CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT

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CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
CONNECTING
      THE FUTURE

                       Turboprop market
                       forecast 2018-2037

atrbroadcast   atraircraft   atraircraft   atr   atrchina
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
introduction

The competitive environment of regional aviation is
showing its utmost importance for developing local
economies and territorial cohesion. It not only feeds
hubs, but more importantly, it allows connections to the
world’s regional capitals.
Everyone likes fast and easy trips from a nearby airport.
Not only do turboprops offer the right capacity and
technology, they also reach places where no other aircraft
can go: more than one third of the world’s commercial
airports rely exclusively on turboprops.
As new regions emerge, new regional routes will be
opened and developed. This is another mission at which
turboprops excel.
By efficiently connecting such a large diversity of
communities, with the most limited environmental
footprint, turboprops are revealed as the most efficient
choice to quickly enable and sustain economic
development of many regions.
Looking 20 years ahead requires us not only to study the
past and the world today but also to imagine the networks
that will shape our future.

                                       Christian Scherer
                              Chief Executive Officer ATR
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
TABLE OF
CONTENTS

   06
   EXECUTIVE
   SUMMARY

   12
   RATIONALE

   16
   REGIONAL
   TRAVEL TRENDS

   28
   BENEFITS OF
   REGIONAL AVIATION

   38
   FORECAST
   BY REGION

   56
   FREIGHTERS
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
Executive Summary                                                                  ExecutiveSummary
                                                                                                                                                                          Executive Summary
                                                                                         CAPACITY
                                                                                    TRAFFIC GROWTH                                            ROUTES CREATED BY TURBOPROPs

      AVERAGE ANNUAL TRAFFIC GROWTH                                                                                            New turboprop routes

             ACTUAL                                                  Forecast

                                                                                                                                                                     9%
                                                                                                                    30%                                      6%
                                                                                                                    New           12%
                                                                                                                                                                                   25%
                                                                                                                    Routes
                                                                                                                                                                           7%
                                                                                                                                                              11%
                                                                                                                                          15%                                       16%
                                                                                                                    70%
                                                                                                                    Existing
                                                                                                                    network

                                                                                                                                             Africa &
                                                                                                                                      300    Middle East            200    South Asia
    2007
           2009
                  2011
                         2013
                                2015
                                       2017
                                              2019
                                                     2021
                                                            2023
                                                                   2025
                                                                          2027
                                                                                 2029
                                                                                        2031
                                                                                               2033
                                                                                                      2035
                                                                                                             2037

                                                                                                                                      330    North America
                                                                                                                                                                    690    China

                                                                                                                                             Latin America
                                                                                                                                      410    & Caribbean
                                                                                                                                                                           Central Europe,
                                                                                                                                                                    240    Russia & CIS
                                                                                                                                      440    Asia Pacific           160    Western Europe

                   +3.2%                                                                +4.5%                                         30%                             +2,770
                                                                                                                                 of 2037 activity comes                    potential new
                                GDP                                                        TRAFFIC                                  from new routes                       routes created

8                                                                                                                                                                                            9
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
Executive Summary                                          ExecutiveSummary
                                                                                                      Executive Summary
                                               CAPACITY
                                       TURBOPROP DEMAND                            TURBOPROP DEMAND by region

     TURBOPROP Fleet Evolution and deliveries                        Turboprop deliveries
     In-service passenger fleets

                             4,060                     3,020

                                      Growth
                                      1,800
                              60%

                                                       deliveries
         2,260

                                      Replacement
                                      1,220
                             40%
          In service

                                      Stay in                                  Africa &
                                      service                             350   Middle East
                                      1,040
                                                                                                260     South Asia
                                                                          350   North America
        2017                2037
                                                                                                300     China
                                                                                Latin America
                                                                          420   & Caribbean            Central Europe,
                                                                                                250    Russia & CIS

                                                                                                350    Western Europe
                                                                          740   Asia Pacific

                                                 3,020
                                                 deliveries

       Fleet growth is envisioned to account for 60% of
       turboprop deliveries in the next 20 years.

      	Most of this growth is driven by the creation of new routes
       as part of airlines’ network development strategies.
                                                                           630                        2,390
       The other part relates to the expanded usage of the               40-60 SEATS              61-80 SEATS
       turboprop technology in pre-existing markets.

10                                                                                                                       11
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
RATIONALE                                                       EXECUTIVE SUMMARY
                                                                                                                                    RATIONALE
                                                    ASSUMPTIONS
                                                      CAPACITY                                                             METHODOLOGY

     ASSUMPTIONS                                                                 FORECAST STREAM

The following assumptions and definitions apply unless
otherwise specified:                                                                                     Aircraft
                                                                                                        allocation
         ASK: Available Seat Kilometer – seats multiplied by
                                                                                      CURRENT &                            CURRENT &
         distance.                                                                    HISTORICAL                           HISTORICAL
         GDP: Gross Domestic Product considered in this                               NETWORK                               TP FLEET
         document at Purchasing Power Parity.
         Mature markets: North America, Western Europe, Japan,
         South Korea, Australia, Singapore, Chinese Taipei, Hong
         Kong, New Zealand & South Africa.
         Turboprop in-service fleets are considered in the range of                    Macro-economic                                 Retirement
         20-80 seats in standard configuration.                                        & demographic                                  & conversion
                                                                                       forecast
         Network range up to 900 NM ~ 1,700 km ~1,000 mi.
         Route size considered: up to 450 daily seats each way per
         carrier.
         Traffic allocation to all types of existing aircraft categories
         from 20 to 200 seats, jet and turboprop technologies.
         Deliveries include aircraft currently in-production and                                                      TP Fleet
                                                                                                                                  Replacement
         launched programs.                                                            NETWORK                        staying
                                                                                                                                    demand
                                                                                      EVOLUTION                      in service

                                                                                                                                                 DELIVERIES
                                                                                                        Allocated
                                                                                                          to TP
     Sources
     •   ATR Studies and survey
     •   Flightglobal
     •   IATA                                                                               NEW                           Growth demand
                                                                             Larger        ROUTES
     •   OAG                                                               Capacity
     •   Oxford Economics
     •   US Department of Transportation
     •   US Energy Information Administration

14                                                                                                                                              15
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
regional travel trends                                                  regional travel trends
                                                              FUEL TRENDs upward                                 Higher Fuel Price in Regional Airports

     Oil price evolution                                                                                     Difference in fuel price between main
                                                                                                             airports and regional airports

                                                                     Forecast

                                                                                                        x2

                                                                                                                                       fuel price
     1998
             2001
                    2004
                           2007
                                  2010
                                         2013
                                                2016
                                                       2019
                                                              2022
                                                                     2025
                                                                            2028
                                                                                   2031
                                                                                          2034
                                                                                                 2037

                                                                                                                                       differences

     Data: US Energy Information Administration/ Haver Analytics

                                                                                                              No difference          Average              Over 100%
                                                                                                                                    difference             difference

                                                                                                              Blank: no data       +34%
            In a context of economical growth, oil price is expected                                          Fuel price is higher in regional airports than in main
            to double in the next 20 years, regardless of temporary                                           airports due to higher fuel transportation costs, which
            fluctuations.                                                                                     translates to a worldwide average extra cost of +34%.

            Fuel price will again be a key decision factor for airlines.                                      Turboprop technology limits airline exposure to this
                                                                                                              additional volatility.

18                                                                                                                                                                 19
regional travel trends                                                 regional travel trends
                  different PROPENSITies TO TRAVEL                                                key GROWTH CONTRIBUTORS

     Seats flown vs Wealth per capita                                   TURBOPROP MARKET MECHANISMS

                                                                         Total seats
     Regional seats /
     thousand inhabitant                                                 Upsizing to larger capacity aircraft
                                                                        	Growth of remaining network
                                                                         Route creation
                                         2000                  2037
                                                                                                                     +4.5%
1.00                                                                                                                TRAFFIC GROWTH
              10,000     20,000     30,000    40,000    50,000 60,000
                                                                                                            +3.0%
                                                       GDP per capita
                          2037

          2037
                                                                                                   +3.5%
0.10
              2000                                                                        -2.0%
           2000

0.01

           	Advanced
           Emerging       average
           	Developing
           Advanced
           Emerging       countries in 2017
           Developing
                                                                                2017                                    2037

     	As middle-class and consumer spending increase in                 	Creation of new routes will outpace upsizing to larger
      many regions, the propensity to travel will develop - with         aircraft, and will contribute 2/3 of total growth for the
      new emerging regional markets taking the lead.                     next twenty years.

       It has been observed recently that people in countries
       with a strong turboprop presence have a 40% higher
       propensity to travel regionally.

20                                                                                                                                   21
regional travel trends                                     regional travel trends
                      ROUTE CREATION intensifies                strong CONTRIBUTION FROM NEW ROUTES

     Number of regional routes created                       Seats flown on routes created since 2002

                               +33%                                 route creation
                                                                    period

                                                                    2012-2017
                                            	China
                                            	Asia Pacific           2007-2011
                                             excl China             2002-2006
                                            	Latin America
                                             & Caribbean
                                            	Africa
                                             & Middle East
                                             Europe & CIS
                                             North America

     2002-2006   2007-2011     2012-2017

                                                             2002               2007           2011                2017

                                                              The bulk of growth comes from the Asia-Pacific region.
                                                              Europe is once again creating routes while simultaneously
                                                              growth in China is gaining momentum.

                                    58%
                             of the current regional
                                                                                                 21%
                                                                                       of current regional seats
                             network has been created                                  come from routes created
                             in the last 15 years                                      in the last 15 years

22                                                                                                                   23
regional travel trends                                           regional travel trends
                                 New regional markets                                 TURBOPROP: the proven optimal
                                     are yet to emerge                                       choice for short haul

     Regional networks maturity stage                                Share of Turboprop vs Regional Jet

                                                                   100%
                                                                                                                    Rest of the world
                                                                                                                    World average
                                                                                                                    United States

                                                                   75%

                                                                   50%
                                                                                                   330 NM

                                                                   25%

                                   Maturity
                                   stages

                                                                    0%
                         Regional aviation activity
      Early stage                                        Mature               100    200     300     400      500     600      700
                             per inhabitants
                                                                                                                                    (NM)

      Blank: no data

     	Although some are very well populated, many countries
      still have poor regional connectivity, contrasting with             Turboprops are airlines’ preferred choice worldwide for
      mature European and North American markets.                         distances up to 330 NM.

     	Leveraging turboprop advantages (cost efficiency, access            There is a substantial fleet of legacy regional jets in
      to challenging airfields), these countries will contribute          the United States leading to the contrast between this
      to the bulk of market growth while developing the                   country and other regions.
      economies of secondary and tertiary cities.

24                                                                                                                                   25
regional travel trends
                                                                                                      regional travel trends
                     Turboprops: the way to reduce
                                                                                    TURBOPROPs ARE MORE SILENT
                        regional aviation emissions

     Potential emission savings by replacing                    EFFECTIVE PERCEIVED NOISE IN DECIBEL (EPNDB)
     regional jets with turboprops

                                                                      TP                    Similar size RJ
            tonnes

                                          11%
                                                                                                                 Chapter 3 limit
                                                                                                                 (1978)
                                   Up to              of
          876,000                  overall regional aviation                                                            -10dB
                                   emissions saved
                                                                                                                 Chapter 4 limit
                                                                       Current generation                        (2006)
                                                                       regional jets
                                                                                                                         -7dB
         1,095,000                                                                                               Chapter 14 limit
                                                                     9dB margin                                  (2020)

                                                                                                                 Future noise limit?

                                                                                               Future regional
                                                                                               jets (EIS 2021)
         1,168,000
                         CO2 annual savings by replacing
                         jets on routes up to…
                           400-500 NM                            Today’s environment noise regulations are getting more
                           300-400 NM                            and more stringent.
          949,000
                           200-300 NM                            With their remarkably low noise signature, turboprop
                           Up to 200 NM                          aircraft are the benchmark with a strong margin to 2020s’
                                                                 ICAO standards.

                                                                 Turboprops’ low noise footprint allows operations at
                                                                 airports located in city centres that impose strict sound
                                                                 levels, like London City or Stockholm Bromma.
     	Assuming all short haul flights operated by regional
      jets today are replaced by modern turboprops, 11% of
      overall regional aviation CO2 emissions could be saved.
                                                                                                                 Turboprops are
      These 4,100,000 tonnes of CO2 overall regional aviation                                                    already meeting
      emissions are equivalent to the annual absorption of                                                       future standards
      200,000,000 trees.

26                                                                                                                                  27
benefits of regional aviation
                              benefits of regional aviation                                               Executive Summary
                      CONNECTING LOCAL COMMUNITIES                                     AIR CONNECTIVITY SUPPORTS
                                         CAPACITY                                             LOCAL DEVELOPMENT

     Airports SERVED exclusively BY regional                      Economic Impact of Regional Aviation
     aircraft

          50%
      Airports relying
                                                                                  More                 More
                                                                          Social Development         Employment
        exclusively on
      regional aircraft

                                      3,800+
                                    commercial
                                     airports

          36%                                                     +5%                   +6%                   +8%Foreign
      Airports relying
       exclusively on                                              Tourists            Regional GDP         Direct Investment
          turboprops

     	Many communities rely on regional aircraft to connect
      to other countries and regions in the world. Through an
      adapted technology and capacity, turboprops efficiently
      answer this essential market need.                                           +10%
      Turboprops are the benchmark as they provide specifically
                                                                                      FLIGHTS
      adapted economics for the average worldwide route                             Generates
      length of 300 NM.

      Furthermore they ensure accessibility to all airfield        Either through tourism development or by establishing
      profiles and are the lifeline of many communities.           business, interlinking secondary and tertiary cities allows
                                                                   every community to be connected and benefit from
                                                                   world economic growth – a key component of sustainable
                                                                   development.

30                                                                                                                          31
benefits of regional aviation                                          benefits of regional  aviation
                                                                                                                        Executive Summary
                                    Turboprops complement                                                 VALUABLE TIME SAVING OF
                                                 CAPACITY
                                    ground transportation                                                       AIR CONNECTIVITY

     Different solutions for different schemes                                Average time benefit of air vs ground
                                                                              transport
     From surface ...                      ... to air transport

                  Manila                                 Manila
      1h30
                                              1h30
                 10h

              Kalibo
                                                     Kalibo

                                                         
                                                           
                       
                           11h30                               1h30

     from dense air traffic...             ... to high speed train
     with large capacity                   and regional aircraft

                            Paris                                     Paris

                                                                                            Average difference between flight-time
                                                                               1.5h       and ground transport time over all city-pairs   >10h
           Nantes                                 Nantes

                                                                               Blank: no data

       Turboprops provide a valuable travel solution which                    	Depending on ground infrastructure and/or geographical
       qualitatively complements any alternative mode of                       constraint, the time saved flying regionally is highly
       ground transportation.                                                  valuable to travellers.

       Not only turboprops provide travelers accustomed to                    	Moreover, regional air transport is a quick enabler of
       slower modes of ground transportation with the comfort                  economic development as it requires shorter lead-time
       and convenience of extra speed, but they also maintain                  to implement connectivity.
       essential air connectivity on previously dense routes
       where flows have reached levels that allow high speed
       trains to ‘dry out’ air traffic.

32                                                                                                                                           33
benefits of regional aviation
                                                                                                                      Executive Summary
                                                                                                          benefits of regional  aviation
                                  Lower competition on
                                            CAPACITY                                                     FIRST MOVER ADVANTAGE
                                       regional routes

     COMPETITION FORCES VS TRAFFIC VOLUME                            Yield difference in regional routes
                                                                     depending on number of operators

      Average
      number
      of carriers
                                                                                                +3%
                                                Trunk routes

                                                                                                               -38%
             Regional routes
                                                                                                                              -44%

                                                                          Route
                                                                         opening               1 operator*      2 operators   3+ operators
       20    140     260    380     500   620   740    860     980
                                                   Seats flown
                                                 daily each way      *
                                                                         after one year since route opening
            Emerging markets
            World average
            Europe
            North America

      Regional networks tend to be operated by fewer carriers            	Opening a route offers a dominant competitive position
      than routes with larger traffic volume.                             that eventually leads to a higher yield when the route is
                                                                          mature. However, the entry of new competitors has an
      This “blue ocean” provides a wealth of opportunities to             adverse effect on total revenues.
      get away from the cash-intensive competition on main
      routes                                                              Turboprops, as typical first movers, offer higher rewards
                                                                          for exploring new routes and developing regional
                                                                          networks.

34                                                                                                                                     35
benefits of regional aviation                                                    benefits of regional aviation
                                                                                                                                   Executive Summary
                                     AFTER ROUTE OPENING:                                                   Advantages of high frequencies
                               DIFFERENT GROWTHCAPACITY
                                                 PROFILES                                                                 with turboprops

     AVERAGE ROUTE GROWTH PROFILES                                                           Leveraging schedule flexibility

                     MAIN CLUSTERS BY GROWTH POTENTIAL
                     (% of total new routes)

                          High (8%)
                         	Medium (11%)

     Weekly
                          Intermediate (20%)                                                 Flexibility                                  
     flights             	Low to Intermediate (26%)
                         	Low (30%)                                                          Higher yield                                 
 56
                                                                                             Protect
                                                                                            the market                                   
 49
                                                                                                                 High frequency     Low frequency
 42
                                                                                                                  Small module       Large module
                                                                          Growth potential

 35

 28

 21

 14
                                                                                             	Operating high frequencies with turboprops offers a
                                                                                              competitive advantage to airlines:
     7
                                                                                               •   Adapt to peaks of demand with a flexible offer and
                                                                                                  strategic utilisation of slots
     0
            Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7                            •   More choices for business passengers, which allows
                                                                                                   20% higher yield than low frequencies
                                                                                               •   Protect the market by blocking the entry of new
                                                                                                   operators.
         There are various patterns of new route development,
         ranging from fast growing routes likely to welcome
         single-aisle capacity within a few years, to flows whose
         growth is capped due to more limited traffic potential.

36                                                                                                                                                 37
FORECAST by region                                                       Executive Summary
           FOCUS ON Africa & Middle East
                              CAPACITY

                              Turboprop 70

     Turboprop 50

                              260
      90

                    350
                 DELIVERIES

                                                                       +3.5%                +4%                  300
                                                                      GDP GROWTH        TRAFFIC GROWTH        NEW ROUTES
                                             TURBOPROPs in service

                                                                      The Africa & Middle-East region is the largest and most
                                                                      versatile region, but the poorest in terms of road and
                              460                                     railway infrastructure.

           300                                                       	Many ageing 30-50 seater aircraft are costly to operate
                                                                      and need to be replaced.

                                                                     	Modern turboprops are the easiest way to an immediate,
                                                                      safe and affordable regional connectivity, which answers
         2017                  2037                                   accessibility challenges and supports local economies.

40                                                                                                                          41
FORECAST by region                                                        Executive Summary
                    FOCUS ON North America
                                 CAPACITY

                             Turboprop 70

     Turboprop 50

                             240
     110

                    350
                DELIVERIES

                                                                     +1.7%                +2.2%                  330
                                                                    GDP GROWTH         TRAFFIC GROWTH          NEW ROUTES
                                            TURBOPROPs in service

                                                                    With many inefficient 50-seater jets left over from the 90s
                             555                                    and the subsequent average capacity growth, US regional
                                                                    aviation has failed to maintain many air links. Modern
          430                                                       turboprops can restore connectivity by replacing ageing
                                                                    30-50-seaters and providing an efficient alternative to a
                                                                    5-6 hour drive.

                                                                    In Canada, with their enhanced performance, modern
                                                                    turboprops will access more communities and extend
         2017                 2037                                  the essential air service required.

42                                                                                                                          43
FORECAST by region                                                      Executive Summary
     FOCUS ON Latin America & CAPACITY
                              Caribbean

                              Turboprop 70

      Turboprop 50
                              350
       70

                     420
                 DELIVERIES

                                                                      +2.4%               +13%                  410
                                                                     GDP GROWTH        TRAFFIC GROWTH        NEW ROUTES
                                             TURBOPROPs in service

                              525                                    Turboprops are a proven strategic component for airlines
                                                                     to offer access to an extensive network in Latin America
                                                                     at suitable economics. Growth will come from connecting
           230                                                       communities to economic recovery.

                                                                     Essential for the tourism and socio-economic
                                                                     development of the Caribbean, turboprops will remain
          2017                 2037                                  the island hopper benchmark for sustainable air links.

44                                                                                                                         45
FORECAST BY REGION                                                       EXECUTIVE SUMMARY
                     FOCUS ON ASIA PACIFIC
                               CAPACITY

                             TURBOPROP 70

                             600
     TURBOPROP 50

     140

                    740
                DELIVERIES

                                                                     +2.8%               +4.3%                  440
                                                                    GDP GROWTH         TRAFFIC GROWTH        NEW ROUTES

                         1015
                                            TURBOPROPS IN SERVICE

          590
                                                                    Route creation will accelerate and drive growth,
                                                                    especially in South East Asia, where air connections will
                                                                    offer a faster and more efficient choice to travelers.

                                                                    Many ageing and out of production turboprops are
                                                                    still operated in mature countries and will have to be
                                                                    replaced.
         2017                 2037
46                                                                                                                        47
FORECAST by region                                                      Executive Summary
                      FOCUS ON South asia
                               CAPACITY

                             Turboprop 70

     Turboprop 50
                             220
      40

                    260
                DELIVERIES

                                                                     +5.9%              +10.9%                 200
                                                                    GDP GROWTH        TRAFFIC GROWTH        NEW ROUTES
                                            TURBOPROPs in service

                             360                                    With some of the fastest growing markets, route creation
                                                                    is crucial to enhance connectivity and support economic
                                                                    growth in the region.
          120
                                                                    Turboprops are the perfect tool for this, allowing
                                                                    affordable and sustainable operations on thin markets
         2017                 2037                                  and from challenging airfields.

48                                                                                                                        49
FORECAST by region                                                          Executive Summary
                                FOCUSCAPACITY
                                      ON China

                             Turboprop 70

     Turboprop 50

                             230
      70

                    300
                DELIVERIES

                                                                      +4.6%               +47.1%                   690
                                                                     GDP GROWTH          TRAFFIC GROWTH         NEW ROUTES
                                            TURBOPROPs in service

                                                                     Regional market is at an early stage of development with
                             340                                     an inefficient use of large capacity aircraft generating the
                                                                     extensive need for public subsidies.

           40                                                       	Chinese government encourages the development of
                                                                     regional connectivity which will result in the creation of
         2017                 2037                                   new routes.

50                                                                                                                            51
FORECAST by region
     FOCUS ON Central Europe, Russia & CIS
                               CAPACITY

                               Turboprop 70

       Turboprop 50

                               190
         60

                      250
                  DELIVERIES

                                                                        +2.2%                 +10%                   240
                                                                       GDP GROWTH          TRAFFIC GROWTH         NEW ROUTES
                                              TURBOPROPs in service

                                                                      	Stronger growth in emerging economies creates
                               280                                     opportunities for increasing air traffic and better regional
                                                                       connectivity.
            100
                                                                      	Ageing current turboprop fleet will pave the way for a
                                                                       requirement for cost-efficient and high performance
           2017                 2037                                   replacement aircraft.

52                                                                                                                              53
FORECAST by region                                                      Executive Summary
                FOCUS ON WESTERN EUROPE

                             Turboprop 70

     Turboprop 50                300

      50

                    350
                    DELIVERIES

                                                                      +1.4%                +1.2%                  160
                                                                     GDP GROWTH         TRAFFIC GROWTH         NEW ROUTES

                                 525
                                            TURBOPROPs in service

                                                                     Turboprops have the unique capability to access even
          450                                                        the most challenging airfields, thus contributing to
                                                                     valuable point-to-point connectivity in a competitive
                                                                     market.

                                                                    	Modern turboprops are the most cost-efficient
                                                                     replacement for the existing fleet as well as for upsizing
         2017                    2037                                the current 30 seat fleet.

54                                                                                                                           55
FREIGHTERS
                                                                                                                                                               FREIGHTERS
                                                                                                                                                        Executive Summary
              Significant untapped opportunities
                                       CAPACITY                                                    E-commerce continues to grow
                             in emerging markets

     Worldwide turboprop freighter fleet                               Population with internet access
     distribution 2017

                                                                                                                                                                                    x2
                              37%
        41%

                                  9%              6%
                7%

                                                                    2007
                                                                           2009
                                                                                  2011
                                                                                         2013
                                                                                                2015
                                                                                                       2017
                                                                                                              2019
                                                                                                                     2021
                                                                                                                            2023
                                                                                                                                   2025
                                                                                                                                          2027
                                                                                                                                                 2029
                                                                                                                                                        2031
                                                                                                                                                               2033
                                                                                                                                                                      2035
                                                                                                                                                                             2037
                                                                                                                                      Emerging & Developing

                                         78%                                                                                         	Advanced

                                 of the current turboprop
                                 freighter fleet is flying in
                                 Europe and North-America

                                                                           	Developing and emerging countries will see their share
                                                                            of Internet users double over the next 20 years, while also
      There is still ample room for expansion in emerging                   enjoying the bulk of population growth.
      markets (e.g. China, India, Brazil, South-East Asia).
                                                                            E-commerce will continue to influence consumer habits,
      Turboprop freighters could efficiently contribute to                  shaping worldwide cargo and logistics networks.
      regional economic development in these markets, be it
      as feeders in larger integrator networks or as a faster and           Turboprop freighters have key role to play as a means of
      more reliable alternative to surface transportation.                  last mile delivery in a timely manner.

58                                                                                                                                                                                  59
FREIGHTERS                                            FREIGHTERS
                                                                                              Executive Summary
                                     upsizing capacity
                                            CAPACITY                            Turboprop freighter demand

     Influence of feedstock on fleet capacity                  In-service turboprop freighter fleet
                Opportunities
     Today's    for freighter                    Tomorrow’s
      fleet      conversion                         fleet
                                                                                                TP 8t
                                Down-gauge                                      420             TP 5t
     TP 3t                      to 2t capacity
                                                                                                TP 3t
                  No
                                                      0
                  feedstock

                                Up-gauge to
                                                                  122
                                5t capacity

     TP 5t
                  Limited
                  feedstock                                       87

                                Up-gauge to
                                8t capacity
                                                                  124

     TP 8t
                  Ample                                                          40
                  feedstock
                                                                  2017          2037
                                                                                                           460
                                                                                                         Freighter
                                                                                                         deliveries

      The air cargo market is highly price sensitive and       	Growing world trade together with the emergence of
      operators constantly seek the best economics. This        new markets will result in a 3.2% annual growth over the
      explains the clear market preference for turboprops,      next 20 years. This growth will translate into an increase in
      which represent 96% of the regional freighter fleet.      overall fleet size and upsizing of current aircraft gauge.

      The evolution of the turboprop freighter fleet will be    The 8-tonne segment will become the reference point
      determined by feedstock availability and market needs.    for the market while 3-5 tonne capacities will significantly
                                                                reduce due to a lack of feedstock.

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SAFE HARBOUR STATEMENT
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