Worldwide Market Forecast for Commercial Air Transport 2005-2024

(1)

YGR-5045

Worldwide Market Forecast for

Commercial Air Transport 2005-2024

September 2005

Marketing

Japan Aircraft Development Corporation

(2)

Foreword

The forecast of world air traffic and airplane demand for the next 20 years from year 2005 are described in this document prepared by the Market group of Japan Aircraft Development Corporation.

This forecast covers jet and turboprop commercial transport larger than 15 seats excluding freighters operated by the world airlines domiciled in the 10 geographical regions except CIS, which are Africa, Asia (exclude Japan and China), China, East Europe, Japan, Latin America, Middle East, North America, Oceania and West Europe.

Data sources of this forecast are International Civil Aviation Organization (ICAO), OAG MAX Database, AirClaim CASE Database, and Global Insight.

(3)

Contents

1. Summary ... 1

2. Traffic Forecast ... 7

2.1 Regions ... 7

2.2 Relationship among Passenger Traffic, Economy and Yield ... 7

2.3 Economic Forecast ... 8

2.4 Trend of Yield ... 10

2.5 Passenger Traffic (RPK) ... 10

3. Available Seat Kilometer (ASK) ... 13

3.1 Load Factor ... 13

3.2 ASK Forecast by Region ... 14

3.3 ASK Forecast by Region and Range ... 14

4. Fleet and Delivery Forecast ... 19

4.1 Improvement of Aircraft Utilization ... 19

4.2 Trend of Airplane Size ... 20

4.3 Retirement of Existing Fleet ... 23

4.4 Jet Airplane Backlog ... 24

4.5 Stored Airplanes ... 25

4.6 Current and Future Airplane Models – Jet and Turboprop ... 26

4.7 Jet Share in Small Airplane Market ………... 28

4.8 Jet Fleet and Deliveries Forecast ... 29

4.9 Turboprop Fleet and Deliveries Forecast ... 35

5. Engine Market Forecast ... 40

5.1 Engine Category and Their Applications ... 40

5.2 Engine Deliveries Forecast ... 41

6. Forecast Methodology ... 42

(4)

1. Summary

z World air traffic in 2003 decreased 2% from previous year because of Iraq War on March and SARS disease on April, which affected especially Asian airlines transport. After the severe recession from 2001 to 2003, air traffic in 2004 recovered by 11% to 12% over previous year and finally surpassed the traffic volume in 2000 (before the terror attack).

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04

USA EUROPE ASIA/PACIFIC RPK Change（％）

from the Same Month i 2000

MONTHLY TRAFFIC GROWTH IN MAJOR MARKETS

RPK：Revenue Passenger Kilometers

SARS APR. 2003 US TERRORS

SEP. 2001

IRAQ WAR MAR. 2003

z The low cost carriers (LCC), such as JetBlue in USA, Ryanair and easyJet in Europe, are expanding passenger shares by offering low fare and new routes, and the trend of emerging low cost airlines expanded in Asia and in Latin America. To compete with the LCC, Delta and United Airlines in USA founded new low cost airlines as their subsidiaries.

z Operating profit of world airlines is continuing 3-year loss since 2001 after 8-year profit to 2000 and it is estimated $3.7 billion loss in 2004. Return to profit is expected in 2006 or later.

WORLD AIRLINES OPERATING PROFIT

-2.0 2.3

8.4 14.0

12.3

16.5 15.9

12.3 10.7

-11.8 -4.9

-2.8 -3.7

-15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0

OPERATING PROFIT

（NOMINAL $ BILLION）

(5)

z The world economy, which is one of the major drivers for traffic growth, grew very slowly, only 1.4% in 2001, 1.8% in 2002 and 2.5% in 2003. In 2004 the growth rate recovered to 4% at last. For the next 20 years, the growth rate of real GDP is expected to maintain 3.1% of past average rate before terror attack.

z The yield, which is another driver for traffic growth, will decline at 1.3% per year from now on.

z World airlines experienced traffic growth at 5.4% per year in average for the past 20 years. During the next 20 years, they will achieve an average of 4.8% growth per year, and the traffic volume in 2024 will reach 8,886 billion revenue passenger-kilometers (RPK), 2.6 times of the year 2004.

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

1984 1989 1994 1999 2004 2009 2014 2019 2024

2623 2395 2994 874

1184 1011 914 370

FORECAST ACTUAL

3479

8886

YEAR 2004

YEAR 2024

YEAR 1984 1210

WORLD RPK FORECAST

RPK (BILLIONS)

AVE. ANNUAL GROWTH RATE (%) 1985-2004 2005-2024 NORTH AMERICA 4.0 4.1

EUROPE 5.9 4.4

ASIA/PACIFIC 7.9 6.1 REST OF WORLD 4.7 4.4 TOTAL WORLD 5.4 4.8

TOTAL WORLD OTHERS

ASIA/PACIFIC

EUROPE

N.AMERICA

z North America region, which now has the largest market share of 35% in 2004, will grow at 4.1% per year slower than the world average growth rate. Accordingly its market share will decrease to 29% in 2024. Europe region which now shares 29%

in the world market will grow at 4.4% per year, and the share will decrease slightly to 27% in 2024. By the faster economic growth of Asian countries, Asia/Pacific region will realize 6.1% growth per year and the market share will increase from current 26% to 34% in 2024. Asia/Pacific region then becomes larger than North America and Europe, namely the largest market in the world.

(6)

2004

1%

3%

7%

4%

2% 4%

35%

29%

11%

N.AMERICA

W.EUROPE E.EUROPE

ASIA OCEANIA CHINA

JAPAN M.EAST

AFRICA L.AMERICA

(29%) EUROPE ASIA/PACIFIC

(26%) OTHERS

(11%)

2024

1%

4%

11%

4%

2%

4%

29%

26%

15%

N.AMERICA

W.EUROPE E.EUROPE

ASIA OCEANI

CHINA JAPAN

M.EAST

AFRICA L.AMERICA

(34%) OTHERS

(9%)

z The traffic capacity in terms of ASK (Available Seat Kilometer) will grow at an average of 4.6% per year which is slightly lower than passenger traffic growth because of load factor improvement from 73% to 76% for the next 20 years and reach 11,638 billion seat kilometer which is 2.5 times of the present capacity of 4,743 billion seat kilometer.

z In 2004, 14,300 jets and 3,900 turboprops are operating in the world. 7,700 jets (54%) whose 80% are narrow bodies and 3,050 turboprops (78%) of them will be retired for the next 20 years.

z In 2024, jet fleet in the world will account 31,700 units which are 2.2 times of the present number. On the other hand, turboprop fleet will decrease to 1,700 units, which are 43% of current fleet, caused by the shift to the regional jets.

0 5000 10000 15000 20000 25000 30000

1984 1989 1994 1999 2004 2009 2014 2019 2024

JET FLEET FORECAST

20-59 SEATER 60-99 SEATER 100-119 SEATER OVER 400 SEATER

120-169 SEATER 170-229 SEATER 230-309 SEATER 310-399 SEATER UNITS

ACTUAL FORECAST

31657

14292

22050

6056

9491 RETAINED

NEW DELIVERY

328JET,ERJ135/145,CRJ200 CRJ700/900 717,737-600

A318

ERJ170/190 737-700/800

A319/A320 A310 757

A350-800 A340

777 747X

A380

727-200,737-300/400 A320,MD80/MD90 DC8,707

747 DC10,MD11 L1011

767

727-100,737-100/200/500,TRIDENT,DC9S BAC111,F28/F70/F100,DC9

A300 A321

A350-900 747

A310 A300

737-900 767787 A330-300

A330-200

C110/130

ARJ21,RRJ95

(7)

1822 1318

822

1436

6054

2787

1230 567

1241 441

1047644 640 2923

3819 4063

6430

1824

2764

534

349 282 187

2725

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

2004 2024 2004 2024 2004 2024 2004 2024 2004 2024 2004 2024 2004 2024 2004 2024

JET FLEET AND DELIVERY FORECAST

RETAINED NEW DELIVERY

1822 4241

822 4168

1436 4345

6054 9217

1230 2391

1241 3205

1047 3369

640 721

20-59 Seats

60-99 Seats

100-119 Seats

120-169 Seats

170-229 Seats

230-309 Seats

310-399 Seats

Over 400 Seats TOTAL

2003 YEAR-END: 14,292 2023 YEAR-END: 31,657 2004-2023 DELIVERIES:

25,082

WIDEBODY JET NARROWBODY JET

REGIONAL JET UNIT

z The demand for the new commercial jets between 2005 and 2024 will be 25,100 units including backlog of 2,600 units. The largest market will be 6,400 jets for 120-169 seats, and the next large segment will be 4,100 jets for 100-119 seats. For the new turboprop market, demand will be only 830 units.

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

1984 1989 1994 1999 2004 2009 2014 2019 2024

TURBOPROP FLEET FORECAST

UNITS

15-19 SEATS 20-39 SEATS 40-59 SEATS OVER 60 SEATS

RETAINED

NEW DELIVERY 3914

1694 2691

2926

4401 ACTUAL FORECAST

JET STREAM31, DHC6 BE99/MOD1900,METRO,EMB110

JET STREAM41,CN235 SD330/360

SAAB340 748,F27/F50

SAAB2000 DHC8-300

DHC8- 300

FD328,DHC8-100 EMB-120

FD228, MOD1900

ATR72,DHC8-400

(8)

1637

224

945

232

920

212

412 199

64 115

302 346

0 200 400 600 800 1000 1200 1400 1600 1800

2004 2024 2004 2024 2004 2024 2004 2024

1637

288

945

347

920

514

15-19 Seats 20-39 Seats 40-59 Seats

TURBOPROP FLEET AND DELIVERY FORECAST

UNITS

TOTAL FLEET 2004 YEAR-END: 3,914 2024 YEAR-END: 1,694 2005-2024 DELIVERIES

827

412 545

60-79 Seats

z North America region will maintain the largest market in the world, and it will get 8,600 deliveries which are 34% of total new jets. The second largest market will be Asia/Pacific region which is expected to grow faster than other regions, and they will receive 6,900 new jets (27%). Europe region will need 6,300 new jets (25%) for the next 20 years.

2964

1801 1247

563 8570

6335 6881

3296 5956

3754

2771

1811

0 2000 4000 6000 8000 10000 12000

2004 2024 2004 2024 2004 2024 2004 2024

RETAINED

JET FLEET AND DEMAND BY REGION

UNITS

NEW DELIVERY 11534

N.AMERICA EUROPE ASIA/PACIFIC OTHERS

8136 8128

3859 TOTAL FLEET 2004 YEAR-END 14,292 2024 YEAR-END 31,657

2005-2024 DELIVERIES 25,082

z 25,100 jets delivered for the next 20 years will be $1,251 billions in dollar value.

The largest jet market will be $343 billions for 310 - 399 seats, the next largest will

(9)

The amount of turboprop delivery will be very small ($11.8 billions) relative to jet delivery value.

4063

2764

1824 6430

2923

3819

534 2725

0 1000 2000 3000 4000 5000 6000 7000

20-59 60-99 100-119 120-169 170-229 230-309 310-399 400-

JET SALES FORECAST BY SIZE (2005-2024)

UNITS

2004 US$

BILLIONS

0 100 200 300 400 500 600

49

99 77

246

87

252 343

97

SIZE (SEATS)

NARROWBODY WIDEBODY

TOTAL 25,082 UNITS

1,251

$ BILLIONS

700

z Engine deliveries will be 62,300 units for jets and 1,700 units for turboprops between 2005 and 2024. They will be $340 billions and $1 billions respectively in 2004 dollar value.

z The largest engine market category will be 12,000 - 35,000 lb class which is installed in A320 and B737 series, and they represent 47% (30,200 units) of total engine market in unit and 44% ($151 billions) in dollar value.

15508

7241 9334

30239

1654 0

5000 10000 15000 20000 25000 30000 35000

T/P <12 12-35 35-65 65-100

A330 A380 B777 A300/A310/A340

B747/B757/B767 A318/A319/A320

A321/A340 B757/B767/B737 328JET

CRJ-200/700/900 EMB135/145/170/190 1900,

ATR42/ 72, CN235, DHC- 8 EMB-120

ENGINE DELIVERY FORECAST (2005-2024)

NUMBER OF ENGINE NUMBER OF ENGINE

No.of ENG VALUE ($B) TURBOPROP 1,654 1

JET 62,322 340

TOTAL 63,976 341

0 25 1

47

151

70 72

50 75 100 125

SALES VALUE

SALES VALUE (US $ BILLIONS)

THRUST (X1000 LBS)

150

(10)

2. Traffic Forecast 2. 1 Regions

Growth rates of traffic vary in regions because they have different geography, population and economic activity. Then, the world is divided into 10 regions as follows, excluding CIS.

2. 2 Relationship among Passenger Traffic, Economy and Yield

The economic (GDP) growth and the decline of air fare (Yield) have sustained the passenger traffic (RPK) growth.

The relationship among RPK, GDP and Yield in the past is analyzed by each region to obtain recurrent equation, and regional RPK is forecasted by using their relationship with GDP and Yield forecast results. In the calculation, regional RPK means RPK for airlines domiciled in the geographical region, and GDP of each region and average Yield of scheduled airlines in the region are used.

-15 -10 -5 0 5 10 15

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

CHANGE (%)

GULF WAR RPK

GDP

YIELD

RPK vs. GDP, YIELD

TERROR ATTACK

IRAQ WAR SARS

(11)

2. 3 Economic Forecast

GDP forecast in the region basically depends on the long term GDP forecast of every country conducted by Global Insight in 2004.

World GDP was depressed to 1.3% growth in 2001, 1.8% growth in 2002 and 2.6% in 2003. The recovery was slower than expected, and in 2004 world GDP growth finally recovered to 3.9%, the forecasted level before the terror attack.

0%

1%

2%

3%

4%

5%

6%

1994 1999 2004 2009 2014 2019 2024

Source: Global Insight

WORLD REAL GDP

CHANGE

YEAR

TERROR ATTACK

For the long-term, economic growth rate in developed countries goes down or maintains current level while economic growth rate in developing countries is larger than the past. As a result, world real GDP will grow at 3.1% annually over the next 20 years, the same growth rate as in the past.

North America and West Europe will keep moderate growth at the rate of 2.9%

and 2.1% per year, which are about the same rates in the past 20 years. Japan recovered to 2% growth in 2003 after a decade long recession since early 1990’s, and it will grow at the lowest rate of 1.7% per year in the future. China will maintain high growth rate of 6.1% per year, although it is lower than the miraculous growth rate in the past. Other Asian countries (excluding China and Japan) also sustain high growth rate of 4.7% per year because of recovery from recession.

Latin America, East Europe, Middle East and Africa will show higher growth rates of 3.9%, 4.1%, 3.7% and 4.3% respectively than the past because of shift to

(12)

liberalism (East Europe) and progress by stabilization of political situation (Latin America, Middle East and Africa).

3.9% 4.1% 4.3%

3.7%

8.6%

5.7%

2.5%

3.3%

2.7% 2.9%

1.4%

2.5% 2.2%

3.1% 3.2%

4.7%

6.1%

1.7%

2.7%

2.1%

2.9%

3.1%

0%

2%

4%

6%

8%

10%

WORLD NORTH AMERICA

LATIN AMERICA

WEST EUROPE

EAST EUROPE

AFRICA MIDDLE EAST

OCEANIA JAPAN CHINA ASIA 1985-2004 2005-2024

REAL GDP FORECAST

GDP GROWTH per YEAR

(13)

2. 4 Trend of Yield

Although the main factor of the reduction in fare for the past 20 years was cost reduction by using the newer fuel efficient airplanes with advanced technology and airlines’ restructuring efforts, emergence of low-cost carrier and purchase of low-fare ticket through internet also spurred to lower the fare level.

As the circumstance of aviation business is getting harder, airline efforts of restructure will be more difficult to achieve and the change toward the low fare will not be so much as in the past.

Thus, world average yield which was declined at 4.0% per year since 1984 will continue to decline but its rate, 1.3% per year for the next 20 years, is significantly lower than the past trend. Even if the new large airplane that is now developed enters into service, the impact of the airplane on the air-fare is not as big as the emergence of 747.

As the yield for North American airlines is already lower than the world average, it will decline at 1.0% per year for the next 20 years. For West European airlines, yield is higher compared to other regions; it will decline at 1.5% per year in the future.

0.0 5.0 10.0 15.0 20.0 25.0 30.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

REAL YIELD FORECAST

2003 CENT/RPK

1985-2004 2005-2024 N.AMERICA -2.6% -1.0%

W.EUROPE -2.0% -1.5%

WORLD -4.0% -1.3%

ANNUAL GROWTH RATE （％）

W.EUROPE

N.AMERICA

CALENDAR YEAR WORLD

2. 5 Passenger Traffic (RPK)

Passenger traffic (RPK: Revenue Passenger Kilometer) forecast is obtained by 10 regions from relationships among RPK, GDP and Yield in each region.

These relationships can not describe unexpected affairs such as passenger decrease affected by Gulf War in 1991, 9/11 attack in 2001, Iraq War and SARS in 2003.

It is noticed that the affects of 9/11 attack and the later incidents remained 4 years.

(14)

Since 1985, average growth of the world air passenger traffic (RPK) was 5.4%

per year. World RPK will grow 4.8% per year by 2024 and it will reach 2.6 times as much as 2004 traffic to be 8,886 billion RPK in 2024.

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

1984 1989 1994 1999 2004 2009 2014 2019 2024

2623 2395 2994 874

1184 1011 914 370

3479

8886

YEAR 2004

YEAR 2024

YEAR 1984 1210

WORLD RPK FORECAST

RPK (BILLIONS)

AVE. ANNUAL GROWTH RATE (%) 1985-2004 2005-2024 NORTH AMERICA 4.0 4.1

EUROPE 5.9 4.4

ASIA/PACIFIC 7.9 6.1 REST OF WORLD 4.7 4.4 TOTAL WORLD 5.4 4.8

TOTAL WORLD OTHERS

ASIA/PACIFIC

EUROPE

N.AMERICA

The traffic growth for North America, which is the largest market in the world, will be 4.1% per year in next 20 years, and reaches 2.2 times larger than the current RPK, while its share in the world air traffic will decrease from 35% in 2004 to 29% in 2024.

The traffic growth of Europe will be 4.4% per year for next 20 years to achieve 2.4 times as large as current level, while its share will decrease from 29% in 2004 to 26% in 2024.

2004

1%

3%

7%

4%

2% 4%

35%

29%

11%

N.AMERICA

W.EUROPE E.EUROPE

ASIA OCEANIA

CHINA JAPAN

M.EAST

AFRICA L.AMERICA

(26%) OTHERS

(11%)

2024

1%

4%

11%

4%

2%

4%

29%

26%

15%

N.AMERICA

W.EUROPE E.EUROPE

ASIA OCEANI

CHINA JAPAN

M.EAST

AFRICA L.AMERICA

(34%) OTHERS

(9%)

(15)

6.0

3.1 2.9

6.3 6.6

4.6

18.5

4.8

4.1 4.4 4.4

3.4 4.1

5.0

6.4

4.0 4.4

7.4

5.4

7.1

4.5 4.1

0.0 5.0 10.0 15.0 20.0

WORLD NORTH AMERICA

LATIN AMERICA

WEST EUROPE

EAST EUROPE

AFRICA MIDDLE EAST

OCEANIA JAPAN CHINA ASIA 1985-2004 2005-2024

WORLD TRAFFIC GROWTH FORECAST

RPK GROWTH / YEAR (%)

Asia/Pacific region, where China and NIES/ASEAN countries are the main performers, has maintained the highest traffic growth of 7.9% per year in the past 20 years. For the next 20 years, their traffic will grow at 6.1% per year to achieve 3.3 times as big as today, and its share will increase from 26% in 2004 to 34% in 2024.

Asia/Pacific region will be the largest market in the world, beating North America and Europe markets, while Japan will not grow as fast as past. The traffic growth rate of Japan will be 4.1% per year.

In Africa, traffic will not grow so much in spite of economical growth because air travel market is not mature yet, but the traffic growth will be 4.1% per year for the next 20 years which is larger than the past. In Middle East, traffic will decline to 4.5% from 6.3% in the past due to continuous political unrest. Latin America will maintain their traffic level of 4.4%, because of stabilization of the political situation and the economy.

East Europe will grow their traffic so much as 3.4% due to the EU enlargement and the shift to westernization.

(16)

3. Available Seat kilometer (ASK)

The required ASK (Available Seat Kilometers) is calculated by dividing RPK by passenger load factor. Therefore, the forecast of passenger load factor, which is considered to increase in the future, is necessary to obtain ASK.

3. 1 Load Factor

Average load factor of world airlines increased from 63% in 1984 to 73% in 2004, especially North American and West European airlines show 75% in 2004, which is higher than the world average. These high average load factors are due to current capacity reduction to meet the high break-even load factor compelled by low fare competition, and two-digit passenger increase.

Airlines will strive to improve their load factor by using revenue management system, internet booking system, and offering the same level high quality service through an alliance. However, considering the hourly and seasonal variation of passenger demand, the appropriate average load factor for a year will be 70 to 75%, because higher average load factor over 80% results in passenger spill in crowded conditions, and lower load factor means poor revenues.

Therefore, average load factor of world airlines is estimated to go up to 76%

until 2024.

50.0 55.0 60.0 65.0 70.0 75.0 80.0 85.0 90.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

N.AMERICA W.EUROPE JAPAN AISA WORLD

PASSENGER LOAD FACTOR FORECAST

%

(17)

3. 2 ASK Forecast by Region

World ASK has grown at the rate of 4.5% per year from 1985, which is lower by 0.8% than 5.4% of RPK growth for the same period. During 2005 to 2024, RPK will grow at 4.8% per year, then ASK will grow at 4.6% per year due to load factor improvement from 73% to 76%.

Growth rate for North American and European airlines will be 3.9% and 4.2%

per year respectively, less than the world average of 4.6%, and will reduce their shares in future. Asia/Pacific airlines will continue higher growth rate of 5.8%, and the region will be the largest market in the world.

0 2000 4000 6000 8000 10000 12000 14000

1984 1989 1994 1999 2004 2009 2014 2019 2024

AVE. ANNUAL GROWTH RATE (%) 2005-2024 NORTH AMERICA 3.9

EUROPE 4.2

ASIA/PACIFIC 5.8 REST OF WORLD 4.1 TOTAL WORLD 4.6

N.AMERICA EUROPE ASIA/PACIFIC

OTHERS

1573 1353 1290 526 4743

TOTAL WORLD

YEAR 2004

3397 3096 3967 1178 11638

1936

WORLD ASK FORECAST

ASK (BILLIONS)

CALENDAR YEAER

YEAR 2024

YEAR 1984

(18)

3. 3 ASK Forecast by Region and Range 3. 3. 1 Range Categories

Traffic growth varies by region and route distance. According to the present(*) timetable of world airlines, turboprops mainly operate under 1,000km routes, regional jets operate under 2,000km, narrow-body jets excluding regional jets operate under 4,500km, and wide-body jets mainly operate over 4,500km. Thus, the market is divided into the following 4 categories by route distance.

(*): September 2003

Long-range : over 4,500km

Middle-range : 2,001 to 4,500km Short-range : 1,001 to 2,000km

Regional : under 1,000km

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000

Turboprop Regional Jet

Narrowbody Jet Widebody Jet 0

100000 200000 300000 400000 500000 600000

Turboprop Regional Jet Narrowbody Jet Widebody Jet

RANGE(Km)

RANGE CATEGORY AND ASK DISTRIBUTION

ASK(Millions)

LONG-RANGE MEDIUM

SHORT REGIONAL

SOURCE: OAG MAX Database, Sep.2003

4500 2000 1000

(19)

3. 3. 2 ASK Distribution by Region, Range and Airplane Size Categories

ASK distribution by region and by range category is further divided by size of airplane. 15 size categories are assumed by the number of seats from 1 to 800 by almost 20% increment of number of seats.

ASK distribution of the whole world is shown in the figure below.

In regional and short range category of total world, 40-59 seats jet (CRJ200, ERJ145 etc.) and 120-169 seats jet (A320, B737 etc.) are the two major airplane sizes.

In medium range category, 120-169 seats, 170-229 seats (A321, B757) of narrow-body and 230-309 seats (A300/310, B767) of wide-body are mainly operated. In long range category, the majority of operated airplanes are 310-399 seats of wide-body (A340, B777, MD-11) and 400-499 seats (B747).

Future ASK distribution is obtained based on the current ASK distribution by region, range and size categories by considering the airplane size trend and ASK growth estimation.

001- 019 020-

039 040- 059 060-

079 080- 099 100-

119 120- 169 170-

229 230- 309 310-

399 400- 499

1-1000 1001-2000

2001-4500 4501- -

100,000 200,000 300,000 400,000 500,000 600,000

ROUTE ASK DISTRIBUTION - TOTAL WORLD

AIRCRAFT SIZE （SEATS） RANGE (KM)

ASK (MILLIONS)

(20)

3. 3. 3 ASK Share Forecast by Range

Based on the past ASK growth data, there are difference among the growth rates of “ASK by Range”. Then the share of “ASK by Range” is estimated first using the share trend of “ASK by Range” in past 20 years.

According to the 20 years trend, long-range market has expanded its share compared with other market. One of the reasons why only the long-range market expanded was the improvement of airplane range capability and the popularization of overseas travel.

In future, the long-range market will be matured as same as the other categories, and the regional market will be active again, then ASK share in each market will balance at certain constant level.

0 10 20 30 40 50 60 70 80 90 100

1984 1989 1994 1999 2004 2009 2014 2019 2024

ASK SHARE FORECAST BY RANGE

ASK SHARE (%)

23.9 21.3 24.6 30.1

18.9 22.5 22.0 36.6

18.5 24.0 18.9 38.6

Under 1000km 1001-2000km 2001-4500km Over 4500km

(21)

3. 3. 4 ASK Forecast by Region and Range

Dividing the regional ASK into range categories by using “ASK by Range”

share forecast, ASK forecast by region and range can be obtained.

About three fourths (3/4) of ASK in North America is for routes under 4,500km range because domestic market is widely developed in the region.

In European and Asia/Pacific market, the half of ASK will be occupied by the long-range market. In other region, total ASK is less than the half of ASK of any other region and long-range market share will be only thirty percent.

274 522

267 606

248 745

197 423

900

272 696

812

224 526

1192

286

621

294 351

783

669 1507

560 1788

464

101105 267

216

133 146

187 0

500 1000 1500 2000 2500 3000 3500 4000 4500

2004 2024 2004 2024 2004 2024 2004 2024

N.AMERICA EUROPE ASIA/PACIFIC OTHERS

Under 1000Km 1000-2000Km 2000-4500Km Over 4500Km 1573

3397

1353 3096

1291 3967

526 1179 ASK（BILLIONS）

ASK FORECAST BY REGION AND RANGE

YEAR 2004 4,743 ASK(B) YEAR 2024 11,638 ASK(B)

AVE. ANNUAL GROWTH RATE (%) 2005-2024 Under 1000Km 4.3 1000-2000Km 4.6 2000-4500Km 4.4 Over 4500Km 4.8 TOTAL WORLD 4.6 AVE. ANNUAL GROWTH RATE (%)

2005-2024 NORTH AMERICA 3.9

EUROPE 4.2

ASIA/PACIFIC 5.8 REST OF WORLD 4.1 TOTAL WORLD 4.6

(22)

4. Fleet and Delivery Forecast

Based on the fleet at 2004 year-end, the future fleet ASK are calculated by region, range and size categories. And number of aircraft in future are calculated from dividing future ASK by yearly ASK per aircraft.

Yearly ASK per aircraft = Seats x Aircraft km per year

Aircraft km per year = Block Speed (km/hour) x Utilization (hours/year)

Future Fleet ASK will be supplied by the retained aircraft and new delivery aircraft. Future Fleet ASK for new delivery aircraft will be assigned to each aircraft which consists of current aircraft in production and planned aircraft by each aircraft market share that is calculated by aircraft characteristics such as price, operating cost and range, and manufacture’s sales power.

4. 1 Improvement of Aircraft Utilization

Aircraft utilization in terms of yearly aircraft flight distance has gradually increased with some fluctuation. This fluctuation was resulted from imbalance between supply and demand of aircraft to meet with traffic volume. The trend of improvement will continue at 0.4% per year for the next 20 years, and yearly jet aircraft flight distance will reach 1.799 million km in 2024. For turboprop aircraft, an improvement of the utilization is assumed as same as jet aircraft.

JET AIRCRAFT UTILIZATION

1.0 1.2 1.4 1.6 1.8 2.0

AIRCRAFT KM PER AIRCRAFT PER YEAR

(MIL. KM)

SOURCE : ICAO SCHEDULED DATA

AVE. GROWTH RATE 0.25％ p.a.

2005-2024 AVE.GROWTH RATE

0.40%

1.799 1.661

(23)

4. 2 Trend of Airplane Size

According to passenger increase, an airline increases the frequency and/or airplane size to expand the capacity (ASK). Trends of airplane size vs. ASK growth in each region and range for the past are analyzed, and applied them to the forecast.

As a total world, average seats per ASK for the long range routes(over 4,501 km) were almost constant between 1982 and 1995 and then decreased after 1995, and will not change so much in the future. Average seats per ASK for short and medium range routes and regional jet routes have a trend toward decline since 1982 and will not change either in the future. Average seat per ASK for turboprop decreased between 1982 and 1992, and then increased in spite of decrease of ASK, and expected to continue this trend of increase.

0.0 0.5 1.0 1.5 2.0 2.5 3.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

ASK AVE.SEAT FREQUENCY Index

（2004=1.0）

GROWTH OF ASK, AVERAGE SEAT, FREQUENCY FOR TURBOPROP ROUTES - WORLD

0.0 0.5 1.0 1.5 2.0 2.5 3.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

（2004=1.0）

GROWTH OF ASK, AVERAGE SEAT, FREQUENCY FOR UNDER 1000KM JET ROUTES - WORLD

0.0 0.5 1.0 1.5 2.0 2.5 3.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

（2004=1.0）

GROWTH OF ASK, AVERAGE SEAT, FREQUENCY FOR 1001-2000KM JET ROUTES - WORLD

0.0 0.5 1.0 1.5 2.0 2.5 3.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

（2004=1.0）

GROWTH OF ASK, AVERAGE SEAT, FREQUENCY FOR 2001-4500KM JET ROUTES - WORLD

0.0 0.5 1.0 1.5 2.0 2.5 3.0

1984 1989 1994 1999 2004 2009 2014 2019 2024

（2004=1.0）

GROWTH OF ASK, AVERAGE SEAT, FREQUENCY FOR OVER 4501KM JET ROUTES - WORLD

(24)

In North American airlines, average seat per ASK for the long-range market that is mainly transatlantic, declined during 1982 to 1992 due to appearance of long range medium size airplanes such as B767 and A310, and slightly increased later due to EIS of large twin airplanes such as B777. Average seats per ASK for medium-range and short-range which are almost US domestic routes, were declined slightly for past 20 years. For regional market, it also declined for recent years due to expansion of new regional jets, while average seat for turboprop market showed a trend of little increase.

0 50 100 150 200 250 300 350 400

1984 1989 1994 1999 2004 2009 2014 2019 2024

Over 4500km Jet 2001-4500km Jet 1001-2000km Jet Under 1000km Jet Turboprop AVERAGE SEAT TREND OF AVERAGE SEAT - NORTH AMERICA

In West European airlines, average seat per ASK for long-range market

increased during 1982 to 1992 and then decreased but is almost stable lately. Airplane size for medium-range including Middle East and Africa routes has a trend toward smaller but the trend becomes stable lately as same as long-range market. Airplane size for short-range and regional markets which cover European region still declined slightly. However airplane size for turboprop market is increasing a little.

(25)

0 50 100 150 200 250 300 350 400

1984 1989 1994 1999 2004 2009 2014 2019 2024

Over 4500km Jet 2001-4500km Jet 1001-2000km Jet Under 1000km Jet Turboprop AVERAGE SEAT

TREND OF AVERAGE SEAT - WEST EUROPE

In Asian airlines, airplane size is larger than other regions because the routes are concentrated in the major cities of each country. Airplane size for long-range market, which includes Pacific and European routes, was increased during 1982 to 1995 and shows a decline trend lately. But introduction of a new large airplane such as A380 will reverse the trend to increase. Airplane size of medium/short-range market shows a trend of decline for past 20 years. In regional market, airplane sizes of jet and turboprop are almost stable but they are slightly increasing in last 10 years.

0 50 100 150 200 250 300 350 400 450

1984 1989 1994 1999 2004 2009 2014 2019 2024

Over 4500km Jet 2001-4500km Jet 1001-2000km Jet Under 1000km Jet Turboprop

TREND OF AVERAGE SEAT - ASIA

AVERAGE SEAT

(26)

4. 3 Retirement of Existing Fleet

The average life of passenger jets scattered over 20 to 29 years for the past years, which includes retired passenger jets due to freighter conversion. However, 90% of existing jets were manufactured after 1960, and their average life is about 28 years. Hush-kitted airplane has been extended its life 5 to 10 years more according to the trend. However, hush-kitted airplanes will retire in the next 20 years because of incompatibility with the latest noise restriction, and then their extended life will effect only to yearly demand but have little effect on total demand.

Model curve for a passenger jet retirement is based on a standard deviation curve derived from the retirement data during 1960 to 1999 period. Conversion from passenger jets to freighters were conducted between 10 to 25 years of age and converted freighters average age would be 34 years, that means they would be used until the average age of 40 years, if they do not encounter any accident.

Assuming average life of 28 years, 7,720 units (54%) of existing 14,290 jet over 20-seat will retire by 2024. About 80% of existing 100 - 119 seat jets including old B737-200 and DC-9-30 will disappear within the period. It is the 120-169 seat category that the number of aircraft retired is the largest among all seat categories. 3,270 units of existing 6,050 including such as old 727-200 and MD-80 will retire for the next 20 years.

Over 170 seat jets and 20 - 59 seat regional jets which are relatively young, will not retire so much.

0 2000 4000 6000 8000 10000 12000 14000 16000

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

20-59 SEATER 60-99 SEATER 100-119 SEATER 120-169 SEATER 170-229 SEATER 230-309 SEATER 310-399 SEATER 400-499 SEATER

JET AIRPLANE RETIREMENT

UNITS

400-499 640 187 453

310-399 1047 644 403

230-309 1241 441 800

170-229 1230 567 663

120-169 6054 2787 3267

100-119 1436 282 1154

60-99 822 349 473

20-59 1822 1318 504

14292 6575 7717 2005-2024 Retirement 2024

Year-end 2004 Year-end

TOTAL NARROW BODYWIDE BODY AVERAGE RETIREMENT: 28 YEARS.

(27)

4. 4 Jet Airplane Backlog

At the end of 2004, jet airplane backlog for over 30-seater including freighter stand at 3,340 units, of which 2,570 units are passenger jet and this is reduced by 19%

from 3,150 at the end of 2003. 85% (2,190 units) of passenger jets are scheduled to delivery to airlines until 2009. 77% (1,970 units) of backlog are narrow-bodies which include 500 regional jets.

In this forecast, these backlogs will be delivered to the regions where airlines placed firm orders.

0 100 200 300 400 500 600 700 800 900

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TBD 500-599 seats 400-499 seats 310-399 seats 230-309 seats 170-229 seats 120-169 seats 100-119 seats 80-99 seats 60-79 seats 40-59 seats 20-39 seats

JET AIRPLANE BACKLOG AND ESTIMATED DELIVERY - 2004 Year-end

DELIVERY YEAR UNITS

SOURCE : Airclaim CASE TOTAL 2,566 Units

763

560

399

277 192

79 66

25 40 30 8 1

12

(28)

4. 5 Stored Airplanes

Historically, there are stored jets in the airline owned fleet, and the number of the stored aircraft is about 6% of the airplane in service. At the end of 2001, the stored jets were increased to 14% (1750 jets) because airlines grounded the older and inefficient airplanes from the services to adjust the capacity of the traffic decrease after the 9/11 terror attack. They have been going back to the service gradually due to traffic recovery, but 1,210 units (8%) are still stored at the end of 2004. The ratio of stored aircrafts is considered to return to the level of about 6%, normal stored aircraft ratio.

10606

11155 11681

12546 12510

13074 13540

14292

860 871 601

573

1745

1205

1687 1632

0 2000 4000 6000 8000 10000 12000 14000 16000

1997 1998 1999 2000 2001 2002 2003 2004

IN SERVICE STORED

STORED PASSENGER JETS

YEAR END NUMBER OF

AIRCRAFT

5.6% 5.4%

7.4% 6.9%

13.9 12.9% 12.1%

8.4%

(29)

4. 6 Current and Future Airplane Model 4. 6. 1 Jet Airplane

The current and future airplane models are assumed as follows considering current new planned aircrafts under development.

A/C Size Manufacturer Range

Capability

Sales

Term Comments 20-39 328JET 30 (1) F.DORNIER/AvCraft RG -2008

SEATS ERJ-135 37 (1) EMBRAER RG 1999-

MJ-35 34 (1) JAPAN RG 2009-

40-59 ERJ-140 44 (1) EMBRAER RG -2004

CRJ-440 44 (1) EMBRAER RG -2004

CRJ-200 50 (1) BOMBARDIER RG 1992-

MJ-50 50 (1) JAPAN RG 2010-

60-79 CRJ-700 70 (1) BOMBARDIER RG 2001-

ERJ-175 78 (1) EMBRAER RG 2004-

ARJ21-700 85 (1) CHINA RG 2008-

ARJ21-900 99 (1) CHINA RG 2010-

80-99 ERJ-190 98 (1) EMBRAER RG 2005-

CRJ-900 90 (1) BOMBARDIER RG 2002-

RRJ-95 95 (1) SUKHOI RG 2008-

100-119 C110 99 (2) BOMBARDIER SR/MR 2010-

SEATS C130 119 (2) BOMBARDIER SR/MR 2011-

A318 115 (2) AIRBUS SR 2003-

B717 106 (2) BOEING SR/MR -2006

B737-600 108 (2) BOEING SR/MR 1998-

120-169 A319 124 (2) AIRBUS SR/MR 1996-

SEATS A320 150 (2) AIRBUS SR/MR 1988-

B737-700 127 (2) BOEING SR/MR 1998-

B737-800 160 (2) BOEING SR/MR 1998-

170-229 A321 180 (2) AIRBUS SR/MR 1993-

B737-900 177 (2) BOEING SR/MR 2001-

SEATS B757-200 186 (2) BOEING SR/MR -2004

B757-300 186 (2) BOEING SR/MR -2004

230-309 B767-200/200ER 181 (3) BOEING SR/MR/LR -2006 SEATER B767-300/300ER 218 (3) BOEING SR/MR/LR -2008 B767-400ER 245 (3) BOEING SR/MR/LR -2010

B787-3 296 (2) BOEING SR/MR 2010-

B787-8 223 (3) BOEING MR/LR 2008-

B787-9 259 (3) BOEING MR/LR 2011-

A300-600 231 (3) AIRBUS SR/MR -2010

A310-300 166 (3) AIRBUS MR/LR -2004

A330-200 256 (3) AIRBUS SR/MR/LR -2010 A350-800 245 (3) AIRBUS SR/MR/LR 2010- 310-399 A330-300 295 (3) AIRBUS SR/MR/LR -2012 SEATER A350-900 275 (3) AIRBUS SR/MR/LR 2012-

SEATS A340-300 295 (3) AIRBUS MR/LR 1993-

A340-500 313 (3) AIRBUS MR/LR 2002-

A340-600 380 (3) AIRBUS MR/LR 2002-

B777-200/ER/LR 305 (3) BOEING SR/MR/LR 1995- B777-300/ER 368 (3) BOEING SR/MR 1998- 400-499 B747-400/ER 416 (3) BOEING SR/MR/LR -2010

SEATER B747DV 430 (3) BOEING SR/MR/LR 2010-

B747ADV ST 504 (3) BOEING SR/MR/LR 2012- Over 500 A380-800 555 (3) AIRBUS SR/MR/LR 2006- SEATS A380-900 656 (3) AIRBUS SR/MR/LR 2010-

Seats (cｌａｓｓ)

NARROW-BODY JETWIDE-BODY JET

Airplane Model

(30)

4. 6. 2 Turboprop Airplane

The turboprops now in production are assumed as future airplanes as follows, because no new turboprops are to be developed.

A/C Size Manufacturer Range

Capability

Sales

Term Comments

15-19 BE1900 19 (1) RAYTHEON RG

SEATS

20-39 DHC8-100 30 (1) BOMBARDIER RG SEATS

40-59 DHC8-300 50 (1) BOMBARDIER RG

SEATS ATR-42 42 (1) ATR RG

60-79 ATR-72 70 (1) ATR RG

SEATS DHC8-400 70 (1) BOMBARDIER RG Seats

(cｌａｓｓ) Airplane Model