LCC Market Outlook Efficiency drives long-term growth Randy Tinseth Vice President, Marketing Boeing Commercial Airplanes October 2014 The statements contained herein are based on good faith assumptions and are to be used for general information purposes only. These statements do not constitute an offer, promise, warranty or guarantee of performance. Copyright © 2014 Boeing. All rights reserved. China Southern receives Shandong Airlines Donghai Airlines 1st 777-300ER orders (50) 737NG/MAX orders (25) 737-800 9 Air orders (50) Ruili Airlines commences China Eastern commits Okay Airways orders 737 NG/MAX operation with 737-700 to (80) 737NG/MAX (10) 737NG/MAX Hainan Airlines Xiamen Airlines China Eastern Air China orders (50) 737 MAX receives 787 receives 777-300ER receives 747-8I Copyright © 2014 Boeing. All rights reserved. China market outlook LCC market 737 – the LCC solution Copyright © 2014 Boeing. All rights reserved. RPKs (billions) Added traffic Annual 2013 traffic 2014 - 2033 growth % 6.6% 7.5% 6.1% 6.3% 5.0% 10.0% China Average 6.6% Growth: 6.9% 7.5% China GDP Growth: 6.2% 7.4% Copyright © 2014 Boeing. All rights reserved. China will need more than 6,000 new airplanes valued at $870 billion Number of Value, 6,930 airplanes billion $ 4,620 Growth 6,020 77% 2,310 1,400 Replacement 23% Regional Single- Small Medium Large jets aisle wide-body wide-body wide-body 910 Retained fleet 3% 72% 13% 11% 1% 2013 2033 Copyright © 2014 Boeing. All rights reserved. LCCs open more LCCs stimulate traffic Efficient narrow-bodies point-to-point markets demand provide lowest cost and maximum flexibility Copyright © 2014 Boeing. All rights reserved. LCC expansion to further stimulate more traffic demand LCC capacity share of total seats World: 30% 27.2% 25% 20% 15% China: 10% 8% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SOURCE: CAPA, OAG Copyright © 2014 Boeing. All rights reserved. Single-aisle aircraft are replacing wide-bodies on short-haul routes Widebody % of short- LCC market share haul frequency SOURCE: OAG Copyright © 2014 Boeing. All rights reserved. Point-to-point New markets CO2 Faster growth +13,000t /year =260,000t in Economic 8% the next 20 yrs development 20% Lower cost More flexibility 737-900ER Low emissions 737 MAX 9 Copyright © 2014 Boeing. All rights reserved. 737 – The LCC Solution Copyright © 2014 Boeing. All rights reserved. more 737s serving LCCs than A320 worldwide The 737 is preferred by successful low-cost carriers 737 operators (1,948) A320 operators (1,603) SOURCE: Centre for Asia Pacific Aviation, July 31 2014 Copyright © 2014 Boeing. All rights reserved. The 737 is preferred by successful low-cost carriers Europe USA Canada South America Australia Asia Copyright © 2014 Boeing. All rights reserved. Backlog by Chinese LCC / startups 120 Total 108 100 Ruili Airlines Okay 80 Airways Total 58 Donghai 60 West Air Airlines Loong Air 40 9 Air Qingdao 20 Airlines Spring Airlines Capital Airlines 0 Airbus A320 Boeing 737 Copyright © 2014 Boeing. All rights reserved. OEW per seat (kg) Relative seat-mile cost % 737-800w A320W IAE (189) (180) 250 0% Base 245 -1% 240 Base 235 -2% Better 230 -3% 225 Lower cost Less risk -4% 220 -8.4% 215 -5% 210 -6% -6% 205 200 -7% 737-800w737-800 A320W(IAE) (189)(189) (180) Cash airplane-related operating cost 2013 U.S. dollars Fuel price, $3.50 per US gal 500-nmi trip 737 family with optional winglets Exit-limit seating A320 series with optional winglets and IAE engines ( ) Number of seats * Includes one optional auxiliary fuel tank Copyright © 2014 Boeing. All rights reserved. Boeing Sky Interior 787-inspired architecture Copyright © 2014 Boeing. All rights reserved. MAX Efficiency: 14% lower fuel consumption Fuel per seat comparison 61” 69” 737-800W Uses 14% 737 MAX 8 162 seats less fuel 162 seats Less efficient More efficient +7% Base -6% 8% more efficient -14% 68” 78” A320 Uses 13% A320neo 150 seats less fuel 150 seats CFM engines Typical mission rules 800-nmi trip Two-class seating 737-800 includes optional winglets Copyright © 2014 Boeing. All rights reserved. 737NG/MAX737NG A320 99.7% 0.3% more reliable for a fleet of 30 means 99.4% 50% 20,000 less schedule less affected interruptions each year passengers Manufacturer-reported data through September 2013 Typical utilization for 500-nmi flights is 2,140 flights a year (about 6 flights a day) using Boeing typical short-medium rules 12-month rolling average percentage of flights without delays over 15 min, cancellations, air turn backs, or diversions (technical causes only) Passenger load factor, 75% Copyright © 2014 Boeing. All rights reserved. While carrying more passengers 189 Passengers 737-800 3,080 (5,705) 180 Passengers A320neo 3,050 (5,650) 189 Passengers 737 MAX 8 3,535 (6,550) 200 Passengers 737 MAX 200 3,265 (6,045) Range, nmi (km) Typical mission rules Exit limit seating Copyright © 2014 Boeing. All rights reserved. 800-nmi trip New mid exit door X X X 200 passengers 28-in pitch 4 galley carts 3 lavatories Relative fuel % Worse BASE Fuel per Seat -5% 737 MAX 200 A320neo Better 200 seats 189 seats Copyright © 2014 Boeing. All rights reserved. Chinese fleet will more than triple in the next 20 years China is catching up in LCC market Single-aisles offer lower unit costs and more flexibility 737 has lower unit cost than A320 737 MAX extends the advantage Copyright © 2014 Boeing. All rights reserved. THANK YOU! Copyright © 2014 Boeing. All rights reserved. For more information, please visit our CMO website: http://www.boeing.com/cmo You can also visit my blog, Randy’s Journal: http://boeingblogs.com/randy/ Copyright © 2014 Boeing. All rights reserved..