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Atlanta, Georgia September 29, 1999 Neil G. Whitehouse,FRAeS, President

AFRICA & CARIBBEAN The Challenge of Modernizing Aircraft Fleets PanAfrican Conference on Air Transportation. Atlanta, Georgia September 29, 1999 Neil G. Whitehouse,FRAeS, President Ariel Aviation, Inc. Lyceum Building, Suite 204, Tarrytown, NY 10591, U.S.A.

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Atlanta, Georgia September 29, 1999 Neil G. Whitehouse,FRAeS, President

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  1. AFRICA & CARIBBEAN The Challenge of Modernizing Aircraft Fleets PanAfrican Conference on Air Transportation Atlanta, Georgia September 29, 1999 Neil G. Whitehouse,FRAeS, President Ariel Aviation, Inc. Lyceum Building, Suite 204, Tarrytown, NY 10591, U.S.A. Tel: 914-332-1919 whitehouse@arielaviation.com Fax: 914-332-1991

  2. Africa & the Caribbean The Challenge of Modernizing Aircraft Fleets • aircraft fleets and forecast requirements • capital • fleet modernization …..“ new or used ” • acquisition strategies • practical issues

  3. World Commercial Fleet 1998Distribution by Region

  4. Fleet Average Age by Region

  5. Stage 2 FleetDistribution by Region

  6. Stage 3 FleetDistribution by Region

  7. B707 44 B727-100 18 B727-100F 13 B727-200 56 B737-200 80 BAC 1-11 59 Caravelle 5 DC-8 12 DC-9 12 Fokker F28 13 B707 1 B727 11 B737-200 8 DC-9 2 Stage 2 Manufactured Aircraft AFRICA CARIBBEAN Total Stage 2 Manuf. 312 % Africa Region Fleet 59% Replacement Candidates 126 Total Stage 2 Manuf. 22 % Caribbean Region Fleet 40% Replacement Candidates 1

  8. A300 / A310 38 A319 / A320 / A321 33 A340 9 BAe 146 2 B737-300/400/500/800 41 B747 34 B757 8 B767 21 B777 3 Canadair RJ 6 DC-10 9 Fokker 100 1 MD-80 / 90 10 A300 / A310 7 A320 8 L1011 4 MD-80 14 Stage 3 Manufactured Aircraft AFRICA CARIBBEAN Total Stage 3 Manuf 215 % Africa Region Fleet 41% Total Stage 3 Manuf. 33 % Caribbean Region Fleet 60%

  9. Africa Annual Growth 1999 - 2018% World Africa - Europe 5.1% 1.98 Domestic Africa 4.0% .31 Intra Africa 4.0% .19 Africa - N. Amer. 4.7% .18 Africa - Asia 4.2% .16 Africa - Mid East 4.6% .14 Africa - Pacific 6.0% .08 Africa - L. Amer. 5.0% .04 Africa Annual Growth 1999 - 2018 Africa - Europe 4.9% Domestic Africa Intra Africa 4.9% Africa - N. America 6.7% Africa - Asia 6.0% Africa - Mid East 4.0% Africa - Pacific 4.4% Africa - L. America 6.9% Forecast Growth 1999 - 2018 BOEING AIRBUS Africa = 3.04% of World RPK’s Total Stage 3 Manuf. 215 % Africa Region Fleet 41%

  10. Africa (1998 base passenger and freight fleet = 527) Total deliveries 457 BOEING AIRBUS Forecast Aircraft Required 1999 - 2018 Africa (1998 base passenger fleet = 254) Replacement 209 Growth 218 Total deliveries 472 Seat Size Aircraft % 70 - 100 66 15% 125 - 175 198 46% 210 - 250 92 22% 300 - 400 53 12% > 400 18 4% Size Aircraft % Single aisle 315 69% Intermediate Twin 122 27% B747 & larger 20 4%

  11. Caribbean (1998 base passenger fleet = 53) Replacement 41 Growth 46 Total deliveries 87 Caribbean Total deliveries 115 Forecast Aircraft Required 1999 - 2018 AIRBUS BOEING Seat Size Aircraft % 70 - 100 3 4% 125 - 175 56 69% 210 - 250 18 22% 300 - 400 10 12% > 400 0 Size Aircraft % Single aisle 95 83% Intermediate Twin 20 17% B747 & larger 0

  12. World Population(millions)

  13. World Real GDP

  14. Per Capital Income(Real GDP v. Population)

  15. Number of Incomes Requiredto Purchase New $40 Million Aircraft

  16. Expertise Access to Capital The Challenges of Fleet Modernization Aircraft fleet development requires • Strategic Planning • Technical • Financial • Negotiating / Trading • Equity • Debt • Credit Status

  17. Aircraft Acquisition Strategies • New v. Used • Purchase (finance lease) • Operating Lease

  18. New Aircraft MINUS PLUS • lower operating costs • higher capital cost • factory support (training, spares) • high utilization required • manufacturers’ guarantees • higher U.S. dollar amounts • (or convertible currency) • maintenance honeymoon • more limited availability • passenger acceptance • typically longer lead times

  19. Used Aircraft MINUS PLUS • higher operating cost • lower capital costs • greater technical • demands on operator • lower utilization required • little or no factory training and logistical support • wider availability • faster access • limited and more expensive • financing on older aircraft • passenger acceptance • less passenger appeal

  20. Purchasing Criteria for purchasing and finance leasing: • substantial capital investment • well established company • (long term track record) • solid credit • (or government guarantees) • long term planning time frame • (to match lead time and financing structure)

  21. Operating Leasing • provides access to a strong balance sheet • reduced capital investment requirement • reduced lead time • access to newer aircraft • shorter planning time frame • less complex transactions (but still sophisticated) • no residual value exposure (or profit opportunity)

  22. Utilization, Yield & Currency “ With any capital asset, utilization defines the level of capital that can be supported. ” Assuming fare yield in a normal range and hard currency availability. Capital constraints will strongly influence the future African fleet, therefore, USED AIRCRAFT will be important.

  23. Practical Issues Use outside expertise to acquire and sell aircraft (Only large airlines should have full-time in-house expertise.) Maintain records to the highest FAA standards. Plan ahead and get good advice. Smart aircraft acquisition is most critical to your success.

  24. Issues, Questions, Problems ? Neil G. Whitehouse FRAeS President New York

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