Still The World’s Strongest Industry…

For Now Aviation/Defense Overview And Forecast

Presentation To Kansas Economic Outlook ConferenceWichita, KSBy Richard AboulafiaVice President, AnalysisTeal Group Corporationwww.tealgroup.comSeptember 2016

Civil And Military Aircraft DeliveriesAggregate 2006-2015: 53% Growth (4.8% CAGR)

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '150

20

40

60

80

100

120

140(Market Value in 2016 $ Bns)

Civi l Mil i tary

‘06-‘15: 25.1% Growth(2.4% CAGR)

‘06-‘15: 63.9% Growth (5.5% CAGR)

Aircraft Markets, Through Good And Bad Years

World New Deliveries CAGR CAGR Change ChangeIn 2015 (2016 $) ’03-‘08 ’08-‘13 ’13-14 ’14-‘15

Large Jetliners ($103.6 b) 7.5% 10.3% 7.9% 4.9%Business Aircraft ($22.9 b) 17.1% -3.7% 5.1% -6.3%Regionals ($7.1 b) 4.6% -6.5% 17.7% -10.5%Civil Rotorcraft ($5.4 b) 18.2% -1.5% -2.6% -9.4%Military Rotorcraft($13.6 b) 10.3% 8.9% 15.0% -16.7%Military Transports ($5.9b) 3.2% -1.2% -4.9% 9.0%Fighters ($18.2 b) 1.8% 1.1% 1.8% 6.4%All Civil ($139.2 b) 10.0% 5.0% 7.4% 1.4%All Military ($41.4 b) 3.9% 3.2% 7.1% -1.7%Total ($180.6 b) 8.2% 4.6% 7.3% 0.6%

Business Aircraft History (W/Jetliners+RJs+Turboprops)

'64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16f0

300

600

900

1,200

1,500

1,800 (Units Delivered)

0

4

8

12

16

20

24

28

32(Market Value in '16$ Bns)

Units Value

Post-2003 boom

9/11, tech and coms downturn

The Great Expansion: strong economic growth, fractionals, new models, etc

Smaller plane boom; some military Learj et market distortion

Market creation, exhaustion of initial demand

Static period. Limited growth in late 1980s, limited downturn after First Iraq War

The Great Bi-furcation

Bottom Half Bizjet Segment V. Top Half

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '150

4

8

12

16

(Market Value in '16 $ Bns)

Bottom Half (<$26M) Top Half (>$26M)

‘03-‘08 CAGR: 19.7% Bottom, 15.3% Top ‘10-‘15:

2.9% Bottom, 2.2% Top

‘08-‘10: -56.8% Bottom, 3.5% Top

Total Business Aircraft Market V. Wichita

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '150

5

10

15

20

25

30(Market Value in 2016 $ Bns)

Total Market Wichita

‘03-‘08 CAGR: 17.1% Total, 16% ICT

‘08-‘10 Drop: -26.9% Total, -59.1% ICTPeak: >50% of

market in 1992-1995 (from 39% in 1989 14.1% of

market in 2015

Oil Prices And Top Half Jet Deliveries

US Energy Information Administration (Annual Average Imported Crude Oil Price in 2012 $); Teal Group research

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '160

20

40

60

80

100

120(Oil Prices/bbl in '12$)

0

5

10

15

(Value of Deliveries in '16$ Bns)

Oil Prices Value

Business Aircraft Market By ClassA Gradual Shift Towards Larger Aircraft

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25$0

$5

$10

$15

$20

$25

$30

$35('16$ Billions)

Very Light Entry Level Mid-Sized Super Mid-Sized LargeVery Large Ultra Jetliners+RJs Turboprops

Business Jet Manufacturer Market SharesBy Deliveries Value, 2016-2025 Vs 2006-2015

Excludes jetliners, RJs, turboprops

32.5%

5.1%

16.1%

13.5%

29.9%

2.5%0.3%

28.1%

0%

16% 15%

31.9%

8.2%

0.8%

Bombardier Hawker Dassault Cessna Gulfstream Embraer Other0%

5%

10%

15%

20%

25%

30%

35%

'06-15 '16-25

Our Forgotten Nemesis...CyclicalityLarge Jetliner Deliveries By Value

'58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14'15$0

$20

$40

$60

$80

$100

(Value in '16 $Bns)

‘01-‘03 -10.7% CAGR; -28.8% peak-trough‘91-‘95 -12.5%

CAGR; -41% peak-trough‘80-‘84 -13.9%

CAGR; -45% peak-trough

‘68-‘77 -11% CAGR; -65% peak-trough

‘84-‘9116.1% CAGR

‘95-‘9920.8% CAGR

‘04-‘159.2% CAGR; A 12-Year Supercycle

OR‘99-‘03 -11% CAGR; -37.3% peak-trough

Y/Y Traffic: Respectably Strong Numbers2015 Totals: RPKs 6.5%, ASKs 5.6%, FTKs 2.2%; 2014 Totals: RPKs 5.9%, ASKs 5.6%, FTKs 4.5%; 2013 Totals: RPKs 5.2%, ASKs 4.8%, FTKs 1.4%

Source: IATA

Jul '0

8SepNov

Jan '0

9MarMayJu

lSepNov

Jan '1

0MarMayJu

lSepNov

Jan '1

1MarMayJu

lSepNov

Jan '1

2MarMayJu

lSepNov

Jan '1

3MarMayJu

lSepNov

Jan '1

4MarMayJu

lSepNov

Jan '1

5Apr

Jul

OctDec

Feb '1

6Apr

Jul

0%

10%

20%

30%

-10%

-20%

RPKs ASKs FTKs

Historical Jetliner Orders And Deliveries

All Airbus and Boeing aircraft

'69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '160

500

1000

1500

2000

2500

3000(Number of aircraft)

Deliveries Net orders

BRIC Market Large Jet Deliveries

31 25 28 40 5894 106 107 104

151 156 167200

248 268301

98

7 9 6

25 718

20

1824

5

2 4 43

1519

7024

4221

17

30

4032 4

5 9 20

5

32

34

24

2122

17

19

2923

18

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

50

100

150

200

250

300

350Number of Aircraft Delivered

China Russia India Brazil

Single And Twin Aisle DeliveriesPowered By...Hubris

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '190

20

40

60

80

(Market Value in '15 $ Bns)

Single Aisles Twin Aisles

‘05-‘14 CAGR: 8.1% Single, 11.6% Twin

‘09-‘14 CAGR: 6.5% Single, 17.8% Twin

‘15-‘19 Plan: 13.1% Single, 9.4% Twin

Commercial Jetliners History And ForecastAn Inevitable Correction Looms

Airbus, Boeing, CSeries, C919, MS-21; includes KC-30, KC-46, P-8

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

500

1,000

1,500

(Units Delivered)

0

20

40

60

80

100

120(Market Value in '16$ Bns)

Units Value

Comparative Backlog Values

130.03 107.75

79.53

199.11

300.42

269.97

300.11 316.81

365.33

421.92 413.8 402

48.55

112.93 115.48

173.03

281.81 277.58

309.53 321.6

397.42

436.27 456.7 452

3.51 5.19 5.8 7.1 9.5 9.5 9.5

Mid '97

Mid '01

End '04

End '06

End '08

End '10

End '11

End '12

End '13

End '14

End '15

1H '1

6 0

50

100

150

200

250

300

350

400

450

500(Value in '16 $Bns)

Boeing Airbus Bombardier

Large Jetliner Market Shares By Deliveries Value

'75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '250

20

40

60

80

100

120(Value in '16 $Bns)

Boeing Middle Market Airbus DouglasLockheed BBD/COMAC/Irkut

DoD Investment, O&M Funding

Then-year dollars

115

140

173190

179

214

239 237

271

293 285 284

256 260247 250

240 235 235 240245

424657 65 69 73 78 77 80 80 81 72 64 63 64 70 72 70 70 6869

546178 83

97 105

134

165

135 138 134121

104 101 103 111 112 115 118 119122

FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY210

50

100

150

200

250

300($ bns)

Procurement RDT&E O&M

World Fighter Production Shares

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

5

10

15

20

25

30(Deliveries in '16 $bns Value)

F-35 US F-35 International Undetermined EuropeRussia RoW Non-F-35 US

The US Military Fixed Wing WaterfallMuch Riding On The F-35...But There’s A New Wave Coming

Excludes jetliner deriv atives

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

5

10

15

20

25(Value in '16$ Bns)

C-17 AV-8B F/A-18 F-15 F-16 F-22T-45 T-6 C-130 F-35 T-X LRS-B

Boeing Military Fixed Wing Deliveries

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

2

4

6

8

10

(Value in '16$ Bns)

C-17 AV-8B F/A-18 F-15 P-8 KC-46

Trainer/Light Attack Aircraft Market Outlook

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

1

2

3

4

(Share By '16 $bns Value)

Props Jets T-X

US Military Rotorcraft Market Falling; International Military Growing; Civil Falling

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

2

4

6

8

10

12(Market Value in '16 $ Bns)

Civi l Mil i tary (US) Mil i tary (International)

Aircraft Production 2006-2025Still Growing, For Now....

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '250

30

60

90

120

150

180

210

(Market Value in '16 $ Bns)

Fighters Business Aircraft RotorcraftMil i taryTransports/Trainers/Other Jetl iners/Regional AC

Global Aircraft Market Outlook In One Page

Market 2016 Risk Elevator CommentLarge Jetliners 0.1% Tough to de-rail the ramp, but fuel prices and China

are big concerns. Execution too.

Business Aircraft -8.5% Weak emerging markets and resource-extraction country/company demand.

Regionals -1.1% Scope clause is only big risk.

Civil Rotorcraft -32.5% Getting ugly. Too many new models aimed at a weak Segment (oil).

Military Rotorcraft 3.7% Will trend down as programs of record end/slow; no risk of accelerated downturn.

Military Transports 24.6% Last of C-17s/A400M ramp; Only risk is A400M execution; C130J benefits if it’s a problem.

Fighters 0.1% I like this market.

All Civil -2.7% Jetliner growth not compensating for weakness in other segments; more risk from emerging markets, oil.

All Military 4.5% Global insecurity, Tension, Malice.

Total Industry -1.0% Downshifting, with more risk