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REGIONAL AIRLINE, BUSINESS AVIATION AND GA INDUSTRY REVIEWS

REGIONAL AIRLINE, BUSINESS AVIATION AND GA INDUSTRY REVIEWS. Prepared for: Regional Airport Planning Committee Oakland, CA January 26, 2007 Prepared by: Gerald Bernstein Partner The Velocity Group Washington Orlando San Francisco Tokyo. A Couple Measures of Magnitude . Fleets.

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REGIONAL AIRLINE, BUSINESS AVIATION AND GA INDUSTRY REVIEWS

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  1. REGIONAL AIRLINE, BUSINESS AVIATION AND GA INDUSTRY REVIEWS Prepared for: Regional Airport Planning Committee Oakland, CA January 26, 2007 Prepared by: Gerald Bernstein Partner The Velocity Group Washington Orlando San Francisco Tokyo

  2. A Couple Measures of Magnitude Fleets • Mainline Airline Widebody Aircraft 560 • Mainline Narrowbody Aircraft 3380 • Regional Jets 1120 • Regional Turboprops and Piston 1760 • Rotorcraft (Turbine and Piston) 7600 • Business Jets and Turboprops 16,660 • GA Piston 162,000 Operations at Airports with Control Towers • Air Carriers (Mainline and LCCs) 13.5 M • Commuters and Air Taxis 12.6 M • General Aviation (Turbine and Piston) 34.1 M • Military 2.9 M Source: FAA Forecast, 2006

  3. Regional Aviation General Aviation Business Aviation Three Topics will be Addressed

  4. Regionals Have Grown from 10% to 22% of Domestic Enplanements in 15 Years Sources: RAA, ATA, FAA

  5. Why All This Success? • Lower Cost • Ability to match aircraft with traffic (new routes, turboprop upgrades, mainline downsize (frequency), off-peak service) • Competitive Tool (raiding competitors territory)

  6. Airlines use these Aircraft as a Competitive Tool (DL Connection Routes, Jan 05)

  7. Local Perspective on Regional Service Regional Airlines Serving the Bay Area • American Eagle (#1 Nationwide, American) • Skywest (#4 Nationwide, United, Delta) • Mesa (#5 Nationwide, America West/US Air) • Horizon (#11 Nationwide, Alaska) Airports Served • Oakland (5 Routes) • San Francisco (30 Routes) • San Jose (10 Routes)

  8. Traditional Regional Aircraft have been 35-, 50- and 70-Seat Jets (and Turboprops)

  9. We Expect the New Embraer Aircraft to be a “Game Changer” • 70- to 105-seats • 6’5” headroom, bins capable of fitting wheelies • Watch Air Canada, JetBlue and USAir

  10. Regional Aviation General Aviation Business Aviation

  11. Business Aircraft Fleets Have Been Growing Steadily Since the 1960s

  12. We are in the Midst of an Historic Boom in Sales (Jets)

  13. Cessna Mustang Embraer Phenom 100 HondaJet Eclipse 500 A New Class of “Very Light Jets” is Expected to Expand Production

  14. A Number of Favorable Influences Has Supported Business Aviation Growth • Interest and Ability to Purchase- Strong Corporate Profits the past few years- ESPECIALLY in the oil industry which is a major buyer • Government Policies (Taxes and Access)- No major tax changes (this is changing…)- Can also include fees and charges • Competitive Alternatives- New Aircraft introductions with improved economics and customer appeal- Lousy airline service - New Ownership models and options, including: -- Fractional Ownership -- “Card” programs (eg, 25 hours use) -- Air Taxis ?????

  15. Over 5000 Owners Participate in Fractional Programs

  16. Bank of America Bechtel Charles Schwab Chevron-Texaco eBay First Republic HP Oracle (Ellison) PG&E QUALCOMM Sun Williams-Sonoma World Savings Asset Management Co Marmalade Skies Matador Management Investments Medical Air Transport Stage III Technologies XO Jet TAG Aviation Kaiser Air San Jose Jet Center Some Local Business Jet Operators

  17. Regional Aviation Business Aviation General Aviation

  18. GA Piston Aircraft Have Many Uses

  19. Sales of these Aircraft Have Grown Recently-- But Nowhere Near Historic Levels

  20. The FAA Forecasts the GA Piston Fleet to Remain More-or-Less Stable

  21. US ACTIVE PILOT CERTIFICATES HELD 800,000 700,000 600,000 COMMERCIAL 500,000 400,000 PRIVATE 300,000 200,000 100,000 STUDENT 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 The Decline in Pilots is the Major Challenge for the Industry Source: FAA; excludes Transport and Helicopter pilots

  22. NEW STUDENT PILOT CERTIFICATES 180,000 160,000 140,000 120,000 100,000 ANNUAL CERTIFICATES ISSUED 80,000 60,000 40,000 20,000 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 YEAR Source: FAA; 1960 - 1964 estimated At Least 60,000 New Students are Needed Annually to Maintain the Pilot Pool

  23. Closing Thoughts • All segments of the aviation industry contribute to the productive movement of persons and goods, for pleasure or for profit • Each segment is characterized by its own driving forces • Each segment meets the needs of a particular user group • As demand grows, the growth in (and funding for) system capacity expansion becomes increasingly politicized-- between aviation and other users, as well as between the various aviation segments themselves

  24. The Velocity Group236 W. Portal Ave., #359San Francisco, CA 94127(415) 242-9296www.velocity-group.com

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