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. 2 A Couple Measures of Magnitude  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  Air Carriers (Mainline and LCCs)13.5 M  Commuters and Air Taxis12.6 M  General Aviation (Turbine and Piston)34.1 M  Military 2.9 M Source: FAA Forecast, 2006 Operations at Airports with Control Towers Fleets

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

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

5. 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. 6 Airlines use these Aircraft as a Competitive Tool (DL Connection Routes, Jan 05)

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

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

9. 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. 10 General Aviation Regional Aviation Business Aviation

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

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

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

14. 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. 15 Over 5000 Owners Participate in Fractional Programs

16. 16 Some Local Business Jet Operators  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

17. 17 Regional Aviation Business AviationGeneral Aviation

18. 18 GA Piston Aircraft Have Many Uses

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

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

21. 21 The Decline in Pilots is the Major Challenge for the Industry US ACTIVE PILOT CERTIFICATES HELD STUDENT PRIVATE COMMERCIAL 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 1960196519701975198019851990199520002005 Source: FAA; excludes Transport and Helicopter pilots

22. 22 At Least 60,000 New Students are Needed Annually to Maintain the Pilot Pool NEW STUDENT PILOT CERTIFICATES 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1960196519701975198019851990199520002005 YEAR ANNUAL CERTIFICATES ISSUED Source: FAA; 1960 - 1964 estimated

23. 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. 24 The Velocity Group 236 W. Portal Ave., #359 San Francisco, CA 94127 (415) 242-9296 www.velocity-group.com