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Re-thinking ownership

Brian Proctor – President & CEOMente Group

Re-thinking Ownership

Corporate Jet Investor

November 12, 2019

For Distribution.

November 12, 2019

©2019 MENTE Group, LLC. All Rights Reserved.

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Aircraft Options – Price vs. Range (2004)

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Citation CJ1

Citation CJ1+

Citation CJ2

Premier I

Citation CJ2+ Citation Bravo

Citation CJ3

Hawker 400XP

Citation Encore

Learjet 40

Learjet 40XR

Citation XLSLearjet 45

Learjet 45XR G100

Learjet 60SE

Hawker 800XPi

Citation SovereignChallenger 300

Citation X Falcon 50EX

Gulfstream G200Falcon 2000

Falcon 2000EX EASy

Challenger 604Gulfstream G350

Gulfstream G450

Falcon 900EX EASy

Gulfstream G500

Global Express

Gulfstream G550

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Ave

rage

Mo

de

l Se

llin

g P

rice

($

Mill

ion

s),

Range ( NM)

Light

Midsize

Super Midsize

Large

Ultra Large

31 Models / Average Cost: $17.1M

Aircraft Options – Price vs. Range (2019)

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Citation M2Phenom 100EV

Elite-HA420Lear 75

Citation CJ4

Phenom 300E

Citation XLS+ Citation Sovereign+

Citation Latitude

Legacy 450 Challenger 350

Citation Longitude

Falcon 2000S

G280Challenger 650

Falcon 2000LXS

Legacy 650

Falcon 900LX

Falcon 7X

Falcon 8X

G500G550

Global 5500

Global 6500

G600

Global 7500

G650

G700

G650ER

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Ave

rage

Mo

de

l Se

llin

g P

rice

($

Mill

ion

s)

Range (NM)

Light

Midsize

Super Midsize

Large

Ultra Large

29 Models / Average Cost: $30.0M

What Does This Look Like

0

2

4

6

8

10

12

$0-10M $10-20M $20-30M $30-40M $40-50M $50-60M $60-70M $70M+

2005 2019

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What Does This Look Like - Comparison

0

2

4

6

8

10

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$0-10M $10-20M $20-30M $30-40M $40-50M $50-60M $60-70M $70M+

2005 2019

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Market Trends

▼Good rationalization of the fleet

– Fewer competing models in each segment

▼Couple of key gaps

– $10M-$15M segment virtually empty

– Traditional Mid-sized market (Hawker 900XP) replaced by Super-mid

– $30M-$40M DA900LXS as the only option – aging platform

▼Evolution of the High End of the market

– 7 models above $50M

– Upper End moving up - $70 mm+

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What Does This Mean – Case Study

▼Fortune 500 Company

▼Missed Earnings Q1

▼CEO Called, wanted to sell some aircraft

▼Reviewed the fleet; all aircraft were leased

▼G650:

– $65M Purchase

– LRF 0.9

– $585,000 per month

▼Here’s where the problem starts

– Capital: $7M

– Fixed: $2.6M

– Variable (Direct): $2.3M

– 400 Hours per Year

– Fully Loaded: $29,775 per hour

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Charter Market

▼Soaring Costs

– Pilot Comp up 20% YoY for three straight years

– Maintenance and Engine cost increases

▼Plummeting Aircraft Values

– New aircraft approaching 40% value loss in first five years of ownership

(60% RV)

– Clearly 50-60% of annual ownership is capital

▼Evolution of pricing tools

– Eroding margin

– Benefitting the charterer (ie., the person taking no risk)

▼Pricing must change

– If pricing doesn’t begin to increase, market supply will naturally decline

▼On a brighter note

– Charter a G650 on the way home

– Cost: Only $10,000 per hour! 10

Trends in Market – Anti Business Jet Movement

▼Undesirable Identifiable Business Asset

– Ford, GM, GE

– Press and Activist Investors

– WeWork

– “America’s #1 Corporate Jet Abuser?” Seeking Alpha, 18 Sept 2019

– Investment Fund D.E. Shaw and Emerson Electric, 22 Oct 2019

▼Environmental Perception

– Corporate Sustainability Policies

– British Labour Party – proposed ban on fossil fuel powered corporate jets

in England by 2025 announced 04 November

▼Tax the Rich

– Canadian Liberal Party (reelected 21 Oct 2019) – proposed 10% Luxury

Tax on Private Aircraft, Boats and Cars over $100,000 Cdn

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There’s Something Missing

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▼The entire Business Aviation industry is

aligned with selling and operating

aircraft

▼Most buyers, however, don’t want to

“buy” an aircraft

▼They want access to what the aircraft

provides…lift.

▼We are working with several industry

partners and will be announcing in

Q12020 a new business, designed to

deliver what the market wants

▼See you in London!

Thank You

MENTE Group, LLC

3201 Dallas Parkway, Suite 777

Frisco, Texas 75034

Office: (214) 351-9595

Fax: (214) 350-3276

www.mentegroup.com

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Thank you!