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Boeing Capital Corporation

BOEING CAPITAL CORPORATION

Space and Defense Financial ServicesArranges, structures, and provides financing

for defense and space-based products

Aircraft Financial ServicesProvides aircraft leasing and secured

lending to airlines worldwide

Commercial Financial Services Asset-backed lender provides financing to users of capital equipment

BOEING CAPITAL CORPORATION

Customer Diversity

Excludes held-for-sale or lease

Aircraft Financial Services

$9.1 Billion

As of December 31, 2002

5%

4%

44%

5%9%

10%

197 Customers23% 83

CustomersCommercial

Financial Services$2.5 Billion

UnitedAirTranBoeingAmerican Trans AirHawaiian AirlinesOther AFS CustomersCFS

77%

23%

Market Outlook and Airplane Market Outlook and Airplane Residual ValuesResidual Values

Randy Tinseth

Director, Product and Services MarketingBoeing Commercial Airplanes

ELA Large Ticket Conference

Irving, Texas, April 2003

Agenda

• Experiences of the past year

• Our Long Term Forecast

• How Boeing affects airplane residual values

Unprecedented Times Of Uncertainty

Slower RecoverySlower Recovery

• Terrorism, Iraq, SARS, oil prices, security and capital markets

• Cycle deeper and longer?• Asia…SARS effect• Europe…sluggish economy• U.S.…sluggish economy…bankruptcy risks remain

• Industry restructuring• New business models• Reduced capacity to match demand• Simplification and consolidation

Timeline for Industry Recovery

World Economic Outlook Is Slowly Improving

$0 $2,000 $4,000 $6,000 $8,000

Eastern Europe*

Mexico*

India*

Australia

Russia*

Canada

China* (mainland)

Britain

South America*

Other Asia*

Japan

United States

Euro Area

GDP, Billions U.S. Dollars

SatisfactoryCautionaryMajor Concern

G

RY

1.0%

World Growth: 2002 1.6% 2003 2.0%

* All Markets based on The Economist consensus forecasts.Major markets updated monthly; emerging markets quarterly.

4.0%

1.6%

7.4%

4.1%

5.7%

3.2%

3.0%

2.2%

0.8%

1.9%

2.8%

3.0%

World Air Travel has Recovered To Revised Trend

100

120

140

160

180

200

220

240

1998 1999 2000 2001 2002 2003

Long-Term Trend Experienced Trend Future TrendBillions RPKs

4.9% annual growth

About 2,000 Airplanes Are Parked But Only 450 Are Expected To Return

-500

0

500

1000

1500

2000

2500

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1/14 2/12 3/12 4/11-3%

0%

3%

6%

9%

12%

15%Number of Parked Airplanes (Worldwide)

Scrapped During Year

Percent of Fleet

Parked at Year-End

1,965 Airplanes

(11.8% of Fleet)

Western-built, commercial jet fleet. Source: Airclaims Ltd. (through April 11, 2003). 2003

In production+MD11; 737 classic, MD80/90727, 737-1/2, 747-1/2/3, DC9/10, A300 707, DC8Withdrawn from service Percent of fleet

Nearly 4,000 Aircraft are Closing in on RetirementPeriod I Period II Period III

e.g. 707, DC-8 e.g. 727, 737-100/200, 747-100/200/300, DC-9, DC-10, A300

e.g. ALL in-production models plus MD-11, MD-80, 737 Classic

• Three flight crew• Stage I noise• Turbojets, early turbofans• 4-engines• High Fuel Burn

• Two/Three flight crew• Stage II noise (later hushkits)• Early turbofans• Tri-jets, short-haul twins• ~30% lower fuel burn

• Two flight crew• Stage III noise and quieter• High-efficiency turbofans• Twinjets dominate• ~70% lower fuel burn

Source: Airclaims Ltd. (through April 11, 2003)

Scrapped1,200

Parked100

In Service100 Scrapped

2,150

Parked1,180

InService2,470

Parked700

In Service12,070

1,400 Airplanes 5,800 Airplanes 12,900 Airplanes

Scrapped130

Timeline for Industry Recovery

Multiple Forces Drive Our Industry

Passengers Drive Airline Strategies

Air Travel Growth Has Been Met By Increased Frequencies And Non-Stops

Index 1980=100

75

100

125

150

175

200

225

250

275

300

1980 1985 1990 1995 2000

Frequency Growth

Non-stop Markets

Average Airplane Size

Air Travel Growth

Few Choices Prior To Liberalization

Liberalization Has Led To More Frequencies And Non-Stops

Increased Frequencies And Non-Stops Meet North Atlantic Air Travelers’ Demands

Index 1980=100

50

100

150

200

250

300

350

1980 1985 1990 1995 2000

Frequency Growth

Non-stop Markets


Air Travel Growth

50

100

150

200

250

300

350

1980 1985 1990 1995 2000

Index1980=100

Non-stop Markets

Average Airplane Size Regulated

Market

1993Third

Package1990Second

Package1987First

Package

FrequencyGrowth

Air Travel Growth

1997 Single Aviation

Market

In the European Market Liberalization Stimulated Frequencies and Non-stop Flights

Frequency Growth Has Exceeded Air Travel Growth On The Asia-Europe Market

Index1990=100

0

50

100

150

200

250

300

350

400

450

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

FrequencyGrowth

Non-stop Markets


Air TravelGrowth

777 Is Fragmenting The North PacificAs 767 Did the North Atlantic

The Use Of Intermediate-Size Airplanes IsIncreasing In The Tokyo-U.S. Market

Trans-Pacific Air Travel Growth Has Been Met WithIncreased Frequencies And More Non-Stops

80

100

120

140

160

180

200

Index1990=100

Frequency GrowthNon-stop Markets

Average AirplaneSize

Air Travel Growth

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Very Large Airplanes Will Not ReduceAirport Congestion

0

50

100

150

200

250

300

350

100 or less 101-150 151-200 201-250 251-300 301-350 350-401 401-450 Over 450

Dailydepartures

Seat size category

• Flights by seat size atLondon-Heathrow airport

• OAG August 2002

• All scheduled passenger service

In A Downturn, Large Airplanes Have More Risk

Passengers Passengers to Break-even

Passengers to Break-even

• In a downturn, smaller airplanes provide less risk• In an upturn, smaller airplanes provide more frequencies and non-stops

32% more passengersTo break-even

RISKRISK

2002 Current Market Outlook

2002 Current Market Outlook

1971 1981 1991 2001 2011 20210

3

6

9

Air Travel Growth Varies By Region

0 500 1,000 1,500 2,000

Europe-Mid-East

Africa - Europe

Europe - L. Amer.

No. Amer. - L. Amer.

Latin America

Transpacific

Europe - Asia

No. Atlantic

Europe

Asia-Pacific

No. America

Added traffic, 2002 - 2021

RPKs (billions)

2001 traffic2002-2021

growthAnnual

growth %3.5%

6.2

4.3

5.4

5.5

7.9

5.0

4.9

4.8

5.2

4.7

4.9% World Average

Regional Market Evolution Shapes Fleet Requirements2002 - 2021

0

500

1,000

1,500

2,000

2,500

2001 2021 2001 2021 2001 2021 2001 2021 2001 2021 2001 2021

747 and largerTwin-aisleSingle-aisleSmaller regional jets

ASKs (billions)

Asia-Europe Trans-Pacific North Atlantic EuropeAsia-Pacific North America

Long-Term Demand For New AirplanesRemains Strong

8,566retained fleet

6,705 replacements

17,224growth

airplanes

0

10,000

20,000

30,000

40,000Units

15,271

32,495

23,929

20212001

Airlines Will Need Nearly 24,000New Airplanes

23,929 Airplanes

Smaller regional jetsSmaller regional jetsSingleSingle--aisleaisleTwinTwin--aisleaisle747 and larger747 and larger

2002-2021

4%4%

21%21%18%18%

57%57%

1.8 TrillionDelivery Dollars*

* In year 2001 dollars

42%42%

5%5%

41%41%

12%12%

Freighter Fleet Will Almost Double70 Percent Will Be Modified Airplanes

20012001

1,775 Freighters

22%22%

39%39%

17%17%

Smaller (<30 tons)Smaller (<30 tons)Medium standardMedium standard--body (30body (30--50 tons)50 tons)Medium widebody (40Medium widebody (40--65 tons)65 tons)Large (>65 tons)Large (>65 tons)

22%22%

20212021

3,078 Freighters

34%34%

29%29%

11%11%

26%26%

Same Traffic Projection, Different Fleet Solutions

Boeing

15,181 Passenger Jets18,502 Passenger Jets

Single-Aisle13,210 (71%)

Single-Aisle13,210 (71%)

Single- Aisle8,259 (54%)

Single- Aisle8,259 (54%)

Twin-Aisle& 747s

3,842 (25%)

Twin-Aisle& 747s

3,842 (25%)

500+ seats 1,138 (8%)

Airbus

Twin-Aisle& 747s

4,936 (27%)

Twin-Aisle& 747s

4,936 (27%)

500+ seats356 (2%)

2001–2020 Forecast: Excludes small and intermediate regional jets

210 Seats1,942(13%)

210 Seats1,942(13%)

Sharply Different Views Of Future Airplane Size

- Based on 2001-2020 forecast

How Airplane Manufacturers affect airplane residual values

• Supply and demand determines airplane values

• Airplanes are still good investments

• Especially an airplane that is:− less sensitive to business cycles

− more adaptable to evolutionary industry changes

Aircraft Residual Value Checklist

Market Acceptance

Mission Flexibility

Operating Economics

Manufacturer Commitment

Diverse and Healthy Customer Base

Serves Multiple Market Segments

Right Sized with the Right Mix of Low Trip Costs and Seat-mile Costs

Maintaining and Adding Value

Aircraft Residual Value Checklist: 737737

Market Acceptance

Mission Flexibility

Operating Economics


0

50

100

150

200

0 500 1000 1500 2000

737NG Market Acceptance After 5 Years

Number of Operators

Number of Airplanes Delivered

737 NG

737 Classic

A320 Series

SinceLaunched First Delivery 737NG EIS

737 NG 11/93 12/97 1,228A320 Series 3/84 4/88 1,112

737 Flies More People to More Places

4,379 737’s flown by 395 operators


Market Acceptance

Mission Flexibility

Operating Economics


Outstanding


Market SegmentsMarket SegmentsLow Fare

Global Network

Short Range/Domestic

Intra-Regional

Long Haul International

Charter/Inclusive Tours

Cargo

Market Acceptance

Mission Flexibility

Operating Economics



Market Acceptance

Mission Flexibility

Operating Economics


Unmatched Flexibility

Outstanding

500

600

700

800

900

75000 85000 95000 105000

737 Has A More Efficient Structure

Operating Empty Weight (OEW) - Lbs

OEW/seat – Lbs per seat

737-600

A318

A319

A321-200

737-800

737-900

737-700 A320-200

BetterStructural Efficiency

9% Lower (60 Lbs per seat)

New 737 Design Technology ProvidesLower Operating Costs

-30

-20

-10

0

10

20

-10 0 10 20 30Trip cost, %

Seat-mile cost, %

A318

A320-200

737-600

737-700

737-800

737-900

A319

A321-200

4% to 10%Lower!

Loweroperatorcosts


Market Acceptance

Mission Flexibility

Operating Economics



Outstanding

Designed for Lower Costs

Introduced New 737 Family

Four Family Members

Operational Commonalitywith Classics

Winglets, Head-Up Display (HUD) and other FlightDeck innovations


Product InnovationProduct Innovationand Improvementand Improvement

Market Acceptance

Mission Flexibility

Operating Economics



Market Acceptance

Mission Flexibility

Operating Economics



Outstanding

Designed for Lower Costs

Maintaining Marketplace Value

Manufacturers can also harm residual values by destructive pricing and oversupply.

Airbus Continues to Over Supply the Market using Destructive Pricing

0

10

20

30

40

50

60

2002 2003 2002 2003

Num

ber o

f A/C

ava

ilabl

e

29

56

177

Source: Speednews – January 2002 to March 2003 Data

737NG Family

0

20

40

60

80

100

J-01

N-01

F-02

M-0

2

S-02

D-02

M-0

3

J-03

# of

Par

ked

Airc

raft

A320 Family

Parked A320s Continue to be at High Levels

Source: Airclaims

A320s Available for SaleHave Almost Doubled

10

“The A320 lease rate is half what it was 18 months ago” Glenn Hickerson, Advisory Board Chairman of GATX Air, Airline Business 4/1/03

66A320

737NG


Market Acceptance

Mission Flexibility

Operating Economics



Number of Operators

0

25

50

75

100

0 250 500 750 1000

777 Market Acceptance After 7 Years

777A330A340

747-400

767

SinceLaunched First Delivery 777 EIS

777 10/90 5/95 423A330-300 6/87 12/93 100 A340 6/87 12/93 172

777 Serves the World’s Airlines

423 In-Service 777s and 30 operators


Market Acceptance

Mission Flexibility

Operating Economics


Exceptional

Low Fare

Global Network

Short Range/Domestic

Intra-Regional

Long Haul International

Charter/Inclusive Tours

Cargo


Market SegmentsMarket SegmentsMarket Acceptance

Mission Flexibility

Operating Economics


The Versatile 777 is Used Around the WorldAllowing Airlines to Use the Most Efficient Airplane to Meet Market Demands

MarketU.S. DomesticIntra-AsiaTransatlanticEurope-AsiaTranspacific

777168

1,402567

91170

A3400

215224114

40

A330-3000

793150

00

Round Trip Weekly Frequency

August 2002 OAG data


Market Acceptance

Mission Flexibility

Operating Economics


Most Flexible Wide-body Ever

Exceptional

777 has a More Efficient Structure

Operating Empty Weight (OEW) - Lbs

OEW/seat – Lbs per seat

A340-200

A340-500

A340-600

777-200LR

777-300

777-300ER

777-200

777-200ER

A340-300

A330-300

BetterStructural Efficiency

900

1000

1100

1200

1300

1400

275000 300000 325000 350000 375000 400000 425000

~ 17% lower,(230Lbs per seat,

almost 27,000lbs total!)

-15

-10

-5

0

5

10

15

20

-10 -5 0 5 10 15 20 25 30

777 Design Technology Provides Lower Operating Costs

Trip cost, %

Seat-mile cost, %

A340-300

A340-500

A340-600A330-300

Loweroperatorcosts

777-200LR777-200ER

747-400777-300ER

777-200

777-300

~ 15% lower

Cabin Area Dictates Relative Seating Capacity

BoeingSeat counts

416

365

301

323

280

262

1.34

1.38

1.38

1.36

1.41

1.34

Boeing

Seat Density(seats/sq. M)

747-400/-400ER

777-300/-300ER

777-200/-200ER/-200LR

Three-class seating

Seating CabinArea (sq. M)

A340-600

A340-500

A340-300

310

264

219

237

199

195

* Calculated based on Airbus seat density of 1.6

/ 496 *

/ 422 *

/ 350 *

380

313

295

1.60

1.57

1.51

AirbusSeatcountsAirbus

413

378

3041.39

1.43

1.33


Market Acceptance

Mission Flexibility

Operating Economics


Most Flexible Widebody Ever

Exceptional

Unmatched Economics


Product InnovationProduct Innovationand Improvementand ImprovementNew Ultra-Long Range777-200LR & 777-300ER

Flight Crew Commonality

Space Utilization

Market Acceptance

Mission Flexibility

Operating Economics



Market Acceptance

Mission Flexibility

Operating Economics


Most Flexible Widebody Ever

Exceptional

Unmatched Economics

More Range, Space and Value

0

50

100

150

200

0 500 1000 1500 2000

All Boeing Airplanes Score Well on the Aircraft Residual Value Checklist

Number of Operators


737 NG

737 Classic

A320

All Data through Nov

757767

A330A340

747-400777

717

A300-600A310

A300

Where they want to goWhen they want to go

New Opportunities For Passengers And Airlines

How The 7E7 Uses Sonic Cruiser Technology

-30

-20

-10

0

10

20

30

Rel

ativ

e fu

el b

urn

per s

eat (

%)

Sonic CruiserA330-200(base)

A340-500

7E7

Really Fast and EfficientReally Fast and Efficient

Super Efficient and FastSuper Efficient and Fast

Sonic Cruiser Technology Applied to the 7E7

• Configuration

• Materials

• Manufacturing

• Systems

• Environmental

• Propulsion

Middle Of The Market Opportunities

0

100

200

300

400

500

600

700

0 1000 2000 3000 4000 5000 6000 7000 8000 9000

Range, nmi

Seat

s

• A big market segment, quiet for now

• 2000 to 3000 airplane market

757/767 & A330-200 Size

Middle-of-Market

747 &

A380Size

A330 / A340 & 777 Size

737 & A320 Size

717RJ’s

• Increased point-to-point travel and more frequency choices• Speed, Range and Comfort of the 777 in a smaller size• Increased point-to-point travel and more frequency choices• Speed, Range and Comfort of the 777 in a smaller size

New International Medium & Long-HaulCity-Pairs & Frequencies

How Can The 7E7 Serve The Middle Of The Market?Medium and long-haul international routes

Domestic and Intra-RegionalMedium-haul International

How Can The 7E7 Serve The Middle Of The Market? Domestic and intra-regional and medium-haul routes

• Increased capacity for dense single-aisle city pairs• Large airplane seat economics with smaller airplane trip costs• Increased capacity for dense single-aisle city pairs• Large airplane seat economics with smaller airplane trip costs

What Is The Future Demand And TimingFor The Middle Of The Market

0

500

1000

1500

2000

2500

3000

3500

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

No.

of

Airp

lane

s ov

er 2

0 Ye

ars

Old

• Large opportunities for fleet replacement.

• By 2008, 42 percent of the fleet will be more than 20 years old.

• By 2015, the number climbs to 74 percent.

• 2,000 to 3,000 airplane market, replacement and growth.

• Large opportunities for fleet replacement.

• By 2008, 42 percent of the fleet will be more than 20 years old.

• By 2015, the number climbs to 74 percent.

• 2,000 to 3,000 airplane market, replacement and growth.

Summary

• Economic growth will return and traffic growth will rebound to long-term trend

• Passengers’ demands for shorter trip times, non-stop flights and more frequency choices will drive airline strategies and airplane selection

• Manufacturers can and do affect residual values through design, support, supply and pricing decisions

• Boeing is committed to maintaining its competitive edge in the aviation industry

boeing capital corporation · boeing capital corporation ... a320 series since launched first...

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