Whats hot and whats not

10th July 2012 Les Weal, Head of Valuations Olga Razzhivina, Valuations Manager

Aircraft values- whats hot, whats not

Markets values across the sectors i. Cargo ii. Single aisle iii. Twin aisle iv. Turboprops 2012 Base Values update Recovery path

Cargo a sector transforming?

FedEx founder Fred Smith said that the global freight business would see some drastic changes in the future. Not

only would air carriers face competition from

ships, customers would look for customised door-to-door delivery options.

FedEx has seen a decline in fiscal fourth-quarter profits -- international priority airfreight-shipping volumes fell 3 per cent in its fiscal fourth quarter that ended on May 31, while its US domestic express volume fell 5 per cent, compared to a 4 per cent decline in the previous quarter -- and has chalked out a plan for cost-cutting. Speaking at a post-earnings conference, Smith said that the traditional airport-to-airport business "is not growing. This while the door-to-door express segment is growing, and

the movement of goods on the

water is growing".

Core freighter widebodies

$120m

$100m

$80m B744F-5yr $60m MD11F-10yr B744SF trend $40m

$20m

$0m 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Single-Aisle aircraft utilisation 2.5% below peak levels Click to edit Master title style

Source: Ascend Online Fleets

ascendworldwide.com

Market values in harmony

Market values on different tracks?

Market values in different universe?

In production widebodies the bright spot

$80m $70m $60m $50m A333HGW MV 10yr $40m $30m $20m $10m $0m 2006 2007 2008 2009 2010 2011 2012 A333HGW BV 10yr B772ER MV 10yr B772ER BV 10yr

Geographical spread: A330s

9%

24% 14% 46%

4%

3%

Out of production prone to catastrophe

$70m

$60m

$50m

$40m A343MV-10yr $30m A343BV-10yr

$20m

$10m

$0m 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

11

Turboprops the real hot spot

$16m $14m $12m $10m $8m $6m $4m $2m $0m 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 AT72-10yr D8Q4-5yr

12

Base values 2012

No radical changes but plenty of aircraft on watch Economic and fuel prices in keeping with recent trends Default inflation realigned to 2% Useful lives will they become shorter?

13

Retirements of younger aircraft are increasing Click to edit Master title style

Source: Ascend Online Fleets

ascendworldwide.com

Useful life analysis-aggregation of 24 type/series

Aggregated
100% Early Late Middle All Vintages

% Remaining in Pax Service

75%

50%

25%

0%

8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 Aircraft Age (yrs)

Market recovery-pushed to the right?

Historical MV/BV relationship
1.10 1.05 1.00 0.95 0.90 0.85 0.80 0.75 2002 2003 2004 2005 2006 2007 History 2008 2009 Optimistic 2010 2011 2012 2013 2014 2015 2016 Pessimistic

Looking beyond the horizon: cycle indicators

10th July 2012 Eddy Pieniazek, Director & Global Head of Consultancy

17

Agenda Looking beyond the horizon

What is the Horizon? How far is Beyond? World Economics and long-term changes in traffic patterns Fuel and Airline Profits Show me the Money

Aircraft financing and impact on production cycle Deliveries Next Five Years 2012-2016 Aircraft trading used marketplace

Beyond the Horizon

10 Year outlook - funding Narrowbody and Widebody Landscape 2020-2022

Developing world marching to a catch up beat

19

Major change in the balance of key route markets

New paradigm of high fuel prices

Global Crude Oil and Jet Fuel Prices
140 350

120

300

100 Crude Oil $ per Barrel

250 Jet Fuel c per US Gallon

21

80

200

60

150

40

100

20

50

Oil Price

Jet Fuel

Profit cycle shows a break from previous trends

Recent profits/losses have been in two year cycles IATA forecast range for 2012 was +/- 0.8%
22

Traffic data trends

Passenger traffic growth of 6.9% and capacity increase of 8.2% in 2011 Passenger markets still showing gains however Air freight has continued to decline or stagnate (-1.9% in February 2012)
23

2012 Jet Deliveries

2012 New Deliveries Funding

Click to edit Master title style

New Sources of Capital

Since 2008 there have been few new sources of capital to the industry

Click toUnsecured lessor marketstyle edit Master title

ExIm backed bonds Small number of commercial banks Small number of credit funds

Is it sufficient to make up for the scaling back of European banks? Opportunity exists for new sources but they have been slow to enter market Old aircraft - big concern: new sources likely to start with new aircraft ECA backed loans in 2011/2012: c.30-35% of finance provided.
2013 unclear with the intro of new ASU and greater costs for export credit may still be cheaper than commercial loans but gap is smaller (100bps to 30bps for Category 1 borrower). With deliveries rising, hard to see ECA going away

Capital markets - Unsecured finance has replaced ABS for some lessors.
Restrictions on financing older aircraft and increased new aircraft funding requirements will make increased capital markets issuance a must

Commercial Jet Deliveries Forecast Next 5 Years

In 2012$ assuming Base Value on delivery Click to edit Master title style
$110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 2012 2013 2014
SINGLE-AISLE

US $ Billions

2015
TWIN-AISLE

2016
REGIONAL JET

Source Ascend Online Fleets & Global Fleet Forecaster

Commercial Jet Deliveries Forecast Next 5 Years

Click to edit Master title style
4500 4000 3500 5000

No of aircraft

FEW SLOTS LEFT

3000 2500 2000 1500 1000 500 0

SA FORECAST SA BACKLOG TA FORECAST TA BACKLOG RJ FORECAST RJ BACKLOG

2012

2013

2014

2015

2016

Source Ascend Online Fleets & Global Fleet Forecaster

Used Western Built Aircraft Sales Transactions

600

Number of used aircraft sales transactions

500

400

2006 2007 2008 2009 2010 2011 2012

300

200

100

Jan

Feb

March April

May

June

July

Aug

Sept

Oct

Nov

Dec

Source: Ascend Online

29

Sales with lease attached the missing component

Click to edit Master title style

These trades are held back by lack of secondary purchasers and the lack of finance

MV/BV closely linked to volume of transactions These volumes are at similar levels to 2004
Click to edit Master title style

Forecast 10 Year Global Deliveries By Region

13,000+ ordered aircraft, ~$1,000 billion based on 2012 Base Value (2012$ terms)

36% of $1,000bn market in Asian region

Latin America, $52b, 5% Middle East, $144b, 14% China, $139b, 13% North America, $186b, 18% Europe, $262b, 24% Africa, $33b, 3% Asia/Pacific, $242b, 23%

Beyond the Horizon - Narrowbody Landscape Jet Segmentation by Type: 1960 to 2011, Forecast to 2020
20,000 18,000 16,000 Number of Aircraft in Service 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1960
MS-21 C919 737 Max A320neo Family CSeries 717 737 (NG) MD-90 A320ceo Family 737 (CFMI) 757 MD-80 737 (JT8D) DC-9 727 Convair Soviet Types Caravelle

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Old British Types

Beyond the Horizon - Widebody Landscape Jet Segmentation by Type: 1960 to 2011, Forecast to 2022
7,000 6,000 A350 787 A380 777 A330 A340 MD-11 A310 767 A300 DC-10 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 L-1011 TriStar

Number of Aircraft in Service

5,000 4,000 3,000 2,000 1,000

35

The information contained in our databases and used in this publication has been assembled from many sources, and whilst reasonable care has been taken to ensure accuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend A Flightglobal Advisory Service, part of Reed Business Information Limited, its offices, or employees in respect of any error or omission that may have occurred 36