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Presented by: Jonathan McDonald

Jonathan.McDonald@iba.aero

Narrowbody Market Overview

December 2016

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General Demand – Traffic

RPK – Up 7% for September 2016 v September 2015

Capacity up 6.6% September 2016 vs September 2015

Load Factors @ 81.10% for September 2016 representing slight increase over September 2015

All regions – reasonable year on year growth in excess of 4%

Passenger traffic levels have grown at just below 6% - Growth particularly strong in Asia Pacific

Freight traffic still sluggish with growth at just below 1.5%

Source: IATA

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Annual RPK Growth In Billions (Seasonally Adjusted)

Source: IATA

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580

2012 2013 2014 2015 2016

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Demand - Orders where are we ?

Year Boeing 737 NG Boeing 737 MAX Airbus A320 CEO Airbus A320 NEO Total

2006 649 0 673 0 1,322

2007 695 0 914 0 1,609

2008 437 0 559 0 996

2009 172 0 228 0 400

2010 388 0 422 30 840

2011 409 150 244 1,226 2,029

2012 228 913 310 473 1,924

2013 484 708 377 876 2,445

2014 281 891 558 987 2,717

2015 247 409 154 861 1,671

2016 140 268 145 350 903

Source: IBA Jet Data

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Demand: where are we? Orders: Airbus A320 & Boeing 737 CFM

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Gross Orders

NG MAX NEO CEO Oil

Source: IBA Jet Data

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Narrow-body Historical Production levels

Data based purely on Airbus A320 CEO & NEO / Boeing 737NG / CFM powered 737 Classics

Does NOT include ACJ / BBJ / C40 Clippers & P8 Poseidons etc !!

Important points to consider are -

Consistent growth for both Airbus and Boeing from 2008 onwards meaning production increases have been disciplined and “not all guns blazing”

Despite a small drop in deliveries in 2008 – there has fundamentally been a strong increase in deliveries from 2003 for Airbus A320s and Boeing 737NGs

Source: IBA Jet-Data

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Historic Narrow-body Production Levels

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1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Delivery Profile

737 CL 737NG CEO NEO Source: IBA Jet Data

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Orders & Production – Demand where are we?

2016 orders are well down compared to any of the years 2011 to 2015 inclusive – even adjusted for only 11 months

Is this a problem ?

In IBA’s view – Non !!!

How can it be when Airbus has backlog of over 4,800 A320 Family NEO and Boeing – 3,350 B737 MAX, let alone the remaining production of CEOs and NGs to see out

And that Airbus wants to ramp A320 production to 60 in 2019 and Boeing want to go to 57 B737s in same year: Both well above 30% of today’s production levels.

Source: IBA Jet Data

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Order Build Up Airbus A320 NEO & Boeing 737 MAX

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Cumulative NEO/MAX orders

MAX NEO

Source: IBA Jet Data

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Order Build Up Airbus A320 NEO & Boeing 737 MAX

Take Away Points !!!!

Airbus is ahead with the NEO in terms of cumulative orders, regardless of the fact that the NEO was launched 7-8 months earlier.

In terms of firm orders Airbus have circa 4,800 NEO while Boeing have about 3,350 MAX

Digging just a little deeper

Both the A319NEO and 737 MAX 7 have hardly set the sales stats on fire with sub 100 units each to date

The A320NEO and MAX 8 are very closely matched with the NEO slightly ahead.

The A321NEO is doing very well while sales of the MAX 9 are a little slow – No figures supplied as it is difficult to determine which MAX orders are actually confirmed as the Dash 9

Will Boeing do a MAX 10 ? Jury’s out there on that one

Basically – both NEO & MAX very successful when looked at on a programme basis

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Narrow-body Fleet Composition late 2016 - Circa 13,800 units

Asia Pacific Europe & CIS North America Latin America Middle East Africa

Airbus A320 CEO 2,039 2,124 1,093 551 350 135

Boeing 737 NG 1,762 1,201 1,486 302 126 205

Boeing 737 CL (CFM) 215 291 271 85 37 109

MCD / BOE MD-80/90/717 54 91 450 47 48 29

Boeing 757-200/300 25 134 431 5 6 6

A320 NEO 18 19 5 8 0 0

Total 4,113 3,860 3,736 998 567 484

Source: IBA Jet Data

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Passenger Narrow-body Fleet – Geographical Distribution

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A320ceo 737NG 737 Classics MD-80/90/717 757 A320neo Total

Relative Narrowbody Passenger Fleet

Asia Pacific Europe & CIS North America Latin America Middle East Africa Source: IBA Jet Data

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Passenger Narrow-body Fleet – Age Distribution

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Passenger Fleet Age Distribution

MD-80/90/717 757 737 Classics 737NG 737 MAX A320ceo A320neo

Source: IBA Jet Data

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Passenger Narrow-body Fleet – Age Distribution

Take home facts !!!

Average fleet age is 11 years old or equivalent to a 2005 / 2006 delivery

About 4,300 NB aircraft, or 31% of the sampled fleet is between brand new and 6 years old – or over a third of it within the age range before the more expensive airframe checks etc fall due

A further 3,300 NB aircraft are between 6 years old and 10 years old – a further 24% of the fleet – again within an age before further expensive checks fall due

Physical evidence of this – go to any major busy airport these days – and let’s face it – most of what fills the active ramp is Boeing 737NGs and A320 family aircraft - LHR alone is 57% A320 family !!!

Source: IBA Jet Data / LHR-LGW.com

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Passenger Narrow-body Fleet – Active & Parked Aircraft

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MD-80/90/717 757 737 Classics 737NG 737 MAX A320ceo A320neo

Active & Stored

Active Parked Parking %Source: IBA Jet Data

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Passenger Narrow-body Fleet – Active & Parked Aircraft

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737-300 737-400 737-500 737-600 737-700 737-800 737-900 A318 A319 A320 A321

Parked Narrow Body Aircraft

Source: IBA Jet Data

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Passenger Narrow-body Fleet – Historic Availability 2006 – Present

Source: IBA Jet Data

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0 5 10 15 20 25

A320 737NG 757 737CL M80

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Passenger Narrow-body Fleet – Historic Availability 2006 – Present

Source: IBA Jet Data

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Total

Boeing 737 Classic, 737 NG, MD80, Boeing 757 & Airbus A320 Families Combined Historic Availability

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Passenger Narrow-body Retirements Boeing 737 CL / NG / A320

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

Retirements

737 CL 737NG CEOSource: IBA Jet Data

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Passenger Aircraft – Estimated Lease Expiration to 2025

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2017 2018 2019 2020 2021 2022 2023 2024 2025

Estimated Lease Expiries out to 2025 will exceed 2,400

737CL 737NG CEO NEO Source: IBA Jet Data

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Passenger Aircraft – Transaction Volume Past 10 years - Leases

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD

737CL 737NG A320 Source: IBA Jet Data

Used Aircraft Leases Airbus A320 Families & Boeing 737 CFM

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Passenger Aircraft – Transaction Volume Past 10 years - Sales

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD

737CL 737NG A320

Used Aircraft Sales: Airbus A320 Family and Boeing 737 CFM

Source: IBA Jet Data

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Passenger Aircraft – Lease Rates – Airbus A320-200

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A320 Lease Rates - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15 3m LiborSource: IBA JetData

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Passenger Aircraft – Lease Rates – Boeing 737-800

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737-800 Lease Rates - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15 3m Libor Source: IBA Jet Data

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Passenger Aircraft – Lease Rate Factors – Airbus A320-200

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0.80%

1.00%

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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

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F

A320 LRFs - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15 Source: IBA Jet Data

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Passenger Aircraft – Lease Rate Factors – Boeing 737-800

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0.60%

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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

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737-800 LRFs - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15 Source: IBA Jet Data

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Passenger Aircraft – Values – Airbus A320-200

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$45.0

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A320 Market Values - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15Source: IBA Jet Data

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Passenger Aircraft – Values – Boeing 737-800

$10.00

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$45.00

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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

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737-800 Market Values - Constant Age

Age - 0 Age - 5 Age - 10 Age - 15

Source: IBA Jet Data

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Narrow-body Fleet – Freighters

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North America Europe & CIS Asia Pacific Latin America Africa Middle East

Narrow-body Freighter Regional Distribution

757 737 ClassicsSource: IBA Jet Data

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Narrow-body Fleet – Freighters

Take Away Figures !!!

Excluding rarities such as Boeing 727-200Fs, Boeing 737-200Fs, DC-9/MD-80 Freighted aircraft, the current Narrow-body freighter fleet is essentially dominated by the Boeing 757-200F / SF and Boeing 737-300F /SF QC and Boeing 737-400 F / Combi

Between the Boeing 737 Classics and Boeing 757, we are basically talking about 560 aircraft, evenly split between the two.

From what we hear, demand for Boeing 737-400 Freighters remains strong and there should be ample scope for further Boeing 757 conversions.

Frankly, these two core families are likely to dominate the narrow-body freighter scene for quite some time despite the fact that the Boeing 737-800SF is “only just around the corner” and that Airbus’ A320/321 –P2F is still only just launched.

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Narrow-body Fleet – Freighters Boeing 737-400F CMV

To IBA; what this also means is that once fresh out of a –P2F, with fresh maintenance, a good Boeing 737-400F is actually worth a bit………….

As in US$ 8,000,000

Why so much……..

Good passenger feedstock: US$ 3,000,000 (There’s not a lot of good feedstock left now that Alaskan’s fleet is well on its way out)

Conversion Cost: US$ 2,800,000 (AEI – 11 Pallets) (The cost is what it is)

Mods / Registration / Maintenance / Ferry / CAMO / Rep / Insurance & Legal = US$ 2,200,000

(Don’t underestimate any of these)

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Narrow-body Fleet – Age Profile – Freighters

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16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

757 737 Classics Source: Jet Data

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Freighter - Narrow-body Fleet – Age Profile

Take Away Points !!!

Figures apply to active and parked Boeing 737 CFM Classic and Boeing 757-200 Freighter fleets

Circa 515 Active aircraft and 43 parked aircraft

Of the 560 Boeing 737-300 / 400 Freighters and 757-200 Freighters out there – circa 450 are 20 years old or older still – that equates to 81% of the installed fleet.

Source: IBA Jet Data

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Economic Outlook

Demand trends

Pax traffic

Freight traffic

Yield

Load Factors

Orders

Some Supply factors

Deliveries

Parking levels