BBA 2009 Market Forecast

7/25/2019 BBA 2009 Market Forecast

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leading the way

Bombardier Business Aircraft Market Forecast 2009 - 2018
http://www.bombardier.com/


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03Executive Summary

06Historical Market Performance

09Current Market Drivers

23The Forecast

33Conclusion

35Sources

This presentation includes forward-looking

statements. Forward-looking statementsgenerally can be identified by the use of forward-looking terminology such as may, will,expect, intend, estimate, anticipate,plan, foresee, believe or continue or thenegatives of these terms or variations of themor similar terminology. By their nature, forward-looking statements require Bombardier Inc.(the Corporation) to make assumptions andare subject to important known and unknownrisks and uncertainties, which may cause theCorporations actual results in future periods todiffer materially from forecasted results. Whilethe Corporation considers its assumptions to bereasonable and appropriate based on currentinformation available, there is a risk that they

may not be accurate. For additional informationwith respect to the assumptions underlyingthe forward-looking statements made in thispresentation, please refer to the respectivesections of the Corporations aerospacesegment (Aerospace) and the Corporations

transportation segment (Transportation) in

the F09 MD&A. Certain factors that couldcause actual results to differ materially fromthose anticipated in the forward-lookingstatements, include risks associated withgeneral economic conditions, risks associatedwith the Corporations business environment(such as the financial condition of the airlineindustry, government policies and priorities andcompetition from other businesses), operationalrisks (such as regulatory risks and dependenceon key personnel, risks associated with doingbusiness with partners, risks involved withdeveloping new products and services, warrantyand casualty claim losses, legal risks from legalproceedings, risks relating to the Corporationsdependence on certain key customers and

key suppliers, risks resulting from fixed-termcommitments, human resource risk, andenvironmental risk), financing risks (such as risksresulting from reliance on government support,risks relating to financing support providedon behalf of certain customers, risks relating

to liquidity and access to capital markets,

risks relating to the terms of certain restrictivedebt covenants and market risks (includingcurrency, interest rate and commodity pricingrisk). See the Risks and Uncertainties sectionin the F09 MD&A. Readers are cautioned thatthe foregoing list of factors that may affectfuture growth, results and performance is notexhaustive and undue reliance should not beplaced on forward-looking statements. Theforward-looking statements set forth hereinreflect the Corporations expectations as at thedate of the F09 MD&A and are subject to changeafter such date. Unless otherwise required byapplicable securities laws, the Corporationexpressly disclaims any intention, and assumesno obligation to update or revise any forward-

looking statements, whether as a result of newinformation, future events or otherwise.

All monetary amounts are expressed in

2009 U.S. dollars unless otherwise stated.

Forward Looking Statement

table of contents

Bombardier Business Aircraft Market Forecast 2009 - 2018 02


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executive

summary



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New for the 2009 Forecast

The forecast focuses on the three

categories in which Bombardier

competes; light, midsize and

large. The very light jet segment

is not included unless specifically

mentioned. (See new market

segmentation on p.30).

This years forecast provides

a detailed breakdown of the

international markets and takes

account of new market drivers

such as innovation, as measured

by the Herfindahl-Hirschman Index.

executive summaryThe Bombardier Aerospace Business Aircraft Market Forecast reflects Bombardiers view of

the business jet industrys future. In the current turbulent economic times, there is significant

focus on the challenges facing this industry. Bombardier remains confident that there is strong

potential for the business jet industry over the next 10 years. With a strong product portfolio,

dedication to customer satisfaction and product development, Bombardier is well positioned

to benefit from the expected growth in the business jet industry over the next decade and to

maintain and grow our leadership position.

Industry Orders and Delivery UnitsCalendar years, 1999-2008

: l li i . i i i i lli , i .l i , .

Sources: Actual deliveries from GAMA. Orders estimated from competitive intelligence, OEM guidance.

Excludes Very Light Jet segment, ACJ and BBJ.

OrderandDeliveryUnits

0

400

600

200

800

1,000

1,200

1,400

1,600

1,800

2,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

l

: . , ., .

Total Orders Total De liveries

2008


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historical market

performance

06Bombardier Business Aircraft Market Forecast 2009 - 2018


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Throughout history, the business

jet market has proven to be highly

cyclical. Over the past 40 years,

the industry has been defined

by multiple up and down cycles.

From 1965 to 1995, the CAGR

for industry deliveries was 4%,with most of the growth coming

from its main market, the United

States. After 1995, the business

jet industry began expanding

to other regions of the world,

generating much higher growth,

12% on average.

The following section describes

the last historical business cycles

since 2001.

The 2001-2003 Downturn

The 2001-2003 downturn was

caused by various factors. The

high percentage of aircraft for sale

on the pre-owned market at the

end of the 1990s was the first

sign of a market slowdown. In the

U.S., conjectural factors like the

slowdown of the economy and the

fall of corporate profits at the end

of 2000 and in 2001 considerably

reduced the demand for business

jets. Business aviation suffered, to

a lesser extent than commercial

aviation, from the climate of

uncertainty that followed 9/11.

The reduction in the overall

number of gross business jet

orders, coupled with massive

cancellations from both traditional

and fractional jet businesses,

forced Original Equipment

Manufacturers (OEMs) to sharply

reduce aircraft production.

historical market performance

Historical Business Jet Market DeliveriesUnits, calendar years 1965-2008

Source: Actual deliveries from GAMA. Very Light Jets include CJ1+, CJ2+, Mustang, Phenom 100, Premier I and Eclipse 500. Excludes ACJ & BBJ.

65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

1000

900

800

700

600

500

400

300

200

100

0

2008

CAGR = 4%

CAGR = 12%


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The 2004 2008

Growth Period

The U.S. economy regained itsmomentum and the demandfor business jets significantly

rose between 2004 and 2007.Young markets such as WesternEurope and previously untappedmarkets in Eastern Europe, Asiaand the Middle East began togenerate substantial demand.Moreover, OEMs launched manynew models during this period,pushing orders even higher. Theindustrys 842-unit delivery recordset in 2007 was shattered in2008, with deliveries totalling 927

units for the year. Record sales aswell as a shift in consumer interesttoward larger aircraft explain the2008 peak of $19.8 billion inindustry revenues.

Since Q4 2008

The year was a turning point forthe business aircraft industry.

The U.S. went into recession inDecember 2007. Orders in theU.S. are since down and thelevel of pre-owned aircraft forsale increased sharply. Duringthe first nine months of 2008, the

business aircraft market continuedits expansion, driven by the vigourof international sales. The collapseof the financial markets in thethird quarter of 2008 precipitateda sharp downturn in businessaviation. Order activity stalled inthe fourth quarter. The level of pre-owned aircraft for sale remainedunusually high and residual valuestook a significant hit. Moreover,

OEMs juggled with cancellationsand deferrals. These unfavourablemarket conditions forced allmajor OEMs to decrease theirproduction plans for 2009 and2010. At the time of publication,order activity remained low, eventhough encouraging signs on thepre-owned market suggest thesituation should slowly improvetowards the end of 2009.

historical market performance

Historical Business Jet Market RevenuesUS$B, calendar years 1999-2008

Sources: Revenues estimated from GAMA and B&CA list prices.

Revenue($US

Billion)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

9.510.9 11.0

9.17.6

9.712.2

14.8

17.119.8

All segments in which Bombardier competes


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current

market drivers



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The Bombardier AerospaceBusiness Aircraft Market Forecastis derived from an econometricmodel based on several marketdrivers.

Economic Market Drivers

Global Economy

The state of the world economy,and that of individual countries,is a key factor in the demand forair travel. During 2008 and into2009, the worldwide economyexperienced a sharp downturn.

The current recession is the resultof a major financial crisis, primarily

due to the collapse of mortgage-backed securities originating inthe U.S. The U.S. real GDP shrankat an annual rate of over 6% in thefourth quarter of 2008 and in the

first quarter of 2009. Accordingto IHS Global Insight, world realGDP growth is forecast to shrinkby 2.6% during 2009 and thenresume growing by 2010.

In the longer term, the worldreal GDP growth is expected tostabilize on average at 3.5% peryear. The significant economic

downturn of 2008-09 has resultedin a major short-term reductionin the demand for business jets.In the longer term, resumption ofglobal economic growth will resultin an expected strong recovery

in the demand for business jets.The strong fundamentals of thebusiness jet industry are expectedto remain unchanged.

current market drivers

Prospect for World GDP GrowthWorld real GDP growth forecast (percent change), 2006-2012

-2%

-3%

-1%

0%

1%

2006 2007 2008 2009

Actuals Forecast

2010 2011 2012

2%

3%

4%

5%

Source: IHS Global Insight, May 2009.


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Wealth Creation

Worldwide demand for businessjets is highly correlated with wealthcreation which, in turn, is largelydriven by economic growth.

The Morgan Stanley CapitalInternational (MSCI) index is anaggregate stock market index,based on representative securitieslisted in major financial centresaround the world. By its nature,

the MSCI index is a good estimateof wealth creation. As displayed inthe following chart, world business

jet orders have been highlycorrelated with the MSCI Worldindex over the past 10 years.

economic market drivers

World Business Jet Orders and the MSCI World IndexOrders (units), MSCI value, calendar years, 1999-2008

Sources: Orders estimated from competitive intellige nce, OEM guidance. Excludes Very Light Jet segment, ACJ & BBJ.

MSCI World Index from MSCI-Barra.

0

500

1,000

2,000

1,500

2,000

1,500

2,500

0

1,000

500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

MSCIWorldIndex

Busine

ssJetOrders

Europe Orders

MSCI World IndexRest of the World Orders

U.S. Orderrs


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From 2002 to 2007, the MSCI

World index doubled, mainly

driven by the growing prices

for oil, natural resources and

commodities. In 2008, most of

the gains of the past years were

lost as the MSCI World indexfell 42%. Some regions of the

world experienced more acute

variations; in China and India, the

MSCI Index grew by a factor of 6

and 7 respectively between 2002

and 2007, before being impacted

by the economic downturn. The

China and India MSCI Index fell by

52% and 65% respectively from

2007 to 2008.



2002 2007 2008 (base) (at peak)

North America 100 176 107

Europe 100 245 127Latin America 100 668 315

Russia 100 567 147

India 100 699 244

China 100 605 291

Rest of Asia & Oceania 100 250 142

Middle East and Africa* 100 593 264

World 100 201 116

Source: MSCI World Index, MSCI-Barra.

*Data from Middle East excluded as it was not available before 2005.

MSCI Index Evolution by Region2002 = 100, Calendar years, 2002-2008


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High Net Worth Individuals

Last year, Merrill Lynch and CapGemini estimated in their 2008World Wealth Report that thepopulation of High Net Worth

Individuals (HNWI) (i.e., peoplewith financial assets of $1 millionor more) grew by 22.7% in Indiato 123,000 and by 20.3% inChina to 415,000 during 2007.In 2008, HNWI accounted for10% to 20% of business aircraftsales, and are therefore a targetmarket. At the time of publication,the 2009 Merrill Lynch and CapGemini report was not available.

In March 2009, Forbes releasedits list of world billionaires. 70%of billionaires are located in North

America and Europe. This studyhighlighted a 30% decrease inthe number of world billionairesbetween 2008 and 2009.


Number of BillionairesUnit 2008-2009

Source: Forbes.com

0

300

400

200

100

379

45

74

173

2838

China IndiaLatin

America

Russia

& CIS

Middle

East

& Africa

AsiaEuropeNorth

America

Number of

Billionaires

2430


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Business Jet Perceptions

Business jet usage suffered fromconsiderable negative mediacoverage during late 2008 andinto 2009, particularly in the

United States. Much of thenegative media was associatedwith companies applying forfinancial assistance from the

U.S. Government. The resultinghigh profile media coveragemasked the fact that for the vastmajority of owners and users,business jets are vital assets forincreasing company productivity

and competitiveness. Businessjets are as much a productivitytool as smartphones and laptopcomputers. Business jets enable

employees and executives totravel to remote destinations andmedium size cities, while savingconsiderable time and improvingproductivity.

The business aviation industry,led by the National BusinessAviation Association (NBAA), theGeneral Aviation Manufacturers

Association (GAMA) and theOEMs, have responded vigorouslywith structured campaigns aimedat increasing the visibility of thetrue facts regarding businessaviation. According to GAMA, inthe U.S. alone, business aviationactivities stimulate the economy

by providing 1.2 million jobs andgenerating $150 billion annually.

business jet market drivers


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A business case created by

Bombardier for a Midwestern U.S.

firm showed that use of a super

midsize business jet saved 20%

of managements total time, when

compared with the scheduled

airline alternative.

In addition to the time savings

and productivity benefits of using

a business jet, there are other

less quantifiable but equally

important benefits. These include

on-demand flight schedules,

the ability to conduct business

conversations in private during

flights, access to more airports

located closer to final destination,

(which may not be served by a

scheduled airline), and reduced

stress on the companys travelers.

Bombardier believes that

unwarranted negative perceptions

regarding business jets (in certain

regions) will no longer be an issue

once the market fully re-assesses

the positive benefits offered by

business aviation. The Forecast

accounts for the impact of this

short-term issue through its effect

on sales of new and used aircraft

throughout 2009.


Source: Bombard ier Analysis.

Business Travel Time ComparisonManagement, Man-hours (hrs)

Man-hours

(hrs)

Management's time

0

30,000

10,000

5,000

15,000

20,000

25,000

26,000 hrs total

9,500 hrs

16,500

(64%)

5,300

(20%)

4,200

(16%)

Regular working man-hours

Delta hours spent if traveling commercial

Hours spent traveling (business jet)


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Backlogs

The term backlog refers to

the total number of orders not

yet delivered. In the business

aircraft industry, the order backlog

indicates potential deliveries forupcoming years. OEMs adjust

their production rates based on

their current backlog levels and

their expectations regarding the

number of net orders they can

obtain in the future. Production

rate changes are a costly and

complex matter, due to the

expenses associated with hiring

or laying-off employees as well

as changes to the supply chain

and scheduling. Therefore,manufacturers aim to regulate

their production rates to maximize

deliveries while minimizing the

risk of frequent production rate

changes.


OrderUnits

0

1,000

1,500

500

2,000

Business Jet OrdersEstimated units, calendar years 1999-2008

Sources: Orders/units price s estimated from competitive intelligence, OEM guidance . Excludes Very Light Jet segment, ACJ & BBJ.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

All segments in which Bombardier competes

0

1,000

1,500

500

2,000

3,000

2,500

Industry BacklogEstimated units, calendar years 1999-2008

Sources: Orders estimated from competitive intellige nce, OEM guidance. Excludes Very Light Jet Segment, ACJ & BBJ.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008


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: i i i i lli , i . i i . l i , .

Industry BacklogEstimated Value ($U.S. Billion) Q1-2009

$40.1 B

$16.6 B

$13.0 B

$69.7 B

Large Medium Light

Sources: Orders estimated from competitive intelligence, OEM guidance. List price from BC&A. Excludes Very Light Jet segment, ACJ & BBJ.

In terms of business jet industryorders, 2007 was a record yearwith close to 1,800 orders for thelight, medium and large aircraftcategories. The first half of 2008remained strong as manufacturers

recorded a large number of orders(1,375). However, in the secondhalf of the year, the economicdownturn led to an abrupt drop inorders and a significant numberof cancellations. In general, thelight aircraft category was mostaffected by cancellations. It is alsothe category that experiencedthe most important changes toproduction rates. The mediumaircraft category was less affected,

but still endured decreasedproduction rates. The large aircraftcategory was only slightly affected.

In dollar terms, the industrybacklog in the first quarter of 2009was estimated at approximately$69.7 billion, down from a peak of$77.8 billion in the third quarter of2008. Taking into account the softorder activity experienced to datein 2009, as well as the estimatedlevel of aircraft cancellations anddeferrals, the industry backlog isexpected to continue shrinking inthe short term.


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Pre-Owned Aircraft Inventory as a % of the Fleet%, calendar years 1999Q1 2009

Sources: Aircraft Inventory and fleet from JETNET. Excludes Very Light Jet segment.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1-09

9.9%

12.8%

15.7% 15.7%

14.1%

13.0%

10.9% 11.0%10.4%

16.1%

17.4%

The Pre-owned Market

Over 60% of new business jetorders are replacement aircraft forcurrent owners. The demand fornew aircraft is stimulated by the

conditions prevailing on the pre-owned market. The pre-ownedmarket is considered healthywhen residual values are highand when the inventory of pre-owned aircraft for sale is low. As

of early 2008, the percentage ofthe overall business jet fleet forsale on the pre-owned marketbegan to increase rapidly. Manyaircraft owners either experienceddifficulty or failed to sell their

pre-owned aircraft, which, inturn, made them less likely topurchase replacement aircraft.

The growing number of aircrafton the pre-owned market is aleading indicator of the business

aircraft market downturn thatstarted in the fourth quarter of2008. Between 2002 and 2007the pre-owned aircraft inventory,as a percentage of the fleet,decreased from 15.7% to 10.4%.

From early 2008 to the first quarterof 2009, the level rose from16.1% to 17.4%. This increasewas significant, especially in thesecond half of the year, whenmanufacturers new order intakelevels slowed dramatically. Lookingforward, Bombardier expects thelevel of pre-owned inventory tostart declining in 2010 and returnto historical levels of 10% - 13%.


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New Aircraft Programs

When compared to older aircraftmodels, new models tend to offermore cabin volume, increasedrange and better performance for

a comparable price. The launchof new aircraft programs reflectsOEMs confidence in the marketgoing forward as manufacturersexpect sustained deliveries inthe first years after entry intoservice. The required investmentsin design, development andtechnology as well as markettiming are crucial to the successof business aircraft programs.New aircraft programs can either

be derivative or clean-sheetdesigns. A derivative is a newaircraft based on an existingdesign that has been upgraded,whereas a clean-sheet designis a brand new conceptualized

aircraft. There are significantlyhigher costs involved in designing,building and certifying a clean-sheet design aircraft compared tomodifying an existing platform.

Therefore, the trend has been

for manufacturers to plan aircraftfamilies based on platformsfrom which derivatives of theclean-sheet design allow for adistribution of the design costsover more than one model.

Several clean-sheet and derivativebusiness jet programs werelaunched during the last up-cycleand are now approaching entryinto service. In 2009, three newaircraft programs are expected toenter into service and generate

a significant number of deliveriesduring the next years.



Sources: Dates of entry from competitors' press releases and trade media coverage. *Very Light Jets.

Falcon 2000LX

Lineage 1000Phenom 300

2009

CJ4

Falcon 900LXHawker 450XP

Premier II*

2010

G250

Honda Jet*

2011 2012

Learjet 85

Legacy 450

G650

Global VisionLegacy 500

2013

Entry Into Service of New ProgramsEntry into service by model, calendar years 2009-2013


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The number of models inservice plays a role on the totalmarket demand. The Herfindahl-Hirschman Index (HHI) wasadapted to quantify the level ofcompetition and innovation in

the industry. The HHI measurescompetitiveness in a particularmarket by taking the sum of thesquares of the market shares ofall aircraft models, resulting in ascore between 0% and 100%.

A score of 0% represents amarket with pure competition,while a score of 100% representsa monopolistic market. Whenapplying the HHI to the businessaircraft market, all aircraft are

assumed to be competing inthe same market. Over the past40 years, the increased levelof competition in the businessaircraft industry led to thedevelopment of a significantnumber of aircraft models, drivingan increasing level of orders.

As a result, the HHI has beendecreasing over the last 40 years.



Herfindahl Hirschman Index (HHI)%, 1965 - 2008

Source: Bombardier analysis.

0%

5%

10%

15%

20%

25%

1995 2000 2008199019851980197519701965

Named after economists Orris C. Herfindahland Albert O. Hirschman, HHI is aneconomic concept often used in competitionlaw and antitrust proceedings. The U.S.Department of Justice uses it to evaluatecompetition in different markets.


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Fractional and Branded

Charter Demand

Fractional ownership (whereseveral owners own a fractionof a given aircraft) has existed

since the mid-1990s and hasaccounted for, on average, 14%of industry deliveries over the last10 years. Subsequent variationsinclude fractional card or jet cardprograms where customers can

access on-demand use of abusiness jet by committing to acertain number of hours of usageper year but without the obligationto purchase shares in an aircraft.



Personalized service

Commercial-aviation

offeringBusiness jet market

On-demand service Business jet ownership

Air Travel Options

Low costairlines

Commercialairlines

First-classcommercial

airlines

Air Taxis

BrandedCharters

Jet-cardprograms

Fractionalownership

Fullownership

Source: Bombardier.


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The emergence of charter andbranded charter operators is arecent trend. These operators offeron-demand and tailored serviceswith identifiable, competitivetrip-specific pricing, and no

obligation to purchase sharesin an aircraft. Branded charteroperators are characterized byvolume purchases of a fleet ofaircraft, sophisticated operationsinfrastructure, and a greater use ofairline-style scheduling practicesin order to minimize deadheadcosts. In 2008, branded charteroperator orders representedapproximately 20% to 30% oftotal business jet orders.

Multiple volume orders fromboth fractional and brandedcharter operators have helpedincrease industry orders inrecent years. Over the next 10years, the forecast projects thatapproximately 15% to 20% ofindustry orders are expected tocome from fractional and brandedcharter operators.

240 25%

20%

15%

10%

5%

0%

220

200

180

160

140

120

100

80

60

40

20

0

DeliveryUnits

M a r k e t s h a r e ( % )

Business Jet Fractional Delivery UnitsUnits and share (%) of total deliveries, calendar years, 1999-2008

Source: Airclaims database. Excludes Very Light Jet Segment, ACJ & BBJ.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Deliveries Share of Total

17%

16%

15%

18%

14%

19%

18%

17%

14%15%

96

109102

57

93

113 124

118

130

95




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the forecast



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Orders, Deliveries and

Revenues

As the economy recovers fromthe current downturn, orders forbusiness aircraft will increase,

which should sustain deliveries ofnew business jets over the next10 years.

The sharp contraction of the U.S.economy and ensuing worldwiderecession during 2008-2009 isexpected to cause a significantreduction in the near termdemand for business jets. Many

OEMs have and will likely continueto record negative orders in early2009 due to a significant number

of cancellations. Order intake isforecast to reach a low of 375units in 2009 and is expectedto improve by the end of theyear, reaching 2008 levels ofapproximately 1,400 units per

year by 2013.

the forecast

Orders (units), calendar years, 1999-2018

1999 2000 2001

Total excl. VLJs:8,700 Units


2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Business Jet Industry 10-Year Orders Outlook

2018

0

500

1,000

1,500

2,000

2,500

All segments in which Bombardier competes Very Light Jet segment

Source: Bombardier Forecasting Model. Very Light Jets include CJ1+, CJ2+, Mustang, Premier I, Phenom 100 and Eclipse 500. Excludes ACJ & BBJ.


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the forecast

0

500

1,000

1,500

2,000

2,500

Deliveries (units), calendar years, 1999-2018



Business Jet Industry 10-Year Deliveries Outlook

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Bombardier Forecasting Model. Very Light Jets include CJ1+, CJ2+, Mustang, Premier I, Phenom 100 and Eclipse 500. Excludes ACJ & BBJ.

All segments in which Bombardier competes Very Light Jet segment

The delivery forecast showsdemand for 11,500 aircraft thatwill generate $256 billion in totalrevenue in the light to large aircraftcategories over the 2009-2018period, compared to 6,500 aircraft

and $122 billion in total revenuebetween 1999 and 2008.

Industry deliveries are expectedto recover from a low of 650deliveries per year in 2009-2010, gradually increasing toapproximately 1,400 industrydeliveries per year by the end

of the forecast period in 2018.Existing backlogs heading into the

downturn of 2008-2009 will resultin near term higher deliveriescompared to orders.


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The Forecast is grouped into three

geographic regions: North America,

Europe and the Rest of the World.

Orders from each region are

driven by the previously mentioned

economic and market drivers.

The North American Market

(United States and Canada)

Business aviation started in

North America in the 1960s.

The region has always been

the most important in terms of

business jet sales. The North

American business jet installed

base was 9,400 aircraft at the end

of 2008, or approximately 70%

of the worldwide business jetinstalled base. The well developed

infrastructure in North America

can accommodate a continuously

renewing demand of business

aircraft.

Business aviation also has

strong roots in North America,

from manufacturing to servicing

and maintenance. In 2008,

approximately 75% of business

jets delivered were assembled in

North America.

The recession that began in theU.S. in December 2007 has

significantly affected demand. The

business jet market slowdown

started in early 2008. Other

regions followed the downward

spiral as of the fourth quarter

of 2008. The negative press

associated with business jet usage

among U.S. corporations has also

contributed to the record pre-

owned inventory levels and the

unusual number of cancellations.

The U.S. is expected to beamong the first of the major

economies to recover from the

recession, with positive economic

growth expected to return in late

2009. The expected recovery

will be fueled by significant fiscal

and monetary stimulus measures

by the U.S. Government and

increasing customer confidence.

This should positively impact

wealth creation.

regional details


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As the most dynamic anddiversified economy around theworld, the U.S. should continueto generate wealth and sustainthe development of its businessaircraft industry in the long term.

In May 2009, Moodys decided tomaintain the credit rating of theU.S. because it has a diverseand resilient economy, stronggovernment institutions, highper-capita income, and a centralposition in the global economy.

While Canadian financialinstitutions have proven to bestable throughout the recentcrisis, Canada has experienced

economic decline in 2009,although to a smaller extent whencompared to the U.S. Accordingto the latest IHS Global Insightforecast published in May 2009,both countries real GDP areexpected to show positive growthin the first half of 2010.

North America is forecast to receivethe greatest number of business jetdeliveries between 2009 and 2018with 5,400 units. The 2008 fleetof 9,400 business jets will grow to14,100 aircraft in 2018, resultingin a CAGR of approximately 4%.

Europe

In recent years, Europe hasemerged as a strong market forbusiness jet orders. Buoyed bythe strong Euro relative to the

U.S. dollar strong economicgrowth generated by theexpanding European Union andthe emergence of branded charterbusiness jet operators, Europeaccounted for an estimated 34%of worldwide business jet ordersin 2008; compared with 29% forNorth America.

The Euro-area economy enteredinto recession approximately

one year later than the U.S. TheGDP is expected to decline by4.3% in 2009, however orders

are expected to recover onceeconomic growth resumes, whichshould occur within 12 monthsafter the U.S.

The growing European business

jet installed base will create asignificant replacement market incoming years, ensuring that thisregion will continue to be a majorsource of demand for businessaircraft.Europe will receive the secondlargest number of business jetdeliveries with over 3,000 unitsin the period from 2009 to 2018.

The 2008 fleet of 1,700 business

jets will grow to 4,500 aircraft by2018 with a fleet growth CAGR ofapproximately 10%.

regional details


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The Rest of the World

The forecast region containing

the Rest of the World includes

Latin America, the Middle East

and Africa, Russia and the

Commonwealth of IndependentStates (CIS), and Asia and

Australasia. There is significant

discussion regarding the potential

for China and India to become

larger markets in the business

aircraft industry. As a result, they

have been treated separately from

Asia and Australasia.

Combined, the Rest of the

World regions have continued

to experience economic growththrough the current downturn,

however growth has slowed

versus recent years. As discussed

in the MSCI section, stock markets

in regions like Russia, India or

China have been tremendously

devaluated in 2008. This wealth

destruction will likely prevent these

regions from providing significant

demand for business jets in the

next 24 months.

However, over the next 10 years,

we believe the Rest of the World

business jet installed base will

grow by an impressive 8% per

year on average. The Middle East

and Africa, Latin America and

Russia and the CIS will represent

almost two-thirds of the deliveries

to the rest of the world due to

their solid interest for business

jets, their aviation infrastructures

and the strong potential of their

oil and natural resources driven

economies.

To date, there have been few

orders from China and India,

however there is enormous

potential for these countries

once certain infrastructure and

regulatory obstacles are removed.

Over the 10-year period, China

and India are expected to have

the highest CAGR (respectively

16% and 14%) due to their

relatively small current fleet and

their huge potential for growth.

The fleet in the Rest of the World

was approximately 2,400 aircraft

at the end of 2008. We forecast

additional deliveries of 3,100 units

over the next 10 years.

regional details

Source: Bombardier Forecasting Model. Excludes Very Light Jet, ACJ & BBJ. Fleet from CASE.

Fleet Fleet Fleet CAGR Orders Deliveries (2008) (2018) (2009-2018) (2009-2018) (2009-2018)

North America 9,400 14,100 4.1% 5,900 5,400

Europe 1,700 4,500 10.2% 3,200 3,040

Latin America 1,160 1,780 4.3% 770 710

Middle East & Africa 530 1,190 8.4% 750 720

Russia & CIS 270 820 11.7% 670 600

China 90 370 15.6% 360 300

India 90 320 13.8% 320 250

Asia & Australasia 270 720 10.2% 580 480

(excl. China & India)

Business Jet 10 Year OutlookUnits & %, calendar years, 2009-2018


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regional details

Regional 10 Year Deliveries OutlookUnits, calendar years, 2009-2018

Source: Bombardier Forecasting Model. Excludes Very Light Jet, ACJ & BBJ.


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The following segmentationhelps to differentiate thevarious aircraft offered on thebusiness jet market. It is basedon a combination of price andperformance specifications,

primarily cabin volume, speed,range and takeoff field length.

Light Category

The light aircraft categoryencompasses light to midsizeaircraft segments. Whencompared to other business

jet market categories, the lightcategory value proposition relieson relatively low prices and low

operating costs combined withsufficient range for short-haulmissions. The Learjet 40 XR,the Learjet 45 XR, the Learjet60 XR and the in-developmentLearjet 85 aircraft are all partof this category. The Learjet 85aircraft has been reaching all itsdevelopment milestones, andBombardier is committed to itsentry into service in 2013.

The light aircraft category isexpected to take the longest timeto recover after the downturn dueto the large number of aircraft(18.1% of fleet) for sale in the firstquarter of 2009 on the pre-owned

market. We expect the lightcategory to generate a total of6,000 deliveries over the next 10years, representing $69 billion.

segment details

i

Business Jet Market Segmentation

: i i l .i i l l i i i i l , i .

i

l

l

i i

I I

i i i i

li

i

iII

I i I l

i

Source: Bombardiers internal research department .*Segmentation is largely determined by a combination of cabin volume, range and price.

i

l

l

i i

I I

i i i i

li

i

iII

I i I l

Legacy600

Lineage1000

G250

CL-850

i i li i l l i i i i l i

Bombardier

Cessna

Dassault

Gulfstream

HawkerBeechcraft

Embraer

Others

VeryLightJet

SuperLightJet

LIGHT JETS MEDIUM JETS LARGE JETS

SuperMidsize

JetLarge Jet

MidsizeJet

SuperLarge Jet

UltraLong-Range

Jet

LightJet

Mustang CJ3

G150 G200 G350 G450 G500

G550

G650

Encore+

CJ4

L40XR L45XR L60XR

L85

CL-300 CL-605 G5000 GEX-XRS

CXSovereignXLS+

F900DX F7XF2000DX

F2000EX/LX

F900EX/LX

CJ1+

CJ2+

Premier1A/II

36 In production 13 In development

Phenom100

Phenom300

Legacy450

Legacy500

H400XP/450XP

H750 H4000H850XP

H900XP

HondaJet SJ30-2


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Midsize Category

The midsize category featuresthe super midsize and largesegments. The midsize categoryvalue proposition relies on

enhanced cabin comfort andsuperior range versus the lightcategory. It is the category ofbusiness jets often preferred

by corporations. Bombardiersuccessfully developedthe midsize category withthe Challenger 600 series.Bombardier has 3 strongproducts in the midsize

category: the Challenger 300,the Challenger 605 and theChallenger 850 jets.

The midsize aircraft category isexpected to recover more quicklythan the light category as thereare fewer pre-owned aircraft forsale (16.5% of fleet). The midsizecategory is expected to account

for a total of 2,700 deliveries overthe next 10 years, representing$67 billion in revenue.

segment details

Business Jet Forecast by SegmentDelivery units, avg. revenue per unit, total market revenue (US$B), constant 2008 $,calendar years 2009-2018

Sources: Bombardier analysis. Revenues estimated from GAMA and B&CA list prices.

1,000

010 20 30 40 50 600

2,000

3,000

4,000

5,000

$31B

$32B

$35B

$79B

$41B

$38B

TotalDeliveryUnits

Forecast Average Revenue per Unit (In Billion USD)

LEARJET CHALLENGER GLOBAL

Light/Super

Light

Midsize

SuperMidsize

Large SuperLarge

UltraLong-Range


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Large Category

The large category features thesuper large and ultra long-rangesegments. The large categoryaircraft offer the most capabilities

in terms of range, speed, andcabin comfort. With the Global5000 and the Global Express

XRS, Bombardier has the mostadvanced product line in theindustry for this market category.

Both aircraft will feature the newGlobal Vision flight deck, whichpairs the latest technologicaladvancements in avionics withenhanced and synthetic vision

systems to provide pilots with anunprecedented level of situationalawareness. It is on schedule forfirst flight in summer 2009.

The large category is expectedto expand faster than the othercategories. The recent shift indemand towards more internationalcustomers has driven sales oflarger aircraft. Contrary to U.S.customers, who generally enterthe market from the bottom andthen trade up, most internationalcustomers purchase their firstaircraft within the large category.

Customers in the large aircraftcategory are more willing to pay foradditional comfort and technologythan they were in the past.

Although no category will come

out of the downturn unaffected,we expect deliveries in the largecategory to expand the mostrapidly after the downturn. Total2009-2018 deliveries are forecastto be 2,800 units for a value of$120 billion.

A Note on the Very Light Jet

Segment

The very light jet segment differs

from the rest of business aviationin that the majority of purchasersare owner-operators.

Although the very light jetsegment could become thelargest segment in terms of unitdeliveries with an average of320 deliveries per year forecastbetween 2009 and 2018, it

represents a comparatively smallportion of industry revenues.

The very light jet segment hasbeen significantly weakened bythe economic downturn. Thefuture of this segment will dependon the capacity of the manymanufacturers entering this marketto deliver on their plans as well ason the questionable success of Air

Taxi business models.

segment details


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conclusion



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In a Few Words

The cyclical nature of thebusiness jet industry can easilylead to pessimistic views whichgenerally subside once the market

recovers. OEMs face a toughshort-term period due to the lackof available credit, numerousorder cancellations and reductionof production rates. However,future perspectives remain solid.We strongly believe that thecurrent industry challenges suchas negative perceptions and thehigh level of pre-owned aircraftinventory will fade in the short-term. Medium to long-term growth

in the industry will be fuelled bymanufacturers continuing todesign and market new aircraftto drive value to customers. Inparticular, we expect significantdemand to come from U.S.customers replacing theircurrent aircraft and internationalcustomers from regions such asthe Middle East & Africa, Latin

America, and Eastern Europeentering the market. Business jetswill be used by corporations asglobalization trends continue toincrease in the future.

The business jet market shouldcontinue to experience stronggrowth over the 2009-2018period, with 12,550 orders yieldingdeliveries of 11,500 aircraft, worth

$256 billion of revenues. Thelarge aircraft market categoryis expected to expand fasterthan the other categories. Themanpower needed to manufacturethese aircraft and the revenuesassociated with them will createsignificant economic value.

Leading the way

The business aircraft industrywill likely face new challengesgoing forward. As fuel pricesand environmental concerns

rise, the green wave is expectedto modify customers actionsand perceptions in the future.Bombardier is being proactiveto address environmental

concerns through corporatesocial responsibility initiatives,such as being the first OEM tooffer business aircraft customersa fully managed carbon-offsetprogram to offset their aircraftsaverage carbon emissions.OEMs may have to contributetowards developing worldwideinfrastructure to support theregional development of businessaviation. Bombardier is ready toaddress the new challenges on thehorizon so that the industry cancontinue to flourish in the long-run.

conclusion


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sources



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Airclaims databaseAircraft Bluebook Price DigestAMSTATB&CA Business & Commercial Aviation Magazine

Blue Chip Economic Forecast, May 2009EIU Economist Intelligence UnitEurocontrolEurostatFAA ETMSCFlight International MagazineForbes.comGAMA General Aviation Manufacturers AssociationIHS Global InsightJETNET databaseJP Morgan Business Jet Monthly, April 2009Merrill Lynch and Cap Gemini 2008 World Wealth ReportMerrill Lynch Bizjet Flight Plan, April 2009Merrill Lynch Market Economist, April 2009MSCI-BarraNBAA National Business Aircraft AssociationNBER National Bureau of Economic ResearchOEMs financial reports, websites and press releasesUBS Business Jet Monthly, April 2009U.S. Bureau of Economic AnalysisU.S. Bureau of Labor StatisticsWeekly of Business Aviation

For electronic copies of the Bombardier Aerospace Business Aircraft Market Forecast 2009-2018 visit thecompanys website at www.bombardier.com.

sources

Resources used in the Bombardier Aerospace Business Aircraft Market Forecast:

BBA 2009 Market Forecast

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