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China 2020: Future Planes, Jumbo Jets & Aviation
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2. Today: China has World’s 2nd Largest Aircraft Fleet US Fleet #1 … China Fleet #2 Existing Aircraft Fleets (2010) Aircraft (units) Source: Airfleets, COMAC
3. Today: China Fleet Comprised of 99% Foreign Aircraft China’s Airlines Largely Comprised for Foreign Aircraft Boeing China Major Airline Fleet Composition* Airbus Other Foreign Boeing Airbus Boeing Airbus Boeing Airbus * December 2010 Source: Company Websites; Planespotters
4. The Future: … 230% Increase in Aircraft Needed in China (2028) 230% Increase in Aircraft Needed in China by 2028 New Deliveries 2028 Existing Fleet 2010 Existing Fleet and New Deliveries (2010 - 2028) Aircraft (units) Source: Airfleets, COMAC, Boein,g, EIU
5. 900 800 99 700 90 600 500 53 170 355 400 461 525 239 300 255 200 157 106 100 73 35 0 2005 2010F 2015F 2020F 2025F Driven by: Forward Trend in Exploding Middle Class China’s Middle Class: 400 million (2010) … 500 million (2015) Upper Middle Class Middle Class Income Bands for Urban Population Lower Middle Class Urban Household Income (US$ – PPP-Adjusted) 822 822 756 756 Global > US$107,800 684 684 Affluent US$3,800 - 107,800 607 607 531 531 Urban Population (millions) Upper Middle US$21,501 – 53,900 Lower Middle US$13,500 – 21,500 Poor < US$13,500 Sources: Urbanization Rates, Population based on UN, World Urbanization Prospects 2007; MGI Consumer Demand 2008
6. China World’s 3rd Highest Traffic Volume by 2020 Driven by: Growth Spike in China’s Travel Volume Foreign Inbound & Chinese Outbound Travel Volume 237 167 million Traveler Increase USD millions 69 CAGR 11.8% 51 21 13 Source: China National Tourism Association (CTNA); World Tourism Organization (UNWTO)
7. Foreign Investors: … hunger for China Opportunity Wide Variance in Strategies employed by Major Aerospace OEM’s Aerospace OEM’s Functional Deployments in China Source: Company Information pages, EIU
8. China: … also hungers for Opportunity, However China Fleet 99% Foreign Airplanes China Civil Aircraft Fleet (2010) Source: All Publically Available Information , Company Website
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10. Development: CIVIC drawing on foreign suppliers for nearly all research and development, production for sub-systems, local partner providing facility, sub-contracting
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12. Development: : Fuselage Build by AVIC’s, Shenyang Aircraft Industries Group , Bombardier
19. Schedule: First Flight in 20xx and In- Service in 20xxSource: Chinese Aerospace Market Research
20. Moreover: … China Broadening entireIndustrial Base Leveraging Foreign Investment in Production and Research & Development ERJ145 Assembly EC175 design & production Harbin A350 composite parts Turbine NGVs, turbine rings, compressor seals Heat shields Beijing Shenyang Landing gear & engine nacelle components A320 Final Assembly Line Tianjin Composites manufacturing Xi’An Design & Production of ECS Nanjing Shanghai Chengdu Suzhou COMAC C919 Production Precision sheet metal Autoclaved composite parts Engine parts Xiamen Landing gear components Sensors, valves, nozzles Source: AeroStrategy, 2010
21. And also: … Developing Country’s entire Aviation Infrastructure 38 New Airports … USD46 billion Investment by 2020 Number of Airports in China 20% Increase Number of Airports Investment in New Airports USD18 bn USD39 bn USD46 bn Source: EIU, Center fro Asia Pacific Aviation
45. China aggressively developing aviation industry through joint venture partnerships with major foreign suppliers and aerospace OEMsSource: Public Sources
46. 1. Economic Growth: World Bank Projects China as #1 Economy 2020 GDP* GDP* PPP-adjusted France France EU-27 UK UK EU-27 US US Germany Germany China India Japan $30.0 tr $13.4 tr $28.8 tr $6.8 tr $29.6 tr GDP* PPP-adjusted 2009 GDP* China 6,4 trillionsde $ 3,6 trillionsde $ Japan India Japan $4.1 tr $3.8 tr $9.1 tr $14.2 tr $14.1 tr Source: World Bank
47. China World’s 3rd Highest Traffic Volume by 2020 1. Travel Growth: Growth Spike in China’s International Travel Foreign Inbound & Chinese Outbound Travel Volume 237 167 million Traveler Increase USD millions 69 CAGR 11.8% 51 21 13 Source: China National Tourism Association (CTNA); World Tourism Organization (UNWTO)
48. 1. Tomorrow’s Market: Huge Demand Surge for Future New Aircraft China has 1,315 Aircraft Today … China Needs 3,165 New Aircraft by 2028 Aircraft Deliveries (2009 – 2028) Deliveries (units) Source: EIU, China Statistical Yearbook; Orient Aviation
62. 747-8 ailerons and spoilers, single source; horizontal stabilizer parts and subassemblies (a subcontract from Vought Aerospace, USA)
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64. 747 boeing converted Freighter modification program* June 2007 Source: Boeing, “About us: Boeing in China.”
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66. Development: CIVIC drawing on foreign suppliers for nearly all research and development, production for sub-systems, local partner providing facility, sub-contracting
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68. Development: : Fuselage Build by AVIC’s, Shenyang Aircraft Industries Group , Bombardier
75. Schedule: First Flight in 20xx and In- Service in 20xxSource: Chinese Aerospace Market Research
76. 2. Resources: Why China’s Focus on Single-Aisle & Regional Jets? China’s 3,165 New Aircraft = 12% of Future Global Demand Future Global Aircraft Deliveries (2009 – 2028) 26,500 New Aircraft by 2028 Source: Airbus, “Airbus Global Market Forecast, von Tronchin, March 2010, other Public Sources
77. 3. Innovation (Stage 1): Tied to Development of Regional Jets 2010: ARJ21 Largely Based on Foreign Research & Development Suppliers for China’s ARJ21 ARJ21 ROSEMOUNT AEROSPACE Source: Baidu Encyclopedia, Various Public Sources
78. 3. Innovation (Stage 2): Tied to Development of Single-Aisle Jets 2016: C919 Largely Based on Joint Sino-Foreign Research & Development Suppliers for China’s C919 C919 Source: Airframers, January 2011; Various Public Sources
79. 3. Innovation: Investment Directed at Aviation Clusters Investment Footprint largely aligned with China Aviation Structure/Clusters ERJ145 Assembly EC175 design & production Harbin A350 composite parts Turbine NGVs, turbine rings, compressor seals Heat shields Beijing Shenyang Landing gear & engine nacelle components A320 Final Assembly Line Tianjin Composites manufacturing Xi’An Design & Production of ECS Nanjing Shanghai Chengdu Suzhou COMAC C919 Production Precision sheet metal Autoclaved composite parts Engine parts Xiamen Landing gear components Sensors, valves, nozzles Source: AeroStrategy, 2010
80. 3. Innovation: Investment Largely Aligned with AVIC Subsidiaries Strong Manufacturing … Institutional Support … Labor Arbitrage Structure of China’s Aviation SectorAviation Industry Corporation of China (AVIC) Harbin Aircraft Industries Harbin Shenyang Shenyang Aircraft Industries Shaanxi Aircraft Company Hanzhong Xi’an Aircraft Company Shanghai Aviation Industry Co. Shanghai Xi’an Chengdu Aircraft Company Chengdu Changhe Aircraft Company Jingdezhen Nanchang Hongdu Aviation Industry Source: Xinhua, “Aviation Industry Corporation of China Founded”
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82. Development: CIVIC drawing on foreign suppliers for nearly all research and development, production for sub-systems, local partner providing facility, sub-contracting
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84. Development: : COMAC and joint ventures with foreign suppliers to jointly research and develop the platform systems
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86. Development: COMAC and joint ventures with foreign suppliers to jointly research and develop the platform systems
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88. Development: COMAC and joint ventures with local domestic suppliers to jointly research and develop the platform systems
89. In- Service: 2020 – 2030? Source: Chinese Aerospace Market Research
91. Senior Executives Select China as Most Attractive in World Investor Confidence in China #1 in World Top 14 Most Attractive Destinations for Future Investment (2009 – 2011) % Percent of Responses Source: World Investment Prospects 2009 - 2011
92. Foreign Investment Continues to Soar – Strong Vote of Confidence Record FDI of USD106 billion in 2010 Foreign Direct Investment Inflows (1990 – 2010) USD Source: China Statistical Yearbook
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94. China banks cleaned up in 1990s: Non-performing loans in 1997 averaged 40 – 50%; only 6% in 2007.
95. Financial institutions extended approximately USD1.4 tr in new loans in 2009; almost double that of 2008; and USD1.2 tr in 2010, slightly down from 2009.
100. State Owned Enterprise net profits as share of GDP has grown from (-1%) in 1997 to (+4.3%) in 2007.
101. Record corporate profit growth over past 5 years (industrial profits rose 38 ppa); liability ratios declined.
102. Urban incomes have nearly doubled in past 10 years.Source: Deutsche Bank; Standard Chartered; UBS; IMF; Other
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