©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

UNCERTAINTY AND RISK . . .

2014–2024 GLOBAL MRO FORECAST

MRO AMERICA CONFERENCE

APRIL 2014

04/08/2014

©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

A LOOK BACK

2 04/08/2014

©TeamSAI 3

IN 2004, TEAMSAI PREDICTED MRO IN 2014 WOULD EXCEED $56B

04/08/2014

$42.7

$56.5

2004 2014

2004 Forecast 2003 Forecast

2004 2009 2014

16,030 21,042 25,586

2,873,863 3,691,000 4,491,000

$11.6 $13.1 $14.5

$10.1 $12.2 $14.7

$6.9 $7.4 $8.9

$8.5 $9.1 $10.9

$37.0 $41.8 $49.1

2004 Forecast 2014 Forecast

BUT WOULD ANYONE SAY IT HAS BEEN AN EASY DECADE?

Note: All values in 2014 $US

.

Total Jet Aircraft MRO Forecast (2014 $USB)

$54.7

2014 2024

$83.3

©TeamSAI 4

RPM HISTORY COMPARED TO AIRLINE PROFITABILITY (1989-2013)

04/08/2014

Gulf War

9/11

SARS

Global Financial Crisis

©TeamSAI

WHAT DOES IT MEAN FOR MRO PLANNING?

04/08/2014

MROPLANNING

risks and uncertainty abound…

Forecast

Uncertainties

MRO

Uncertainties

Geo-

Political

Risks

Natural

Disaster

Risks

©TeamSAI 6

DON’T GET COMPLACENT…GEO-POLITICAL RISKS CONTINUE

04/08/2014

slowdown in

China • Chinese economic growth accounts for 24% of net global

growth

GE

O-P

OL

ITIC

AL

currency

fluctuations

• Threatens airlines in emerging markets such as India and Indonesia

• Ticket prices

• Ability to purchase oil and parts

short term

short to

medium

term

China as a share of

net economic growth ¼ Ticket prices

US$-denominated oil

Non-local spare parts ▲

?

emerging market

currency fluctuations

slowdown in

China

©TeamSAI 7

DON’T GET COMPLACENT…MRO RISKS ABOUND M

RO

©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

FLEET AND MRO

OUTLOOK

8 04/08/2014

©TeamSAI

year-by-year fleet forecast

year-by-year MRO forecast

improved airframe modifications model

improved component MRO model

improved line maintenance model

implemented engine shop visit model and

improved interval driver methodology

improved labor/material differentiation across all

models

9

MODEL ENHANCEMENTS FOR 2014

04/08/2014

©TeamSAI 10

GLOBAL FLEET OUTLOOK - COMMERCIAL AIRLINE SECTOR

04/08/2014

2014-2024

Growth

Rate

2024

Market

Share

0.8% 24%

2.1% 18%

4.4% 17%

7.3% 12%

5.1% 8%

5.6% 6%

5.8% 6%

5.1% 5%

11.4% 3%

©TeamSAI 11

GLOBALLY, THE MRO GROWTH OUTLOOK IS HEALTHY

04/08/2014

$58B-

$87B Global Market

Size

+4.2%

CAGR

2014-2024

Airframe 4.1% 20%

Engine 4.1% 38%

Component 4.4% 22%

Line 4.1% 20%

CAGR % SHARE

©TeamSAI 12

MRO REGIONAL MARKET SHARES CHANGE DRAMATICALLY BY 2024

04/08/2014

ME/Africa • ME will double by 2024,

driving majority of

growth

Asia • Asia will be the largest

MRO market by 2024

Europe • EU to have moderate

MRO growth, at 2.9%

Americas • Large-scale fleet

replacement in NA

translates to flat MRO

• LA&C market drives

growth

Americas

Europe

Asia

ME/Africa

©TeamSAI 13

NORTH AMERICAN FLEET GROWTH WILL BE LIMITED

04/08/2014

pax traffic 2014F (IATA) ▲ 2.5% RPK

current fleet 2014 (Ascend Online) 7,305

fleet CAGR 2014-24 (TeamSAI) +0.8%

deliveries 2014-24 (TeamSAI) 3,700+

retirements 2014-24 (TeamSAI) 2,900+

RJ

▼

2014-2024

CAGR

0.8%

0.3%

-2.2%

1.3%

2.1%

©TeamSAI 14

NORTH AMERICAN MRO OUTLOOK

04/08/2014

$18B-

$19B

NA Market Size

+0.7%

CAGR

2014-2024

Airframe 1.9% 20%

Engine 0.0% 36%

Component 0.4% 25%

Line 1.3% 20%

CAGR % SHARE

©TeamSAI 15

NORTH AMERICAN MRO BY VINTAGE & MODEL TYPE

04/08/2014

Consider Impact

to MRO

less-mx-intensive HMV ▼

engine MRO honeymoon ▼

component MRO honeymoon ▼

1970s + 1980s share ▼

1990s, 2000s, 2010s share ▲

North America's Top 10 Aircraft Families in terms of MRO Spend

2014 2024 1 737 NG & MAX 15% 737 NG & MAX 28%

2 757 13% A320 CEO & NEO 18%

3 A320 CEO & NEO 12% 777 7%

4 767 8% 757 5%

5 CRJ-700/900/1000 7% Embraer 170/175/190/195 & E2 5%

6 CRJ-100/200 5% A350 4%

7 777 5% 787 4%

8 MD-80/90 4% 767 4%

9 ERJ-135/140/145 4% A330 3%

10 747-400 4% MD-11/11F 3%

©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

DEALING WITH

UNCERTAINTY AND RISK

16

04/08/2014

©TeamSAI 17

RISKS AND UNCERTAINTIES IN FLEET AND MRO FORECAST

04/08/2014

Region 2014-24

Net MRO Increase

AP $6.6

CH $6.2

ME $4.1

WE $3.4

LA&C $2.7

EE $1.9

IN $1.6

NA $1.3

AF $1.2

Total $29.2

Vintage 2014-24

Net MRO Increase

1970's -$1.2

1980's -$8.7

1990's $15.2

2000's $15.9

2010's $8.0

Total $29.2

HIGH: higher deliveries/lower retirements

moderate interest rates

stable economic growth in emerging regions

moderate oil prices

lower deliveries/higher retirements

higher interest rates

LOW: low economic growth

©TeamSAI

BENEFITS

18

POSITIONING THE BUSINESS EFFECTIVELY

04/08/2014

Methods to Achieve

strong balance sheet

good bottom line

distinctive reputation

effective scenario/ contingency planning

customer focus

broad vision

excellent execution

financial discipline

Le

ad

in

g Q

ua

litie

s EXCELLENCE

PROFITABILITY

▼SURVIVABILITY

▲VERSATILITY

PREPAREDNESS

©TeamSAI 19

AIRLINES’ WIDEBODY HMV WORK IN THE AMERICAS

04/08/2014

L. AMERICA

65% WB HMV

ALL IN HOUSE

N. AMERICA

38% WB HMV

8% IN HOUSE

30% ON SHORE

2%

2% 9%

49%

25%

10%

The opportunity to repatriate WB HMV is feasible, but not without risk

©TeamSAI

Deliver……..

Define ……..

Analyze……..

20

MROS MUST ANALYZE, DEFINE, AND DELIVER VALUE TO CUSTOMERS

04/08/2014

know your

market

know your

proposition

know your

customer

compelling presentation

execution

clear business case

pricing

clear strategy, positioning

market attractiveness

competitor analysis

market potential

©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

THANK YOU

21 04/08/2014

Chris Doan Chairman & CEO

TeamSAI, Inc.

(404) 762-7257

cdoan@teamsai.com

WWW.TEAMSAI.COM