Bombardier Market Forescast

MARKET FORECAST
2012-2031
COMMERcIAL AIRcRAFT
TABLE OF CONTENTS
BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031
02
Executive Summary Economic Trends Airline Industry Trends The Forecast Conclusion Geographic Details
03 07 16 28 36 38
EXECUTIVE SUMMARY
BOMbARDIER COMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031
03
EXECUTIVE SUMMARY
Welcome to the Bombardier Aerospace Commercial Aircraft Market Forecast, our 20-year view of the market for 20- to 149-seat aircraft.
World airline protability in 2011 was estimated by International Air Transport Association (IATA) to reach $7.9 billion, the second consecutive year in which all regions were break even or protable. This expansion was fueled by continuous traffic growth and steady increases in overall ticket prices. These positive trends were countered by rising oil prices, continued nancial turmoil in the Eurozone and increased political tension in the Middle East and North Africa. While airline protability was considered fragile, it was contrasted by another record year for aircraft orders. The growing backlog in the large single-aisle aircraft segment remains a concern, as a sharp increase in traffic demand would be required to absorb the excess capacity represented by these orders. After even a few tough years of industry consolidation and tremendous discipline in constraining capacity growth, it is difficult to understand the rationale behind deliberately introducing excess capacity back into the system. As optimization is always the survival instinct of the aviation industry, it will eventually nd its way to adapt, adjust and ascend going forward.
04
MATURE MARKETS
IHS Global Insight reduced its long term forecast of GDP growth from 3.4% last year to 3.26% in 2012. North America and Europe are forecast to have below-average GDP growth for the next 20 years. In a mature market, where route network and business models are fully established, most demand
DELIVERY FORECAST (UNITS)

Segments 20- to 59-seat 60- to 99-seat 100- to 149-seat 20- to 149-seat total Deliveries 300 5,600 6,900 12,800
Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.
EXECUTIVE SUMMARY
for commercial aircraft will result in the need to rejuvenate an ageing eet as it approaches retirement. Even though these regions are expected to see only small organic growth year over year, their signicant installed bases will continue to require a large number of new aircraft for the next 20 years.
05
TOTAL FLEET UNITS

Total Fleet Units
11,200
17,000
20,000
16,000
GROWTH REgIONS
The growth regions of Africa, Asia/Pacic, Latin America, Middle East and Russia & CIS, where long-term GDP growth is forecast above average, will require a signicant number of new aircraft to support the growth of the aviation industry. In addition to more capacity, new airline business models and network connectivity are being tested or optimized by airlines and entrepreneurs. Aircraft in various capacities are all needed to help shape the development of the industry in these growth regions.
12,000
9,000 5,100 2,500 3,600
8,000
4,000
6,800 1,200
2031
0 2011
100- to 149-seat 60- to 99-seat 20- to 59-seat

Source: Bombardier Commercial Aircraft Market Forecast 2012-2031, OAG Aviation Solutions.
OPTIMIZATION
The nancial viability of the airline industry is extremely dependent on the external environment, yet the industry is also very resilient, due to its relentless drive for optimization. The increased price of oil predicted by the U.S. Energy Information Administration (EIA) is the single most concerning factor in airline economics over the forecast period. This concern is further amplied by the increase
in oil price forecast, since EIA issued its Annual Energy Outlook last year, by nearly $20, reaching $126 per barrel average for next 20 years. While airlines successfully managed increasing fuel costs by raising ticket prices last year, the continuous pressure transferred from cost to ticket price will soon reach the tipping point of consumer price resistance. Aircraft with the lowest cost and high performance capability will therefore be favored going forward.
Airlines strive to optimize their eet solutions to best serve their customers needs. Airline customers expect frequency, schedule, comfort and competitive fares while traveling on modern aircraft. New aircraft designs continue to focus on optimizing performance, lowering fuel consumption, reducing environmental footprint and maximizing cabin comfort.
EXECUTIVE SUMMARY
THE 20- TO 149-SEAT MARKET
Aircraft deliveries in the 20- to 59-seat market will decline substantially over the next 20 years. This capacity will gradually shift to larger and more economical regional aircraft. Demand for new aircraft in this larger, more economical regional aircraft segment is expected to increase in the latter half of the forecast period, driven mainly by the anticipated availability of new technology. Some 300 units will be delivered by the end of the forecast period. In the near and mid-terms, the pre-owned markets will continue to supply the aircraft needed in this segment. In particular, Russia, Africa and Latin America will see considerable absorption of used 50-seat regional jets. Regional airlines are gradually anchoring their business models around large regional aircraft in the 60- to 99-seat segment, both turboprops and jets. With increased capacity, lower per-seat operating costs and a seamless service offering, large regional aircraft connect route networks by adding new city pairs. This service provides connections not only between major airports, but also linking secondary and tertiary airports. With some 5,600 units forecast for delivery, this segment will experience the strongest eet growth over the next 20 years.
06
The 100- to 149-seat aircraft segment will enjoy the strongest growth in terms of deliveries. This segment is currently dominated by ageing aircraft. Thanks to step change engine technology, the arrival of new aircraft specically designed for this segment will invigorate market demand to further optimize airline route networks and protability. We forecast deliveries of 6,900 aircraft in the 100to 149-seat segment over the forecast period.
The commercial aviation industry is an integral component of the global economy. The long-term economic outlook supports continuous demand for new, optimized capacity and more fuel efficient aircraft, with deliveries of 12,800 new aircraft predicted over the next 20 years
ECONOMIC TRENDS
07
ECONOMIC TRENDS
ECONOMIC AND AIR TRAVEL gROWTH
The worlds recovery from the 2008 nancial crisis began in 2009 and has continued, at varying paces and with varying degrees of success into 2012. Growth in gross domestic product (GDP) has reected this variation, reaching 4.1% in 2010 and 2.7% in 2011. The recovery has slowed due to continuing economic concerns, notably the Eurozone crisis, high and volatile oil prices (as discussed below) and Chinas ability to sustain its comparatively rapid growth, the recovery has slowed. As a result, IHS Global Insight has reduced its expected rate of GDP compound annual growth for the 2012 2031 forecast period, from 3.4% (2011 2030) to 3.26%. The economic recovery is taking longer than expected in mature markets, while growth in emerging economies has returned to pre-crisis rates; whether they will be able to sustain this pace remains to be seen. Demand for air travel, and with it the health of the worlds airline industry, depends heavily on the strength of the economy. Most recently, IATA reported a 7.4% increase in international passenger travel (based on revenue passenger kilometers (RPKs)) for the month of April 2012, compared to April 2011. Demand for air travel
08
WORLD REAL GDP GROWTH %, 2011
World Average 2.7%
1.8% 1.8% 4.8% 9.2% 6.8% 3.44% 4.2% 1.3%
Source: IHS Global Insight 2012. Note: GDP = Gross Domestic Product
is also reected in orders for new aircraft. New aircraft order intake (encompassing 20 - 220 seats) more than quadrupled from 2009 to 2011. Net orders rose to 2,381 units in 2011, up from the 2010 tally of 1,414 units, which itself more than doubled the 2009 pace of 556 aircraft orders.
ECONOMIC TRENDS
BOMBARDIER COMMERCIAL AIRCRAFT MARKET FORECAST 2012-2031
09
COMMERCIAL AIRCRAFT ORDERS AND GDP GROWTH

3500 7% 6% 5% 2500 4% 3% 2% 1500 1% 0% -1% 500 -2% 0 1971 1975 1980 1985 1990 1995 2000 2005 2010 -3%
3000
2000
1000
The continuing recovery in demand for air travel is also expected to see a return to commercial service of some of the aircraft currently parked. The parked commercial aircraft eet has declined by 9% year-overyear, to approximately 2,220 at the 2011 year end. This total is down from the peak of 2,496 aircraft idled in 2009, but it remains above the 10-year low of 1,681 aircraft parked in 2007. Regionally, economies outside North America and Europe are expected to lead the world in GDP growth from 2012 to 2031. According to IHS Global Insight, China is expected to grow
Commercial Aircraft Orders

Sources: Bombardier Analysis, OAG Aviation Solutions, IHS Global Insight
GDP Growth
at 6.6% annually, followed by Africa, at 4.4%; Latin America, at 4.1%; Middle East, 3.8% and Asia/Pacic at 3.4%. In contrast, the North American economy is expected to grow at 2.6%, with Europe trailing, at 2.1%. The overall compound annual growth rate, as noted, is expected to be 3.26%, with non-North American or European economies accounting for 61% of the growth.
Demand for air travel is also reected in orders for new aircraft.
ECONOMIC TRENDS
North America and Europe have historically represented both the largest commercial aircraft eets and the largest markets for new aircraft. This year, the Bombardier Commercial Aircraft Market Forecast anticipates total demand for new aircraft in the 20- to 149-seat segments to be evenly divided between mature and emerging markets. Although starting from much smaller baselines (and assuming proportionate growth in aviation infrastructure), demand for new aircraft is expected to be particularly strong in emerging markets, such as China, Asia/Pacic (including India) and Latin America. Europe, Africa, and the Middle East are expected to require somewhat fewer aircraft during the period and North American forecast demand remains unchanged. As a countrys per capita GDP grows, so does its residents desire for travel, and this desire in turn fuels demand for aircraft. The Bombardier Commercial Aircraft Market Forecast, which anticipates long-term growth through the continuing economic recovery, presents a positive picture of commercial aircraft demand through the 20122031 period. Overall eet growth of 52% (2.1% CAGR) and 12,800 new aircraft deliveries approximately half of which will be needed to meet the worlds growing demand for air travel - is estimated over the forecast period.
10
PROPENSITY TO TRAVEL
10
New Zealand Portugal
Hong Kong
United States Switzerland Netherlands
Norway Qatar
Trips per Capita
Brazil Russia China

0.1
Israel
Italy
Germany
India
0.01 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
2011 Per Capita GDP

Passengers originating from respective country, GDP in 2005 USD. Sources: IHS Global Insight 2012, MIDT data, Bombardier Analysis.
POPULATION GROWTH AND URBANIZATION

The propensity for air travel is closely associated with wealth (as represented by per capita GDP) and urbanization. As both wealth and urbanization increase, particularly in emerging markets, the impact on commercial aviation is expected to be profound.
The Organization for Economic Co-operation and Development (OECD) estimates that middle-class consumer spending, as a reection of a regions per capita GDP, will expand rapidly in emerging markets. In Asia/Pacic (including China and India in the OECD analysis), middle-class consumer spending is expected to balloon, from $5.0 trillion in 2009, to $32.6 trillion in 2030 on a purchasing
ECONOMIC TRENDS
11
GDP GROWTH RATES

(2012-2031)
8% 7% 6% 5% 4% 3% 2% 1% World
7.4% 6.6%
4.4% 3.26%
4.1%
3.8% 2.6% 2.4% 2.0%
India
China
Africa
Latin America
Middle East
North America
Asia/Pacic (ex. China, India)
Europe
Sources: IHS Global Insight, Feb 2012, Bombardier Analysis.
MIDDLE-CLASS CONSUMER SPENDING IN TRILLIONS USD*

power parity basis. In other emerging markets, the increase is expected to be substantial, if not spectacular. Spending in Central/South America is expected to grow from $1.5 trillion to $3.1 trillion, while the sub-Saharan Africa will see middle-class consumer spending grow from $0.8 trillion to $2.0 trillion by 2030. Spending in the Middle East and North Africa is expected to grow from $0.3 trillion to $0.8 trillion over the same period.
$1.5 2009
$21.3 $55.7
PROJECTED
$5.6
$8.1
$5.0
$0.3 $0.8
Middle East & North Africa Sub-Saharan Africa Central & South America
2030
$5.8
$11.3
Asia/Pacic
$32.6
$3.1 $2.0
$0.8
North Europe America
Source: OECD. * On a purchasing power parity basis.
ECONOMIC TRENDS
12
ASIA, AFRICA AND LATIN AMERICA URBANIZATION

1,042 862
2025 2009
Population living in urban areas Millions
661 561 494 739 624 461 356 399 531 285
Europe North America
560
341
Latin America
Rest of Aisa 2
China
India
Africa
1 Urban population according 2 Excluding China and India.
to national denitions.
Sources: United Nations Population Division Department of Economic and Social Affairs, World population prospects: The 2009 revision, March 2010; McKinsey Global Institute analysis.
In contrast, while middle-class consumer spending in mature markets is expected to continue growing, the increases are much smaller, with the result that, by 2030, Europe and North America together are expected to account for approximately 30% of the worlds middle-class consumer spending, compared to approximately 64% in 2009.
ECONOMIC TRENDS
13
CHINA EXPENDITURE ON AIR TRAVEL AND GROSS DOMESTIC PRODUCT

Billions of 2005 U.S. $
100 90 80 70 60 50 40 30 20 10 0 0 4,000 6,000 10,000 12,000
8,000
Rapid urbanization is also a feature of many of these fast-growing economies and presents an even more dramatic picture of large-scale global change. The United Nations estimates that the population of the worlds urban areas will increase by more than 1.1 billion people over the period from 2009 to 2025. Urbanization will continue in Europe, and more so in North America. However, approximately 92% of that urban growth will occur in Africa, Latin America, India, China, and the rest of Asia, leading to increased demand for air travel in those regions.
2,000
19 98 20 0 0 20 0 2 20 0 4 20 0 6 20 0 8
20
22 20
12
14
16
18
96
19 90
19 94
20
20
20
20
20
19
Expenditure on air travel (left scale)

Source: Bombardier Analysis and IHS Global Insight.
Gross Domestic Product (right scale)
20
20
19
24
92
10
ECONOMIC TRENDS
OIL PRICE AND VOLATILITY
Unit Operating Cost (Cents per Available Seat Mile)
14
LABOUR AND FUEL UNIT COST HISTORY

6.0 5.0 4.0 3.0 2.0 1.0 0.0 3Q00 3Q04 3Q06 3Q08 1Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 1Q05 3Q05 1Q06 1Q07 3Q07 1Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
The outlook for consistently high oil prices and continued oil price volatility presents some of the biggest challenges for the world airline industry. Jet fuel which closely tracks the price of crude oil represents airlines largest single expense, now amounting to 34% of operating costs on average, according to IATA. With this large and growing inuence, oil prices and oil price volatility are major determinants of the size and other make-up of the commercial aircraft eet of the future. From an average price of $80 a barrel in 2010, oil prices rose by $20 to $100 per barrel in 2011. In the nal months of the year, the prices spiked higher, and continued upwards by 8% in the rst ve months of 2012. Although peak prices have not reached the $147 per barrel experienced in July 2008, neither have they retreated to the December 2008 low of less than $35 per barrel. With 2011 average oil prices 25% higher than 2010, we anticipate that prices will remain above $100 per barrel through 2012 and, indeed, throughout the 20-year forecast period. In fact, the U.S. Energy Information Administration (EIA) revised its 20-year average oil price forecast from $107 per barrel in 2011 to $126 per barrel in 2012 (Annual Energy Outlook 2012 Early Release), a nearly $20 increase.
Fuel Labour
Source: Air Transport Association of America, 2012.
AVERAGE OF WEEKLY CUSHING AND BRENT SPOT PRICE FOB 1

(Dollars per Barrel)
$130 $120 $110 $100 $90
2010 Avg.: $79.72 2011 Avg.: $103.16 YTD 2012 Avg.: $110.94
$80 $70 $60
2-10
3-10
4-10
5-10
6-10
7-10
8-10
9-10
10-10
11-10
12-10
1-11
2-11
3-11
4-11
5-11
6-11
7-11
8-11
9-11
10-11
11-11
12-11
1-12
2-12
Source: Energy Information Administration. Note: 1. FOB = Freight on board
3-12
ECONOMIC TRENDS
Further, as observers have noted, a continuation of the unrest in the Middle East, particularly the threatened closure of the Strait of Hormuz (a major oil trading passage), could drive oil prices to the $150 per barrel range, resulting in an estimated 2012 average price of $135 per barrel. While oil prices directly affect airlines protability, they also inuence eet decisions and drive network optimization strategies. These inuences are reected in increasing demand for highly fuel-efficient, high-productivity solutions, such as modern turboprop aircraft. Oil price volatility challenges airlines ability to forecast passenger volumes, airline workloads and eet replacement timing decisions, whether on a daily, monthly or annual basis. Looking ahead, we believe that oil prices will remain signicantly above the historical averages from just a few years ago and that prices will continue to demonstrate signicant volatility over the near term. Although continuing high oil prices will challenge airlines protability at least through 2012, the arrival of new aircraft incorporating technological advantages that deliver direct operating cost reductions will accelerate the retirement of older, less fuel-efficient aircraft types.
15
OIL FORECAST
160
Actual
140
Forecast
Average: $126 per barrel

120
100
80
60
AEO2012 Early Release Reference
40
AEO2011 Reference
20
0 2000 2002 2006 2008 2022 2026 2020 2028 2004 1980 1990 1994 2030 2010 1996 1984 2024 2012 2016 1986 1998 2014 1982 1988 1992 2018
Source: Annual Energy Outlook (AEO) by Energy Information Administration.
AIRLINE INDUSTRY TRENDS
16

AIRLINE ECONOMICS
Region World North America Europe Asia/Pacic Middle East Latin America Africa
17
AIRLINE INDUSTRY NET PROFITS

(Billions U.S. $)
2007 12.9 3.7 6.4 3.0 -0.1 0.1 -0.2
2008 -16.0 -9.6 0.0 -4.7 -0.3 -1.4 -0.1
2009 -4.6 -2.7 -4.3 2.6 -0.6 -0.5 -0.1
2010 15.8 4.1 1.9 8.0 0.9 0.9 0.1
2011 7.9 1.3 0.5 4.9 1.0 0.3 0.0
2012F 3.0 1.4 -1.1 2.0 0.4 0.4 -0.1
Source: International Air Transportation Association (IATA), June 2012.
FRAgILE PROFITABILITY
The nancial outlook for the worlds airlines remains in a state of ux as broad economic concerns continue to work their way through our deeply interconnected, interdependent global economic system. Against this backdrop, demand for air transportation remained strong through 2011 and into 2012. IATA reported that total passenger demand increased 5.9% in 2011, with a 4.8% expected increase in total passenger kilometers own in 2012. IATA data covering the rst four months of 2012 reected an overall 7.1% increase in passenger traffic, while capacity (available seat kilometres (ASKs)) increased 4.9%. As a result, passenger load factors grew to 77.5%. Global airline revenues have increased throughout the period of economic recovery, from a low of $476 billion in 2009, to $547 billion in 2010, and to $597 billion in 2011, representing a 9.3% year-over-year increase. According to IATA, global airline protability improved signicantly, from a net loss of $4.6 billion in 2009 to total net prots of $15.8 billion in 2010, before declining to $7.9 billion in 2011. Should the world economy slip further to a growth rate of just 2%, IATA observes that historically, this slow growth rate has resulted in the airlines sliding into industrywide losses.

IATAs central forecast for 2012 anticipated a further decline in airline protability, to just $3.0 billion. Regionally, Asia/Pacic is expected to perform best, as per IATAs central forecast scenario, indicating protability of $2.0 billion. North America airline protability is expected to be $1.4 billion, Middle East $0.4 billion and Latin America $0.4 billion. Airlines in Europe and Africa are expected to incur new losses of $1.1 billion and $0.1 billion, respectively. In summary, the economic recovery is continuing and demand for air transportation also continues to build with it, subject to the challenges posed by slow growth in global gross domestic product and high oil prices. In the face of these challenges airlines have shown creativity and consistency, in addressing their expenses a scenario in which operating a modern, highly fuel-efficient aircraft eet remains the single most important strategy for business viability and long-term success.
18

AIRLINE BUSINESS MODELS
Three distinct business models are present in the passenger segment of the airline industry: mainline carriers (sometimes referred to as network carriers), regional carriers and lowfare (or low-cost) carriers. Mainline carriers are characterized by eets of 100-plus seat aircraft serving multiple cities and countries through hub-and-spoke networks. Due to cost pressures, notably high fuel prices, and relentless competition, mainline carriers have focused on the replacement of older equipment with newer, more efficient aircraft. Regional carriers typically operate smaller aircraft, such as regional jets and turboprops with fewer than 100 seats, on short- and medium-haul routes. By representing mainline carriers to meet passenger demand for service and frequencies in markets with lower volumes, regional carriers enable their mainline partners to right-size aircraft use throughout their networks. This specialization strategy for network optimization has developed strong linkages between mainline and regional carriers, which now account for one third of all commercial passenger ights worldwide. Low-fare carriers typically operate aircraft from 70 to 200 seats on point-to-point service connecting secondary airports. By separating ancillary revenue from the base fare, the
15.0
19
U.S. AIRLINE SEGMENTATION PROFITABILITY/LOSS*
Operating Prot/Loss as % of Total Operating Costs
10.0
5.0
0.0
-5.0
Low-Cost**
-10.0 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010
Regional
Mainline
1Q 2011
2Q 2011
3Q 2011
Source: U.S. Bureau of Transportation Statistics, May 2012. *Most current available data. **Low-Cost Carriers are also referred to as Low-Fare Carriers
low-fare carriers have thereby made air travel accessible to passengers who could not otherwise afford it. Low-fare carriers, which typically have lower cost bases than mainline carriers, are now present in nearly every part of the world and their market share has increased signicantly, particularly in North America and Europe.
20
COMMERCIAL AIRCRAFT CAPACITY WORLDWIDE BY SEAT CATEGORY

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2000 2005 2010 60- to 99-seat 2015 100- to 149-seat 2020 2025 2030
Actual
Forecast
20- to 59-seat
The growing importance of regional carriers in the U.S. is reected inthe growing size of regional aircraft to an average size of 37 seats in 2000 to 50 seats in 2005 and to 56 seats today. Regional carrier average trip length has also increased over this period, from 296 statute miles in 2000, to 464 statute miles in 2010 and to 468 statute miles as of the rst half of 2011. A similar pattern is recognizable in Europe, at least partly due to less restrictive scope clauses, where average regional aircraft
size has increased from 63 seats in 2001, to 72 seats in 2009 and to 78 seats today. Although European average regional airline stage lengths are shorter than their U.S. counterparts, these have increased from 384 statute miles to 390 statute miles over the same period. Continued turbulence in the airline industry, including insolvency, consolidation, outsourcing, unbundling of services and attempts by some mainline carriers to reinvent themselves
by shedding legacy cost structures, has resulted in the three established business models becoming less individually distinct. However the need to right-size aircraft to market needs remains paramount in controlling costs, especially as commercial aircraft capacities range from fewer than 50 seats to more than 600.

For longer routes with less traffic, regional jets in the 60- to 99-seat segment present an optimized solution. While small, single-aisle jets provide longer-haul capacity up to 3,000 nautical miles and routing exibility, and advanced technology turboprops are best suited to short and medium-haul ights.
21
U.S. AIRLINE LABOUR PRODUCTIVITY
3,000 Productivity, ASKs (000) per FTE
2,500
LABOUR TRENDS
While airline labour costs have decreased as a percentage of airlines total costs, largely due to the increase in fuel prices, they remain the airlines second biggest expense category and one of the largest sources of optimization opportunities. At the industry level, selective outsourcing of scheduled passenger operations to regional carriers has increased the mainline carriers access to passengers in smaller centres, who would otherwise be cost-prohibitive to serve with larger aircraft. As low-cost carriers, regional airlines can generate prots on thin routes that their mainline counterparts nd too costly. One constraint on this strategy has been scope clauses negotiated between mainline carriers and their unionized ight crews, which restrict the use, number and seating capacity of regional airlines aircraft in mainline carriers network. Scope clauses are a predominantly U.S. and European phenomenon.
2,000
1,500
1,000
500
2000
2001
2002
2003
2004
2006
2007
2008
2009
Source: Air Transport Association of America (ATA), 2012 FTE: Full Time Equivalent employees, most current annual data
Additional labour cost control outsourcing initiatives have addressed catering operations, maintenance services and reservations, and have helped lower airline costs dramatically. Continued loosening of scope clause rules (to permit regional carriers to operate even large aircraft) as well as the development of new business models, will increase demand for air transportation. Bombardier expects these trends to continue.
2005
1992
1996
1997
1994
1999
1993
1995
1998
2010
1991
22
Units, %, Actual 2001 and 2011, Forecast 2012-2031 period

Oil @ $26 per barrel Oil @ $111 per barrel Oil @ an average of $126 per barrel
DELIVERY BY ENGINE TYPE 20- to 99-SEATS
319 12%
248 45%
5,900
Units
48%
Turboprop
88% 55% 52%

Regional Jet
2001 Actual
2011 Actual
2012-2031 Forecast
Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031, Energy Information Administration 2012-2031 forecast.
TURBOPROPS AND JETS: OPTIMIZATION IN PRACTICE

Aircraft and engine types are critical choices in optimizing airline eets and networks. The greatest efficiencies are achieved by deploying turboprop aircraft on short- and medium-haul markets and jet aircraft on longer routes. Rising fuel prices expanded the use of turboprops worldwide and led aircraft manufacturers to increase the size and capability of these aircraft. These aircraft
began operating in mainline carriers eets in signicant numbers in 2007. Advanced turboprops will continue to play an integral role in the regional airline marketplace as carriers confront the dual pressures of rising fuel costs and increasingly restrictive environmental regulations. The comparatively lower fuel burn of turboprops, compared to regional jets of similar size, will enable carriers to maintain capacity and shrink their overall environmental footprint. Modern 70-passenger turboprop aircraft represent a cost-effective replacement
on routes previously served by 50-passenger jets, which are no longer in production. Of approximately 5,900 aircraft to be delivered in the 20- to 99-seat segment, Bombardiers Commercial Aircraft Forecast for 2012 - 2031 anticipates based on oil at an average $126 per barrel that 48% will be modern turboprop airliners, the rst time this product category has achieved this degree of market penetration. Further, of the approximately 2,850 turboprop aircraft to be delivered over
23
FLEET EVOLUTION FROM 2011 TO 2031

20- to 149-seat Fleet
17,000
Growth
11,200
Replacement
5,800 (45%)
12,800 Deliveries
7,000 (55%)
Retained Fleet Todays Fleet (units)

Todays Fleet (units)
4,200
2031 Fleet (units)
the period, approximately 2,700 or 95% will be in the 60- to 99-seat segment, which is expected to experience substantial growth over the forecast period. The balance of the forecast deliveries in the 20- to 99-seat segment will be larger regional jets, which airlines will require to optimize seating capacities, maintain passenger comfort and accommodate traffic growth while reducing unit costs.
AIRCRAFT RETIREMENTS
Aircraft retirements and replacements are key product life-cycle milestones in shaping future aircraft deliveries and eet composition. Historically, older aircraft are replaced to capture the nancial, operating and maintenance advantages offered by newer, more cost effective and more fuel-efficient aircraft, as they become available. Other factors that inuence aircraft retirement timing decisions include international and local airport noise and emissions regulations
and fees; airline branding; the competitive environments; as well as nancial and tax considerations (such as maintenance costs, depreciation and incentives), airline growth strategies, aircraft economic structural life, the certication status of new aircraft development programs and replacement opportunity factors, such as delivery slots. This year, the number of anticipated aircraft retirements over the 20-year forecast period has been increased by a total of 300 units, from approximately 6,700 in our 2011 forecast to 7,000.

Much of the reason for this increase lies in oil prices, which have seen a $20 per barrel jump on average prices over last year, reaching an average $126 per barrel throughout the forecast period. A further factor in the increased forecast retirements is Russian regulators decision to ground ageing, domestically produced aircraft. However, since the utilization of these aircraft is typically very low, they will not be replaced on a one-to-one basis. The increased retirements are expected primarily in the 20- to 59-seat segment (an increase of 200 units, from 2,500 retirements to 2,700), as well as in the 60- to 99-seat segment (an increase of 100 units, from 1,200 retirements to 1,300). Gradually rising oil prices over the forecast period add burden to aircraft operating economics. Twenty- to 59-seat aircraft are particularly affected due to the resulting higher cost per seat, and hence the increased retirements in this segment. This also applies to the 60- to 99-seat segment towards the end of the next decade due to the ageing 70-seat and 90-seat aircraft that entered service in the early 2000s. Most aircraft move through a recognizable series of product life cycle stages. Passenger aircraft, when removed from commercial
24
IN-SERVICE AIRCRAFT 15 YEARS OF AGE OF OLDER

2500 2000 Units 1500 1000 500
10- to 19-seat
20- to 39-seat
40- to 59-seat
60- to 99-seat
100- to 149-seat
150- to 174-seat
175- to 219-seat
220+ seat
Sources: OAG Aviation Solutions, Bombardier Analysis.
operation with front-line carriers, typically move into cargo operations. Some others move to less demanding markets and applications, serving commercial operators with different utilization needs, different operating environments and different business models. As a signicant number of 50-seat regional jet airliners reach 20 years of age, Bombardier expects many will be converted into freighter aircraft. Small freighter aircraft (with payloads of 5,000 to 20,000 lbs) are expected to be in demand to replace a large eet of all-cargo aircraft currently in service around the world, nearly all of which are limited-range turboprops averaging 29 years of age. The constant
evolution of the regulatory environment also inuences the pace and pattern of aircraft retirements and, thereby, the eet mix. During the past 40 years, regulations imposed by the International Civil Aviation Organization, Committee on Aviation and Environmental Protection (ICAO/CAEP) led to the phase-out of noisier aircraft from U.S. and European commercial eets. New ICAO/CAEP noise and emission standards will further affect the global aviation eet. Most recently, the European Union has implemented an Emissions Trading Scheme that, since January 1, 2012, has applied to commercial aircraft operating in European airspace.

The typical life cycle stages of aircraft use are also inuenced by seemingly unconnected external events. Following the attacks of September 11, 2001 for example, older aircraft retirements accelerated and even some new model aircraft were temporarily parked. Now, almost 11 years later, not all of these aircraft have returned to active service.
% of eet active
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COMMERCIAL AIRCRAFT GENERAL RETIREMENT PROFILE

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 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 37 38 39 40 41 42 43 44 45
Source: Bombardier Analysis.
Of the current eet of 20- to 149-seat commercial passenger aircraft, Bombardier anticipates that 60% will retire by 2031. Looking in more detail, we expect the fewest retirements in the 60- to 99-seat segment, and the most 70% of todays eet in the 20- to 59-seat segment. These aircraft will be retired due to their comparatively higher per-seat operating costs and high fuel costs. Without the advent of new technology-advanced, in-production 20- to 59-seat aircraft in the near-term forecast period, Bombardier expects this segment to decline dramatically, from 33% of todays 20- to 149-seat eet, to just 8% in 2031. In sharp contrast, the near-term period will see the introduction of new-generation 100to 149-seat aircraft, which are expected to account for 53% of the total 20- to 149-seat eet in 2031. The response to the arrival of optimized, new generation aircraft is expected to result in signicant retirements and deliveries, amounting to 3,000 retirements and 7,000 new aircraft deliveries.
Standard Commercial Passenger Aircraft Retirement Curve
80% retired from commercial passenger service
More than half of the current commercial aircraft eet will be replaced in the next 20 years, a slightly greater percentage than expected last year, due to technical obsolescence, cost inefficiencies and age. The increasing pace of older aircraft retirements will have a positive impact on demand for new aircraft.

AIRLINES AND THE ENVIRONMENT
Environmental issues and increasing environmental regulation will increasingly shape the worlds airline industry and infrastructure over the 2012 2031 forecast period. These issues can be broadly categorized as: local air quality, aircraft emissions and community noise. The aviation industry has improved its performance in these areas consistently over more than 50 years. Greater fuel efficiency directly boosts airline protability and aircraft operations have become 20% more fuel efficient over the past 10 years alone. Modern aircraft now achieve fuel efficiency of 3.5 litres per 100 passenger kilometers, roughly comparable to todays leading hybrid passenger cars, with much greater speed. Other environmental performance highlights: Todays aircraft fly three times farther on the same fuel than 30 years ago, a 75% gain in fuel efficiency per passenger kilometer. New aircraft are 70% more fuel efficient than 40 years ago. The maximum range of commercial jet aircraft has increased to 15,200 km from 5,190 km in 1960, carrying more passengers farther, with less fuel.
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While passenger traffic (in revenue passenger kilometers) has increased at an average of 5% annually, increasingly efficient aircraft operations have limited emissions growth to about 3%. Todays aircraft are 50% quieter than those 40 years ago. Current ICAO Chapter 4 requirements are 35-40 dB quieter than the requirements 40 years ago.
The aviation industry aircraft manufacturers and airlines are working on further improvements in aircraft environmental performance, with guidance from ICAO and the Air Transport Action Group (ATAG), among others. Bombardier, with other key stakeholders, is committed to moving toward carbon-neutral growth within the industry during the forecast period and achieving by 2050 a 50% reduction in CO2 emissions from 2005 levels.

The application of new technological developments in new aircraft designs will be paramount in meeting these commitments. IATAs Technology Roadmap provides a summary and assessment of technology-based opportunities for future aircraft, including technologies that will reduce, neutralize and eventually eliminate commercial aviations carbon footprint. Bombardier is also taking steps to reduce its own carbon and environmental impacts. Through our corporate responsibility activities, Bombardier is committed to minimizing the footprint of its manufacturing and operating activities, through increased efficiency, on-site innovation and the creation of environmental synergies through engagement with our supply chain partners. In summary, the world aviation industry is actively addressing environmental concerns through the retirement of older aircraft, eet modernization, application of technology, and improvements in operations and infrastructure. Growing environmental awareness and increased environmental regulation will increase demand for efficient new aircraft.
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IATA TECHNOLOGY ROADMAP, 2009

Riblets Hybrid wing body Truss-braced wing Cruise-efficient STOL Fly by light Wireless ight control system PEM fuel cell Solid-oxide fuel cell Solid acid fuel cell Morphing materials Morphing airframe Wireless optical connections for IFE Spiroid wingtip Advanced y-by-wire MEA architecture Variable camber with new control surfaces Energy harvesting devices Natural laminar ow Hybrid laminar ow control Engine replacements New engine core concepts Open rotor / unducted fan
Airframe & Systems
Advanced 3rd gen. core Active stability management Thermal management Variable cycle Boundary-layer ingesting inlets Embedded distributed multi-fan Adaptive / active ow control Ubiquitous composites Non-Brayton cycles Pulse detonation cycles Regenerative / recuperative cycle Adaptive cycles
Geared turbofan Advanced direct drive
Engine
Counter-rotating fan
Alternative Fuels
Biomass to fuel or biojet Synthetic paraffinic kerosene Biodiesel Furans Transesterication fuels Butanol
Liqueed petroleum gas Liquid methane Compressed natural gas Ethanol Liquid hydrogen
Air Traffic Management
Data link communication Required time of arrival Performance-based navigation Automatic dependent surveillance broadcast - OUT System-wide information management GNSS landing system via ground based augmentation system Automatic dependent surveillance broadcast - IN Retrot Update New Aircraft < 2020 New Aircraft > 2020 All stages
2010
2020
2030
Source: International Air Transport Association (IATA) Technology Roadmap 2009.
THE FORECAST
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THE FORECAST
ASSUMPTIONS
The Bombardier Commercial Aircraft Market Forecast covering the period 2012 2031 is based on the following principal assumptions and market drivers: Demand for air travel will be cyclical and directly related to economic growth and wealth creation over the long term Fleet utilization is directly related to economic growth Demand for air travel will be supported by aviation infrastructure. In some emerging markets, lagging infrastructure development will constrain growth in air travel and Increasing environmental regulation will affect eet mix and encourage carriers to seek lower per-passenger fuel burns and emissions The following assumptions regarding commercial aviation also guided development of the forecast: Oil / fuel prices will affect fleet mix Airlines will continue to focus on cost reduction and will prefer the advantages of larger capacity aircraft in each segment Contractual restrictions on airline operations based on aircraft size and engine type will ease over time and Airline markets will continue to be opened to greater competition through liberalization of international air transportation agreements
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The forecast was developed based on the following metrics applied to the 20-year period: 3.26% Average economic growth in global GDP (down from 3.4% last year) $126/bbl Average oil price, according to the EIA (up from $107/bbl last year).
20-YEAR OUTLOOK
Market Drivers that increase/decrease aircraft demand
Economic Growth Fuel Prices Fuel Volatility Replacement Demand Emerging Markets Environmental Regulations Environmental Fees Labour Trends
FLEET GROWTH FORECAST

WORLD 20- to 59-seat 60- to 99-seat 100- to 149-seat TOTAL 2011 Fleet Deliveries Retirements 2031 Fleet
3,600 2,500 5,100 11,200
300 5,600 6,900 12,800
2,700 1,300 3,000 7,000
1,200 6,800 9,000 17,000
THE FORECAST
FORECAST RESULTS
The Bombardier Commercial Aircraft Market Forecast anticipates the delivery of 12,800 new 20- to 149-seat aircraft in the 2012 2031 period. Coupled with retirements of approximately 7,000 aircraft, the world commercial eet will grow from approximately 11,200 aircraft at the start of 2012, to approximately 17,000 at the period end. Overall eet growth will be 52%, representing a compound annual growth rate of 2.1%. Almost half of the new deliveries will be replacement aircraft, while the balance will be deployed for growth in new or expanding markets. The 20- to 59-seat segment of the market is expected to shrink by approximately 66% over the period, from approximately 3,600 aircraft in 2012, to just 1,200 by 2031. The 300 expected deliveries in this segment will be more than offset by 2,700 expected retirements. The 60- to 99-seat segment is expected to grow 270% between between 2012 and 2031. From a current base of 2,500 aircraft, 5,600 new aircraft deliveries will be countered by 1,300 retirements, resulting in a 2031 eet of 6,800 aircraft. The 100- to 149-seat segment is expected to grow from a current base of approximately 5,100 aircraft, with deliveries of 6,900 new
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BOMBARDIER MARKET SEGMENT EVOLUTION

Fleet, Deliveries, Retirement: 2011-2031
20- to 59-seat
60- to 99-seat
100- to 149-seat
6,900 3,000
9,000 5,600 1,300 6,800 5,100 3,600 300 2,700 2,500 1,200
2011 Fleet
2031 Fleet
2011 Fleet
2031 Fleet
2011 Fleet
2031 Fleet
Fleet 2011: 11,200
Deliveries: 12,800
Retirements: 7,000
Deliveries: 17,000
aircraft and retirements of 3,000 aircraft resulting in a eet of approximately 9,000 aircraft at the forecast period end, representing a 2.9% (CAGR). Aircraft in this segment are typically employed to replacement and growth roles in about equal proportions.
Overall eet growth will be 52%, representing a compound annual growth rate of 2.1%.
THE FORECAST
REGIONAL 20-YEAR DELIVERY OUTLOOK
Units, 2012-2031
31
North America
4,730
Europe, Russia & CIS
2,240
2,220
China
Latin America
930
Africa and The Middle East
970
Asia/ Pacic
1,710
THE FORECAST
20-YEAR OUTLOOK
are expected to decline by 2.3%, compared to Bombardiers 2011 forecast, the reduction is expected primarily in European and Middle Eastern markets (down 200 and 80 aircraft, respectively). Demand in North America, China, Asia/Pacic and Latin America is expected to remain on par with last years forecast. Aircraft demand in China and Asia/ Pacic, considered together, reect the growing economic strength and inuence of these markets, which are expected to experience more rapid economic growth than western markets.
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GDP Distribution by Country (2011 and 2031)

120,000
Total GDP ($Trillion)
100,000 80,000 60,000 40,000 20,000
50% 39% 61% 50%
2011
North America
2031
Europe (incl: Russia & CIS) China ROW
20- TO 59-SEAT SEgMENT

Bombardier foresees a total of 300 20- to 59-seat new aircraft deliveries in this segment over the 20-year forecast period. This segment is the only part of the 20- to 149-seat commercial aircraft market expected to experience a net reduction in eet size, a reection of the preference for larger aircraft sizes throughout the industry in response to high fuel prices. Over the last year, new aircraft deliveries in this segment effectively balanced the few retirements and maintained the eet size at approximately 3,600 units. Bombardier expects very few deliveries annually over the next 15 years, with the potential of new aircraft offerings in this segment driving a
Asia/Pacic (ex. China)
Sources: Bombardier Commercial Aircraft Market Forecast 2012-2031, IHS Global Insight, February 2012.
GEOgRAPHIC BREAKDOWN
Global demand for air travel and new aircraft continues to shift towards emerging markets, although not as rapidly as anticipated in previous forecasts. Over the forecast period to 2031, North America is expected to account for 37% of new aircraft deliveries, China 17%, Europe (including Russia & CIS) 18%, Asia/ Pacic 13%, Latin America 7% and Africa & Middle East 8%. While total world forecast period aircraft deliveries in the 20- to 149-seat segments
potential resurgence later in the forecast period. This years forecast also anticipates an additional 200 aircraft retirements (8%) over the 20-year period, due mainly to the impact of high fuel prices on the competiveness of small regional jet aircraft in service with mainline carriers in developed markets. These 50-passenger class aircraft will continue to deliver protable service in emerging markets, such as Africa, Latin America and Eastern Europe, where the capacity and range characteristics can help accelerate the development of the air travel industry.
THE FORECAST
This segment is one of the most dynamic in commercial aviation, as growth will be driven largely by the evolving relationship between mainline and regional carriers. The outsourcing of regional aircraft operations to carriers with appropriate, low-cost structures, namely regional airlines, continues to be the main thrust of network optimization efforts. Bombardier expects that scope clauses in North American and European operations will continue to ease, to meet growing demand in this market segment. Elsewhere, the attractive economics and operational exibility of regional aircraft can be used to right-size aircraft capacity according to traffic demand. Since on short stage lengths turboprop aircraft are more economical to operate than jets, modern turboprops are a natural hedging tool for air carriers against high and volatile fuel prices. High speed turboprops are now used by many airlines to replace 50-seat regional jets on short-haul routes, with little or no increase in block time or reduction in passenger comfort. More than 200 new 60- to 99-seat aircraft were delivered in 2011, bringing the total segment eet up to 2,500 aircraft at the beginning of the forecast period. In comparison to last years forecast, expected 20-year deliveries have been reduced by 200 units, due largely to a slower economic recovery in mature markets and a preference for larger capacity aircraft in emerging markets. Aircraft retirements have also been increased by 100 units in this years forecast, principally 70-seat and 90-seat regional aircraft delivered in the early 2000s that are expected to go into retirement towards the end of the next decade. Of the approximately 5,900 new aircraft to be delivered in the 20- to 59-seat and 60- to 99-seat segments in the forecast period to 2031, 48% will be turboprops and virtually all
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of these deliveries are expected to be in the 60- to 99-seat segment. Regional jet deliveries in this 60- to 99-seat segment are expected to amount to approximately 2,900 units and represent $102 billion in sales revenues. These aircraft will be used by the worlds airlines to help optimize network capacity. In all, this segment is expected to have a demand for 5,600 new aircraft, worth over $180 billion in sales revenue. The current eet will grow 270%, to reach 6,800 aircraft by the end of the forecast period.
20-YEAR TURBOPROP FORECAST

20- to 99-seat Aircraft
20- TO 99-SEAT DELIVERY PROFILE
Segment 20- to 59-seat 60- to 99-seat Total
2012 CAMF 150 2,700 2,850

Turboprops Regional Jets
48%
52%
THE FORECAST
The 100- to 149-seat segment is expected to achieve a 2.9% CAGR as it expands from approximately 5,100 aircraft in 2012, to approximately 9,000 units by 2031 the largest market growth opportunity recognized by the Bombardier Commercial Aircraft Market Forecast. This segment will see deliveries of approximately 6,900 new aircraft against retirements of 3,000 units, or 59% of todays eet. Many of these aircraft are derivatives of larger aircraft and not originally designed for this segment. The higher weight and greater drag of these current products result in higher fuel burns and greater CO2 emissions. Such aircraft are daily more challenging to operate in an ultra
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PROFIT ZONE RIGHT-SIZING AIRCRAFT FOR TRAFFIC DEMAND

High Large RJ New design small single-aisle jet Current large single-aisle jet
Prot contribution per Departure
Current small single-aisle jet
Low 60 Passenger Demand per Departure

Sources: U.S. Department of Transportation, Bombardier Analysis. RJ = Regional jet, Small single-aisle jet: 100- to 149-seats, Large single-aisle jet: 150+ seats.
200
Newly designed aircraft that deliver superior operating economics will accelerate the retirement of older aircraft.
cost-conscious and increasingly environmentally-aware business environment. An industry that requires a fundamental improvement in operating economics as a matter of survival is turning its future focus toward aircraft optimized for their intended segments and able to deliver signicant improvements in airline protability.
Newly designed aircraft that deliver superior operating economics, through advances in technology, as well as operational exibility and attention to passenger comfort, will accelerate the retirement of older aircraft. In fact, at the 2011 year end, the OAG Fleet iNet identied approximately 2,091 single-aisle aircraft in storage and at least temporarily inactive.
THE FORECAST
This segment saw a eet decrease of approximately 100 units in 2011, while deliveries also declined, as some orders for new 130-seat single-aisle aircraft were converted into orders for larger aircraft. Total deliveries in this segment across the 20-year forecast period have been reduced by approximately 100 units, due mainly to the slower economic growth. The expected rate of aircraft retirements in this segment has remained constant since last years forecast. While higher oil prices are accelerating the retirement of older platforms, the large majority of the aging aircraft in this segment, such as MD80/90, BAe 146 and Boeing 737 Classics would have exited the market by the middle of the next decade, even with fuel prices at 2011 levels. The 6,900 new aircraft destined for the 100- to 149-seat segment over the next 20 years will generate sales revenues of more than $449 billion.
35
CONCLUSION
36
CONCLUSION
The commercial aviation industry has gone through signicant change since the recent global recession. The industrys unwavering focus on optimization and efficiency is the key reason for its resilience. Economic growth will drive the demand for more aircraft. Rising oil prices and continued price volatility will drive airlines to accelerate the retirement of older, less efficient aircraft, thereby increasing the demand for new-technology and fuel-efficient aircraft. Bombardier remains optimistic in the 20- to 149-seat aircraft market. The company presents the most optimized capacity aircraft to connect not only primary and secondary, but also tertiary airports around the world. The overall eet in this market will grow by 51% from 11,200 units in 2011 to 17,000 units in 2031. New aircraft deliveries will reach 12,800 units, generating over $630 billion in sales revenue over the next 20 years.
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New aircraft deliveries will reach 12,800 units, generating over $630 billion in sales revenue over the next 20 years.
GEOgRAPHIC DETAILS
38
GEOgRAPHIC DETAIL
INTRODUCTION
The top-level message delivered by the Bombardier Commercial Aircraft Market Forecast this year is that while airline industry fundamentals remain sound and attractive over the longer term envisioned by this forecast, the immediate term presents some important challenges that will see early-term deliveries of new aircraft delayed until somewhat later in the period. The rst of these challenges is that the world economy is not recovering from the nancial crisis of 2008 as quickly or as consistently as we might have concluded a year ago. Europe continues to deal with sovereign debt crises, unemployment remains stubbornly high in the United States and political unrest present or imminent threatens economic stability in much of Africa and the Middle East. A second central challenge is the extent to which growth regions can sustain their pace of expansion. As the worlds economies are increasingly interconnected and interdependent, signicant economic events in one region such as a sovereign default in Europe can be expected to have negative global implications as far away as China. The third challenge is that fuel prices, which have spiked signicantly since the third quarter of 2011, have shown their potential to put a brake on economic recovery and growth, and demonstrate clearly the extent to which western economies still rely on inexpensive energy. More expensive fuel is also here to stay. These challenges, and more, have seriously compromised the ability of the worlds airlines to operate at a prot a circumstance which is likely to result in continuing consolidation and capacity reductions, and which is certain to heighten carriers focus on cost reduction as a central strategy of day-to-day operations. What has not changed, despite these challenges, is that air travel remains a central building block of future prosperity and continuing development. Air travel links populations quickly and efficiently over distances that make other transportation alternatives unsatisfactory. It does so
39
at reasonable nancial cost and with environmental impacts that are already small and getting smaller every day. Modern aircraft that help their operators serve their customers at signicantly lower cost, with lower fuel burns, lower emissions and more operational exibility are clearly part of the solution and will help todays most enlightened, most forward-thinking air carriers not just survive todays challenges, but actively prepare themselves to prosper and grow in a changed world. Bombardier is bringing such aircraft to market.
Air travel remains a central building block of future prosperity and continuing development.
GEOgRAPHIC DETAIL
NORTH AMERICA (EXcLuDIng MEXIcO)
40
According to data from IATA, passenger air travel grew only modestly in 2011, 1.7% compared to 9.9% growth in 2010. IATA sees continuing slow growth of passenger air travel in 2012, at 0.5%. Regional airlines operating in partnership with mainline carriers continue to play an important role in North American passenger air travel. According to industry statistics, regional airlines accounted for 48% of 2010 departures from the top 10 U.S. airports, representing approximately 24% of passengers enplaned and 21% of domestic airline revenues. Approximately 74% of U.S. airports with commercial airline service are served only by regional carriers. North America, the worlds largest aircraft market, will maintain its leadership position over the course of the 20 years covered by the Bombardier Commercial Aircraft Market Forecast. This market is expected to require more than 4,700 new commercial aircraft, 37% of total world demand in the 20- to 149-seat segments, which is unchanged from last years forecast. Economic growth, at just 2.6% CAGR, is forecast to lag most of the rest of the world, which will average 3.26%, as GDP generation leadership continues to shift to economies such as India and China traditionally viewed as emerging. In a further departure from global trends, less than half of the new aircraft required in North America (45% or approximately 2,150 units) will be in the 100- to 149-seat segment. Instead, most of the deliveries (52% or approximately 2,450 units) will be in the 60- to 99-seat segment, the traditional domain of regional airlines. The nancial arrangements for regional partners are typically based on a xed fee-forying or capacity purchase agreement (CPA) that is not based on the number of passengers carried. Regional airlines operating under contract to their mainline partners are a vital part of making the air travel system function efficiently by enabling the mainline carriers to right-size the equipment offered throughout their networks. They also enable access to some small market airports that cant handle the mainline carriers larger aircraft.
GEOgRAPHIC DETAIL
U.S. CARRIERS TOTAL CASH AND CASH EQUIVALENT
35 30 25 U.S. $ billion 20 15 10 5
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DEMAND DISTRIBUTION BY SEAT SEGMENT, NORTH AMERICA, 2012-2031

Total: 4,730 Units
3%
45% 52%
Source: Bureau of Transportation Statistics, Schedule B-1.
20- to 59-seat 60- to 99-seat
Bombardier believes that the scope clauses, which have constrained both the size and number of regional aircraft operating in the mainline carriers systems, will continue to ease over the forecast period and that this will drive demand for larger capacity regional aircraft in greater numbers. North Americas large installed eet base requires constant replenishment and renewal. As air carriers here regain nancial strength following a period of declining passenger loads, nancial failures, bankruptcies,
restructurings and consolidations, their attention will focus on cost control strategies that include expanding scope clauses to cover larger aircraft, capacity planning and optimizing their asset use. One key will be eet renewal that delivers signicant improvements in operating efficiency and exibility. New aircraft that burn less fuel and deliver other operating efficiencies are certain to be in high demand in the coming cycle of eet renewal.
100- to 149-seat
One key will be eet renewal that delivers signicant improvements in operating efficiency and exibility.
GEOgRAPHIC DETAIL
EUROPE (IncLuDIng RussIA & CIS)
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Airline strategies have focused on cost reduction as well as consolidation through acquisition among larger airlines, which reduces demand for new aircraft. In addition, Europes population density, comparatively short travel distances and extensive airport security measures also mean that both rail and road provide signicant competition to air travel. Tightening environmental regulations are also increasing the pace at which older, less fuel-efficient aircraft are being retired.
...a signicant increase in expected Russian & CIS deliveries is offset by a

Europe, including Russia & CIS, remains a strong market for aircraft in 20- to 149-seat segment, accounting for approximately 18% of expected worldwide deliveries from 2012-2031. Anticipated deliveries for Europe, including Russia & CIS, are unchanged from Bombardiers 2011 forecast, as a signicant increase in expected Russian & CIS deliveries is offset by a projected decline in deliveries in the nancially troubled Eurozone.
projected decline in deliveries in the nancially troubled Eurozone.
GEOgRAPHIC DETAIL
Overall deliveries in this region reect the broader industrys shift to larger aircraft, as 52% of the total deliveries are expected to be in the 100- to 149-seat segment. Deliveries of aircraft in the 60- to 99-seat segment dominated by regional carriers are expected to account for 45% of deliveries, while the 20- to 59-seat segment will make up the remaining 3%. Russia & CIS are expected to grow more rapidly than the rest of Europe, at an average 3.4% CAGR for the 20-year forecast period. It is expected that approximately 300 new aircraft in the 100- to 149- seat segment will be needed, representing 26% of total European demand for aircraft in this segment. The Russian aviation authority announced the grounding of a number of domesticallybuilt aircraft eets in 2011. This action has advanced the retirement of these already ageing eets, thereby creating an immediate opportunity for both new and used aircraft for the replenishment. As a result, we revised our forecast to increase the demand of 60to 99-seat aircraft by approximately 180 units from last year forecast to 320 units. This is considered a moderate increase, when taking into account the low utilization of current eets, even though the grounded eet is much larger.
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DEMAND DISTRIBUTION BY SEAT SEGMENT, EUROPE (INCL. RUSSIA & CIS), 2012-2031
Total: 2,240 Units
3%
52%
45%

GEOgRAPHIC DETAIL
ASIA/PACIFIC (EXcLuDIng ChInA)
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SUB-REGION OF ASIA/PACIFIC
Northeast Asia South Asia Southeast Asia Oceania
Delivery expectations for Asia/Pacic, excluding China, remain largely unchanged from Bombardiers Commercial Aircraft Market Forecast from a year ago. Economic forecasts predict annual GDP growth of approximately 3.4%, which is close to the world average over the forecast period. This region is expected to account for approximately 13% of new aircraft deliveries over the forecast period, representing approximately 1,710 aircraft against retirement of 790 aircraft, resulting in eet growth of 920 aircraft, to a total of 2,090 in 2031.
In Asia/Pacic, connections between countries are expected to increase in both number and extent over time. Larger, longer range aircraft are increasingly required for international routes and, as in most other regions addressed by Bombardiers forecast and the industry generally, the 100- to 149seat segment is expected to account for more than half the deliveries (57%) over the period. Smaller, short-haul aircraft will be required for growth and eet replacement in domestic markets.
In Asia/Pacic, connections between countries are expected to increase in both number and extent, over time.
GEOgRAPHIC DETAIL
In India, despite the continuation of strong economic growth, the airline industry has been hard hit by the devaluation of the rupee and overcapacity, with the result that consolidation is now under way. More broadly, favourable aviation policies continue to stimulate demand for regional aircraft in order to meet the growing desire for air travel from the burgeoning middle-class.
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AIRPORT CONGESTION AND EXPANSION PLAN

India
CHINA
PAKISTAN NEPAL BHUTAN
In common with other emerging economies, notably China, the growth of commercial aviation in India is expected to be limited by infrastructure shortcomings. India currently has four international airports operating at or above optimum capacity, three of which have identied expansion plans in place, while the fourth cannot be expanded, due to physical encroachments. Fourteen airports have been identied for construction, conversion or expansion, while an additional 35 airports have been identied in Indias 10th Five Year Plan (2002 2007), although many projects have been delayed due to nancing or bureaucratic delays. Most of the 14 airport projects underway are located in southwestern India and there are incentives for carriers to add service, which could see these facilities approach optimum capacity utilization. More specically, nancial incentives for operating aircraft with fewer than 80 seats include waived landing fees and lower jet fuel taxes, which encourages the operation of regional aircraft.
1
BANGLADESH
MYANMAR
9 5
Existing airports at or above optimum capacity Indias scheduled airports for expansion /construction
1 1 4
49
6 8 1
SRI LANKA
200km
Lambert Azimuthal Equal Area Projection Based on 2.5 arc-minute resolution data
Persons per km2 0 1-5 6-25 26-250 251-1,000 1,001+
Sources: CAPA and Bombardier anlaysis.
GEOgRAPHIC DETAIL
Despite fall-off in demand from many parts of the world following the nancial crisis of 2008 2009, Indias manufacturing sector has remained robust. Air travel is expected to see a signicant period of growth as the government addresses substantial infrastructure decits over the next ve years in particular, with overall spending set to increase to more than $1 trillion. India has a large land mass and a very large and increasingly prosperous and mobile population that is set to claim an increasing share of the worlds material wealth. It lacks a high-speed rail network which could compete with the advantages of air travel. Forecast growth in Indias GDP appears to be following the pattern established by China, although with a ve-year lag. Indias population growth and widespread poverty continue to create pressure within the countrys political system. Successful development of Indias commercial aviation potential will be dependent largely on nancing to translate the growing demand into new aircraft, as well as the ability to support market demands with domestic airport infrastructure. Northeast Asia, led by Japan, is recovering slowly from the ravages of the Fukushima environmental crisis and tsunami, although showing signs of individual and corporate resilience signs which will result in strong regional domestic demand and continued economic development. Growth markets linking major city pairs continue to develop and will be stimulated further by the continued loosening of regulatory restraints, except those relating to aircraft environmental performance, which are expected to remain among the strictest in the world. Modern turboprop and jet aircraft which meet these standards will be well positioned for increased acceptance.
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DEMAND DISTRIBUTION BY SEAT SEGMENT, ASIA/PACIFIC, 2012-2031

Total: 1,710 Units
2%
41% 57%

GEOgRAPHIC DETAIL
CHINA (PRC)
47
DEMAND DISTRIBUTION BY SEAT SEGMENT, CHINA, 2012-2031

Total: 2,220 Units
1%
36% 63%

Chinas emergence as an economic powerhouse drives demand for new aircraft and this market is now second only to North America, with 17% of world demand. We forecast a demand for approximately 2,220 aircraft over the 20-year forecast period, including approximately 1,400 aircraft in the 100- to 149-seat segment, as well as more than 800 in the 60- to 99-seat regional aircraft segments.
Chinas forecast economic growth of 6.6% CAGR signicantly outpaces both the forecast world rate (3.26%) and the runners-up, AfricaMiddle East (4.1%) and Latin America (4.1%). China has focused much of its development on building and supplying export markets for a very wide variety of goods. As the success of that strategy generates Chinese domestic
nancial returns, and the middle class begins to prosper and experience material comforts, some of the countrys emphasis is likely to shift to development for meeting domestic needs. Chinas need for domestic transportation is central to its economic growth plans and aviation is expected to play a central role.
GEOgRAPHIC DETAIL
In its current strategic ve-year plan. China seeks to have more than 80% of its population within 100 km or 1.5 hours of air transportation a feat which would provide air transportation to 96% of its GDP base. While the air transportation system is developing, Chinas high-speed rail network can be expected to pursue and capture excess demand, particularly at and near major airports, and where the journey is less than 600 km. Airports and air traffic control system capacity are major brakes on the growth of commercial aviation in China. China has 15 international airports operating at or above optimum capacity, and the central government has implemented plans to build, expand or convert 40 airports for commercial use, with a further 50 airports to be built, expanded or converted by 2020. Most of the 40 airport projects already underway are located in the Central, South and East regions, which reects the distribution of population within China, although there are some initiatives to build aviation infrastructure in the less populated western provinces. Current commercial air space limitations, combined with aircrew shortages, monopolistic fuel pricing and restrictive airline route expansion and airport usage policies, have favored the use (and purchase) of larger jets and resulted in congested airspace around Chinas largest urban centres. Accordingly, China will need to build aggressively and equip a signicant number of new airports some to relieve air traffic congestion in heavily populated and traveled areas, and still more to develop and extend economic and social links to more remote parts of the country. China is therefore expected to require a signicant number of 60- to 99-seat regional aircraft to meet this demand, as well as the pilots to operate them, technicians to maintain them and an air traffic control system with which to operate them safely.
48
AIRPORT CONGESTION AND EXPANSION PLAN

China (PRC)
1 4
2 1 1 2 2 2 2 4 2 3 2 3 3 2 7 9 8 6 1 1 3 5 1 3 2 1 3 2 11
2 1
3
2 1 3 3 1 3
Existing airports at or above optimum capacity
40
Chinas scheduled airports for expansion/construction
Traditional market barriers to trade in China can be expected to lessen over time to help accomplish these challenges. Chinese GDP growth is expected to slow in the coming years from consistent double-digit rates to rates more in line with mature markets and the government is being counseled to reduce
its interventions in the marketplace. Instead, the government is being advised to create and maintain an environment in which markets determine economic inputs and reward commercial success. According to reports by the World Bank and Development Research Centre, signicant policy changes are required if China is to realize its potential as the worlds largest economy and a high-income country.
GEOgRAPHIC DETAIL
LATIN AMERICA (IncLuDIng MEXIcO AnD CARIbbEAn)
49
Bombardier forecast a demand for approximately 930 new aircraft in Latin America over the forecast period. We expect this region (which includes Mexico and the Caribbean) to account for 7% of new aircraft deliveries over the coming 20-year forecast period, representing 930 total units. Of these, 65% or 600 aircraft are expected in the 100- to 149-seat segment and 32% or 300 in the 60- to 99-seat segment. Latin American economic growth is expected to be among the highest, at an average 4.1% for the period, which should result in a medium-high growth environment for air travel and deliveries of new aircraft.
This region currently accounts for approximately equal shares of global GDP and world passenger traffic (6% in each) yet is served by 11% of the worlds airlines.
GEOgRAPHIC DETAIL
This region currently accounts for approximately equal shares of global GDP and world passenger traffic (6% in each) yet is served by 11% of the worlds airlines a circumstance that results in erce competition and, in recent years, business failures and industry consolidation. IATA estimates that passenger traffic in Latin America increased by 9.8% over 2010, which itself showed 14.5% improvement over a at 2009. IATAs forecast traffic growth for Latin America was among the strongest in both base case and oil price spike scenarios, and signicantly exceeded those for North America and Europe, although starting from a much smaller base. The Latin American region is increasingly home to world-scale events, such as the 2014 FIFA World Cup and the Summer Olympic Games in 2016, which can be expected to boost regional economies and to energize the development of infrastructure to support air travel growth. In addition, the recent growth of low-fare air carriers is helping to make air travel much more accessible to the population, largely through the use of regional jet, turboprop and single-aisle jet aircraft.
50
DEMAND DISTRIBUTION BY SEAT SEGMENT, LATIN AMERICA, 2012-2031

Total: 930 Units
3%
32% 65%

GEOgRAPHIC DETAIL
AFRICA AND THE MIDDLE EAST
51
The political uncertainty contrasts the strong economic growth in Africa and the Middle East. Bombardiers forecast for new aircraft deliveries in this region remains relatively unchanged at 970 units, approximately 1% lower than last year forecast, over the forecast period. Within the region, the Middle East is expected to take 420 new aircraft and Africa to require 550. Economic growth is expected to be solid and slightly above the world average, at 3.8% CAGR in the Middle East and 4.4% CAGR in Africa. As in most other regions, new aircraft deliveries are expected to be dominated by the 100- to 149-seat class, with 61% or approximately 600 aircraft, while 60- to 99-seat aircraft will amount to 36% of deliveries, or approximately 350 aircraft.
Economic growth is expected to be solid and slightly above the world average.
GEOgRAPHIC DETAIL
Both these regions face signicant challenges, including political unrest, slow development of infrastructure and slow liberalization of traditionally highly regulated aviation markets all of which have slowed commercial aviation growth. In Africa, for example, the development of aviation infrastructure has focused on a comparatively small number of showcase international hub airports, rather than secondary or tertiary destinations that would help build domestic and regional air travel networks and make air travel accessible to more of the population. This pattern of surface-focused development is prevalent across Africas many countries and in many other essential industries, such as telecommunications, which vary widely between regions and countries and often lags in less developed areas. There are signs of growing, positive change, however, in the scale of external investment from countries such as China and India. To support economic growth, India has extended $5 billion in credit to Africa over three years and steadily increased its imports from Africa to more than $26 billion annually. China has played a similar role, having invested more than $5 billion in sub-Saharan Africa annually since 2006. IATA estimated that air passenger travel in Africa shrank slightly in 2011, following very strong growth in 2010, at 15.0%. Its forecast predicts a modest growth in 2012, at 4.2%. Air travel in the Middle East was predicted to grow at 8% or more in 2011 and 2012, according to IATA, following double-digit growth in 2010. Following a period of social and political turmoil, there is some increased expectation of additional growth potential germinating in the aftermath of regime change and increasing political stability across the Middle East.
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DEMAND DISTRIBUTION BY SEAT SEGMENT, AFRICA AND THE MIDDLE EAST, 2012-2031
Total: 970 Units
2%
36% 62%

FORWARD-LOOKING STATEMENTS
This presentation includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, guidance, targets, goals, priorities, markets and strategies, nancial position, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; expected growth in demand for products and services; product development, including projected design, characteristics, capacity or performance; expected or scheduled entry into service of products and services, orders, deliveries, testing, lead times, certications and project execution in general; our competitive position; and the expected impact of the legislative and regulatory environment and legal proceedings on our business and operations. Forward-looking statements generally can be identied by the use of forwardlooking terminology such as may, will, expect, intend, anticipate, plan, foresee, believe , continue or maintain, the negative of these terms, variations of them or similar terminology. By their nature, forward-looking statements require us to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. While we consider our assumptions to be reasonable and appropriate based on information currently available, there is a risk that they may not be accurate. For additional information with respect to the assumptions underlying the forwardlooking statements made in this presentation, refer to the respective Guidance and forward-looking statements sections in Overview, Bombardier Aerospace and Bombardier Transportation sections in the Managements Discussion and Analysis (MD&A) in the Corporations annual report for the scal year ended December 31, 2011.
53
Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include risks associated with general economic conditions, risks associated with our business environment (such as risks associated with the nancial condition of the airline industry and major rail operators), operational risks (such as risks related to developing new products and services; doing business with partners; product performance warranty and casualty claim losses; regulatory and legal proceedings; to the environment; dependence on certain customers and suppliers; human resources; xed-price commitments and production and project execution), nancing risks (such as risks related to liquidity and access to capital markets, exposure to credit risk, certain restrictive debt covenants, nancing support provided for the benet of certain customers and reliance on government support) and market risks (such as risks related to foreign currency uctuations, changing interest rates, decreases in residual value and increases in commodity prices). For more details, see the Risks and uncertainties section in Other. Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. The forward-looking statements set forth herein reect our expectations as at the date of the Corporations MD&A and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this presentation are expressly qualied by this cautionary statement.
All monetary amounts are expressed in 2012 U.S. dollars, unless otherwise stated.
RESOURCES
Resources used in the development of the Bombardier Aerospace, Commercial Aircraft Market Forecast, 2012 2031 include: AACO Arab Air Carriers Organization AAPA Association of Asia/Pacic Airlines ACAS AirCraft Analytic System database AIA Aerospace Industries Association of America Airline Monitor ATA Air Transport Association ATAG Air Transport Action Group Aviation Daily Bank of America Merrill Lynch Industry Overview Report BTS U.S. Bureau of Transportation Statistics CAAC Civil Aviation Administration of China DOT U.S. Department of Transportation EIA U.S. Energy Information Administration ERAA European Regional Airline Association IATA International Air Transport Association ICAO International Civil Aviation Organization IHS Global Insight IPCC Report on Aviation and Climate Change OAG BACK Aviation RAA Regional Airline Association www.enviro.aero
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MARKET FORECAST

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

BOMbARDIER COMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

DELIVERY FORECAST (UNITS)

Source: Bombardier Commercial Aircraft Market Forecast 2012-2031.

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

TOTAL FLEET UNITS

9,000 5,100 2,500 3,600

100- to 149-seat 60- to 99-seat 20- to 59-seat

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

WORLD REAL GDP GROWTH %, 2011

World Average 2.7%

1.8% 1.8% 4.8% 9.2% 6.8% 3.44% 4.2% 1.3%

BOMBARDIER COMMERCIAL AIRCRAFT MARKET FORECAST 2012-2031

COMMERCIAL AIRCRAFT ORDERS AND GDP GROWTH

Commercial Aircraft Orders

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

New Zealand Portugal

United States Switzerland Netherlands

Trips per Capita

Brazil Russia China

0.01 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

2011 Per Capita GDP

POPULATION GROWTH AND URBANIZATION

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

GDP GROWTH RATES

3.8% 2.6% 2.4% 2.0%

Asia/Pacic (ex. China, India)

Sources: IHS Global Insight, Feb 2012, Bombardier Analysis.

MIDDLE-CLASS CONSUMER SPENDING IN TRILLIONS USD*

North Europe America

Source: OECD. * On a purchasing power parity basis.

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

ASIA, AFRICA AND LATIN AMERICA URBANIZATION

1 Urban population according 2 Excluding China and India.

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

CHINA EXPENDITURE ON AIR TRAVEL AND GROSS DOMESTIC PRODUCT

Expenditure on air travel (left scale)

Gross Domestic Product (right scale)

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

LABOUR AND FUEL UNIT COST HISTORY

Source: Air Transport Association of America, 2012.

AVERAGE OF WEEKLY CUSHING AND BRENT SPOT PRICE FOB 1

$80 $70 $60

Source: Energy Information Administration. Note: 1. FOB = Freight on board

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

Average: $126 per barrel

Source: Annual Energy Outlook (AEO) by Energy Information Administration.

AIRLINE INDUSTRY TRENDS

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

AIRLINE INDUSTRY TRENDS

BOMbARDIER cOMMERcIAL AIRcRAFT MARKET FORECAST 2012-2031

AIRLINE INDUSTRY NET PROFITS

2007 12.9 3.7 6.4 3.0 -0.1 0.1 -0.2

2008 -16.0 -9.6 0.0 -4.7 -0.3 -1.4 -0.1

2009 -4.6 -2.7 -4.3 2.6 -0.6 -0.5 -0.1

2010 15.8 4.1 1.9 8.0 0.9 0.9 0.1

2011 7.9 1.3 0.5 4.9 1.0 0.3 0.0

2012F 3.0 1.4 -1.1 2.0 0.4 0.4 -0.1

Source: International Air Transportation Association (IATA), June 2012.