Market Outlook 2010-2029a look forwardMarket Outlook 2010-2029trends and analysisby the numbersexecutive summaryregional overviewmarket forecastdefinitionsThe reverse of the old saying is particularly true for commercial aviation, an industry characterized by irregular cycles of demand, profitability and the timing of new aircraft orders. Although it can be difficult to predict the magnitude and duration of each cycle, traffic volumes always recover and grow. A strengthening world economy needs a vibrant air transport network to satisfy the demand for more aircraft seats and cargo capacity.Since the prosperity of the airline industry correlates closely to GDP, several world regions are expected to lead the return to health. Already, were seeing some remarkable evidence of that strength. In 2009, the number of intra-Asia Pacific/China air travelers surpassed those of North America and became the worlds largest market. Growth is also predicted to be strong in emerging markets where regional aviation will provide greater connectivity.Our twenty-year market outlook suggests order prospects are strong at the top end of the 30 to 120-seat aircraft capacity segment. Nearly half of the predicted volume of new aircraft will be needed to satisfy expected traffic growth and address right- sizing opportunities in established markets. The other half will replace the worlds ageing fleet with more efficient, environmentally-friendly aircraft. We are continually studying new technologies, including research with renewable fuels, to ensure our products comply with the strictest noise and emissions standards.Companies, like people, often emerge from economic downturns with renewed perspectives. I believe airlines in countries that never had jet aircraft with fewer than 120 seats have a unique opportunity to re-examine their approach to capacity and seize the untapped potential of that category. As many of our more than 50 E-Jets customers can attest, their fleet decision years ago helped them weather todays economic turmoil.What goes down eventually comes back up.Paulo CesarExecutive Vice President, Commercial345a look forwardexecutive summaryExecutive SummaryEmbraers twenty-year forecast is determined by a combination of global economic, political, social, technological and economic forces.Economic ForcesEmerging nations have been major drivers of the global economic recovery and traditionally strong countries like the USA and those in Western Europe are improving at much slower rates. This is a signal of a shift in the balance of global economic power following the worst post-war financial crisis in history.Within the new global landscape, the GDP of China is rivaling that of Japan and is destined to become the second largest world economy in 2010.Top 5 World Economies Nominal GDP (US$)Rank2009201920291USAUSAChina2JapanChinaUSA3ChinaJapanIndia4GermanyGermanyJapan5FranceIndiaGermanySource: The EconomistThe Environment and New TechnologiesEnvironmental impact has become a fundamental component of any industry. Copenhagen 2009 raised awareness of the most pressing climate change issues. Strict government policies for high carbon emission rates were developed.The implications for aviation are enormous with engine and airframe manufacturers increasingly in the spotlight.Although aircraft CO2 emissions account for only 2% of total global greenhouse emissions, the aviation industry is stepping up its efforts to develop products with new technologies that will reduce fuel consumption, increase efficiency and generate fewer emissions.Embraer has a long tradition of developing technology that promotes a cleaner environment. It was the first manufacturer to build a certified ethanol-fueled airplane. In November 2009, Embraer, Brazils Azul Airlines, General Electric and Amyris of the USA agreed on a joint project to study the technical aspects and sustainability of a renewable jet fuel derived from fermented sugar cane.Political/SocialEconomicsEnvironment/New Technologies? ? ? ?Air Transport System6a look forwardexecutive summaryChart 1 Projected Traffic and Economic Growth (2010-2029) RPK (Billion) by Region05001000150020002500AfricaCISLatin AmericaMiddle EastChinaAsia PacificEuropeNorth America05001000150020002500AfricaCISLatin AmericaMiddle EastChinaAsia PacificEuropeNorth AmericaThere will be greater pressure to accelerate the retirement of old- generation aircraft and replace them with more fuel efficient models that will help reduce carbon emissions.Political and Social Forces The commercial air transport industry has become stronger. Market liberalization in Asia, Latin America and, mainly, the Open Skies agreement between the USA and Europe has allowed more airlines to seize opportunities to grow their networks.Consum