Expeditors International of Washington, Inc. Status update

Thank you, Samantha. Thank you.

Good morning, good afternoon, everybody. Just real quick, high level, we wanted to just give you an idea of what the agenda was going to be like today. What I'm going to be covering is kind of a growing demand and some of the backlogs that we all hear about. Really what this is doing is it's just giving you a good kind of global overarching theme of what we see in the marketplace at large. From there, Jim's going to take over. He's going to talk about changing industry and the needs. Then Chris Greenam's going to get into a little bit more about how to respond with critical logistics. I'll also mention very briefly before we start that I'm going to be showing you just some charts and some other tables. This is all from publicly available sources.

We will have that information again when Samantha shares the presentation with everyone if they are looking for it. Generally, this is all coming from either IATA, it is coming from Boeing, it is coming directly from Airbus. There is nothing proprietary Expeditors here. It is all just publicly available information. We think it is important because it still tells a good story that most of the time we do not necessarily see, because on our day-to-day, we are so focused on what it is that we are doing with our own little cog in the wheel of aerospace. The first thing we wanted to start off with is that there is strong demand, and there is projected to be strong demand for the next 20 years. These are estimates of what GDP growth is going to be like over the next 20 years.

Really if you are kind of wondering why GDP growth is a big thing, as GDP increases, especially in countries like India and China, we have heard before about the growing middle class. What that means is that more people will be traveling for leisure purposes, I guess. This is looking at how GDP is growing compared to the number of yearly trips per capita that are going to be happening. While the U.S. and the EU are remaining mostly static over the next 20 years, just because there is already so much travel that is coming from those two geographies, you can see how much India and how much China, Brazil, some of these other countries, how much they are growing. If more people are flying, there is just going to be more demand on airplanes. What does that demand look like? This is from Airbus. This is what they showed the global fleet to be like in 2025.

Again, because it is Airbus, this is looking at it through the lens of commercial aviation. So, 18,700 aircraft in the fleet in 2025. Airbus is predicting that fleet is going to grow by almost 20,000 aircraft to 37,000 in the next 20 years. It is important to note, and most of you may already know this or suspect this. It is not just growing by that 18,000 aircraft because in the next 20 years, it is expected that over 15,000 aircraft in the current fleet are also being replaced. What that really looks like, as this chart shows, is that there are almost 34,000 new aircraft deliveries happening.

In the next 20 years, it is only expected, or at least according to Airbus, it is only expected that 3,000 planes that are currently in service today will still be flying in the next 20 years. Let us look at it a slightly different way about the complexity of what this supply chain is looking like. This was kind of a shock to me almost. It is very interesting, at least. This is strictly looking at A321 cabin configuration, so narrow body aircraft, regional aircraft, regional planes. This is not your larger wide body aircraft flying the larger international longer routes. It has historically been a one to two cabin configuration, but you can see 10 years ago, you started to see a third cabin class with certain airlines. As of this year, there are now four cabin classes on several of these airlines flying narrow body aircraft.

It seems almost like it is interesting to say the least. You can see as we have more cabin classes coming on even narrow body aircraft, it is just increasing the complexity of these manufacturing lines. It is not just low cost carrier configurations of 240 seats on one of these single aisle aircraft. Now you are looking at four different cabin classes for these things. That is more seat components, more laboratory components. The overhead bins could be different in size just depending on where within the cabin. The galleys that they are fitting for all of these multiple classes on narrow body, again, it is just quite interesting. That complexity is only going to continue to grow within the next 20 years as the industry also continues to grow. This is very similar to what I just said, but it is from Boeing's perspective.

Just because we want to be fair here we do not want to just talk about either Airbus or Boeing. This is Boeing's outlook on things, and you can see it is very similar. Their estimates of what the 2025 fleet look pretty close to how Airbus was showing it. Boeing is predicting much stronger growth over the next 20 years, from just under 40,000 to now 50,000 aircraft in the fleet within the next 20 years. The average annual revenue growth is also exceeding what Airbus was even predicting. An interesting thing to note on Boeing's slide is they even have the services outlook. This would be spares programs. This could be MRO work that they are predicting. They are estimating the thousands of additional new personnel and the billions of USD that will be spent on the services side of things that happen after new aircraft are delivered to their airlines.

The rest of this, you can kind of see single aisle still completely dominates what the aircraft manufactured deliveries are. Single aisle is the largest growing kind of size of aircraft that is out there. Some of you probably may not necessarily be interested in commercial aviation, and so I wanted to show this as well. This is global military aircraft deliveries. With certain events that are happening globally right now, we know that there is a lot of focus on drones, a lot of focus on unmanned aircraft. But as you can see, the darkest line, the darkest area that is on the bottom of the graph still represents piloted fighter aircraft. The next one above that is rotary wing, piloted rotary wing aircraft. As military spending continues to go up, there is still strong demand coming for piloted systems.