International Boeing

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International Market AnalysisDeep-dive: Brazil and China

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Objectives

• Analyze the Aerospace and Defense outlook globally.

• Investigate opportunities for Boeing the emerging nations of China and

Brazil.

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Agenda

• Global trends and considerations > Commercial industry> Defense Industry > Countries to target

• Deep Dive Brazil/China > Country Overview> Competition and Boeing> Defense Strategy > Commercial outlook > Insight> SWOT summary

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GLOBAL TRENDS AND CONSIDERATIONS

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Commercial IndustryOverall outlook…

Good!

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Commercial IndustryAir Resiliency

+45%

In the past 10 years. This is despite 3 major world crises.

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Commercial IndustryWhat this means in profits:

+45%

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Commercial IndustryJust in the past couple of years:

+45%

Notable Purchases

Paris Show 2011: Airbus receives a record number of orders. 74 Billion won.

Singapore Airshow 2012: Lion Air has largest single order in aviation history:

$22.4 Billion. 380 Boeing planes.Farnsborough 2012: Boeing finishes with

$37 Billion won.

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CommercialWhat drives Air Demand?

>GDP growth>International Trade

and Deregulation>Government Support

and Subsidies >Fuel prices

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CommercialBuying Trends and Forecast

1. Single Aisle planes still leading the way!

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CommercialBuying Trends and Forecast

Single Aisle Planes Represent:

87% of all routes traveled today71% of all deliveries through

2030

1. Single Aisle planes still leading the way!

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CommercialBuying Trends and Forecast

2. BRIC and Developing nations generating most traffic

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CommercialBuying Trends and Forecast

3. New Generation Engines making up most of the world's fleets!

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CommercialInsight> Commercial Air is still a growing market > Commercial aircraft market is looking for fuel efficiency- Improved Air Traffic- Bio fuels- Fuel efficient aircraft

• 787, 737MAX

> Single Aisle plane demand is not decreasing

• 737, best selling jet

The good news: Boeing has all of these solutions already.

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Defense Industry

BRIC Nations growing

US Recession and Eurocrisis

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Defense Industry

US Exporting more and more military equipment

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Defense Industry

BRIC Nations growing

US Recession and Eurocrisis

Defense budget growth is dependent on GDP Growth. Who’s growing?

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Defense Insight• >US and Europe defense budget declining.

Capitalize on growing economies with rising defense demands, and bigger GDP allotment.

• >The BRIC nations, (especially Brazil, India and China) have growing needs for defense aircraft but are still only beginning to create domestic military aircraft technology.

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A & D INSIGHT: MARKETS TO TARGET

A& D continues to globalize to every corner of the world, such as:

BrazilChina

• Mexico• India/Russia

• USA

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BRAZIL DEEP DIVE

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Country Overview

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Country Overview

• Before 2010• Emerging Market

> 35 Million Brazilians climbed to the middle class in recent years

• Oil Reserves found, increasing country value

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Country Overview

• Today’s Market Slowed economic growth

> Projections around 3.0% yearly for the next decade

> “I don’t see how Brazil can ever grow 5% per year unless you change the Brazilian people.” – Brazilian National Development Bank and the country's communications minister Carlos Mendonca de Barros

• Expensive Nation> Big taxes, especially on imports

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Competitive Landscape

Airbus• 33% of

Brazilian Fleet in 2011

Dassault• Candidate in

fighter plane contract.

• Currently use Dassault fighter plane.

Embraer•Cooperating with Boeing in KC-390 transport

•3rd commercial manufacturer in the world

•43% market share of regional jets

SAAB• Swedish-

Brazilian Research and Innovation Centre

• Financially investing in domestic engineer Akaer

Boeing• Working with

Embraer on KC-390

• Fighter Jet contract fight

• Research center in Sao Paulo

• 34% of Brazilian fleet

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Commercial Air Market

Expected to

Rise

Why? x3 Air Demand in the past decade

x1.5 Revenue for airlines since 2003

x2 Domestic tourism since 2006

2 of the biggest world events happening in the next 4 years

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Commercial Air Market

Expected to

Rise

Why? x3 Air Demand in the past decade

x1.5 Revenue for airlines since 2003

x2 Domestic tourism since 2006

2 of the biggest world events happening in the next 4 years

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Defense Strategy

• Want to independize from GPS system• Integrate all aerospace monitoring

Prioritize Amazon Region

• Substitute current fighter plane

Airforce Development

Prioritize Air Surveillance

Develop Satellite technology

Acquire new presidential plane

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Country SWOT

Strengths• Strongest Economy in Latin

America • Becoming a center for World

Events• Increasing defense budget as it

becomes a bigger world power.

Opportunities

Weaknesses• Economy is finally reaching a

slump in growth. • Difficult to tell if air travel will

grow after world events in Brazil plateau in 2016.

Threats• If economy continues to slump, so

will defense budget. • SAAB and Dassault already

established in the country • Controversial situation involving

Bio-Fuels in Amazon. • With growing Aerospace industry,

domestic aircraft is a possibility

Domestic and

International Tourism

Biofuel Research Presidential

Plane Fighter Plane

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Opportunity

Domestic and

International Tourism

Biofuel Research Presidential

PlaneFighter Plane

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CHINA DEEP DIVE

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Country Overview

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Country Overview

Region/Country Average Growth (%)2006-2011

Contribution to Global Growth

World growth 3.7 3.7

Developing world 6.7 3.3

China 11 1.7

US .9 .2

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Country Overview

>High tax on import and leasing of aircraft.

>Widely known for “Renovating” other countries’ technologies

> Pollution costs china 10% of its GDP

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Competitive Landscape

Airbus• 40% of market

share in commercial air.

• A380 is the biggest competition for Boeing.

Comac• Will be among

3 largest manufacturer.

• Plans to build regional jet as well as twin aisle planes

Northrop Grumman •Awarded with contract in ‘10 to provide ATC equipment

Boeing• 48% of market

share in commercial air

• Boeing and COMAC Create Energy Technology Center in Beijing

• China’s military currently using 737

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Defense Strategy

Preserving Communist Party

Stop Taiwan from gaining independence as a nation

Prevent US intervention from helping china

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Defense Strategy

Preserving Communist Party

Stop Taiwan from gaining independence as a nation

Prevent US intervention from helping china

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Defense Insight

• > While relations with China are growing, it is noteworthy to point out that even in their national defense strategy they are weary of the US.

• > Increase of defense budget, the political environment for Boeing to target China as a client does not seem promising.

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Expected to

Rise

Commercial Aircraft

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Expected to

Rise

Commercial Aircraft

Why? 2nd Largest market for new airplanes

x2.5 Air Traffic since 2010

55 New airports being built

5-7% Forecasted growth per year

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Commercial Aircraft

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Expected to

Rise

Commercial Aircraft

China is increasing Twin Aisles and Large Aircraft. Maintaining Regional Jets stagnant.

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Commercial Aircraft

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Commercial Aircraft Insight

• >With 55 new airports, air traffic increasing, and an emerging middle class the possibilities are growing for Boeing in China.

• >The threat of new domestic entrants, like Comac is likely. Capitalize on products China lacks domestically > Twin Aisle, Large Aircraft, and Regional Jets

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Country SWOT

Strengths• 2nd Biggest economy in the

world and growing.• 2nd Biggest aerospace market

in the world• Growing defense budget

Opportunities

Weaknesses• Communist nation and taxes on

imports • Far wider support for domestic

companies and technologies than foreign

• Weary of US government• Known to copy technology

Threats• Comac forecasted as 3rd most

competitive aircraft manufacturer.

• Airbus owns large percent of the marketshare. Pollution Air Traffic

Delays Biofuel Testing

Regional Jets and

Twin Aisle Planes

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Opportunities

Pollution Air Traffic Delays Biofuel

Testing

Regional Jets and

Twin Aisle Planes

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Overall…Globally•Commercial air industry rising•Defense industry reorganizing and changing

Brazil •Economic growth slowing•Room to grow in domestic and international flights

•Prioritizing defense more

China•Becoming extremely powerful in the world

•Are not looking for international help in defense

•Are becoming competitive with local commercial air company

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Questions?