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
Average Airplane Size
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
Average Airplane Size
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
Manufacturer Commitment
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
Aircraft Residual Value Checklist: 737737
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Outstanding
Aircraft Residual Value Checklist: 737737
Market SegmentsMarket SegmentsLow Fare
Global Network
Short Range/Domestic
Intra-Regional
Long Haul International
Charter/Inclusive Tours
Cargo
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Aircraft Residual Value Checklist: 737737
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
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
Aircraft Residual Value Checklist: 737737
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Unmatched Flexibility
Outstanding
Designed for Lower Costs
Introduced New 737 Family
Four Family Members
Operational Commonalitywith Classics
Winglets, Head-Up Display (HUD) and other FlightDeck innovations
Aircraft Residual Value Checklist: 737737
Product InnovationProduct Innovationand Improvementand Improvement
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Aircraft Residual Value Checklist: 737737
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Unmatched Flexibility
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
Aircraft Residual Value Checklist: 777777
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Number of Airplanes Delivered
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
Aircraft Residual Value Checklist: 777777
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Exceptional
Low Fare
Global Network
Short Range/Domestic
Intra-Regional
Long Haul International
Charter/Inclusive Tours
Cargo
Aircraft Residual Value Checklist: 777777
Market SegmentsMarket SegmentsMarket Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
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
Aircraft Residual Value Checklist: 777777
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
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
Aircraft Residual Value Checklist: 777777
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Most Flexible Widebody Ever
Exceptional
Unmatched Economics
Aircraft Residual Value Checklist: 777777
Product InnovationProduct Innovationand Improvementand ImprovementNew Ultra-Long Range777-200LR & 777-300ER
Flight Crew Commonality
Space Utilization
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
Aircraft Residual Value Checklist: 777777
Market Acceptance
Mission Flexibility
Operating Economics
Manufacturer Commitment
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
Number of Airplanes Delivered
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