International MKT Pri

International Market
Analysis:
Market Prioritization
Discussion Document
March 2013
CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited
To develop a prioritization of international market opportunities,

we leveraged a diverse set of experts, data sources, and statistics
1
2
Collect initial fleet size
data and projections on all
markets
3
Refine full list to countries that
matter and develop initial
clustering
Conduct deep dives to

finalize prioritization and
identify ~4 priority
Cessna markets
Sources used
Databases
Experts
Statistics
ACAS global fleet data

World Economic Forum
International Monetary
McK aviation experts

3 Asia experts
2 Latin America expert
1 Middle East expert
2 Europe expert
Global aviation experts
Bus Dev Leader, global OEM
Fund
Credit Suisse Wealth
Report
S&P credit ratings
OneSource corporation
data
Bombardier market
forecasts
JetNet market forecast
Embraer market forecast
IHS Global Insight
Teal database
(China, India, Brazil, EU)

Sales Lead, global OEM
(Africa, Australia, Middle East,
Brazil)
OEM market advisor (Brazil,
China, India, Russia)
Jet purchase advisor for corps
HNW (EU, Brazil, India,
Russia)
Fleet size
Historical fleet growth (%)
GDP growth
Corporate profits
HNWI projections
Airport infrastructure
Credit rating
Fleet penetration rates
Competitor market share
Jet class segmentation
Market environment index
McKinsey & Company
| 1
Our approach started with the 163 countries with general aviation and
focused on 9 market clusters of interest
Outputs
Last Modified 3/8/2013 1:28 PM Eastern Standard Time
Approach
163 total countries
2 Excluded countries with 2012 low fleet size

(< than 50)
27 countries selected, 137 markets
3 Aggregated neighboring countries selected in

step 2 to create market clusters (added
small neighboring countries with similar
economic characteristics to develop core market
clusters)
Created 19 clusters (anchored around
4 Evaluated each clusters economics and

general aviation environment to prioritize,
e.g.,
GDP, HNWI population, # of corporations
Current fleet size, expected growth
Competitive position
Aviation infrastructure, political / regulatory
support
Prioritized clusters of interest

High opportunity: Brazil, C. Europe
Growth options: China/HK, India,
SOURCE: ACAS; McKinsey analysis
excluded, (examples of excluded

countries: Guatemala [24 business
jets], Iran [19 business jets])
the 27 countries selected in the prior

step, and adding in select small
neighboring countries (e.g., Switzerland
added to C. Europe group)
Turkey, E. Europe, Russia/CIS,

Indonesia, Saudi/UAE
McKinsey & Company
| 2
Printed 3/8/2013 1:29 PM Eastern Standard Time
1 Start with all the countries listed in ACAS

database
19 international clusters represent >85% of near-term international

sales opportunity
Figures represent average
annual addressable market
opportunity1 in $, million
C. Europe
Brazil
593
Canada
Venez.,
Argent., Colom.
Mexico
317
189
Other Amer.
207
258
87%
UK
CR, Pol.,
& Slovak.
S. Europe
218
152
Russia/CIS
148
Turkey
109
N. Europe
86
Other E. Eur.
79
183
Africa is fragmented and has

limited prospects
Nigeria,
Kenya,
102
63%
& Tanz.
South Africa
94
Other Africa
115
95%
China
226
Australia
203
India
194
Indonesia
77%
120
Other Asia
227
In the Americas, growth is expected to

be dominated by Brazil
652
Asia expected to sustain growth

momentum in a few key countries
Middle East opportunity is

concentrated in a few countries
Saudi Arabia &
UAE
122
83%
Lebanon &
Jordan
55
Other ME
36
1 Proxy forecast. method: For business jets, allocated 3 regional growth forecasts to 2012 addressable base (business jets < 15 seats and light
turboprops) to determine growth through 2017. Then distributed expected regional growth across countries according to each countrys absolute fleet
growth as % of region total. For turboprops, took historical 5 year CAGR by country and projected forward as growth. Adjusted from expert interviews.
SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P
McKinsey & Company
Europes growth is driven primarily by

Central Europe
| 3
Cessna may benefit from new sales approaches targeted at select highvalue and high-growth markets with unique challenges
High value
High growth
Stable market
High risk
Environmental support
Categorization
Low value
Bubble Size represents fleet

value estimate in 20121
5 = Robust infrastructure,
very supportive
government (e.g., US)
4 = Good infrastructure
and govt support;
select inefficiencies
1 = Unstable political
conditions or market
environment
Australia
Canada
N. Europe
S. Europe
UK
Brazil
C. Europe
India
Turkey
S. Arabia & UAE
Russia & CIS
2
2 = Limited infrastructure
and / or high corruption, stable market
Mexico
Indonesia
3 = Supportive infrastructure and political

support, but concerns
South Africa
China & Hong Kong
Czech Rep., Poland, & Slovakia

Nigeria,
Kenya,
Tanzania
1
Jordan & Lebanon
Venez., Arg., Colom.
0
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
Expected market opportunity2

$ millions, per annum
1 Estimated market value of existing addressable fleet per country. Addressable fleet Includes bizjets <15 seats and light TPs. Light TPs weighted at 30% of the value of a jet (due to
$9.5M average jet cost compared to $3M average TP cost)
2 Proxy forecast. method: For business jets, allocated 3 regional growth forecasts to 2012 addressable base (business jets < 15 seats and light turboprops) to determine growth through
2017. Then distributed expected regional growth across countries according to each countrys absolute fleet growth as % of regional total. For turboprops, took historical 5 year CAGR by
country and projected forward as growth. Adjusted based on expert interviews.
SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P; expert interviews
McKinsey & Company
| 4
We propose prioritizing the high value and growth option

market clusters
High opportunity prioritized
C. Europe
5
4
3
2
1
0
Brazil
200
400
600
800
High growth markets prioritized
Stable markets de-prioritized
5 S. Arabia/UAE
Turkey
India
4
3
China
2
Russia
Indonesia
1
Czech Rep
0
0
200
400
600
5
4
3
2
1
0
Expected market opportunity
800
5
4
3
2
1
0
Canada
Australia
S. Europe
0
Mexico
UK
200
400
600
High risk markets de-prioritized
800
Jordan, Nigeria,
Lebanon Kenya, Tanz.
Venez., Argent.,
Colombia
0
200
400
600
800
Prioritization rationale:
Prioritization rationale:
Deprioritization rationale:
Deprioritization rationale:
Highest market opportunity

($600-650M / year)
Mid-sized opportunities ($150300M) with low growth (3-4%)
Typically small markets

(<$100M)
Immense fleet base (1200+)
Mid-sized market opportunities

($125-250M) with very high
annual growth (10-20%)
Small-medium fleet base
(typically 100-200)
Large existing fleet (400-1000)
New customers, opportunities

to become established player
in large future market
Cessna already has leading

position in all of these markets
for jets, often 35%+ share
Only large group is Latin

American, of which Venezuela
accounts for , and has worst
market environment (rated 180
of 185 countries to do business
in by World Bank)
Very low penetration relative to

US (e.g., China and India have
2-15% US corp penetration);
potentially great upside
Most markets (exception

Mexico) likely similar
segmentation to US
Variable growth rates (5-20%),

though high rates from very
low base
Political and infrastructure

development may create
opportunities for immense
growth if well positioned
Highly developed
infrastructure with supportive
governments
Serve as anchor to other
markets with lower value (e.g.,
N. Europe, Mexico)
SOURCE: Team analysis
All mature markets with

established competition
McKinsey & Company
| 5
Even within groups, markets significantly differ on fleet size, market

potential, Cessna position, and environment
Light / Mid-size bizjets
Addressable Cessna
fleet size
Share
(# jets, props) (jets %)
Highest
opportun.
Growth
option
C. Europe
1,368
44
Brazil
1,391
44
136
India
199
Czech, Pol., & Slovak.
107
Russia & CIS
107
Saudi Arabia & UAE
113
Indonesia
104
Turkey
91
Stable
Low value
Australia
488
916
11
20
15
39
32
266
43
930
32
19
34
Jordan & Lebanon
n/a
23
423
222
37
South Africa
Nigeria, Kenya, Tanz.
72
21
14
34
17
19
10
4
25
13
17
21
n/a
11
120
44
65
521
133
1.565
78
n/a
78
n/a
High
194
Medium
183
Medium
148
Medium
122
Medium
120
Medium
109
Medium
Low
317
218
Low
203
Low
189
Low
152
Medium
188
860
Low
226
260
17
270
Medium
593
92
38
534
25
525
652
11
Light TPs
Variation
Forecast
annual growth in growth
scenarios
($ mil)2
11
31
21
74
Forecast fleet
growth (%)
29
30
Penetration
per 1,000
Corps.
37
S. Europe
N. Europe
20
21
443
Venez., Arg., Colomb.

High risk
61
United Kingdom
Mexico
60
23
1,008
Environ.
Support
(1-5)
13
13
China & Hong Kong
Canada
Cessna
Share
(prop %)
94
Low
86
Medium
258
9
102
23
55
Medium
Medium
Medium
1 Proxy forecast. method: Allocated Bombardier, JetNet IQ, and Embraer regional growth CAGR to 2012 base to determine growth through 2017. Then distributed expected regional
growth across countries according to each countrys absolute fleet growth as % of regional total. Averaged across 3 forecasts. Assumed average cost of business jet at $9.5M and
average cost of turbo-prop at $3M.
2 Business jet projected fleet discounted to account for portion of jets that are large, defined as >15 seats.
McKinsey & Company
| 6
C. Europe, Brazil, China, and India present large opportunities for Cessna
Group
Country
High value
markets
Brazil
High
growth
markets
Central Europe has immense fleet (~1,300), with nearly 80% in Germany,
Austria, and France
Corporate and HWNI penetration only 10-20% of US, presenting growth

opportunities; likely not reach US levels (competitive infra., regulatory issues)
Growth from light and mid-sized business jet purchases, to access emerging
markets (e.g., Asia, Eastern Europe)
Brazil has highest penetration of HNWI and corporations due to cultural

norms, lack of competitive infrastructure, and supportive reg. environment,
which should support further penetration as customers increase (2x HNWI by 2017)
Business jet growth driven by companies pursuing regional expansion, and

HNW families living abroad
High turboprop growth driven by HNWI ranchers, who commute to urban

centers from remote ranches with private runways
Chinas relatively small fleet (140) has seen 30% growth in recent years, driven
by strong economics (9% GDP, doubling of HNWI and corp profits)
Chinas regulatory environment constrain growth (corporate penetration at

2% of US): airspace restrictions, flight planning delays, and infra. limitations
Explosive growth could occur in mid- to long-term with reforms to regulatory

environment and continued investment in infrastructure
Mid-sized fleet (200) has relatively high penetration (20% of US corp), due to
broad geography, lack of competing infrastructure, and govt support
Globalizing companies and geographically dispersed HNWI expected to drive
continued demand for business jets (12% p.a.)
While select bureaucracy may inhibit efficiency, continued government reforms
(FDI openness in Sept 2012) and investment should enable growth
India
SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, Expert interviews
McKinsey & Company
China
C. Europe
Initial insights on priority markets
| 7
These priority markets have significantly different demographics and

customer base from US, and may require a different sales approach
312
156
US
C. Europe
GDP Growth
% CAGR (2013-17)
1,344
1,241
China
India
197
Brazil
9%
3%
2%
China and India have

nearly 4x US population
Brazil, China, and India

have higher 1.5-3x
expected GDP growth than
US, from lower base
India, China, and Brazil

have only 2-10% of the
HNWI of the US; due to
lower income (India, China)
and inequal wealth
distribution (Brazil)
China has similar number

of corporations as US and
Europe (though many stateowned enterprises)
8%
4%
Brazil
China
India
227
1,056
158
Brazil
China
India
11,023
3,747
US
C. Europe
Large Corps.
# (000s), rev. > $100M
US
C. Europe
HNWI
# (000s), income > $1M
Country Population
# millions
35
14
US
C. Europe
SOURCE: World Bank, Credit Suisse, OneSource
3
Brazil
13
China
2
India
McKinsey & Company
| 8
In addition, fleet size and penetration is generally lower than the US, which
could drive market growth
18,487
US
1,068
1,391
136
199
C. Europe
Brazil
China
India
Fleet Penetration of HNWI

# per 1,000 HNWI
US leads world in fleet

size; Brazil is second with
only 7% of US fleet
C. Europe penetration of
HNWI and corps only 1020% of US
Brazil has highest fleet

penetration of HNWI in
world; corp. penetration in
line with US
India HNWI penetration is

~60% of US, though
corporate penetration is only
~20%; both HNWI and corps
expected to double in 5
years
Chinas penetration of
HNWI and corporations is
lower than any peers (only
2-5% of US)
6.1
1.7
US
0.3
C. Europe
0.1
Brazil
China
1.3
India
Fleet Penetration of Large Corps.

# per 1,000 Large Corps
533.6
523.4
73.8
US
C. Europe
SOURCE: World Bank, Credit Suisse, OneSource
Brazil
10.8
92.3
China
India
McKinsey & Company
Total Fleet Size (2012)

#
| 9
1 Central Europe offers growth from increasing customer base and

focus on emerging markets, limited by cultural and political issues
Central Europe has immense fleet base (~1,300), with nearly 80%
in Germany, Austria, and France
Corporate and HWNI penetration only 10-20% of US market,

presenting further growth opportunities
Growth from light and mid-sized business jet purchases, to

access emerging markets (e.g., Asia, Eastern Europe)
Additional growth in customer base: corporate profits (up 30%

by 2017) and HNWI (up 60% by 2017)
Likely will not reach US penetration levels due to cultural and

regulatory issues (e.g., 22% tax, high fees, airspace inefficiencies)
McKinsey & Company
| 10
1 Central Europe expected to see stable growth from large base,

Deep dive to follow
though select regulatory constraints remain
Positive indicator
Criteria
A
B
Demand
drivers
C
Infrastructure
Supportive
environment
D
Govt/
Regulatory
Addressable fleet size
Light/med bizjets
Light TP
Piston engine
Current and
forecast fleet
Market
opportunity
Value
Negative indicator
Neutral indicator
Country assessment
Large addressable fleet regional fleet nearly equivalent

to Brazil
Moderate growth on large base Jet and turbo-prop

growths are above GDP
Moderate GDP growth similar to developed world average
~750
~500
TBD
Forecast fleet growth
Light/med bizjets
Light TP
6% p.a.
GDP growth forecast
2% p.a.
Corporate profits 5 year

growth
30%
HNWIs 5 year growth
60%
High and growing number of HNWI
Airport infra. rating1
Regional airport infra.
4.5-5.5
Good
Robust airport infrastructure, but certain ATC

inefficiencies and very high airport fees
MRO/FBO availability
High
High availability, but expensive higher fees than in US

due to expensive land, labor, fuel, and high tax rates
Government stability
and credit score
Airspace regulation
Tax incentives and

fees
Financing availability
3% p.a.
Stable but increasing profits
AA- to Stable government

AAA
Select Supportive reg. within countries; inefficient handoff
inefficiencies between country ATCs (e.g., multi-hour wait times)
15-25% High taxes and fees; no accelerated depreciation; high
VAT
airspace-usage fees
TBD
Financing available
1 Based on 1-7 airport infrastructure score from World Economic Forum's Travel and Tourism Report. Factors include: overall quality of air infrastructure, airport density
in the country, number of departures, and number of operating airlines
McKinsey & Company
| 11
1A Central Europe demand remains high, while Euro-crisis solvency

has depressed demand in Northern and Southern Europe
Comparative view of European regions
Year 1 market opportunity
$, million
Overall market drivers

Pent-up demand since
financial crisis
Lower corporate adoption
so far than US and lower
penetration per capita
provide room for growth
Robust airport
infrastructure
Business jets drivers

Access to Eastern
Europe, Russia/CIS, and
select Asian countries will
drive growth for midsize models
Turbo-prop drivers
May be used to fly to
countries with poor
infrastructure
(e.g., Eastern Europe)
652
Recovering
economies
and significant
base create
opportunity
Germany
Austria
France
Weaker economy
and Euro solvency concerns limit
potential
opportunity
218
Belgium
152
86
Switzerland
Other
C. Europe
UK
S. Europe
N. Europe
Credit Rating
(S&P)
AA- to
AAA
AAA
CCC+ to
AAA
BBB- to
AAA
Corporations
(rev. > $100M)
~15k
~10k
~7k
~4k
Corp. Profits
($)
2.4T
~975bn
~1.7T
~500bn
SOURCE: S&P, OneSource, IHS Global Insight
McKinsey & Company
| 12
1D Select inefficiencies in the Western European aviation

environment may keep it from reaching US levels of penetration
Barrier
Overview of Barrier
Competitive
infrastructure
Most business hubs in EU are linked by direct commercial routes

High speed trains (e.g., TGV) link key cities in UK, France, and Germany
These alternatives reduce demand for small / mid-size jets
Cultural
norms
Much lower cultural acceptance than US

Jets are often portrayed as corporate misuse of funds
Government actively discouraging jets to relieve congestion of airports
Higher cost /
fees
Taxation /
depreciation
Inefficient ATC
between
countries
Netjets estimates a 1.5-2.5x cost multiple over US flying cost

Significant costs for airspace (fees >$100 / hour), airport fees, FBO
services, fuel, parking, labor (due to social taxes), etc.
VAT ranges from 15-25%, charged for flying within a country as well as
maintenance, fuel, etc.

Typically amortize assets over 20 years, versus 5 years in the US
Handoffs between fragmented ATC centers cause multi-hour delays

Limited access to major airports due to lower value proposition for airport
Fees for flying across different airspaces based on aircrafts seats,
weight, distance traveled, countries in question, etc.
SOURCE: Expert interviews conducted by McKinsey team
McKinsey & Company
| 13
1 Europe will likely continue along its recovery, but

Euro crisis could reduce growth by ~3% per annum
Scenario
Base Scenario:
Steady EU
Recovery
Description
EU member countries recover as expected
Alt Scenario:
EU Debt Crisis
Occurs
(1-2% GDP growth p.a. 2013-17)

Select interventions may be needed by stable
EU countries (Germany) to support smaller
ones (Spain, Portugal, Italy, Greece), but
overall market grows
Over the next five years, corporate profits
gradually increase (33%) as do HNWI (67%),
enabling continued demand
5% fleet CAGR 2013-17
EU debt crisis occurs, reducing
government stability, financing, consumer

confidence, and economic growth (-5-2%
GDP growth p.a. 2013-2017)
Sovereign debt levels remain high relative to
GDP and various EU countries are
downgraded, affecting financing
Jet and turboprop demand falls to a similar
growth rate as 2008-12 global financial crisis
(1-2%)
Likelihood1
Light TPs
Forecast annual
growth ($ mil)2
85-90%
575
57
611
59
650
61
691
63
734
65
519
553
589
628
669
2013 2014 2015 2016 2017

10-15%
219
37
224
38
229
39
234
40
239
182
186
190
194
199
41
2013 2014 2015 2016 2017
1 Based on varied analyst projections on Euro collapse scenario.

SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P, IH Global Insight, Credit Suisse
McKinsey & Company
| 14
2 Brazil offers a political and cultural environment supportive of

private aviation, and the market is enhanced by strong economic
growth
Brazil has second largest fleet in the world and highest

penetration of HNWI and corporations due to cultural norms, lack
of competitive infrastructure, and supportive environment
Customer base increasing immensely, with HWNI and corporate

profits expected to double by 2017
High turboprop growth driven by HNWI ranchers, who commute

to urban centers from remote ranches with private runways
Business jet growth driven by companies pursuing regional

expansion, and HNW families living abroad
Developed airport infrastructure will be maintained by continued

government investment (recent $7 billion in airport infra. project)
McKinsey & Company
| 15
2 Brazil is a large market opportunity for Cessna with relatively

Deep dive to follow
low environmental risks for doing business
Positive indicator
Criteria
A
Market
opportunity
Very large fleet Brazil has the second largest fleet of

business jets and turbo props in the world
High fleet growth - Across both business jets and turboprops
Strong GDP Growth - double the US / EU GDP growth
~100%
Very high 800,000 millionaires expected in 2017
3.91
Good
Developed regional airport infrastructure robust network

of regional airports; HNWI have private runways
~700
~700
TBD

5% p.a.
Light/med bizjets
Light TP
10% p.a.
GDP growth forecast
4% p.a.
HNWIs 5 year growth
C
Infrastructure

Good
Good MRO availability - large regional airports have MRO

services; select remote regions (e.g., Amazonias) do not
Government stability
and credit score
BBB
High political stability high government stability (BBB

rating)
Airspace regulation
Supportive
Efficient regulation open airspace, easy to register

aircraft
Tax incentives and

fees
TBD
Tax incentives / fees - TBD
TBD
B
Demand
drivers
Supportive
environment
Neutral indicator
Country assessment
Light/med bizjets
Light TP
Piston engine
Current and
forecast fleet
Value
Negative indicator
Govt/
Regulatory

~100%
growth
Very high corporate profits expected to double
Financing availability - TBD
1 Based on 1-7 airport infrastructure score from World Economic Forum's Travel and Tourism Report. Factors include: overall quality of air infrastructure,
airport density in the country, number of departures, and number of operating airlines
McKinsey & Company
| 16
2A As expected, the vast majority of aircraft are located in

Sao Paulo and key business centers
Number of aircraft registered by state (2011)
2011 fleet composition
000s
% fleet by aircraft type

Turboprops
Helicopters
13
Jets Others
7 5
0
75
Piston
2011 fleet composition
% fleet by aircraft primary use
Others
Agriculture
6
9
Instruction 11
Air Taxi
SOURCE: ABAG Second Report of Brazilian Aviation (2012), EBACE (2011), team analysis
12
62 Private
Business
Aviation
McKinsey & Company
| 17
2B Brazils business jet and turboprop markets have unique

demand drivers that may create three specific segments
Regional trade drive business jets
Brazilian turboprop growth from HNWI
Light to medium jets demand by companies
Turboprops are significant focus for
pursuing regional and intl expansion
wealthy agriculture or ranch owners
Jets use driven by regionally (e.g., Sao
Agriculture in Brazil is a $100 billion / year
Paulo, Rio) and international expanding

(e.g., Argentina, Miami) companies
Light jets used for travel between major
industry, and covers 400,000 sq mi, driving

immense wealth in the country
Increasing turboprop demand from large
developed hubs (e.g., Sao Paulo and Rio)
ranchers and farmholders in remote

areas of Brazil (e.g., Amazonias)
Mid-sized jets for LatAm, US expansion
Jets additionally used by HNWI commuting

to international homes
Bifurcated society of extremely wealthy
families commuting for safety reasons;
want discretion
Corporate profits
$ million
2
1
1.0
0.70.8 0.9 0.9
0
2013 14 2015 16 2017
SOURCE: Expert interviews, Credit Suisse Wealth Report (2012)
Ranchers often have makeshift runways to
fly from their land to major cities (to meet

with politicians, have social life)
Turboprops, unlike business jets, have
ability to handle rougher infrastructure
High Net Worth Individuals

thousands of millionaires
+17%
227
2012
497
2017F
McKinsey & Company
| 18
2C Brazils government continues to support aviation and promote

public and private infrastructure investments ($50-100B per year)
Brazils supportive aviation environment
Brazil continues to increase investment in its infrastructure
Developed infrastructure in cities and

relatively well developed support
mechanisms
December 2012: Dilma Roussef

announced $7 bn investment
to Brazilian regional airport
infrastructure and support
Some congestion in Sao Paulo, but
not a restriction on growth

Variation in degree of FBO / MRO
support at smaller regional airports;
key markets supported
Private
Relatively open airspace with
Immense investments planned over

next 5-10 years with increasing
private partnerships
191
Public
+13% p.a.
continued growth
219
163
137
Supportive government promoting

minimal restrictions on airspace
Very easy to get planes certified
through Brazils regulatory body
(Infraero)
+18% p.a.
111
92
104
36
42
62
83
88
34
32
43
49
55
66
2006 07
08
09
10 2011
56
24
32
69
26
2012F1 13F
14F
15F 2016F
1 BMI industry definition of infrastructure (graph on the right) is more comprehensive than ABDIB (graph on the left)
SOURCE: BMI, ABDIB; Team Analysis
McKinsey & Company
| 19
3 Chinas immense customer potential is artificially constrained

in short-term by government policies and infrastructure
Chinas relatively small fleet (140) has seen 30% growth in recent
years, driven by strong economics
Driven continued economic growth (GDP 9%+), market drivers of

HNWI and Corporate profits expected to double by 2017
Chinas political and regulatory environment constrains

penetration in corporations (2% of US) and HNWI (5% of US)
Airspace restrictions, flight planning delays, and infrastructure

inefficiencies may limit penetration in short-term
Explosive growth could occur in mid- to long-term with reforms

to regulatory environment and investment in infrastructure
McKinsey & Company
| 20
3 Chinas political environment and infrastructure are expected

Deep dive to follow
to continue to curtail growth of an otherwise
Positive indicator
robust economy
Criteria
A
Demand
drivers
C
Infrastructure
D
Supportive
environment
Small/medium fleet size China has only recently begun

developing its fleet, in part due to restrictive policies
Very high growth Chinas fleet should grow significantly from

low base
Highest long-term GDP growth in world
~100
~50
TBD

15% p.a.
GDP growth forecast
9% p.a.

growth
~75%
HNWIs 5 year growth
~100%
Very high 2M millionaires expected by 2017
4.24
Limited
Business jet infrastructure under developed regional

airports inadequate; governmental investment expected
Poor
Limited FBO/MRO limited support at regional airports, and lack

of aviation training among Chinese population
Government stability and

credit score
Airspace regulation
AA-
Restrictive
Stable, military driven government stable government with

strong fiscal position, but little transparency
Highly restrictive air regulation Immense airspace restriction,
excessive delays on flight planning (1-6 days; no flexibility)
Very high taxes and restrictive ownership military restricts
ownership and operation
Govt/
Regulatory
Light/med bizjets
Light TP
Market
opportunity
B
Neutral indicator
Country assessment
Light/med bizjets
Light TP
Piston engine
Current and
forecast fleet
Value
Negative indicator
Tax incentives
and fees
25% p.a.
22%
Very high and growing corporate profits
TBD
1 Based on 1-7 airport infrastructure score from World Economic Forum's Travel and Tourism Report. Factors include: overall quality of air infrastructure, airport density in the country,
number of departures, and number of operating airlines
McKinsey & Company
| 21
3C 3D Regulatory and infrastructure constraints detract from the

attractiveness of owning business jets in China
China
US
High tariffs (5% import tax + 17%
Negligible tax only
Restricted private ownership of
Unrestricted ownership
VAT on AC)
aircraft
Current
Flight plan approval requires 1-6 Approval requires 30 min

Regulatory
landscape
days on average (can be 1 month)

minimal flexibility to change
Airspace is highly regulated by
Deregulated airspace
Domestic flight require Chinese
No restrictions
military; aviation body

controlled by military
(CAAC1)
aviators (shortage of trained pilots

who fly internationally)
Business jet infrastructure under Wide network of both

Infrastructure
availability
developed; commercial more

robust
Lack of robust MRO services;
government investment to develop
commercial and GA
airports
regulatory regime
will likely prevent
explosive growth
Significant pent
up demand from
HNWI,
corporations, and
politicians
Some a/c based
and registered
outside China
(especially Hong
Kong, Singapore)
Full MRO services
1 General Administration of Civil Aviation of China, charged with regulating China's airspace, overseeing civil aviation operators,
and commercial airline flights
SOURCE: Interviews; BCA; Press; team analysis
McKinsey & Company
| 22
3D Foreign OEMs often required to leverage local JVs, while

sharing IP to establish strong position in market
Bombardier COMAC Deal
Audi A6
Deal between Bombardier and COMAC re: Cseries jet, signed in 2012 that enables
Bombardier to gain deeper access to China
Goal to achieve gains in product development
and cost efficiencies across C-Series and C919
Bombardier co-developed designs with

COMAC, sharing practices and technology
regarding their C-Series model to increase
commonalities
Overview
Benefits
Bombardier
share
Challenges
23
77
Audi sold ~400,000 Audi A6s in China in 2012 (a

record high), 1/4 of Audis global sales, and 1/3
of Chinese premium car market
One fifth of Audi A6 sales were to governments
Audi market
share
100
Bombardier President Hachey cited the sharing

of IP in this partnership as a major issue
Bombardier had to consider
Concerns remain that local companies may use
the IP to compete against Bombardier later
SOURCE: Interviews; Press releases
Joint venture between FAW Group and

Volkswagen, which began in 1988
Audi locally produced a Chinese version of the
A6, which enabled it to rapidly penetrate Chinas
premium car market
33
67
100
In early 2012, government announced preference

for domestic cars to clamp down on waste
Demand shifted to BYD, Guangzhou, and others
chosen by local government authorities
Domestic manufacturers may be using Audis IP,
discovered from its local production
McKinsey & Company
| 23
3D Loosening of Chinas strict regulation aviation

could increase demand by up to 20% per annum
Scenario
Base Scenario:
Current
aviation
regulations
Description
Light TPs
Forecast annual
growth ($ mil)2
Likelihood1
Current government regulation uncertainty
limits corporate jet purchases

Assumes tempered market growth, closely tied to
GDP
Market underpenetrated due to regulatory
restrictions
Similar to 2008-2012 overall fleet CAGR of 23%
90-95%
158 186 219 259

80
63
49
39
156 179
120 137
306
101
204
2013 2014 2015 2016 2017

Alt Scenario:
Loosening of
aviation
regulations
Government opens airspace above 20,000 feet,
loosens regulations, and makes allowance for

corporations to purchase airplanes
SOEs follow US corporations purchasing behavior
for jets (same number of jets per unit of revenue)
Market heavily penetrated with jets due to
government endorsement, open airspace, and
lower flight lead-times
40% fleet CAGR 2013-17 (double 2008-12)
5-10%
389
57
332
544
80
463
1,485
1,062 219
760 157
112
1,266
906
648
20133 2014 2015 2016 2017
1 Based on interviews with experts regarding Chinas regulatory landscape.

3 Illustrative trajectory assuming loosening of restrictions at 2012 fleet size.
SOURCE: ACAS; Bombardier; IMF country database; World Economic Forum, S&P, IH Global Insight, Credit Suisse
McKinsey & Company
| 24
4 Indias economic growth and strong environmental support

should further drive demand for private aviation
Indias mid-sized fleet (200) has relatively high penetration (60%

of US HNWI and 20% of US corp), due to broad geography, lack of
competing infrastructure
Geographically dispersed HNW families, and globalizing

companies driving demand for business jets (12% p.a.); both
expected to increase 40-60% over next 5 years
Environmental drivers include government support (open skies)

and developed regional airport infrastructure (built during WW2)
While select bureaucracy may inhibit efficiency, continued

government reforms and investment should enable further growth
McKinsey & Company
| 25
4 India has significant demand drivers expected to push growth,

Deep dive to follow
as well as supportive infrastructure and regulation
Positive indicator
Criteria
A
Light/med bizjets
Light TP
Piston engine
Current and
forecast fleet
Neutral indicator
Country assessment
Mid-size fleet strong growth (17%) over last five years
~100
~100
TBD
Very high jet growth Indias fleet should grow significantly from low
base, with strong (12% p.a.) jet growth; limited turboprop (~3%)
growth
Second highest long-term GDP growth in world

Very high and increasing corporate profits
~100%
Very high 240,000 millionaires expected by 2017
4.11
Well-developed infrastructure regional airports developed during

WW2; government is investing $5 billion during next few years on
modernizing
MRO/FBO availability variable - remote airports have little support
services, though India overall has many trained pilots and engineers
Light/med bizjets
Light TP
Market
opportunity
Value
Negative indicator
12% p.a.
3% p.a.
B
Demand
drivers
C
Infra-structure
Supportive
environment
Govt/
Regulatory
GDP growth forecast

growth
HNWIs 5 year growth
Government stability and

credit score
Airspace regulation
Tax incentives
and fees

8% p.a.
~60%
Good
Variable
BBB-
Supportive
26%
Highly stable democratic country Stable international relations

and economic growth; government subsidies increasing debt
Relatively de-regulated open sky Indian government poses little
restrictions, though
High taxes, but reasonable fees India taxes aircraft 26%, but
airport use fees are not excessive
TBD
1 Based on 1-7 airport infrastructure score from World Economic Forum's Travel and Tourism Report. Factors include: overall quality of air infrastructure, airport density in the country,
number of departures, and number of operating airlines
McKinsey & Company
| 26
4B India has five key factors driving demand for private aviation
Robust economic growth increasing individual and corporate wealth: GDP

growth ~8% on average throughout past decade (second to China, making it
10th largest economy); number of millionaires expected to double by 2016
Rail and road infrastructure fail to link Indias immense geography: India is
the 7th largest country in the world (1.2 million sqmi), but no high speed rail
systems linking cities, road infrastructure density is one of lowest in world
Well-developed regional airports and supportive government: During WWII,

the British colonials build thousands of smaller airports across India for military
purposes; government investing USD billions in modernization, and relative
open sky policy
Indian corporations shift to regional and international expansion: India

corporate profits expected to double in next 5 years; global corporations (looking
to expand across India and beyond; expected to drive demand for small- to midrange aircraft
Geographic dispersion of HNW families expected to drive private aircraft

use: Indian familiar are often geographically dispersed across the country and
abroad; HNW families increasingly Owner-Users with small/mid aircraft to
maintain family ties
McKinsey & Company
| 27
4C 4D India has an overall supportive regulatory and infrastructure

environment, with select constraints due to bureaucracy
India
26% tax on imported AC

Flight plan approval for intl flights
Regulatory
landscape
requires 1 business day

More flexible for flight plan changes than
China
Airspace generally deregulated;
government supportive of growth in private

aviation
Paved airport infrastructure allows

connectivity to main hubs only
Infrastructure
availability
Variable MRO services in India, though
significant pilots and trained engineers
GA face same delays as commercial

airlines; have to go through same
processes
Indian government continues to invest

heavily in airport infrastructure:
Delhi & Mumbai
airport modernization
(2006-13)
$1.5B
Chennai & Kolkata

Airport upgrades
(2006-13)
$1.2B
35 additional
airport modernizations
(2006-13)
Various airport
Investments in
single year (2008)
$1.6B
$5.0B
Also, in September 2012, Indian

government announced reforms
opening aviation to private investment
and privatization
McKinsey & Company
| 28
Appendix: Additional Detail on Prioritized Markets
McKinsey & Company
| 29
1 C. Europe Market View of Business Jet and Light Turboprop

Markets
Historical and forecast growth
Market characteristics
Business Jets
Business Jet Class (% of jets)

+7% p.a.
+6% p.a.
1,142
831
633
354
Netherlands
Austria
Liechtenstein
France
Gibraltar
Switzerland
Monaco
Belgium
San Marino
259
273
117
70
33
0
481
Germany
102
35
2
3
173
127
80
53
32
5
3
1
3
2007
2012
Avg age: 12
Light Turboprops
+3% p.a.
+3% p.a.
632
467
24
133
215
50
19
0
24
0
2
2007
537
186
209
28
19
1
0
64
27
3
0
2012
260
Germany
Austria
France
Liechtenstein
Switzerland
Gibraltar
Belgium
Monaco
Netherlands
203
33
19
0
82
30
5
0
2017F
SOURCE: ACAS; Bombardier; Embraer; JetNet
26
Light/Medium
74
Business Jet Competitors (% of jets)
168
96
82 32 3
9
8
5
2017F
Heavy
Avg age: 15
San Marino
Cessna
Dassault Aviation
Bombardier
Learjet
Gulfstream Aerospace
Embraer
Raytheon Aircraft
Other
19
13
8
5
3
2
6
44 Top Model:
Citationjet
Light Turboprop Competitors (% of turbo-props)

Beech Aircraft Corporation
Cessna
Socata
Embraer
Pilatus
Piper
Hawker Beechcraft
Other
31
13
13
12
8
8
5
11
Top Model:
King Air B200
McKinsey & Company
| 30
1 C. Europe Market View of Macroeconomic Growth and Drivers

Country Macroeconomic Environment
Germany
France
Switzerland
Belgium
Netherlands
Austria
Liechtenstein
Gibraltar
Monaco
San Marino
2.5
2.0
1.5
1.0
0.5
0
2013
2014
2015
Infrastructure Index Score1

World Economic Forum Index (1-7)
Credit Rating
S&P rating by country
Market GDP Growth Forecasts

% growth over prior year
2016
AAA
AA+
AAA
AA
AAA
AA+
AAA
N/A
N/A
N/A
Germany
France
Switzerland
Belgium
Netherlands
Austria
Liechtenstein
Gibraltar
Monaco
San Marino
Training centers
# of training centers, 2012
2017

HNW individuals
#, thousands
5,979
3,747
14,478
2017
12
France
6
Switzerland
5,000
Belgium
4,000
Netherlands
3,000
Austria
2,000
Liechtenstein
Gibraltar
1,000
2012
15
Germany
Corporations
Corporate Profit Forecasts
#, revenues > $100M $ billions
+10% p.a.
5.48
5.5
5.08
4.3
4.99
4.37
N/A
N/A
N/A
N/A
0
2013
4
0
N/A
Monaco
2014
2015
2016
2017
San Marino
1 WEF Ranking Factors include: overall quality of air infrastructure, airport density in the country, number of departures, and number of operating airlines
SOURCE: IMF country database; World Economic Forum, S&P; Credit Suisse;
McKinsey & Company
| 31
C. Europe Business jet market share by manufacturer and model

Covered: 53%
Top-selling models
Competitive Variance
Cessna - Citationjet
Cessna - CJ2
35%
44%
Cessna Top model: Citationjet
21%
Bombardier Top model: CL604
9%
2%
19%
5%
26%
3%
8%
US
3.1%
3.0%
2.8%
2.7%
Dassault - Falcon 50
2.7%
Dassault Top model: Falcon 50
Dassault - Falcon 900EX

Bombardier - Learjet 60
Cessna - Citation Mustang
2.6%
2.4%
2.4%
Gulfstream Top model: G550
Cessna - CJ2+
2.4%
Embraer Top model: Phenom 100
Cessna - Citation Excel

2.3%
2.3%
Cessna - Citation II
2.2%
Cessna - Citation Bravo
2.2%
Bombardier - Challenger 300
2.1%
Other
C. Europe
Business jet segment (% of market)
Heavy1
Cessna - CJ1
Cessna - CJ3
Bombardier - CL604
Cessna - Citation XLS
19%
9%
5.5%
3.5%
30
Light/Medium
70
Cessna - Citation Sovere

Dassault - Falcon 7X
1.8%
1.8%
Bombardier - Learjet 35A
1.8%

Gulfstream - G550
1.8%
1.6%
1 Defined as >15 seats

SOURCE: ACAS
McKinsey & Company
| 32
C. Europe Business jet market share by manufacturer and model

Top-selling models
36%
Beech Top model: King Air B200
13%
Socata Top model: TBM700A
13%
Cessna Top model: CE208B
12%
Pilatus Top model: PC-12XII/45
50%
7%
16%
10%
6%
0%
8%
Embraer Top model: EMB-121AA
8%
Piper Top model: PA-46-500TP Mer
11%
11%
US
C. Europe
SOURCE: ACAS
Other
Covered: 82%
Beech - King Air B200

Cessna - CE208B
Pilatus - PC-12XII/45
Beech - King Air 200
Piper - PA-46-500TP Mer
Beech - King Air C90B
Beech - King Air C90
Socata - TBM700A
Pilatus - PC-12 47E/NG
Reims - F406
Socata - TBM850
Beech - King Air C90A
Socata - TBM700B
Piaggio - P.180 Avanti 2
Cessna - Conquest I
Gulfstream - TurboCommander
Embraer - EMB-121AA
Cessna - CE208
Beech - King Air F90
Beech - King Air E90
Piaggio - P.180
9.6%
7.0%
5.9%
5.5%
5.1%
4.5%
4.5%
4.0%
3.9%
3.5%
3.4%
2.8%
2.8%
2.3%
2.3%
2.2%
2.1%
2.1%
2.1%
1.7%
1.7%
1.7%
1.6%
McKinsey & Company
| 33
1 C. Europe Business Jets by Geography

2
3-5
6-25
>25
Germany
Stuttgart
Belgium
Luxembourg
Paris
Vienna
Zurich
Austria
France
Switzerland
Geneva
SOURCE: AMSTAT
Liechtenstein
Salzburg
McKinsey & Company
| 34
1 C. Europe Turbo-props by Geography

2
3-5
6-25
>25
Germany
Belgium
Luxembourg
Villacoublay
Austria
France
SOURCE: AMSTAT
Switzerland
Liechtenstein
McKinsey & Company
| 35
2 Brazil Market View of Business Jet and Light Turboprop Markets

Business Jets

Heavy
7
+5% p.a.
+18% p.a.
861
Avg age:
12
93
680
299
2007
2012
Cessna
Learjet
Embraer
Dassault Aviation
Raytheon Aircraft
Bombardier
Other
2017F
Light Turboprops
+10% p.a.
+10% p.a.
Avg age:
18
449
2012
2017F
17
15
44 Top Model:
Phenom 100
6
5
3
2
8
1,126
711
2007
Light/Medium

Cessna
Hawker Beechcraft
Embraer
Mitsubishi Heavy Industries
Pilatus
Rockwell
Other
20
14
44 Top Model:
CE208B
7
3
3
2
5
McKinsey & Company
| 36
2 Brazil Market View of Macroeconomic Growth and Drivers


Credit Rating
Brazil:

BBB
Brazil
3.91
4
3
2
1
0
2013
2014
2015
2016
2017
Training centers

HNW individuals
#, thousands
Corporations
#, revenues >
$100M

$ billions
Brazil
1,500
+17% p.a.
497
227
2,607
1,000
500
0
2012
2017
2012
2014 2016
2018
McKinsey & Company
| 37
2 Brazil Business jet market share by manufacturer and model
35%
44%
Cessna Top model: Citation

Mustang
17%
Bombardier Top model: Learjet 35A
9%
15%
Embraer Top model: Phenom 100

Beech Top model: Beechjet 400A
29%
6%
5%
19%
6%
2%

Other
13%
US
Covered: 64%
Top-selling models
Brazil

Heavy1
7
93
Light/Medium
Embraer - Phenom 100

Cessna - Citation Mustang
Cessna - Citationjet
Cessna - Citation I
Beech - Beechjet 400A
Cessna - CJ2
Cessna - CJ3
Cessna - CJ1
Cessna - Citation X
BAe - 125-800B
Beech - Hawker 400XP
Raytheon - 125-800XP
Cessna - Citation VII
Cessna - Citation Bravo
Cessna - CJ2+
8.6%
4.6%
3.9%
3.6%
3.3%
3.2%
3.1%
2.8%
2.7%
2.6%
2.5%
2.4%
2.4%
2.4%
2.3%
2.2%
2.1%
2.0%
2.0%
1.8%
1.7%
1.7%

SOURCE: ACAS
McKinsey & Company
| 38
2 Brazil Turbo-prop market share by manufacturer and model

Covered: 81%
Top-selling models
Cessna - CE208B
18.5%
50%
59%
Beech Top model: King Air C90B
16%
3%
0%
31%
20%
7%
3%
11%
US
SOURCE: ACAS
Brazil
Embraer Top model: EMB-121A

Mitsubishi Top model:
MU-2 Marquise
Other
8.6%
6.5%
6.0%
Cessna - CE208
5.0%
Beech - King Air F90
4.8%
4.7%
Embraer - EMB-121A
4.3%
Beech - King Air C90GTi
4.2%
Beech - King Air C90GT
3.8%
3.2%
Gulfstream - TurboCommander
3.1%
Embraer - EMB-121A1
2.9%
Beech - King Air B200GT
2.2%
1.9%
Mitsubishi - MU-2 Marquise
1.7%
McKinsey & Company
| 39
2 Brazil Business jets by geography

2
3-5
6-25
Amap
Roraima
>25
Maranho
Amazonas
Cear
Par
Rio Grande do Norte

Paraba
Piau
Acre
Pernambuco
Alagoas
Rondnia
Sergipe
Tocantins
Mato Grosso
Bahia
Gois
Brasilia
Distrito Federal
Minas
Gerais
Esprito Santo
Mato Grosso do Sul
Belo Horizonte
So
Paulo
Rio de Janeiro
Rio de Janeiro
Sao Paulo
Osasco
Paran
Santa Catarina
Rio Grande
do Sul
SOURCE: AMSTAT
McKinsey & Company
| 40
2 Brazil Turbo-props by geography

2
3-5
6-25
Amap
Roraima
>25
Maranho
Amazonas
Cear
Par
Rio Grande do Norte

Paraba
Piau
Acre
Pernambuco
Alagoas
Rondnia
Sergipe
Tocantins
Mato Grosso
Bahia
Gois
Goiania
Brasilia
Distrito Federal
Minas
Gerais
Esprito Santo
Mato Grosso do Sul
Belo Horizonte
So
Paulo
Rio de Janeiro
Paran
Sao Paulo
Osasco
Santa Catarina
Rio Grande
do Sul
SOURCE: AMSTAT
McKinsey & Company
| 41
3 China & Hong Kong Market View of Business Jet and Light
Turboprop Markets
Business Jets

Light/Medium
China
China, Hong Kong
+14% p.a.
+31% p.a.
171
88
137
23
2 20
71
16
34
2007
2012
2017F
Heavy
China
+28% p.a.
66

Avg age: 6
Light Turboprops
China, Hong Kong
+27% p.a.
34
Gulfstream Aerospace
Bombardier
Cessna
Israel Aircraft Industries
Dassault Aviation
Hawker Beechcraft
Learjet
Other
35 Top Model:
23
G550
13
8
8
4
4
3
158
14
2007
14
0
48
2012
47
1
158
0
2017F
Avg age: 6
Cessna
Hawker Beechcraft
Piaggio
Other
17
17
6
0
60 Top Model:
CE208B
McKinsey & Company
| 42
3 China & Hong Kong Market View of Macroeconomic Growth

and Drivers

Credit Rating
10
China
China, Hong Kong

AAAAA
China
4.24
China, Hong Kong 5.1
6
4
2
0
2013
2014
2015
2016
2017
Training centers

HNW individuals
#, thousands
Corporations
#, revenues > $100M
8,000
+15% p.a.
12,572
2,081
1,056
2012

$ billions
China
China, Hong Kong 0
6,000
4,000
2,000
2017
0
2013 2014 2015 2016 2017
McKinsey & Company
| 43
3 China Business jet market share by manufacturer and model

83%
Covered:
Top-selling models
Gulfstream - G550
9%
16.2%
Israel Aircraft - G200

35%
19%
Gulfstream Top model: G550
11.1%
Gulfstream - G450
9.5%
Bombardier - CL605
35%
23%
13%
9%
5%
23%
Cessna
Top model: CJ1
8%
Dassault Top model: Falcon 7X
8%
Israel Aircraft Top model: G200
13%
US
Other
China
38 Light/Medium
Heavy1
62
6.7%
Raytheon Aircraft - 125-800XP
3.8%
Bombardier - Global 5000
3.8%
Cessna - CJ1
3.8%
Gulfstream - Gulfstream IV
3.2%
Dassault - Falcon 7X
3.2%
2.9%
Bombardier - Global XRS
2.5%
Gulfstream - Gulfstream V
2.5%
Bombardier - CL604
2.5%
2.5%
Beech - Hawker 4000
1.9%
1.9%
1.6%
1.6%
Bombardier - Global Express
1.6%

SOURCE: ACAS
McKinsey & Company
| 44
3 China Turbo-prop market share by manufacturer and model

Covered: 100%
Top-selling models
16%
Cessna - CE208B
48.1%
Cessna - CE208
60%
50%
2%
33%
Beech
32%
Top model: King Air

C90GTx
23.5%
Beech - King Air C90GTx
8.6%
4.9%
3.7%
3.7%
2.5%
Beech - King Air 350ER
2.5%
Piaggio - P.180
1.2%
Beech - King Air 350i
1.2%
Piaggio Top model: P.180 Avanti 2

6%
0%
US
SOURCE: ACAS
Other
China
McKinsey & Company
| 45
3 China Business jets by geography

2
3-5
6-25
>25
Heilongjiang
Jilin
Xinjiang
Inner
Mongolia
Liaoning
Beijing
Beijing
Tianjin
Hebei
Ningxia
Qinghai
Shanxi
Shandong
Gansu
Henan
Shaanxi
Anhui Jiangsu
Tibet
Hubei
Sichuan
Shanghai
Chongqing
Hunan
Jiangxi
Zhejiang
Guizhou
Fujian
Guangdong
Yunnan
Guangxi
Hainan
SOURCE: AMSTAT
McKinsey & Company
| 46
3 China Turbo-props by geography

2
3-5
6-25
>25
Heilongjiang
Jilin
Xinjiang
Inner
Mongolia
Liaoning
Beijing
Tianjin
Hebei
Ningxia
Qinghai
Shanxi
Shandong
Gansu
Henan
Shaanxi
Anhui Jiangsu
Tibet
Shanghai
Hubei
Sichuan
Shanghai
Chongqing
Hunan
Jiangxi
Zhejiang
Guizhou
Fujian
Guangdong
Yunnan
Guangxi
Hainan
SOURCE: AMSTAT
McKinsey & Company
| 47
4 India Market View of Business Jet and Light Turboprop Markets

Business Jets

Heavy
+12% p.a.
25
185
+17% p.a.
Light/Medium
Avg age:
10
75
105
49
2007
2012
Cessna
Hawker Beechcraft
Bombardier
Dassault Aviation
Raytheon Aircraft
Learjet
Israel Aircraft Industries
Other
2017F
Light Turboprops
80
2007
110
94
2012
Top Model:
Falcon 2000
+3% p.a.
+3% p.a.
23
16
14
14
8
6
5
14
2017F
Avg age:
12

Pilatus
Cessna
Hawker Beechcraft
Piaggio
NAL
Reims
Other
12
11
9
5
1
0
0
63Top Model:
King Air B200
McKinsey & Company
| 48
4 India Market View of Macroeconomic Growth and Drivers


Credit Rating
10
India:
BBB-

India:
4.11
8
6
4
2
0
2013
2014
2015
2016
2017
Training centers

HNW individuals
#, thousands
Corporations
#, revenues > $100M
India
2,000
+9% p.a.
242

$ billions
2,157
1,500
1,000
158
500
2012
2017
0
2013 2014 2015 2016 2017
McKinsey & Company
| 49
4 India Business jet market share by manufacturer and model
23%
Cessna Top model: CJ2
21%
16%
Beech Top model: Hawker 850XP
14%
8%
Raytheon Top model: 125-800XP
35%
19%
6%
9%
4%
27%
19%
US
Other
India

Heavy1
Covered: 70%
Top-selling models
25
Light/Medium
75

Raytheon - 125-800XP
Cessna - CJ2
Bombardier - CL604
Raytheon - Premier IA
Israel Aircraft - G200
Cessna - CJ2+
Gulfstream - Gulfstream IV-S
Beech - Beechjet 400
BAe - 125-700B
Bombardier - Global XRS
Dassault - Falcon 2000LX
Gulfstream - Gulfstream III
7.5%
6.6%
4.2%
4.2%
4.2%
3.3%
3.3%
3.3%
2.8%
2.8%
2.8%
2.8%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
1.9%
1.9%
1.9%
1.9%

SOURCE: ACAS
McKinsey & Company
| 50
4 India Turbo-prop market share by manufacturer and model

Covered: 100%
Top-selling models
34.8%
50%
71%
Beech Top model: King Air B200
11%
6%
US
SOURCE: ACAS
India
8.1%
6.8%
Cessna - CE208B
6.2%
6.2%
5.0%
3.1%
Beech - King Air 200C
2.5%
1.9%
Beech - King Air B200GT
1.9%
NAL - Saras
1.9%
Beech - King Air C90GTx
1.2%
Pilatus - PC-12 47E/NG
0.6%
0.6%
Other
Beech - King Air 300LW
0.6%
0.6%
Reims - F406
0.6%
Cessna - CE208
0.6%
Beech - King Air C90GT
0.6%
16%
24%

10%
12%
16.1%
Pilatus Top model: PC-12XII/45
McKinsey & Company
| 51
4 India Business jets by geography

2
3-5
6-25
Jammu and
Kashmir
>25
Himachal
Pradesh
Uttarakhand
Punjab
Arunachal Pradesh
Chandigarh
Haryana
New Delhi
Rajasthan
Delhi
Sikkim
Assam
Uttar Pradesh
Nagaland
Bihar
Manipur
Meghalaya
Jharkhand
Gujarat
West
Bengal
Tripura
Mizoram
Madhya Pradesh
Orissa
Chhattisgarh
Mumbai
Maharashtra
Andhra
Pradesh
Goa
Karnataka
Kerala
Lakshadweep
SOURCE: AMSTAT
Puducherry
Tamil
Nadu
Andaman & Nicobar Islands
McKinsey & Company
| 52
4 India Turbo-props by geography

2
3-5
6-25
Jammu and
Kashmir
>25
Himachal
Pradesh
Uttarakhand
Punjab
Arunachal Pradesh
Chandigarh
Haryana
New Delhi
Rajasthan
Delhi
Sikkim
Assam
Uttar Pradesh
Nagaland
Bihar
Manipur
Meghalaya
Jharkhand
Gujarat
West
Bengal
Tripura
Mizoram
Madhya Pradesh
Orissa
Chhattisgarh
Maharashtra
Andhra
Pradesh
Goa
Karnataka
Kerala
Lakshadweep
SOURCE: AMSTAT
Puducherry
Tamil
Nadu
Andaman & Nicobar Islands
McKinsey & Company
| 53
Appendix: Additional industry context and select data on pistons
McKinsey & Company
| 54
Questions to be answered by worldwide segmentation

1 What are the priority international markets for Cessna to target?
Which countries should Cessna target?

What drivers and constraints (e.g., demographic, economic,
regulatory) can unlock or limit the market opportunity?
2 What are important customer needs within priority markets?

Are foreign customers buying criteria and decision processes
significantly different than those in the US ?
How can we segment customers (and size segments) to focus efforts?
What is the market size and breakdown of key segments?
3 Which marketing and sales initiatives should Cessna focus on in

global markets?
Which initiatives will generate near-term sales opportunities?
How should Cessna prioritize and implement these new initiatives?
What local partners, relationships should Cessna consider in focusing

on underserved high value markets?
McKinsey & Company
| 55
Strong growth in international markets will make them

increasingly important to Cessnas future
NAM
Rest of world
Global installed base of business jets by geography

CAGR
(2012-17)
3%
3%
4%
Forecast
4%
11%
4%
9%
15%
2003
68%
2008
15%
66%
2012
SOURCE: JP Morgan; ACAS aircraft database, Bombadier, JetNetIQ, Embraer
10%
16%
Europe
7%
62%
NAM
3%
4%
6%
11%
2017F
4%
79%
4%
4%
11%
7%
ME & Africa
APAC
LATAM
Business jet market

continues to shift away
from NAM. Similar trend
occurring in turboprops.
McKinsey & Company
| 56
In fact, Asia and Latin American regions constituted nearly 50%

of the growth from 2008-12, driven by a few markets
Key countries driving high growth markets
Country
100% = 2,317 jets2
Europe
262
(11%)
Bus. Jet Fleet Growth

# jets (2008-12)
Brazil
Middle East
& Africa
344
Mexico
138
Venezuela
154
(7%)
339
Asia
(15%)
Argentina
British Virgin Is.
North
America
85
Colombia
Other S. Amer.
64
32
15
63
China
741
(32%)
Latin America
Asia
1 From Sept 2008 to Sept 2012
159
India
48
Australia
43
Indonesia
14
Thailand
14
All other Asia
801
(35%)
Latin
America
Business jet fleet growth by region (2008-12)1
New growth
markets
48
2 Pie excludes 20 jets with unknown regional origin
SOURCE: McKinsey analysis, JP Morgan; ACAS
McKinsey & Company
| 57
Some growth option clusters in particular have very low penetration and
potential for dramatic economic growth, signaling upside for Cessna
1,181
United States
South Africa
Fleet per 1,000 HNWI

# planes
Fleet per 1,000 corporations

Corporations revenues >100M USD
1.7
523
521
1,083
Venez., Arg., Colomb.
789
Mexico
788
20.2
1,565
6.5
860
648
Nigeria, Kenya, Tanzania

Brazil
574
Canada
570
6.1
534
260
Fleet as a function of GDP

# of planes per $1 Trillion of GDP
439
Jordan & Lebanon
188
317
Australia
2.3
284
Czech R., Pol., & Slovak.

C. Europe
174
0.3
United Kingdom
168
0.3
124
Indonesia
116
1.0
Turkey
116
1.1
Saudi Arabia & UAE
111
1.3
India
102
1.3
30
China & Hong Kong
16
74
44
65
S. Europe
Russia & CIS
133
345
N. Europe
0.6
0.1
120
270
92
11
11
McKinsey & Company
| 58
Macroeconomic indicators are helpful to drive projections, but alone are

not sufficient to understand fleet growth
Country GDP
$ billions, 2012
Historical GDP Growth

Percent CAGR (2008-12)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
10
China
China
8
India
Japan
Saudi Arabia
Brazil
4
Russia France Germany
Brazil
UK
Canada
Mexico
Austria
200
400
600
800
Fleet Size
# business jets, 2012
Nigeria
Turkey
2
0
Hong Kong
Luxembourg
-2
0
10 15 20 25 30 35
Historical Fleet Growth
Percent CAGR (2008-12)
Country level
insights should
additionally
include :
Small airport
infrastructure
Supportive
government
policies
Political
stability
Corporate
profits
HNW
individuals
McKinsey & Company
| 59
North American share of global piston engine deliveries is decreasing,

with Europe, Asia, and LATAM taking increasing share
NAM
Rest of world
Piston engine deliveries by region

(% of total deliveries)
16
15
67
2007
SOURCE: GAMA (2011), McKinsey analysis
68
2008
7
10
6
9
5
10
4
10
14
16
16
19
12
53
58
2010
2011
21
59
2009
20
50
2012
McKinsey & Company
| 60
General aviation aircraft are used for a wide array of applications
Business
transportation
Corporate/
executive
transportation
Personal/
recreational
use
Flying for personal reasons

Excludes business
transportation
On-demand passenger and

all cargo operations (excl.
air tours, medical, scheduled
service)
Aerial
observation
Individual or group business

transportation with a paid
flight crew
Includes fractional
ownership
Air taxi
Aerial
application
in
agriculture
Individual or group use for

business transportation
without a paid flight crew
Refers mainly to agriculture

and forestry, e.g., crop and
timber production, fertilizer
and pesticide application
Aerial mapping/ photography, patrol, SAR,
hunting, traffic, ranching,
surveillance, oil and mineral
exploration, etc.
SOURCE: GAMA (2011); FAA GAATA survey; company Web sites; McKinsey
Public health sprayings,

cloud seeding, firefighting
including forest fires, etc.
Helicopters with external

load (e.g., hauling logs)
Other work includes
construction, parachuting,
aerial advertising
Other aerial
applications
External
load and
other work
applications
Air ambulance services,

rescue, human organ
transportation, emergency
medical services
Commercial sightseeing
Flying under the supervision

of a flight instructor, including
student pilot solo flights
Variety of missions, e.g.,

police observation, military
pilot training, personnel
transport
Air medical
services
Sightseeing
and air tours
Instructional
Military/
government
users
McKinsey & Company
| 61
Within US, most GA piston aircraft usage is driven by personal, corporate,

and instructive uses, whereas turboprops are used more broadly
Usage type
US FAA categories1
Personal
Business
Corporate
Instructive
Agri applications
Aerial observation
Aerial other2
External load
Other work3
Sightseeing
Aero medical
Other
Air taxi
Air tours
On-demand air medical
GA turboprop aircraft
% of active aircraft
19
18
21
1
73
11
1
8
14
6
1
0
2
0
0
2
13
0
2
GA piston aircraft
% of active aircraft
Total fleet: 9,369

aircraft in use
1
2
0
0
0
0
0
1
1
0
0
Total fleet:
155,418 aircraft
McKinsey & Company
| 62
Cessna is one of four players that dominate the piston engine market,
comprising 75% of global deliveries since 1998
Global PE aircraft deliveries, 1998 - 2011
Number of aircraft
9,273
Cessna
5,071
Cirrus
3,055
Piper
2,651
Diamond
1,394
Hawker Beechcraft
American Champion
892
Mooney
731
Columbia Aircraft
636
Maule Air
487
Aviat Aircraft
486
Daher Socata
311
GippsAero
152
Liberty Aerospace
132
4 players
comprise 75%+
of global
deliveries
McKinsey & Company
| 63
The top 10 manufacturers by performance have seen 50%+ dropoff in

sales since the 2007 peak
950
Cessna
900
Cirrus Design Corp.
850
Piper Aircraft
800
Diamond Aircraft
750
Hawker Beechcraft
700
American Champion
650
Columbia Aircraft
600
Columbia Aircraft
(prev. Lancair)
550
500
450
400
350
300
250
200
150
100
50
0
1999
2000
01
02
03
04
SOURCE: GAMA 2011 Statistical Databook and Industry Outlook
05
06
07
08
09
10
11
12
McKinsey & Company
| 64
From a global perspective, aggregate single engine

and multi-engine aircraft are expected to see a
long-term decline
160,000
Historical
Single engine
Historical
Multi engine
Forecast
Single engine
Forecast
Multi engine
Average annual
growth, %
155,000
150,000
145,000
140,000
-0.1
135,000
20,000
15,000
-0.5
10,000
5,000
0
2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 2032
SOURCE: GAMA 2011 Statistical Databook and Industry Outlook
McKinsey & Company
| 65
Chinas general aviation market is similarly limited by regulation,

though expected to become significant force in the future
Forecast of
growth
Infrastructure
Regulation
China regulatory constrains remains a barrier to significant market growth
By end of 2011, China had 70 GA airports and 216 temporary landing points
Opening of low-altitude air space will proceed in three pilot phases, scheduled to complete by 2015
Dec 2012, CAAC and Ministry of Finance released temporary measures to regulate the specific fund
for Chinas general aviation development, which is expected to stimulate the GA and training market
China has large HNWI population with interest in flying constrained by airspace limitations according
to PR of China General Aviation Association
As of 2011 China had 1,124 GA planes including 314 training tails

Recreation and training market will be the key lever for GA piston markets
Agriculture, aerial work and cabin transportation are three main markets for turbprops
Broad GA market in China expected to reach a market value of $1 trillion at peak and become major
force in domestic economy
More than 20 provinces and cities in the country had constructed aviation industrial parks
Many private enterprises are exploring investment opportunities in general aviation
More capital is expected to be introduced into the whole value chain construction
Jun 2012, General aviation airport construction specification released by CAAC1 , is expected to
guide and stimulate the investment of infrastructures of GA
1. Civil Aviation Administration of China

SOURCE: Factiva, CAAC, Lit research, Press clippings, Mckinsey anslysis
McKinsey & Company
| 66
Cessna 172 and the Chinese Yun-5 aircraft jointly dominates the
piston fleet in market, with ~60% of share
Current piston engine fleet
# of aircrafts
Cessna 172
Yun-5
43
DA-40
37
tb200
DA-42
33
27
Piper Seminole PA 44
23
Cirrus SR20
13
Haiyan
13
LE500
12
Nong-5A
6
GA-200
6
tb20
5
DA-20
Cirrus SR22
5
3
Cessna T206H
2
Cessna 152
1
Cessna 182T
1
PL-12
SOURCE: CAAC
150
148
Cessna currently the
dominant player (30%

share), with Yun-5
capturing similar share
The proliferation of flight
training schools in China
presents an opportunity
for the Cessna 172 or 152
due to their size
Yun-5 is a very large
Chinese-made singleengine piston aircraft, that
would not be used for flight
training
McKinsey & Company
| 67
General aviation in India - trends
Forecast of
growth
Infrastructure
Regulation
Applications
In India, general aviation is still a nascent market compared to the countrys size
Lack of aviation infrastructure for GA still most inhibiting factor - India requires 200 airports by 2020 for
general aviation purposes
Indias Airports Authority has started ~$5 billion+ modernization efforts of non-metro airports in 2011
for 60 locations, out of which 35 have been started
Main infra. issues: safety concerns, lack of skilled labor (e.g., maintenance and ground services), lack
of airfield information about small airports, lack of navigation aids, and limited hangar parking space
Due to a nascent GA sector, regulations are airline centric current regulatory environment has many
disincentives for general aviation and their operational and infrastructural needs are often ignored
Process of importing aircraft perceived to be bureaucratic, complex
The presence of global businesses as well as mining, oil, tourism applications are main drivers of
increased activity in general aviation
Increasing demand for helicopter service, especially due to the oil and gas industry
By 2020, the Indian general aviation fleet is expected to reach 2,000, from 680 today
Untapped potential - aircraft movement for general aviation comprised only 15% (including business
jets, helicopters, small a/c) of total movements as of Oct-2011
Financial burden on small operators due to regulatory requirements

These issues are starting to receive attention in the media, and many Indian conglomerates in the
sector (e.g., Tata and Mahindra) pushing government to change regulation
SOURCE: Airports Authority of India (AAI); press search; Chamber of Commerce India (2010); SP Aviation
(Feburary 2013)
McKinsey & Company
| 68
Cessna dominates the piston fleet in India, with 53% of piston

engine aircrafts, primarily the Cessna 152
Current piston engine fleet
# of aircrafts
CESSNA 152
CESSNA 172R
PUSHPAK MK-1
CESSNA 172
DIAMOND DA-40 CS AIRCRAFT
HANSA-3
SWATI TRAINER LT-2M
P68C
CESSNA SKYHAWK 172 SP
TRINIDAD TB20
ZENAIR STOL CH 701
CESSNA 172P
ZENITH CH 2000
PIPER SUPER CUB PA-1
ZLIN Z 242 L
CESSNA 206H
DIAMOND DA 40
PIPER CUB SPECIAL J3
SWATI TRAINER LT-1M
CESSNA 172R GA AIRCRAFT
DIAMOND DA 40D
DIAMOND DA42L360
THORP T 211
ZENAIR STOL CH601
ZLIN143L
SOURCE: Airports Authority of India (AAI)
113
59
50
31
22
17
15
12
10
10
8
6
6
5
5
4
4
4
4
3
3
3
3
3
3
Cessna currently the dominant

player (53% share), driven
primarily by the 152 and 172 small
piston engines
McKinsey & Company
| 69
General aviation is expansive in Brazil, and infrastructure and

regulatory improvements will allow further growth
Forecast of
growth
Infrastructure
Brazil has the world's second largest general aviation fleet behind the United States
General aviation serves 3,500 destinations
As of 2011 it had 13,094 GA planes, Of those, 25 percent are based in Sao Paulo
The sector grew 6.4 percent from 2010 to 2011 and is forecasted to grow 4.5 to 5 percent
In December 2012 Brazils president announced Logistics Investment Program -- Airports, a program to
improve the infrastructure and quality of airport services and to increase access to air transportation for
the Brazilian population, strengthening and expanding regional aviation through investments and
incentives
Over R$ 7.3 billion in investments is planned for the expansion of regional aviation services
Regulation to authorize public civil airports and airfields dedicated exclusively to general aviation was
published on December 21, 2012, which aims to increase the supply of airport infrastructure
dedicated to general aviation:
Regulation
Regulatory improvement for slots (times of arrivals and departures) in airports which already
operate at full capacity
Authorization for airports dedicated to general aviation

Applications
(medical,
transport,
HNWI etc.)
The economy is booming, the companies, the number of rich people and this means higher sales of
aircraft - Dorieldo Luis dos Prazeres, Brazilian Civil Aviation Agency
Perception changes These aircrafts are no longer viewed as luxury in Brazil, but as a tool which
makes it possible to generate more business in less time"
SOURCE: Factiva (Brazil's booming general aviation sector, Aug 2012), http://www.aroundtherings.com , Brazil Gov portal
McKinsey & Company
| 70
Brazils piston-engine fleet is concentrated in Sao Paolo and

comprised mostly of single-engine piston aircrafts
Number of piston engines registered by state (2011)
Pistons by engine type (L1P single, L2P double)

Number of piston engine aircrafts
2010
7,306 7,653
2011
2,032 2,147
Single
engine
5%
Double
engine
6%
Usage of piston aircrafts by engine type

Number of piston engine aircrafts
Single engine
Double engine
4,870
1,534 1,074
1,051
47
Private Air Intruction

Service
SOURCE: ABAG
400 449
Agricultural Air Taxi

Aircraft
258 117
Other
McKinsey & Company
| 71

International MKT Pri

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International MKT Pri

Uploaded by

Copyright:

Available Formats

International Market

CONFIDENTIAL AND PROPRIETARY

To develop a prioritization of international market opportunities,

Conduct deep dives to

ACAS global fleet data

McK aviation experts

(China, India, Brazil, EU)

McKinsey & Company

Last Modified 3/8/2013 1:28 PM Eastern Standard Time

163 total countries

2 Excluded countries with 2012 low fleet size

27 countries selected, 137 markets

3 Aggregated neighboring countries selected in

Created 19 clusters (anchored around

4 Evaluated each clusters economics and

Prioritized clusters of interest

SOURCE: ACAS; McKinsey analysis

excluded, (examples of excluded

the 27 countries selected in the prior

Turkey, E. Europe, Russia/CIS,

McKinsey & Company

Printed 3/8/2013 1:29 PM Eastern Standard Time

1 Start with all the countries listed in ACAS

19 international clusters represent >85% of near-term international

Africa is fragmented and has

Printed 3/8/2013 1:29 PM Eastern Standard Time

In the Americas, growth is expected to

Asia expected to sustain growth

Middle East opportunity is

McKinsey & Company

Last Modified 3/8/2013 1:28 PM Eastern Standard Time

Europes growth is driven primarily by

Bubble Size represents fleet

Printed 3/8/2013 1:29 PM Eastern Standard Time

3 = Supportive infrastructure and political

China & Hong Kong

Czech Rep., Poland, & Slovakia

Venez., Arg., Colom.

Expected market opportunity2

McKinsey & Company

We propose prioritizing the high value and growth option

High growth markets prioritized

Stable markets de-prioritized

Expected market opportunity

Expected market opportunity

High risk markets de-prioritized

Expected market opportunity

Expected market opportunity

Highest market opportunity

Mid-sized opportunities ($150300M) with low growth (3-4%)

Typically small markets

Immense fleet base (1200+)

Mid-sized market opportunities

Large existing fleet (400-1000)

New customers, opportunities

Cessna already has leading

Only large group is Latin

Very low penetration relative to

Most markets (exception

Variable growth rates (5-20%),

Political and infrastructure

SOURCE: Team analysis

All mature markets with