since the beginning of 2015 from 297 inhibit the growth in global passenger de- to 207 aircraft and has plans to reduce an ad- mand. ditional 5 aircraft in 2018. At the same time the carrier plans to add 15 larger regional jets With the approval of the Alaska Airlines/Vir- to its fleet in 2018, on top of the 86 that have gin America merger, the outlook for further been added since 2015. While these actions consolidation via mergers and acquisitions may provide some opportunities for well po- (M&A) appears to be rather limited. Based sitioned regional carriers, the overall impact on FY 2017 data, the top 6 (American, Delta, of consolidation so far has been to reduce United, Southwest) plus Alaska/Virgin and opportunities for regional flying substantially. JetBlue accounted for more than 85% of the U.S. airline industry capacity and traffic. For After suffering through a significant down- many low cost carriers, the sheer size of mer- turn in 2009, business and corporate aviation ger transactions or the amount of risk asso- have seen a partial recovery during the past ciated with a merger makes further merger eight years. The future pace of the recovery activity unlikely. For the network carriers, it in business and corporate aviation is based is unclear how regulatory authorities will re- largely upon the prospects for economic spond to any future proposed mergers. growth and corporate profits. Uncertainty in

47 these leading indicators poses a risk to the increases in the numbers of regional jets and forecast, but the risk is not limited to these business jets as well as the anticipated wide- factors. Other influences, such as potential spread deployment of UAS into the national environmental regulations and taxes do not airspace system will make the FAA’s job seem to be as much of a concern in the short more challenging. This change in the mix of term, but over the long term, uncertainties aircraft will most likely add to workload above about the direction of these influences may and beyond the increasing demand for avia- place downward pressure on the forecast. tion services resulting from the growth in op- On the other hand, there could be a pent-up erations over the forecast period. demand for business jets in the near term that could push the forecast higher. While While overall activity at FAA and contract corporate profits have been high for several towers increased 0.7 percent in 2017, activity years, perceived economic and political un- at large and medium hub airports (60 in total) certainties have caused companies to post- increased 0.4 percent in 2017 and delays re- pone their purchase of new business aircraft. mained at historically high levels at many With the U.S. administration’s emphasis on U.S. airports. FAA forecasts operations at policies designed to stimulate economic these airports to grow substantially faster growth and limit regulation, and the favorable than the overall national trend. As demand terms of the new tax law, companies are feel- continues to grow and workload increases, ing more optimistic about their future pro- congestion and delays could become critical spects that can translate into additional busi- limits to growth over the forecast period. ness jet sales. The impact of fuel price FAA’s forecasts of both demand and opera- movements on business aircraft demand is tions are unconstrained in that they assume also uncertain. Overall, the positive effect of that there will be sufficient infrastructure to declining fuel prices on corporate profits handle the projected levels of activity. translates to increased demand for business Should the infrastructure be inadequate and aircraft. However, business aircraft demand result in even more congestion and delays, it from energy related industries will be nega- is likely that the forecasts of both demand tively impacted if fuel prices remain low (by and operations would not be achieved. historic standards) for an extended period in Increasing concerns about aviation environ- the future. mental impacts could potentially limit or de- Other factors, such as new and more efficient lay the ability of the aviation sector to grow to product offerings and increased competition meet national economic and mobility needs. from new entrant manufacturers, serve to Airspace modernization and airport expan- broaden the potential of the industry. Rais- sion or new construction are often conten- ing the level of security restrictions, and the tious because of concerns over noise, air subsequent travel hassles placed on airline quality, and water quality. Community con- passengers, could make corporate jet travel cerns about aviation noise have led to in- look increasingly appealing. creasing levels of public debate, political interest, and even litigation. Without effective Not only is the volume of aircraft operating at measures to mitigate and abate aviation most large hubs expected to increase over noise, the infrastructure projects needed to the next 20 years, but the mix of aircraft is achieve aviation growth may be delayed. changing for this same period. The expected

The environmental noise and emissions is- tions around the world. Continued advance- sues associated with overflight operations ments in technologies that result in improved also present global challenges. In addition to fuel efficiency, reduced fuel consumption, providing economic benefits, technologies to noise reduction and reduced emissions are improve aircraft fuel efficiency and reduce also required to ensure that access re- fuel consumption provide benefits in terms of strictions or operating limitations are not im- reduced noise and emissions. A global mar- posed on the in-service fleet, which in turn ket-based measure for international carbon may depress growth. dioxide emissions will help ensure an approach that is economically preferable to a patchwork of State or Regional-level regula-

Appendix A: Alternative Forecast Scenarios

Uncertainty exists in all industries, but espe- lus to both sectors. Oil prices remain rela- cially in the commercial air travel industry. tively low by historic standards and there are As volatility in the global environment has in- no external shocks. creased, the importance of scenarios for planning purposes has increased. In order The FAA’s high case forecast uses IHS to help stakeholders better prepare for the fu- Global Insight’s optimistic forecast. The op- ture, the FAA provides alternative scenarios timistic forecast sees stronger overall growth to our baseline forecasts of airline traffic and driven initially by a recovery in the housing capacity. market. After struggling in 2017, household formation rates recover, leading to increased To create the baseline domestic forecast, residential investment and consumer spend- economic assumptions from IHS Global In- ing. Higher business investment generates sight’s 10-year and 30-year U.S. Macro stronger productivity growth, which com- Baselines were used. To develop the alter- bines with lower oil prices to restrain wage native scenarios, assumptions from IHS and price pressures. Confidence is high and Global Insight’s 10-year optimistic and pessi- the stock market sees strong gains while in- mistic forecasts from their January 2018 terest rates remain slightly lower than in the Baseline U.S. Economic Outlook were com- baseline scenario. Stronger imports accom- bined with the optimistic and pessimistic pany the increased domestic demand but ex- forecasts from their Fall 2017 30-year U.S. ports rise as well with improving foreign eco- Macro forecast. Inputs from these alterna- nomic conditions. tive scenarios were used to create a “high” In this scenario, real personal consumption and “low” traffic, capacity, and yield forecast. expenditure (PCE) per capita growth averages 0.6 percentage points faster per year International passengers and traffic are primarily driven by country specific Gross Do- mestic Product (GDP) forecasts provided by IHS Global Insight. Thus, the alternative scenarios use inputs based on ratios derived from IHS Global Insight’s Major Trading Part- ner and Other Important Trading Partners optimistic and pessimistic forecasts in order to create a high and low case.

Scenario Assumptions The FAA’s domestic baseline forecast assumes that economic growth remains solid over the next few years as both consumer and business spending provide support. Re- cent tax cuts result in some near-term stimu-

than the baseline forecast and unemploy- and consumer spending as well, adding to ment averages 0.7 points lower on a fiscal the drag on the economy and the stock mar- year basis than the baseline.8 ket falls sharply. Monetary policy effectively lowers short-term interest rates, which pro- Conversely, FAA’s low case forecast uses vides support to the economy, bringing it out IHS Global Insight’s pessimistic scenario. In of recession and boosting it slightly above this forecast, contraction of an overheated the baseline for a few subsequent years. Oil commercial real estate market combined prices rise faster than the baseline through- with a shock to confidence ends the long- out the forecast. running expansion. The economy suffers a two-quarter recession in the second half of Real PCE per capita in this scenario grows 2018 and GDP growth averages 0.3 percent- 0.4 percentage points slower per year than in age points lower than in the baseline over the the baseline; and unemployment, on aver- first ten years of the forecast. Long-term in- age, is 0.4 points higher on an annual basis terest rates rise, derailing the housing recov- than in the baseline. ery and pushing residential investment 9.0 percentage points below the baseline in the first two years of the forecast. The higher interest rates constrain business investment

8 Real personal consumption expenditure per capita and unemployment are used as input variables to the FAA’s base, high and low forecasts of enplanements.

Real Personal Consumption Expenditure per Capita 3.5

3.0

2.5

2.0

1.5

1.0

0.5 Annual Change Percent Annual - 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic Source: IHS Global Insight

U.S. Population 390 380 370 360 350 340 330 320

Population ( millions) 310 300 290 2017 2018 2022 2026 2030 2034 2038 Fiscal Year Pessimistic Baseline Optimistic

Source: IHS Global Insight

U.S. Unemployment Rate 5.5

5.0

4.5

4.0

% Unemployed % 3.5

3.0 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic Source: IHS Global Insight

U.S. Refiners' Acquisition Cost 200 180 160 140 120 100 80 60

Price per Barrel($) 40 20 - 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic Source: IHS Global Insight

The price of energy is one of the drivers in goods prices causing the optimistic CPI to the growth of consumer prices over the fore- rise similarly to the baseline. In the pessimis- cast period. In the optimistic case, slow tic case, energy prices, wages and import growth of energy prices and import prices prices all rise more rapidly compared to the counteracts faster growth of other consumer baseline.

Consumer Price Index - All Urban Consumers 2.0

1.8

1.6

1.4

1.2

Index Value (2017 = 1) 1.0

0.8 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic

Source: IHS Global Insight

Alternative Forecasts

Enplanements In the baseline forecast, system enplane- the baseline, totaling 1.4 billion, 158 million ments are forecast to grow at an average an- greater than in the baseline. nual rate of 1.9 percent a year over the forecast horizon of 2018-2038 (with domestic The pessimistic case is characterized by a and international passengers increasing at period of weakened consumer confidence rates of 1.7 and 3.3 percent, respectively). combined with a contraction in the commercial real estate market, leading to higher in- In the optimistic case, enplanements grow at terest rates, and curtailed investment and a quicker pace, averaging 2.5 percent per spending. In this scenario, enplanements year (up 2.3 percent domestically and 3.4 grow an average of 1.6 percent per year (do- percent internationally). This scenario is mestic up 1.4 percent and international up marked by a more favorable business envi- 3.2 percent). In the pessimistic case, system ronment and lower fuel prices which make passengers in 2038 are 6.4 percent below the price of flying more affordable to busi- the baseline case, totaling 1.2 billion, or 82 ness and leisure travelers. By the end of the million fewer than in the baseline. forecast period in 2038, system passengers in the optimistic case are 12.3 percent above

System Enplanements 6.0

5.0

4.0

3.0

2.0

1.0 Annual Annual Percent Change - 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic

Revenue Passenger Miles In the baseline forecast, system RPMs grow growth averaging 2.9 percent per year (do- at an average annual rate of 2.4 percent a mestic and international RPMs up 2.6 and year over the forecast horizon (2018-2038), 3.5 percent, respectively). with domestic RPMs increasing 2.0 percent annually and international RPMs growing 3.2 In the pessimistic case, the combination of a percent annually. slower growing economy and higher energy prices result in RPM growth averaging 2.1 In the optimistic case, the faster growing percent annually with domestic markets economy coupled with lower energy prices growing 1.6 percent a year while interna- drives RPMs higher than the baseline, with tional traffic grows 3.1 percent annually.

System Revenue Passenger Miles 6.0

5.0

4.0

3.0

2.0

Annual Annual Percent Change 1.0

- 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year

Pessimistic Baseline Optimistic

Available Seat Miles In the base case, system capacity is forecast In the optimistic case, capacity grows at a to increase an average of 2.3 percent annu- faster clip than in the baseline forecast, aver- ally over the forecast horizon with growth av- aging 2.8 percent annually system-wide (2.5 eraging 1.9 percent annually in domestic and 3.5 percent for domestic and interna- markets and 3.2 percent a year in international markets, respectively). Carriers in- tional markets. crease capacity compared to the baseline forecast to accommodate increased travel

56 demand brought about by a more favorable annually (domestic growth of 1.5 percent an- economic environment. nually and international up 3.1 percent annually). In the pessimistic case, demand for air travel is lower than in the baseline, thus system capacity grows at a slower pace of 2.0 percent

System Available Seat Miles 6.0

5.0

4.0

3.0

2.0

1.0 Annual Annual Percent Change - 2017 2020 2023 2026 2029 2032 2035 2038 Fiscal Year Pessimistic Baseline Optimistic

Load Factor System load factors over the 20-year fore- percent in all three scenarios, optimistic, pes- cast period are relatively similar for all three simistic and baseline. forecast scenarios. System load factor rises from 83.7 percent in 2018 to 84.8 (optimistic), The international load factor is forecast to 84.7 (pessimistic), and 84.7 (baseline) per- hold steady near 81.1 throughout the period cent in 2038, respectively. in the optimistic scenario and rise slightly to 81.2 percent in the pessimistic and baseline In all three scenarios it is assumed that car- scenarios. This reflects in part the relative riers will keep load factors on the high side growth in demand and capacity in the three by actively managing capacity (seats) to (Atlantic, Latin, and Pacific) international re- more precisely meet demand (passengers). gions under each scenario.

The domestic load factor increases over the forecast horizon from 84.7 percent to 86.6

Yield In the baseline forecast, nominal system due to advancements in technology, gains in yield increases 1.9 percent annually, going productivity, and relatively favorable fuel from 13.48 cents in 2018 to 19.82 cents in prices. 2038. In domestic markets, yield in the baseline forecast rises from 13.64 cents in 2018 In the pessimistic case, nominal yields rise to 20.34 cents in 2038. International yield more rapidly than in the baseline, growing an rises from 13.06 cents in 2018 to 18.79 cents average of 2.5 percent annually, reaching in 2038. 22.08 cents by 2038 (23.79 cents domestically and 18.80 cents internationally). This System yield rises in the optimistic case at scenario reflects higher general domestic in- the same rate as in the baseline, up 1.9 per- flation and higher energy prices than in the cent annually to 19.71 cents by 2038. Do- baseline, forcing carriers to increase fares in mestic yield increases to 20.14 cents while order to cover the higher costs of fuel, labor, international yield increases to 18.78 cents. and capital. The modest growth in yield in both cases is

PERCENT AVERAGE ANNUAL GROWTH ANNUAL AVERAGE PERCENT FORECAST TABLE A-1 TABLE FISCAL YEARS 2017-2038 YEARS FISCAL FAA FORECAST ECONOMIC ASSUMPTIONS 4.5 4.2 5.1 5.0 4.6 4.5 -6.5% 3.9% 1.8% 0.6% 0.4% 4.54.5 4.0 4.0 4.4 3.9 4.8 4.0 4.7 4.0 4.6 3.9 -12.1% -12.4% 2.1% -0.3% 1.9% 0.0% 1.2% 0.0% 0.7% 0.0% 48.5 53.82.44 86.7 2.48 117.0 2.80 147.3 182.2 3.21 10.9% 3.83 10.0% 4.60 8.1% 1.8% 6.9% 2.4% 6.3% 2.6% 2.9% 3.1% 48.1 51.52.44 75.12.44 2.48 92.5 2.49 2.79 106.3 2.84 3.16 118.1 3.22 3.57 6.9% 3.61 7.8% 4.03 4.05 6.0% 1.9% 2.3% 5.0% 2.4% 2.6% 4.2% 2.4% 2.6% 2.5% 2.5% 2.4% 2.5% 48.1 46.6 64.3 80.4 85.8 91.6 -3.2% 6.6% 5.6% 4.2% 3.4% 2017E 2018 2023 2028 2033 2038 2017-18 2018-23 2018-28 2018-33 2018-38 36,30836,294 36,88536,292 36,990 38,929 37,058 39,769 41,802 41,713 42,622 44,493 45,529 46,020 47,036 49,723 49,684 1.6% 54,553 1.9% 2.1% 1.1% 1.5% 2.4% 1.3% 1.4% 2.1% 1.3% 1.5% 2.0% 1.2% 1.5% 2.0% Historical Scenario Pessimistic Baseline Optimistic Pessimistic Pessimistic Baseline Baseline Optimistic Optimistic

Pessimistic Baseline Optimistic Variable Economic Assumptions Economic Consumption Personal Real - Cost Acquisition Refiners Index Price Consumer Rate Unemployment Civilian Expenditure per Capita per Expenditure (2009 $) Average - $ Per BarrelAverage Per $ - All Urban, 1982-84 = 1.0

Source: IHS Global Insight Source: (%)

9% 2.1% 2.1% 2.1% 8% 2.0% 2.1% 2.0% 4% 0.8% 0.9% 0.9% PERCENT AVERAGE ANNUAL GROWTH ANNUAL AVERAGE PERCENT 18 2018-23 2018-28 2018-33 2018-38 TABLE A-2 TABLE FORECAST FISCAL YEARS 2017-2038 YEARS FISCAL

FAA FORECAST OF AVIATION ACTIVITY* 954.6 995.3 1,096.1 1,227.5 1,364.8 1,503.6 4.3% 1. 2017E 2018 2023 2028 2033 2038 2017- 954.6954.6 1,001.3 1,004.9840.4 1,128.4840.4 1,191.0 1,258.2 873.9840.4 1,356.9 1,416.8 879.9 931.5 1,547.0 883.6 1,596.0 963.5 1,769.6 1,020.1 1,025.5 4.9% 1,049.5 1,112.7 1,143.6 5.3% 1,159.4 1,201.8 2.4% 1,280.4 1,283.7 3.5% 1,441.6 4.0% 2.3% 4.7% 3.0% 5.1% 1.3% 2.3% 1.8% 2.9% 3.0% 1.6% 2.4% 1.8% 2.9% 2.6% 1.6% 1.9% 2.5% 1.6% 1.9% 2.5% 13.4213.42 13.4813.42 13.48 15.09 13.52 14.98 16.91 15.10 16.52 19.32 16.71 18.15 22.08 18.15 19.82 0.4% 19.71 0.4% 0.7% 2.3% 2.1% 2.2% 2.3% 2.1% 2.1% 2.4% 2.0% 2.0% 2.5% 1.9% 1.9% 1,143.7 1,189.5 1,301.7 1,453.0 1,612.9 1,775.9 4.0% 1. 9,010.2 9,207.5 9,402.0 9,962.4 10,533.6 11,033.6 2.2% 0. 7,411.77,411.7 7,646.37,411.7 7,695.8 8,097.8 7,725.5 8,355.1 8,839.6 8,852.6 9,076.0 9,626.1 9,832.5 10,009.1 10,395.7 11,062.7 10,981.7 12,330.8 3.2% 3.8% 4.2% 1.2% 1.7% 2.8% 1.5% 1.7% 2.4% 1.5% 1.8% 2.4% 1.5% 1.8% 2.4% 1,143.71,143.7 1,196.6 1,200.9 1,339.6 1,413.1 1,489.0 1,604.5 1,673.9 1,826.1 1,883.9 2,086.6 4.6% 5.0% 2.3% 3.3% 2.2% 2.9% 2.3%9,010.2 2.8%9,010.2 9,266.7 2.3% 9,284.7 9,712.3 2.8% 10,325.0 10,214.9 11,130.1 10,932.6 12,060.4 11,740.0 13,167.6 2.8% 3.0% 0.9% 2.1% 1.0% 1.8% 1.1% 1.8% 1.2% 1.8% Historical Scenario Pessimistic Pessimistic Pessimistic

Baseline Optimistic Pessimistic Baseline Optimistic Pessimistic Baseline Optimistic Baseline Optimistic Baseline Optimistic Pessimistic Baseline Optimistic Variable System Aviation Activity Aviation System Miles Seat Available Revenue Passenger Miles CarrierPsgr Departures (BIL) Enplanements (MIL) Flown Miles Carrier Psgr (MIL) (BIL) (000s) Yield Passenger Nominal (cents) * Includes domestic and international activity. international domestic and Includes *

3% 1.6% 1.7% 1.6% 2% 0.6% 0.7% 0.7% 1% 1.4% 1.5% 1.5% PERCENT AVERAGE ANNUAL GROWTH ANNUAL AVERAGE PERCENT 18 2018-23 2018-28 2018-33 2018-38 TABLE A-3 TABLE FORECAST FISCAL YEARS 2017-2038 YEARS FISCAL

FAA FORECAST OF DOMESTIC AVIATION ACTIVITY 809.0 842.2683.3 890.1 713.8 971.6 1,058.7 762.5 1,140.5 837.0 4.1% 915.1 1. 987.8 4.5% 1. 2017E 2018 2023 2028 2033 2038 2017- 683.3683.3 719.2743.5 722.4743.5 791.7 772.2743.5 848.2 778.1 863.9 813.1 781.7 950.1 844.3 957.8 1,069.5 880.7 904.6 1,063.7 909.1 1,211.0 950.2 999.8 5.2% 994.6 5.7% 1,012.1 1110.7 1,089.9 1.9% 1,240.9 3.3% 3.9%13.63 4.7%13.63 1.9% 5.1% 13.64 2.8% 1.0%13.63 13.64 1.6% 1.9% 3.0% 15.44 13.70 2.7% 1.3% 15.28 1.6% 17.49 2.0% 2.5% 15.43 2.6% 1.4% 16.92 1.6% 20.36 17.16 2.4% 1.4% 18.60 1.7% 23.79 18.58 2.3% 20.34 20.14 0.1% 0.1% 0.5% 2.5% 2.3% 2.4% 2.5% 2.2% 2.3% 2.7% 2.1% 2.1% 2.8% 2.0% 1.9% 809.0809.0 848.6 852.5 924.2 990.2 1,002.8 1,102.9 1,108.1 1,237.4 1,228.1 1,398.3 4.9% 5.4% 1.7% 3.0% 1.7% 2.6% 1.8% 2.5% 1.9% 2.5% 8,328.6 8,494.9 8,590.1 9,023.5 9,454.4 9,788.1 2.0% 0. 5,867.05,867.0 6,043.95,867.0 6,090.4 6,223.1 6,118.2 6,463.7 6,662.4 6,927.88,328.6 6,878.8 7,134.78,328.6 7,569.1 8,553.1 7,470.1 7,556.2 8,570.6 8,346.6 8,893.8 8,140.1 9,492.9 3.0% 9,273.8 9,268.9 3.8% 10,159.9 9,838.3 10,932.6 4.3% 0.6% 10,468.2 11,850.2 1.2% 2.5% 1.0% 2.7% 2.9% 1.2% 2.2% 1.1% 0.8% 2.1% 1.4% 2.1% 1.1% 0.8% 1.7% 1.5% 2.1% 0.9% 1.6% 1.0% 1.6% Historical Scenario Pessimistic Pessimistic Pessimistic

Baseline Optimistic Pessimistic Baseline Optimistic Pessimistic Baseline Optimistic Baseline Optimistic Pessimistic Baseline Optimistic Baseline Optimistic Variable Domestic Aviation Activity Aviation Domestic Miles Seat Available Revenue Passenger Miles CarrierPsgr Departures (BIL) Enplanements (MIL) Flown Miles Carrier Psgr (MIL) (000s) Yield Passenger Nominal (cents) (BIL)

PERCENT AVERAGE ANNUAL GROWTH ANNUAL AVERAGE PERCENT 18 2018-23 2018-28 2018-33 2018-38 3.8% 3.5% 3.3% 3.2% 3.1% 4.0%4.1% 3.6% 3.9% 3.4% 3.7% 3.3% 3.6% 3.2% 3.5% 4.9% 3.1% 3.2% 3.2% 3.2% 5.0%5.1% 3.2% 3.5% 3.3% 3.5% 3.3% 3.5% 3.3% 3.4% 3.7% 3.2% 3.1% 3.0% 2.9% 3.9% 3.3% 3.2% 3.1% 3.0% 4.0% 3.7% 3.5% 3.4% 3.3% 3.8% 3.5% 3.3% 3.2% 3.1% 4.5% 2.6% 2.8% 2.8% 2.8% 4.0%4.1% 3.6% 4.0% 3.4% 3.7% 3.3% 3.6% 3.2% 3.5% 4.7%4.8% 2.8% 3.1% 2.9% 3.1% 2.9% 3.1% 2.9% 3.1% 1.3% 1.8% 1.8% 1.9% 1.8% 1.3%1.3% 1.8% 1.8% 1.8% 1.8% 1.9% 1.8% 1.8% 1.8% 515.8 532.3 558.6 189.6 193.7 200.6 635.3 655.7 688.3 18.80 18.79 18.78 2,839.4 2,922.6 3,057.1 1,245.5 1,271.8 1,317.4

449.7 459.0 477.5 162.5 164.9 169.7 554.2 565.8 588.7 17.20 17.20 17.19 2,491.3 2,539.0 2,635.1 1,079.2 1,094.3 1,127.8

390.4 394.3 406.7 139.4 140.4 143.8 481.4 938.9 486.2 501.7 946.0 970.2 15.67 15.66 15.66 2,177.2 2,197.2 2,263.4

FORECAST TABLE A-4 TABLE 6 6 9 336.7 342.8 118.4 119.2 120.9 333. 811. 415.4 423.0 818.6 832.1 14.28 14.27 14.26 411. 1,874.7 1,891.4 1,924.9

FISCAL YEARS 2017-2038 YEARS FISCAL

282.1 282.5 101.7 101.8 101.9 281.5 712.6 348.0 713.6 348.5 714.2 13.06 13.06 13.06 347.3 1,602.4 1,605.4 1,607.3

96.9 96.9 96.9 271.3 271.3 271.3 681.6 334.7 681.6 334.7 681.6 12.89 12.89 12.89 334.7 1,544.8 1,544.8 1,544.8 2017E 2018 2023 2028 2033 2038 2017- FAA FORECAST OF INTERNATIONAL AVIATION ACTIVITY*

Historical Scenario Baseline Optimistic Pessimistic Baseline Optimistic Pessimistic Baseline Optimistic Pessimistic Pessimistic

Baseline Baseline Optimistic Optimistic Pessimistic Baseline Optimistic Pessimistic Variable *Includes mainline and regional carriers. regional and mainline *Includes (BIL) Enplanements (MIL) Psgr Carrier Miles Flown Miles Carrier Psgr (MIL)

International Aviation International Aviation Activity Revenue Passenger Miles CarrierPsgr Departures (BIL) (000s) Nominal Passenger Yield Passenger Nominal (cents) Available Seat Miles Seat Available

Appendix B: FAA Forecast Accuracy

Forecasts, by their nature, have a degree of prepared for the period examined were de- uncertainty incorporated in them. They in- veloped while the U.S. airline industry was volve not only statistical analyses and vari- going through upheaval, the FAA’s forecast ous scientific methods, but also judgment methodology remained consistent during this and reliance on industry knowledge and the time. For this reason, inclusion of prior peri- forecaster’s experience to incorporate indus- ods in an analysis of forecast variance might try trends not yet reflected in recent results. lead to inconclusive or inaccurate implica- The FAA’s annual Aerospace Forecast is no tions about the accuracy of FAA’s current exception. Given the volatile nature of the forecast methodology. U.S. airline industry, it is not surprising that each year’s forecast would contain a certain The table below contains the mean absolute degree of forecast variance. Therefore, FAA percent errors for the projected values ver- forecasters have tried to build forecast mod- sus the actual results for U.S. carriers’ sys- els that give a consistent and predictable pat- tem operations along with the projected val- tern of results. Analysts relying on the fore- ues versus actual results for U.S. GDP. casts produced by the models would then be Each metric has five values showing the rel- able to adjust for the predictable variance ative forecast variance by the number of from actual results. years in advance the preparation of the forecast took place. For example, the “3 Years” The table below presents an analysis of the column for ASMs shows that the mean abso- variance from historical results for a primary lute percent error was 5.3 percent for ASM forecast assumption along with five key fore- forecasts prepared 3 years in advance. For cast metrics during the FY 2010-2017 fore- the period under examination, preparation of cast period. Although many of the forecasts the forecasts for FY 2010 through FY 2017 occurred in FY 2006 through FY 2016. 9

9 It should be noted that the first forecasted year is FY 2010, and the third forecasted year is FY for each respective fiscal year is that very same 2012. year. Therefore, FY 2010’s first forecasted year

Presenting forecast variances from actual in the exogenous variables. Second, all the data in such a manner simplifies a review of metrics examined have increasing variances longer-term trends. Typically, one would ex- as the forecast time horizon lengthens. pect the variances to increase as the forecast Third, the variance in the IFR aircraft handled year is moves away from the year the fore- relative to ASM variance is stable for the 2 to cast is prepared. Presenting forecast vari- 4 year out horizon. This suggests that be- ances in this way allows an examination of yond a 2 year forecast horizon carriers are changes in the relative variances by time able to accommodate changes in capacity by horizon, signaling when dramatic shifts in ac- means other than adjusting operations. curacy occur. Many carriers have been systematically re- ducing the number of smaller regional jets in Examination of the forecast variances re- their fleets, replacing them with larger 70-90 veals several items. First, the forecast vari- seat aircraft. This has allowed carriers to in- ances for GDP, a key exogenous variable, crease capacity without increasing flights. It are similar to the variances of the key traffic is worth noting that the forecast variance in measures, Passenger Enplanements and these two metrics is relatively consistent RPMs. This suggests that a substantial even as the time horizon increases suggest- amount of the forecast variance for the traffic ing that over the long run ASM growth is a variables is attributable to the forecast error good indicator of operations growth.

Appendix C: Forecast Tables

FISCAL YEAR 2019

FISCAL YEAR 2018 TABLE 1 U.S. SHORT-TERM ECONOMIC FORECASTS FISCAL YEAR 2017

2.3% 1.3% 2.6% 1.4%3.0% 2.2% 3.1% 1.9% -0.3% 2.0% 2.0% 1.8% 3.5% 1.7% 1.6% 1.7% 0.4% 1.6% 1.7% 1.6% 1.7% 1.8% 2.5% 2.0% 46.52 49.96 47.66242.2 48.43 244.1 54.10 243.9 52.85 245.2 50.09 247.3 48.90 248.2 48.35 248.5 48.44 249.5 50.69 250.6 49.65 251.7 253.3 254.6 38.4% 33.0% -17.2% 6.7% 55.7% -8.9% -19.3% -9.1% -4.5% 0.8% 19.8% -7.9% 36,059 36,178 36,407 36,530 36,727 36,902 37,082 37,246 37,404 37,562 37,713 37,865 1ST. QTR.1ST. QTR. 2ND. QTR. 3RD QTR. 4TH. QTR. 1ST. QTR. 2ND. QTR. 3RD QTR. 4TH. QTR. 1ST. QTR. 2ND. QTR. 3RD QTR. 4TH. ECONOMIC VARIABLE Source: IHS Global Insight Source: Real Personal Consumption Consumption Personal Real Capita per Expenditure (2009 $) Year over year change Cost Acquisition Average - Refiners' barrel) per (Dollars Year over year change Index Price Consumer (1982-84 equals 100) Annual Rate Adjusted Seasonally

6.9% 6.0% 4.2% 74.61 56.69 39.12 48.14 51.48 75.12 92.53 -6.1% 118.15 106.28 AVERAGE REFINERS' ACQUISITION COST (Dollars per barrel) per (Dollars 03 2.17 2.37 2.39 2.44 2.48 2.79 3.16 3.57 4. 1.7% 1.9% 2.4% 2.4% INDEX (1982-84=1.00) CONSUMER PRICE PRICE CONSUMER 1.7% 1.9% 1.4% 1.5% 32,186 34,842 35,565 36,294 36,990 39,769 42,617 46,014 49,678 TABLE 2 (2009 $) CONSUMPTION REAL PERSONAL EXPENDITURE PER CAPITA PER EXPENDITURE U.S. LONG-TERM ECONOMIC FORECASTS 2.1% 2.6% 2.0% 2.0% 14,685 16,390 16,640 16,987 17,433 19,344 21,188 23,379 25,840 REAL GROSS (Billions 2009 $) DOMESTIC PRODUCT 2015 2016 2017E FISCAL YEAR Historical 2010 2023 2028 2033 Forecast 2018 Avg Annual Growth 2010-17 2038 2017-18 2018-28 2018-38 Source: IHS Global Insight Source:

2.8% 3.2% 2.9% 2.8% 77,341 79,737 65,935 75,537 82,275 95,466 WORLD 4.6% 4.6% 4.3% 3.8% 24,978 26,165 19,056 23,925 27,380 34,071 41,75649,66558,186 109,954 125,382 142,187 ZEALAND OTHER ASIA / / ASIA OTHER JAPAN / PACIFIC PACIFIC / JAPAN BASIN / CHINA / AUSTRALIA / NEW NEW / AUSTRALIA 1.5% 1.9% 3.0% 3.0% 5,788 5,715 5,204 5,790 5,897 6,824 7,942 9,230 MEXICO CARIBBEAN / LATIN AMERICA / / AMERICA LATIN GROSS DOMESTIC PRODUCT TABLE 3 (In Billions of 2010 U.S. Dollars) U.S. 2010 of Billions (In 1.9% 2.5% 2.2% 2.1% 28,601 27,900 25,097 27,347 29,309 32,756 36,351 40,114 44,143 10,729 AFRICA / / AFRICA EUROPE / EUROPE MIDDLE EAST 828 2.2% 2.4% 2.0% 2.0% 1,882 1,614 1,803 1, 1,928 2,141 2,358 2,588 2,845 CANADA INTERNATIONAL REGION GDP FORECASTS BY TRAVEL 2017E CALENDAR YEAR CALENDAR Monthly) Forecast, (Interim Components Tables GDP Global Insight website, Source: 2010-17 2017-18 2018-28 2018-38 Historical 2010 2015 2016 Avg Annual Growth Forecast 2018 2023 2028 2033 2038

4.7% 5.7% 6.6% 7.6% 6,082 8,885 9,483 CHINA 10,132 10,798 14,509 18,781 22,917 27,170 0.8% 0.9% 1.2% 1.1% 5,701 5,998 6,054 6,162 6,239 6,517 6,838 7,117 7,369 JAPAN 1.8% 1.8% 1.2% 2.0% UNITED SELECTED AREAS/COUNTRIESSELECTED

KINGDOM GROSS DOMESTIC PRODUCT TABLE 4 (In Billions of 2010 U.S. Dollars) U.S. 2010 of Billions (In 1.4% 1.5% 2.3% 1.2% EUROZONE 2.0% 2.0% 2.6% 2.1% 17,63619,70020,00520,467 12,634 13,136 13,370 13,702 2,441 2,705 2,758 2,806 21,00223,29125,59328,317 14,01931,384 15,166 16,241 17,324 2,840 18,438 3,099 3,404 3,731 4,084 NORTH (NAFTA) AMERICA AMERICA INTERNATIONAL GDP FORECASTS – CALENDAR YEAR CALENDAR 2015 2016 2017E Historical 2010 Forecast 2023 2028 2033 2038 2018 2018-38 2018-28 2017-18 Avg Annual Growth 2010-17 Source: Global Insight website, GDP Components Tables (Interim Forecast, Monthly) Forecast, (Interim Components Tables GDP Global Insight website, Source:

955 928 890 786 2.4% 2.3% 4.9% 2.8% 1,128 1,258 1,417 1,596 1,001 TOTAL 337 394 459 532 282 271 265 261 231 3.2% 3.4% 4.0% 2.3% INTERNATIONAL INTERNATIONAL 1 792 864 958 719 683 663 629 555 2.0% 1.9% 5.2% 3.0% 1,064 DOMESTIC 964 880 840 820 787 712 1.9% 1.8% 4.7% 2.4% 1,050 1,159 1,284 TOTAL TABLE 5 97 93 90 77 140 165 194 119 102 3.3% 3.3% 5.0% 3.3% U.S. COMMERCIAL CARRIERS AIR INTERNATIONAL TOTAL SCHEDULED U.S. PASSENGER TRAFFIC 909 995 844 778 743 726 696 635 1.7% 1.6% 4.7% 2.3% 1,090 DOMESTIC REVENUE PASSENGER ENPLANEMENTS (Millions) ENPLANEMENTS PASSENGER REVENUE (Billions) MILES PASSENGER REVENUE Sum ofSum U.S. Regional and Mainline Carriers. Air Source: Forms 41 and 298-C, U.S. Department of Transportation. of FormsSource: 41 Department 298-C, and U.S. 2018-38 2018-28 2017-18 Avg Annual Growth 2010-17 2028 2033 2038 2023 Forecast 2018 2017E 2016 2015 Historical 2010 FISCAL YEAR 1

% LOAD FACTOR (BIL) SYSTEM RPMs (BIL) 2.5%4.6% 2.8% 2.2% 4.9% 2.3% 2.3% 2.4% ASMs 1 % LOAD FACTOR (BIL) RPMs INTERNATIONAL (BIL) 2.5%4.0% 2.3% 3.4% 4.0% 3.2% 3.4% 3.2% ASMs TABLE 6 % LOAD FACTOR U.S. COMMERCIAL CARRIERS AIR (BIL) RPMs DOMESTIC 849924 719 792 84.7 85.7 348 415 282 337 81.1 81.1 1,197 1,340 1,001 1,128 83.7 84.2 679744783 555809 629 663 81.7 683 84.5 84.7 281 84.5 323 329 231 335 261 265 82.1 271 80.7 80.6 961 81.0 1,067 1,112 786 890 1,144 928 955 81.8 83.4 83.5 83.5 (BIL) 2.5%4.9% 3.0% 1.7% 5.2% 1.9% 1.9% 2.0% 1,0031,1081,228 864 958 1,064 86.2 86.4 86.6 486 566 656 394 459 532 81.1 81.1 81.2 1,489 1,674 1,884 1,258 1,417 1,596 84.5 84.6 84.7 ASMs SCHEDULED PASSENGER CAPACITY, TRAFFIC, AND LOAD FACTORS Sum ofSum U.S. Regional and Mainline Carriers. Air Source: Forms 41 and 298-C, U.S. Department of Transportation. of FormsSource: 41 Department 298-C, and U.S. Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Forecast 2018 2023 2028 2033 2038 Historical 2010 1 2015 2016 2017E FISCAL YEAR

261 271 282 337 394 459 532 TOTAL TOTAL INTERNATIONAL 75 77 89 101 115 130 PACIFIC 90 96 115 142 173 210 LATIN AMERICA REVENUE PASSENGER MILES PASSENGER REVENUE 1 105 87 73 265 106 109 63 59 231 107 83 71 ATLANTIC 93 97 77 90 TOTAL TOTAL TABLE 7 INTERNATIONAL 14 102 109 1618 119 140 133 151 2023 165 194 171 192 PACIFIC U.S. COMMERCIAL CARRIERS AIR LATIN AMERICA REVENUE PASSENGER ENPLANEMENTS PASSENGER REVENUE 24 55 14 25 58 14 26 62 3034 73 88 3843 106 128 25 40 13 25 52 14 0.2%3.0%2.9% 5.5%2.6% 6.9% 3.6% 1.1% 3.7% 0.8% 2.5% 2.5% 3.3% 5.0% 3.3% 3.3% -0.3% 2.5% 3.3% 5.2% 2.9% 6.2% 4.0% 3.4% 4.0% 3.4% 2.7% 2.6% 2.3% 4.0% 3.4% 3.2% (Mil) (Mil) (Mil) (Mil) (Bil) (Bil) (Bil) (Bil) TOTAL SCHEDULED U.S. INTERNATIONAL PASSENGER TRAFFIC ATLANTIC Sum ofSum U.S. Regional and Mainline Carriers. Air Source: Forms 41 and 298-C, U.S. Department of Transportation. of FormsSource: 41 Department 298-C, and U.S. 2016 2017E 2017-18 2018-28 2018-38 Avg Annual Growth 2010-17 Forecast 2018 2023 2028 2033 2038 FISCAL YEAR Historical 2010 1 2015

244 288 344 409 486 158 208 220 232 5.6% 5.2% 3.5% 3.5% TOTAL 30 36 43 50 60 22 27 28 29 4.2% 4.3% 3.5% 3.4% U.S./CANADA U.S./CANADA TRANSBORDER 43 53 64 76 89 27 36 39 41 6.2% 4.7% 4.1% 3.7% PACIFIC TABLE 8 87 99 53 75 79 82 119 145 178 6.4% 5.1% 3.2% 3.7% LATIN AMERICA TOTAL PASSENGERS BY WORLD TRAVEL AREA (Millions) AREA TRAVEL WORLD BY PASSENGERS TOTAL U.S. CARRIERS AND FOREIGN FLAG 84 99 56 70 75 79 117 137 159 5.1% 5.9% 3.4% 3.3% ATLANTIC TOTAL PASSENGER TRAFFIC TO/FROM THE UNITED STATES Avg Annual Growth 2010-17 fro also received data Commerce; of by Department released and US Customs processed Source: data Protection & Border Canada. Transport 2017-18 2018-28 2018-38 CALENDAR YEAR CALENDAR 2023 2028 2033 2038 Forecast 2018 2015 2016 2017E Historical 2010

(Miles) SYSTEM 1 L (Miles) L INTERNATIONA AVERAGE PASSENGER TRIP LENGTH TRIP PASSENGER AVERAGE (Miles) DOMESTIC SYSTEM TABLE 9 (Seats/Mile) L (Seats/Mile) L INTERNATIONA AVERAGE SEATS PER AIRCRAFT MILE AIRCRAFT PER SEATS AVERAGE 139.3143.0145.8148.3 216.8150.9 219.6 221.3 222.8 155.5 224.4 160.3 164.1 167.2 924.3 170.3 937.7 950.3 963.0 2,770.6 975.9 2,824.6 2,808.0 1,137.9 2,784.4 1,171.1 2,747.2 1,198.9 1,222.0 1,243.3 121.8131.5134.8137.9 216.4 214.8 214.8 216.7 139.7 149.0 151.5 154.3 874.8 902.7 913.2 919.1 2,988.0 2,892.6 2,833.7 1,104.2 2,798.7 1,131.0 1,132.2 1,135.9 SEATS PER AIRCRAFT MILE AND PASSENGER TRIP LENGTH DOMESTIC (Seats/Mile) U.S. COMMERCIALASSUMPTIONS CARRIERS' FORECAST AIR Sum ofSum U.S. Regional and Mainline Carriers. Air Source: Forms 41 and 298-C, U.S. Department of Transportation. of FormsSource: 41 Department 298-C, and U.S. Forecast 2018 2023 2028 2033 2038 FISCAL YEAR Historical 2010 2015 2016 2017E 1

710 815 852 881 926 3.1% 5.1% 2.3% 2.4% 1,045 1,167 1,315 1,482 SYSTEM 230 259 262 269 280 334 391 456 528 2.3% 4.0% 3.4% 3.2% (Billions) INTERNATIONAL REVENUE PASSENGER MILES PASSENGER REVENUE 480 556 590 612 646 711 776 859 954 3.5% 5.6% 1.8% 2.0% DOMESTIC 548 630 665 689 725 797 871 964 3.3% 5.3% 1.8% 2.0% 1,069 SYSTEM TABLE 10 75 87 90 93 98 115 136 160 189 U. S. MAINLINE CARRIERS AIR 3.3% 5.2% 3.3% 3.3% SCHEDULED PASSENGER TRAFFIC (Millions) INTERNATIONAL REVENUE PASSENGER ENPLANEMENTS PASSENGER REVENUE 473 543 575 595 627 682 734 803 880 3.3% 5.3% 1.6% 1.7% DOMESTIC Historical 2010 2015 2016 2017E FISCAL YEAR Forecast 2018 2023 2028 2033 2038 2017-18 2018-28 2018-38 Avg Annual Growth 2010-17 Source: Form 41, U.S. Department of Transportation. of Form Department Source: 41, U.S.

% LOAD FACTOR (BIL) SYSTEM RPMs (BIL) ASMs % LOAD FACTOR (BIL) RPMs INTERNATIONAL (BIL) 2.5%4.0% 2.3%3.4% 4.0%3.2% 3.4% -0.2% 3.2% 0.0% 2.9% 0.0% 0.0% 4.9% 3.1% 2.3% 5.1% 2.3% 2.3% 2.4% ASMs TABLE 11 1 321 259 80.8 973 815 83.7 % LOAD FACTOR U.S. MAINLINE CARRIERS AIR (BIL) RPMs DOMESTIC 756823893 646986 711 776 85.5 859 86.4 86.9 345 87.2 412 482 280 561 334 391 81.1 456 81.1 81.2 1,100 81.2 1,235 926 1,375 1,045 1,547 1,167 84.1 1,315 84.6 84.9 85.0 581653 480 556 82.7 85. 279 230 82.2 860 710 82.5 692718 590 612 85.3 85.2 325 331 262 269 80.7 81.1 1,017 1,049 852 881 83.8 83.9 (BIL) 3.1%5.3% 3.5% 1.7% 5.6% 1.9% 1.8% 2.0% 1,091 954 87.4 651 528 81.2 1,742 1,482 85.1 ASMs SCHEDULED PASSENGER CAPACITY, TRAFFIC, AND LOAD FACTORS 2017-18 2018-28 2018-38 Avg Annual Growth 2010-17 Transportation. of Form Department Source: 41, U.S. 2023 2028 2033 2038 Forecast 2018 2015 Historical 2010 2017E 2016 FISCAL YEAR

98.3 74.6 87.2 89.9 93.5 3.3% 5.2% 3.3% 3.3% 115.4 136.4 160.4 188.9 TOTAL 14.1 16.0 18.0 20.4 22.9 12.9 14.0 14.0 13.9 1.1% 0.8% 2.5% 2.5% ACIFIC P 58.7 69.0 84.2 37.2 48.6 51.5 54.7 5.7% 7.2% 3.7% 3.8% 101.9 123.2 TABLE 12 LATIN AMERICA REVENUE PASSENGER ENPLANEMENTS (MIL) ENPLANEMENTS PASSENGER REVENUE U.S. MAINLINE CARRIERS AIR 25.6 30.5 34.2 38.2 42.7 24.5 24.6 24.4 24.8 0.2% 3.0% 2.9% 2.6% ATLANTIC SCHEDULED PASSENGER INTERNATIONAL ENPLANEMENTS FISCAL YEAR Avg Annual Growth 2010-17 Transportation. of Form Department Source: 41, U.S. 2017-18 2018-28 2018-38 Forecast 2018 2023 2028 2033 2038 Historical 2010 2015 2016 2017E

% LOAD FACTOR (BIL) RPMs INTERNATIONAL (BIL) 2.5%4.0% 2.3% 3.4% 4.0% 3.2% 3.4% 3.2% ASMs % LOAD FACTOR (BIL) RPMs PACIFIC (BIL) 3.7%3.4% 3.4% 2.7% 3.4% 2.6% 2.7% 2.6% ASMs % LOAD FACTOR TABLE 13 (BIL) RPMs LATIN AMERICA (BIL) 4.6% 5.1% 6.4%4.1% 6.4% 4.1% 4.1% 4.1% ASMs U.S. MAINLINE CARRIERS AIR BY INTERNATIONAL TRAVEL REGIONSBY INTERNATIONAL TRAVEL % LOAD FACTOR (BIL) RPMs ATLANTIC 131133 109134 107134 82.9 105 80.0 106 78.0 78 79.5 101 104 62 107 81 85 79.2 80.3 88 81.4 70 82.3 86 87 59 91 71 73 84.1 82.5 75 83.9 279 82.2 321 325 230 259 331 262 82.2 80.8 269 80.7 81.1 137167 109190 133215 79.5 151242 79.5 171 79.5 113 192 79.5 137 79.5 169 93 112 207 139 82.3 251 82.3 170 82.3 207 94 82.3 108 82.3 123 77 140 89 101 158 82.2 115 82.2 82.2 130 82.2 345 412 82.2 482 561 280 334 391 651 81.1 456 81.1 81.2 528 81.2 81.2 SCHEDULED PASSENGER CAPACITY, TRAFFIC, AND LOAD FACTORS (BIL) 0.3% -0.3% 2.5%3.3% 2.5% 2.9% 3.3% 2.9% ASMs FISCAL YEAR Historical 2010 2015 2016 2017E Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41, U.S. Department of Transportation. of Form Department Source: 41, U.S.

SYSTEM (Seats/Mile) TOTAL TOTAL (Seats/Mile) 2 220.9 169.2 PACIFIC (Seats/Mile) INTERNATIONAL INTERNATIONAL (Seats/Mile) TABLE 14 LATIN AMERICA AMERICA LATIN SEATS PER AIRCRAFT MILE SEATS AIRCRAFT PER ATLANTIC ATLANTIC (Seats/Mile) 157.7159.9162.3 237.0 241.7 243.4 173.9 174.1 176.4 272.1 266.6 267.5 219.5 219.8 221.8 173.8 175.1 177.3 162.9165.9168.5170.6 243.9172.7 246.4 248.9 251.4 176.9 253.9 179.4 181.9 184.4 268.2 186.9 272.0 275.7 279.5 221.8 283.2 224.2 225.5 226.8 177.7 228.1 181.6 184.8 187.5 189.9 152.0 231.7 171.7 287. U.S. MAINLINE ASSUMPTIONS FORECAST CARRIER AIR DOMESTIC (Seats/Mile) SCAL YEAR Source: Form 41, U.S. Department of Transportation. of Form Department Source: 41, U.S. FI 2015 2016 2017E Forecast 2018 2023 2028 2033 2038 Historical 2010

(Miles) SYSTEM TOTAL TOTAL (Miles) (Miles) PACIFIC INTERNATIONAL INTERNATIONAL (Miles) LATIN AMERICA AMERICA LATIN TABLE 15 (Miles) ATLANTIC ATLANTIC AVERAGE PASSENGER LENGTH AVERAGE TRIP 1,0151,0231,0271,028 4,433 4,336 4,291 4,278 1,660 1,669 1,650 1,602 4,587 5,080 5,176 3,077 5,373 2,969 2,917 1,296 2,875 1,292 1,283 1,279 1,0311,0441,0571,070 4,2561,083 4,351 4,425 4,474 1,589 4,497 1,629 1,650 1,668 5,507 1,676 5,566 5,610 2,844 5,641 2,893 5,658 2,869 1,276 2,840 1,311 2,798 1,341 1,365 1,386 (Miles) DOMESTIC U.S. MAINLINE ASSUMPTIONS FORECAST CARRIER AIR Historical 2010 2015 2016 2017E 2023 2028 2033 2038 Forecast 2018 Source: Form 41, U.S. Department of Transportation. of Form Department Source: 41, U.S. FISCAL YEAR

(Cents) FY 2017 $ SYSTEM (Cents) CURRENT $ (Cents) FY 2017 $ INTERNATIONAL (Cents) CURRENT $ TABLE 16 REVENUE PER PASSENGER MILE MILE PASSENGER PER REVENUE PASSENGER YIELDS (Cents) FY 2017 $ DOMESTIC 1.4%0.0%2.2% -0.3%2.0% -1.8% -0.3% 0.1% -0.4% 1.3% 1.8% -1.5% 1.8% -0.6% -0.6% 1.0% -0.6% 0.4% 2.0% -0.6% 1.9% -1.4% -0.4% -0.5% 12.6214.7913.96 14.1513.89 15.23 14.24 12.84 13.89 14.16 12.88 14.40 12.93 14.59 13.14 12.69 12.93 14.59 13.62 14.23 13.60 15.03 13.90 13.60 13.9015.5617.23 13.6418.95 13.5820.73 13.30 13.10 12.94 14.31 12.55 15.71 12.86 17.25 12.49 18.84 12.12 13.66 11.77 15.16 11.41 16.72 13.41 18.36 13.23 20.05 12.90 12.53 12.14 (Cents) CURRENT $ U.S. MAINLINE ASSUMPTIONS FORECAST CARRIER AIR Historical 2010 2015 2016 2017E FISCAL YEAR Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41, U.S. Department of Transportation. of Form Department Source: 41, U.S.

(Cents) FY 2017 $ (Cents) TOTAL INTERNATIONAL TOTAL CURRENT $ (Cents) FY 2017 $ PACIFIC (Cents) CURRENT $ (Cents) FY 2017 $ TABLE 17 REVENUE PER PASSENGER MILE MILE PASSENGER PER REVENUE LATIN AMERICA (Cents) CURRENT $ 14.28 13.33 14.95 12.50 14.02 12.84 14.40 (Cents) FY 2017 $ INTERNATIONAL PASSENGER YIELDS BY REGION ATLANTIC U.S. MAINLINE ASSUMPTIONS FORECAST CARRIER AIR 0.9%1.3%1.9% -0.7%1.9% -0.5% -0.5% 0.2% -0.5% 1.1% 1.6% -1.4% 1.6% -0.7% -0.8% -1.4% -0.8% 1.4% 1.9% -3.0% 1.9% -0.5% -0.5% 0.1% -0.5% 1.3% 1.8% -1.5% 1.8% -0.6% -0.6% -0.6% 12.73 14.6413.8313.58 15.08 14.11 13.58 14.38 12.72 13.50 14.81 12.98 13.50 13.20 11.69 11.36 13.59 11.94 11.36 14.16 12.88 12.93 14.59 13.14 12.93 13.7615.1016.65 13.5118.35 13.1720.18 12.85 13.65 12.53 14.74 12.22 16.01 13.40 17.42 12.86 18.82 12.36 11.51 11.89 12.60 11.39 13.89 11.31 15.34 10.99 16.90 10.72 13.10 10.47 14.31 10.23 15.71 12.86 17.25 12.49 18.84 12.12 11.77 11.41 (Cents) CURRENT $ FISCAL YEAR 2015 2016 2017E Historical 2010 Transportation. of Form Department Source: 41, U.S. Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2017-18 2018-28 2018-38 2010-17

(Cents) FY 2017 $ SYSTEM (Cents) CURRENT $ (Cents) FY 2017 $ INTERNATIONAL (Cents) CURRENT $ TABLE 18 JET FUEL PRICES (Cents) FY 2017 $ DOMESTIC 7.7%6.1%4.3% 5.7% 3.5% 1.8% 7.7% 6.1% 4.3% 5.7% 3.5% 1.8% 7.7% 6.1% 4.3% 5.7% 3.5% 1.8% -4.2% -5.5% -4.4% -5.7% -4.3% -5.6% 174.76253.68314.56 171.58362.34 221.35402.42 242.77 173.12 247.42 251.31 243.70 311.62 169.97 358.95 219.27 398.65 240.50 173.84 245.10 252.36 241.42 312.92 170.68 360.44 220.19 400.31 241.50 246.12 242.43 219.16207.29146.17 240.87162.31 209.21 146.17 220.12 162.31 211.77 147.01 241.93 160.79 213.73 147.01 219.49 160.79 208.96 146.47 241.23 161.46 210.90 146.47 161.46 (Cents) CURRENT $ U.S. MAINLINE ASSUMPTIONS FORECAST CARRIER AIR Source: Form 41, U.S. Department of Transportation of Form Department Source: 41, U.S. Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Forecast 2018 2023 2028 2033 2038 Historical 2010 2015 2016 2017E FISCAL YEAR

TOTAL NT'L. I (Millions) TOTAL RTMS RTMS TOTAL DOMESTIC 1, 2, 3 TOTAL INT'L. (Millions) PASSENGER CARRIER RTMS CARRIER RTMS PASSENGER TABLE 19 DOMESTIC TOTAL U.S. COMMERCIAL CARRIERS AIR AIR CARGO REVENUE CARGO AIR TON MILES INT'L. (Millions) (Millions) ALL-CARGO CARRIER RTMS CARRIER RTMS ALL-CARGO 2.1%8.0%1.8% 0.7%2.0% 9.7% 5.5% 1.3% 5.1% 8.9% 4.1% 0.2% 4.0% 7.1% 1.0% 1.4% 1.2% 8.0% 3.9% 1.2% 3.4% 7.9% 3.4% 1.9% 3.1% 7.9% 1.7% 0.9% 1.9% 9.2% 5.0% 1.3% 4.7% 8.7% 3.9% 3.8% 11,24311,636 16,73311,851 16,00813,031 27,976 15,687 27,643 17,569 1,580 27,538 1,453 30,600 1,469 6,332 1,605 6,704 6,476 7,912 6,967 8,157 12,823 7,944 13,089 8,572 23,065 13,320 22,712 14,636 35,888 22,163 35,801 24,536 35,483 39,172 14,06915,728 19,26516,810 25,83718,798 33,334 32,84120,829 41,565 41,437 1,719 49,652 51,902 1,848 60,235 1,897 7,527 72,731 2,034 9,361 11,003 2,177 9,247 12,797 11,209 12,900 14,721 15,788 14,831 17,576 18,707 16,898 26,792 20,832 35,198 43,844 23,006 42,580 54,233 52,774 62,551 66,623 75,065 89,629 DOMESTIC Includes freight/express and mail revenue ton miles on mainline air carriers and regionals/commuters.Domestic figures from 2000 through 2002 exclude Airborne Express, Inc.; international figures for 2003 and beyond include new Domestic figures from 2003 and beyond include Airborne Express. Inc. FISCAL YEAR 1 2 reporting of contract service U.S. by carriers for foreign flag carriers.3 Historical 2010 2015 2016 2017E Forecast 2023 2028 2033 2038 2018 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41, U.S. Department of Transportation of Form Department Source: 41, U.S.

0.9% 9.2% 5.0% 4.7% TOTAL 23,065 22,712 22,181 24,536 26,792 35,198 43,844 54,233 66,623 1, 2 0.0% 9.5% 6.9% 6.1% 5,860 5,383 5,253 5,848 6,404 9,259 OTHER 12,513 16,283 20,837 INTERNATIONAL 2.5% 5.2% 4.9% 8,348 9,021 8,761 9,939 11.7% 18,399 23,096 28,729 11,097 14,706 PACIFIC TABLE 20 7.6% 1.4% 1.2% 1,991 1,639 1,566 1,689 2,084 2,178 2,285 1,817 2,030 -2.3% LATIN AMERICA U.S. COMMERCIAL CARRIERS AIR 0.4% 5.9% 3.8% 3.5% 6,865 6,669 6,601 7,061 7,475 9,203 10,849 12,676 14,771 ATLANTIC (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) INTERNATIONAL AIR CARGO REVENUE CARGO INTERNATIONAL AIR TON MILES BY REGION Includes freight/express and mail revenue ton miles on mainline air carriers and regionals/commuters.Figures for 2003 and beyond include new reporting of contract service U.S. by carriers for foreign flag carriers. FISCAL YEAR 1 2 Historical 2010 2015 2016 2017E 2023 2028 2033 2038 Forecast 2018 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41, U.S. Department of Transportation of Form Department Source: 41, U.S.

JETS TOTAL TOTAL JETS REGIONAL JETS LARGE 517 4,057 98 4,155 526601619 4,143718 4,312833 4,463 98 4,730 80 5,023 79 4,241 78 4,392 78 4,542 4,808 5,101 1.7%1.6%2.3% 2.1% 0.7% 1.0% 0.0% -2.1% -1.1% 2.1% 0.7% 0.9% TOTAL 433127 522 523 517 3,651 3,844 3,976 71 99 97 3,722 3,943 4,073 -100.0% -0.1% 1.5% 4.7% 1.6% 9 0 0 0 0 0000 0 0 0 0 0 0 N/A N/AN/AN/A N/A N/A N/A LARGE WIDEBODY TABLE 21 2 ENGINE2 ENGINE 3 ENGINE 4 1.8%2.2%0.6% 1.4% 0.7% 1.7% 1.6% 2.3% 3,1293,3213,459 470 3,540 492 490 517 3,617 526 3,7113,8444,012 601 4,190 619 718 833 TOTAL PASSENGER JET AIRCRAFT U.S. MAINLINE CARRIERS AIR N/A N/A 8221 1 0 0 1 0 1000 0 0 0 0 N/AN/A N/A N/A LARGE NARROWBODY 1.8% -25.7% 2.2%0.6% 0.7% 0.0% 3,120 3,319 3,457 3,539 3,616 3,710 3,844 4,012 4,190 2 ENGINE2 ENGINE 3 ENGINE 4 CALENDAR YEAR CALENDAR 2015 2016 2017E Historical 2010 Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38

TOTAL TOTAL LARGE WIDEBODY 2 ENGINE2 ENGINE 3 ENGINE 4 252256261 309 328 360 156 149 149 72 77 85 537 554 594 789 810 855 263267267 365270 415272 488 148 621 109 759 76 82 37 97 11 113 595 129 621 136 677 858 787 888 906 944 1,057 1,178 0.8%0.2%0.2% 1.4% 2.9% 3.7% -0.7% -6.4% -12.2% -3.5% 3.3% 2.6% 0.2% 1.3% 2.1% 0.4% 1.0% 1.6% -1.4% 4.5% -4.1% -1.9% 0.8% 0.1% TOTAL TABLE 22 2 2 2 2 2 CARGO JET AIRCRAFT CARGO N/A N/A U.S. MAINLINE CARRIERS AIR 200 0 0 0 N/AN/A N/A N/A LARGE NARROWBODY 235243 19 16 153228 104 22 31 288 265 200 97 562 850 246254265 15 270 11 272 6.8%1.2% -23.5%0.7% 0.5% -6.3% 2 ENGINE2 ENGINE 3 ENGINE 4 2016 2017E 2017-18 2018-28 2018-38 Historical 2010 2015 Avg Annual Growth 2010-17 Forecast 2018 2023 2028 2033 2038 CALENDAR YEAR CALENDAR

TOTAL FUEL CONSUMED TOTAL 184 186 29,610 185 187 27,634 188 190 25,810 194 196 24,339 207 209 22,711 209 211 21,914 206 208 21,345 196 198 20,743 221 223 19,921 GENERAL GENERAL AVIATION AVIATION GASOLINE 2 2 2 2 2 2 2 2 2 AIR CARRIER TOTAL TABLE 23 GENERAL GENERAL AVIATION (Millions of Gallons) of (Millions TOTAL 1, 2 U.S. AVIATION AIRCRAFT CIVIL JET FUEL JET INT'L. U.S. AIR CARRIERS 1.9%3.9%0.7% 0.5%0.9% 2.9% 1.4% 2.4% 3.6% 2.2% 1.3% 1.0% 1.3% 5.2% 2.0% 1.4% 1.7% 3.7% 1.3% 0.0% 1.4% 0.0% 0.0% -0.7% 0.0% -1.0% -0.7% -1.0% -1.0% -0.6% -1.0% 1.4% -0.6% 3.6% 1.3% 1.3% 16,804 10,374 27,178 2,247 29,424 15,935 9,407 25,342 2,105 27,447 15,157 8,496 23,653 1,967 25,620 14,681 7,629 22,311 1,832 24,143 14,169 6,717 20,886 1,615 22,502 13,642 6,526 20,168 1,535 21,703 13,337 6,363 19,699 1,437 21,136 12,682 6,481 19,163 1,383 20,545 11,973 6,290 18,263 1,435 19,698 DOMESTIC TOTAL JET FUEL AND AVIATION GASOLINE FUEL CONSUMPTION Includes both passenger (mainline and regional air carrier) and cargo carriers. Forecast assumes 1.0% available in annual improvement seat gallon per miles for U.S. Commercial Carrier Air Source: Air carrier jet fuel, Form 41, U.S. Department of Transportation; all others, FAA Transportation; estimates. APO others, of all Form Department 41, U.S. fuel, jet Air carrier Source: 2010-17 2017-18 2018-28 2018-38 Avg Annual Growth 2038 2033 2028 2023 Forecast 2018 2017E 2016 2015 Historical 2010 FISCAL YEAR 1 2

2017 $ (Cents) (Cents) CURRENT $

TOTAL TOTAL (Miles)

INT'L. INT'L. (Miles) (Miles) DOMESTIC AVERAGE PASSENGER TRIP LENGTH TRIP PASSENGER AVERAGE MILE** PASSENGER PER REVENUE TABLE 24 TOTAL TOTAL (Seats/Mile) INT'L (Seats/Mile) U.S. ASSUMPTIONS FORECAST CARRIER REGIONAL 56.159.961.563.0 53.2 62.6 68.8 66.1 56.0 60.0 61.8 63.1 464 475 481 482 503 695 721 465 717 480 487 487 15.74 10.94 11.32 11.29 17.65 11.27 11.56 11.29 64.067.269.772.3 66.475.1 67.9 69.4 70.9 64.0 72.4 67.2 69.7 72.3 484 75.0 494 504 514 720 525 735 750 489 765 500 780 510 520 11.30 530 12.64 13.98 15.37 11.09 16.80 11.03 10.79 10.49 10.17 1.7%1.5%0.9% 3.1%0.8% 0.5% 0.4% 1.7% 0.4% 1.5% 0.9% 0.5% 0.8% 0.4% 0.4% 5.2% 0.4% 0.4% 0.4% 0.7% 0.4% 0.4% 0.4% 0.4% -4.6% 0.0% 2.2% 2.0% -6.2% -1.8% -0.3% -0.4% AVERAGE SEATS PER AIRCRAFT MILE AIRCRAFT PER SEATS AVERAGE DOMESTIC (Seats/Mile) FISCAL YEAR Historical 2010 2015 2016 2017E Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Forecast 2018 Transportation. of FormSource: 41 Department 298C, and U.S. ** Reporting carriers. 2023 2028 2033 2038

2.4% 1.9% 2.1% -0.5% TOTAL 9.0% 2.4% 1.9% 2.1% INTERNATIONAL REVENUE PASSENGER MILES PASSENGER REVENUE 2.4% 1.9% 2.1% -0.7% 75,03072,75472,96471,502 1,347 2,116 2,556 2,463 76,377 74,870 75,520 73,965 73,23680,39088,21698,395 2,522 2,769 3,038 3,389 75,759 83,159 91,254 101,784 109,962 3,787 113,750 DOMESTIC 164 156 155 152 155 166 179 196 215 2.0% 1.5% 1.6% -1.1% TOTAL TABLE 25 (In Millions) (In U.S. CARRIERS REGIONAL 3 3 4 3 4 4 4 4 5 3.6% 2.0% 1.5% 1.6% SCHEDULED PASSENGER TRAFFIC INTERNATIONAL REVENUE PASSENGERS REVENUE 162 153 152 148 163 175 191 210 151 2.0% 1.5% 1.6% -1.2% DOMESTIC Historical 2010 2015 2016 2017E 2023 2028 2033 2038 Forecast 2018 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41 and 298C, U.S. Department of Transportation. of FormSource: 41 Department 298C, and U.S. FISCAL YEAR

% LOAD FACTOR (MIL) RPMs TOTAL (MIL) ASMs % LOAD FACTOR (MIL) RPMs INTERNATIONAL TABLE 26 8.9%2.1%1.7% 9.0%2.0% 2.4% 1.9% 0.1% 2.1% 0.3% 0.1% -0.9% 0.1% 2.1% 1.7% -0.5% 2.0% 2.4% 1.9% 2.1% (MIL) ASMs U.S. CARRIERS REGIONAL % LOAD FACTOR (MIL) RPMs DOMESTIC 2.1%1.7%2.0% 2.4% 1.9% 2.1% (MIL) -1.1% -0.7% SCHEDULED PASSENGER CAPACITY, TRAFFIC, AND LOAD FACTORS ASMs 98,46190,68191,158 75,03090,853 72,754 72,964 76.2 71,502 80.2 80.0 1,857 78.7 2,819 3,506 1,347 3,374 2,116 2,556 72.5 2,463 75.0 72.9 100,318 73.0 93,500 76,377 94,665 94,226 74,870 75,520 76.1 73,965 80.1 79.8 78.5 92,763 73,236 79.0 3,445 2,522 73.2 96,207 75,759 78.7 100,829110,127 80,390122,514 88,216136,688 98,395 79.7 109,962 80.1 80.3 80.4 3,744 4,089 4,549 2,769 5,076 3,038 3,389 3,787 73.9 74.3 74.5 104,573 74.6 114,216 83,159 127,063 141,763 91,254 101,784 113,750 79.5 79.9 80.1 80.2 YEAR 2015 2016 2017E Historical 2010 2023 Forecast 2018 2028 2033 2038 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Source: Form 41 and 298C, U.S. Department of Transportation. of FormSource: 41 Department 298C, and U.S.

TOTAL JET TOTAL FLEET 0.9% -2.9% NON JET NON TOTAL JET OVER 40 SEATS 5048 1,756 1,910 1,806 1,958 187 101 1,756 1,910 1,943 2,011 PROP 252014 55 53 52 1,651 1,716 1,663 1,706 1,769 1,715 429 351 266 1,651 1,716 1,663 2,080 2,067 1,929 325926 57 40 65 1,628 1,637 1,644 1,685 1,677 1,709 516 519 487 1,628 1,637 1,644 2,144 2,156 2,131 -3.8% -15.4% 0.4% -0.2% -11.9% 0.4% -2.4% -5.6% -0.6% 0.1% 0.1% -4.7% 0.1% -0.8% -8.8% -0.7% 0.7% 0.7% -7.0% 0.7% -0.2% TOTAL -23.7% -5.8% -0.7% -0.9% -7.8% - REGIONAL AIRCRAFT REGIONAL TABLE 27 0 0 0 0 0 0 JET N/A N/A N/A N/A 31 TO 40 SEATS PASSENGER AIRCRAFT U.S. CARRIERS REGIONAL 20 14 59 PROP -3.8% -5.6% -8.8% 8 6 4 9 0 9 0 N/A N/A N/A SEATS 20 TO 30 9 1 4 0 4 SEATS 10 TO 19 39 220158101 50 36 23 276 63 10 25 365321 55 65 10 26 440346 92 68 82 13 144 32 28 172 99 1,728 1,827 857 1,756 2,613 -4.4%-5.4% -4.8% -5.4% -26.0% -21.7% -9.3% -9.3% -14.0% -3.1% 9 SEATS LESS THAN 2017-18 Avg Annual Growth 2010-17 2018-28 2018-38 2023 2028 2033 2038 Forecast 2018 2016 2017E Historical 2010 2015 AS OF 1 JANUARY

TOTAL TOTAL TURBINES

TOTAL TOTAL PISTONS FLEET TOTAL TOTAL GENERAL GENERAL AVIATION OTHER LIGHT SPORT AIRCRAFT** EXPERI- EXPERI- MENTAL** TOTAL TURBINE ROTORCRAFT TABLE 28 PISTON TOTAL JET TURBO TURBINE ACTIVE GENERAL AVIATION AND GENERAL AIRCRAFT TAXI ACTIVE AIR PROP TURBO FIXED WING FIXED TOTAL PISTON MULTI- ENGINE SINGLE 130,500125,330 12,895118,740 143,395 12,720112,620 138,050 12,465 9,195107,800 131,205 12,170 9,025 14,390 124,790 11,845 23,585 9,870 16,220 119,645 11,225 25,245 18,120 3,465 20,085 12,855 27,990 3,750 7,565 31,310 22,195 4,035 11,030 8,375 35,050 4,345 12,125 9,200 28,140 4,675 10,105 13,235 14,450 29,595 11,110 15,785 30,980 2,705 32,105 3,330 33,105 5,050 3,995 4,705 5,045 213,905 5,440 5,060 213,390 5,060 146,860 212,465 5,065 141,800 212,420 31,150 135,240 214,090 33,620 129,135 37,190 124,320 41,415 46,160 ENGINE 139,519127,887 15,900129,652 155,419 13,254 141,141 12,986 9,369 142,638 9,712 11,484 20,853 9,779 13,440 23,152 13,751 3,588 23,530 3,286 6,514 3,344 10,102 7,220 10,506 7,233 24,784 10,577 27,922 27,585 6,528 2,369 5,684 2,478 4,941 223,370 4,986 210,031 159,007 211,794 144,427 27,367 145,982 30,372 30,763 Avg Annual Growth 2010-172017-182018-282018-38 -1.0% 0.1% -2.9% -0.9% -1.0% -0.3% -1.2% -0.3% -0.4% 0.1% 0.1% -0.9% -0.9% -2.5% 2.9% 0.7% 2.2% 1.7% 1.7% 2.3% 0.3% 2.2% -0.7% 1.7% 1.8% 2.0% 1.8% 1.5% 2.2% 1.0% 1.5% 2.0% 2.1% 1.9% 1.7% 1.8% 1.8% 1.0% 1.0% -12.4% 0.8% -1.7% 4.6% 4.0% -0.7% 3.6% 0.5% 0.0% -1.1% 0.0% 0.4% -0.1% 1.8% 0.0% 0.1% -0.8% -0.8% 0.8% 1.8% 2.0% * Source: 2001-2010, 2012-2016, FAA General Aviation and Air Taxi Activity (and Avionics) Surveys. Avionics) (and Activity Taxi Air and Aviation General FAA 2012-2016, 2001-2010, Source: * **Experimental Light-sport category that was previously shown under SportNote: Aircraft An active is moved aircraft under Experimental is one Aircraft that has category, a current registration starting in 2012. and was flown at least one hour during the calendar year. AS DEC. OF 31 2023 2028 2033 2038 Forecast 2018 2015 2016 2017E 130,330 12,935 143,265 9,430 14,075 23,505 3,405 7,400 10,805 27,865 2,585 5,025 213,050 146,670 30,905 Historical* 2010

TOTAL TOTAL TURBINES TOTAL TOTAL PISTONS FLEET TOTAL TOTAL GENERAL GENERAL AVIATION OTHER LIGHT SPORT AIRCRAFT** EXPERI- EXPERI- MENTAL** TOTAL TURBINE ROTORCRAFT TABLE 29 (In Thousands) (In PISTON TOTAL JET 700 794 2,611 3,405 1,226 311 181 24,802 14,773 8,311 TURBO TURBINE PROP TURBO ACTIVE GENERAL AVIATION AND GENERAL HOURS TAXI ACTIVE AIR FLOWN FIXED WING FIXED TOTAL PISTON MULTI- ENGINE -0.3%-0.9% -1.2%-1.6% -1.1%-1.1% -0.5% -0.6% -1.0% -0.3% 2.0% -1.5% -1.2% 3.4% -1.0% 7.7% 0.8% 2.9% 1.8% 4.3% 3.2% 0.3% 2.7% 2.4% 3.0% -1.0% 2.4% 1.9% 3.4% -0.7% 1.7% 2.6% 3.3% 0.3% 2.3% 2.4% 2.0% 2.2% -6.3% 2.0% 1.7% 5.5% 1.1% 4.9% 0.5% 4.4% 0.3% 0.0% 1.2% 0.1% -0.4% 0.5% 0.8% -0.7% 1.7% -1.2% 4.1% -0.8% 2.5% 2.4% 9,6259,419 1,545 1,556 11,170 10,976 3,259 7,067 3,742 10,326 7,849 1,088 11,591 1,172 3,593 4,681 3,980 5,152 1,677 1,799 409 490 197 198 28,460 30,206 12,257 12,148 13,919 15,571 11,76510,608 1,64710,021 1,578 13,412 1,546 12,187 2,642 11,567 4,604 2,621 7,246 5,616 2,863 8,237 6,331 834 9,194 933 2,510 1,009 3,344 2,884 3,239 3,817 4,248 1,273 1,415 1,556 208 269 336 196 196 196 25,679 26,120 27,097 14,246 13,119 12,576 9,756 11,122 12,433 12,161 1,818 13,979 2,325 3,375 5, 11,21711,865 1,60811,878 1,683 12,825 1,666 13,548 2,538 13,543 3,837 2,708 6,375 3,847 2,674 6,554 4,274 798 6,948 780 2,496 810 3,294 2,348 3,128 2,427 1,295 3,237 1,224 1,248 191 187 197 162 193 24,142 195 24,834 13,623 25,369 14,328 8,871 14,353 8,902 9,376 SINGLE ENGINE S OF DEC.S OF 31 * Source: 2001-2010, 2012-2016, FAA General Aviation and Air Taxi Activity (and Avionics) Surveys. Avionics) (and Activity Taxi Air and Aviation General FAA 2012-2016, 2001-2010, Source: * **Experimental Light-sport category that was previously shown under SportNote: Aircraft An active is moved aircraft under Experimental is one Aircraft that has category, a current registration starting in 2012. and was flown at least one hour during the calendar year. Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 Forecast 2018 2023 2028 2033 2038 Historical* 2010 A 2015 2016 2017E

1 RATED PILOTS INSTRUMENT INSTRUMENT PILOTS STUDENT STUDENT TOTAL LESS ONLY GLIDER ONLY CRAFT ROTOR- AIRLINE TRANSPORT TABLE 30 COMMERCIAL PRIVATE PILOT SPORT 8565 11,050 12,340 142,400 136,650 89,400 89,150 177,100 183,900 18,950 21,050 17,150 17,100 456,135 460,255 318,600 325,100 150125 6,385100 7,915 162,450 9,520 157,450 96,650 149,600 92,000 90,150 161,300 165,900 15,250 171,000 15,650 18,050 17,100 17,650 460,235 17,350 456,690 454,820 307,000 308,600 313,000 212190 3,682175 5,482153 202,020 5,889 170,718 123,705 6,097 162,313 101,164 162,455 142,198 96,081 154,730 98,161 15,377 157,894 15,566 21,275 159,825 19,460 15,518 508,469 15,355 17,991 467,310 18,139 318,001 455,861 304,329 460,185 302,572 306,652 TIONAL RECREA- ACTIVE PILOTS BY TYPE OF CERTIFICATE, EXCLUDING STUDENT PILOTS* Starting in April 2016, there is no expiration date on the new student pilot certificates. This generates a cumulative increase in the student pilot Instrument rated pilots should not be added to other categories in deriving total. ** Source: FAA U.S. Civil Airmen Statistics. Civil Airmen FAA U.S. Source: ** Avg Annual Growth 2010-172017-182018-282018-38 -4.6% -2.0% 7.5% -4.0% 4.7% -4.1% -3.1% 4.1% 0.0% 3.3% -0.8% -3.3% -0.9% -1.5% -0.7% -0.4% 1.7% 0.9% 0.6% 0.0% 0.7% -0.7% -2.3% 1.2% -0.5% 1.6% -0.4% -1.4% -0.3% 0.0% -0.1% -0.5% 0.0% 0.1% 0.2% 0.3% Forecast 2018 2023 2028 2033 2038 AS DEC. OF 31 Historical** 2010 2015 2016 2017 * numbers and breaks the link between student pilot and private pilot or higher level certificates. not sufficient As the implementation data to forecast is very new and there the is student1 certificates unter the new rule, student pilot forecast is suspended and excluded from this table. Note: active An pilot is a person with a pilot certificate a and valid medical certificate.

TOTAL JET FUEL JET TOTAL FUEL CONSUMED 221196206 1,435209 1,383 1,656 1,437 1,578 1,535 1,643 1,744 207194188 1,615185 1,832184 1,823 1,967 2,026 2,105 2,155 2,247 2,290 2,430 -0.7% 1.0% 0.7% AVGAS 1 1 1 1 1 1 2 2 3 N/A LIGHT SPORT** EXPERI- EXPERI- MENTAL* * / OTHER TURBINE ROTORCRAFT TABLE 31 PISTON (In Millions of Gallons) of Millions (In TURBO JET TURBINE PROP TURBO GENERAL AVIATION AIRCRAFT FUEL CONSUMPTION AVIATION AIRCRAFT GENERAL FIXED WING FIXED MULTI- ENGINE PISTON 128137137 40 42 42 191 207 203 1,063 1,117 1,211 10 10 10 128 113 121 15 17 20 133 54 187 1,123 11 125 22 135121114 41108 39104 38 200 37 194 38 207 1,291 232 1,498 260 1,606 10 1,705 12 1,801 12 124 13 140 14 153 20 167 21 186 22 24 25 0.4% -3.5% 1.2% 1.1% -0.8% -0.5% -1.2% -1.0%-1.7%-1.3% -1.5% -0.9% -0.4% -1.7% 0.4% 1.3% 6.6% 2.2% 1.7% 2.6% 1.8% 1.7% 2.9% 2.1% -1.3% 2.0% 1.4% 2.4% 1.3% 4.7% -1.0% 4.3% -1.0% 5.2% -0.6% 2.0% 4.5% 1.7% 1.7% 1.4% SINGLE ENGINE 2015 2016 2017E Historical* 2010 CALENDAR YEAR CALENDAR Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 *Source: FAA APO Estimates. **Experimental Light-sport category that was previously shown under SportNote: Aircraft Detail is moved may not under Experimental add to total Aircraft because category, of independent starting rounding. in 2012.

CONTRACT FAA NUMBER OF TOWERS TOTAL TOTAL LOCAL MILITARY ITINERANT TOTAL TABLE 32 (In Thousands) (In LOCAL GENERAL AVIATION GENERAL ITINERANT WITH FAA AND CONTRACT TRAFFIC CONTROL SERVICE TOTAL COMBINED AIRCRAFT OPERATIONS AT AIRPORTS AIR TAXI/ COMMUTER AIR 2.5%4.2%2.7% -3.8%2.2% -2.0% -2.1% -1.0% -0.6% 0.2% 0.2% 0.0% 0.3% 1.8% -0.6% 0.3% 0.3% 0.9% 0.3% 0.2% 0.3% 0.0% 0.0% -1.1% 0.0% 0.0% -0.4% 0.0% 0.0% 0.0% -0.3% 0.0% 0.0% 1.4% 0.8% 0.9% 12,65813,75514,417 9,41015,047 7,895 7,580 14,864 7,179 13,887 13,904 11,716 13,838 11,691 26,580 11,632 25,578 11,732 25,536 1,309 25,570 1,292 1,317 1,298 1,326 1,203 1,145 2,607 1,200 2,495 51,255 2,462 49,722 2,526 49,995 264 50,322 264 264 244 264 252 252 253 15,67718,61720,418 7,03722,336 5,44224,362 5,672 13,868 5,971 14,040 6,288 14,217 11,939 14,399 12,136 25,807 14,587 12,338 26,176 12,547 26,555 1,326 12,764 26,947 1,326 27,351 1,326 1,200 1,326 1,200 1,326 1,200 2,526 1,200 2,526 51,047 1,200 2,526 52,761 2,526 55,171 2,526 264 57,780 264 60,527 264 253 264 253 264 253 253 253 CARRIER FISCAL YEAR 2015 2016 2017E Historical 2010 Forecast 2018 2023 2028 2033 2038 2017-18 2018-28 2018-38 Avg Annual Growth 2010-17 Source: FAA Air Traffic Activity.

TOTAL MILITARY GENERAL GENERAL AVIATION TABLE 33 (In Thousands) (In AIR TAXI/ COMMUTER TOTAL TRACON OPERATIONS 2.1%4.1%2.6%2.2% -3.7% -1.4% -2.5% -0.7% -0.6% 0.3% 0.4% 0.4% -1.1% 0.0% 0.0% -0.3% 0.0% 1.5% 0.9% 1.0% 13,17413,94814,64015,276 9,511 7,861 7,672 7,281 13,864 13,076 13,090 13,276 2,438 2,286 2,311 2,254 38,987 37,171 37,713 38,085 15,90218,81920,62622,550 7,17624,582 5,351 5,583 5,895 13,317 6,226 13,537 13,841 14,166 2,254 14,505 2,254 2,254 2,254 38,649 2,254 39,961 42,303 44,865 47,567 AIR CARRIER Historical 2010 2015 2016 2017E FISCAL YEAR Forecast 2018 2023 2028 2033 2038 Avg Annual Growth 2017-18 2018-28 2018-38 2010-17 Source: FAA Air Traffic Activity.

TOTAL MILITARY 1.8%1.1%0.7%0.8% -7.2% 0.0% 0.0% 0.0% 1.1% 1.9% 1.3% 1.4% 7,5137,7378,0398,411 1,7658,822 1,765 1,765 1,765 44,699 1,765 47,261 50,916 55,013 59,374 6,5507,0077,3017,428 2,982 1,795 1,826 1,765 40,498 41,918 43,231 43,857 GENERAL GENERAL AVIATION IFR AIRCRAFT HANDLED IFR TABLE 34 (In Thousands) (In AIR TAXI/ COMMUTER IFR AIRCRAFT HANDLED AIRCRAFT IFR AIR 2.2% -0.1% 7.0%2.2%2.1% -12.4% -1.7% -0.6% 27,89631,12034,78038,437 7,525 42,174 6,640 6,332 6,400 6,614 22,34225,27026,31826,074 8,624 7,847 7,787 8,591 CARRIER AT FAA EN ROUTE TRAFFIC CONTROL CENTERS Source: FAA Air Traffic Activity Avg Annual Growth 2010-17 2017-18 2018-28 2018-38 FISCAL YEAR Forecast 2018 2023 2028 2033 2038 2015 2016 2017E Historical 2010