mba morten beyer & agnew

Freighter Aircraft A different kind of market

Bryson P. Monteleone Vice President & CFO China Aircraft Economics Forum Wednesday, 24 March 2004 Beijing China

China Aircraft Economics Forum Page 1

mba morten beyer & agnew

Outline
Corporate Overview New vs Converted
Values/Costs Maintenance Costs Candidates for Conversion What is on the Horizon

Buying Trends

China Aircraft Economics Forum Page 2

mba morten beyer & agnew

Corporate Overview
Industry Expertise
Deep industry experience is a prerequisite for wise decision making.

Worldwide Locations
Paris Washington DC

Integrated Teams
Project teams consist of both technical and strategy subject matter experts that provide deep expertise in a range of areas.

Tokyo

Quality
Understanding client needs and expectations throughout each engagement ensures success.

mba is a broad based aviation consulting firm with offices in the US, Europe and Asia. MBA provides Strategic and Financial analysis, Technical expertise, and Asset Valuations
Services Include: Debt and equity analysis Forecasting analysis Technical support Operations and maintenance audits Market Evaluation Valuations Aircraft/Engines/Spare Parts Routes and Landing Slots

China Aircraft Economics Forum Page 3

mba morten beyer & agnew

New vs. Converted

Currently available new aircraft What is on the horizon What makes passenger aircraft viable for cargo conversion

China Aircraft Economics Forum Page 4

mba morten beyer & agnew

Currently Available Aircraft

New Aircraft
A380F-800

B747-400F/ERF

A300F-600R

B767-300F

Capacity

B757-200PF

Range
China Aircraft Economics Forum Page 5

mba morten beyer & agnew

Currently Available Aircraft

New Aircraft
A380F-800
$170.00-$220.00*

B747-400F/ERF
$52.95-$142.40

Capacity

Market Availability A300F-600R 747-400F 757-200PF 767-300F

0 3 0 0

A300F-600R
$44.15-$61.25

B767-300F
$31.48-$57.00

B757-200PF
$6.50-$30.80

Market Value
China Aircraft Economics Forum Page 6

*Estimated List Prices

mba morten beyer & agnew

< $4,000 >$9,000

$5,000

$6,000

$7,000

Cost/Block Hour A300F-600R A310-F B747-400F B757-200F B767-300F MD-11F A380F

China Aircraft Economics Forum Page 7 Maintenance Cost

20% < 747-400F

10% 15% 20% 25% 30% 35%

as a % of Cost/Block Hour

$8,000

mba morten beyer & agnew

Future Values
747-400, A300F-600R
160 140 120 Values in $ Millions 100 80 60 40 20 0
20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24

A300F-600R 747-400F 747-400ERF

Year

China Aircraft Economics Forum Page 8

mba morten beyer & agnew

Candidates for Conversion

Considerations

Per Aircraft
Additional Maintenance/ Configuration (10%) Conversion Cost (45%)

By Model
Payload/Range Capabilities Model Lifecycle Overhaul Costs Engine Airframe Functionality

Acquisition Cost (45%)

Model Type Payload Capabilities Engine/Airframe Life Acquisition Price Conversion Cost Usually 15+ years of age

China Aircraft Economics Forum Page 9

mba morten beyer & agnew

On the Horizon
Widebody aircraft present the best flexibility for Cargo

737-300/-400 Freighter the new workhorse for FedEx, and others ? 757-200 Freighter maybe not the real answer 7E7 impacting widebody residuals 777 Freighter still a few years out although some carriers want it now A320 Freighter nothing before 2008 A330 Freighter still a few years out A380 Freighter the first aircraft simultaneously launched in both passenger and freighter variants Fokker F.50 conversions.

China Aircraft Economics Forum Page 10

mba morten beyer & agnew

Buying Trends

Type

Example

Purchase Type

Major Airlines/ Wet Lease Operator Express Couriers

Air China, China Airlines, Dragonair, Cargolux, Atlas Air FedEx, UPS

New/Relatively New

New/Used

Bottom Tier Freight Operators

Kitty Hawk, DAS Air Cargo

Used

China Aircraft Economics Forum Page 11

mba morten beyer & agnew

Buying Trends
Asia, in particular China, remains the biggest cargo traffic producer on the horizon Within China a package express carrier is still missing latent narrowbody demand Increased demand of cargo aircraft as belly freight endures heightened security scrutiny Larger aircraft, as a percentage, on the increase as freighter fleet decreases Development of new freighters will subside in the short term limited options Low Interest rates shorten the ownership cycle perhaps creating steeper residuals
China Aircraft Economics Forum Page 12

mba morten beyer & agnew

Thank You.

China Aircraft Economics Forum Page 13