AviaBid Business Plan 04-10-00

8/2/2019 AviaBid Business Plan 04-10-00

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AviaBid.com - The Internet's On-lineAviation Auction Community and Business-to-Business

Marketplace

Business Plan

Marco Santiago JR, President, CEO14432 South 40

thStreet

Phoenix, Arizona 85283

Tel. (602) 300-6059Fax. (425) [email protected]

March, 2000

This copy of the AviaBid.com Business Plan is being issued to you for your personal review. By accepting this copy, you areacknowledging your understanding, agreement, and consent of the following:

This confidential document is the sole property of AviaBid.com, LLC. All information contained within this business plan and itsappendices belong to AviaBid.com, LLC. No part hereof may be reproduced, distributed or used for any other purposes without theexpress written consent of AviaBid com LLC This copy must be immediately returned to AviaBid com LLC upon request


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Table of Contents

1.0 EXECUTIVE SUMMARY .........................................................................................................................................................1

1.1 VENTURE AND MISSION ...............................................................................................................................................................11.2 KEY INVESTMENT CONSIDERATIONS ............................................................................................................................................11.3 MARKET AND OPPORTUNITY........................................................................................................................................................21.4 PRODUCT AND ADVANTAGES .......................................................................................................................................................31.5 MANAGEMENT.............................................................................................................................................................................31.6 FINANCIAL PROJECTIONS .............................................................................................................................................................41.7 CAPITAL REQUIRED .....................................................................................................................................................................4

2.0 COMPANY SUMMARY AND KEYS TO SUCCESS ..............................................................................................................5

2.1 COMPANY OWNERSHIP.................................................................................................................................................................52.2 COMPANY LOCATIONS AND FACILITIES ........................................................................................................................................52.3 SHORT TEM OBJECTIVES ..............................................................................................................................................................52.4 KEYS TO SUCCESS........................................................................................................................................................................5

3.0 PRODUCTS ..................................................................................................................................................................................6

3.1 PRODUCT DESCRIPTION ...............................................................................................................................................................73.2 FUTURE PRODUCTS......................................................................................................................................................................93.3 COMPETITIVE COMPARISON .........................................................................................................................................................93.4 TECHNOLOGY ............................................................................................................................................................................10

4.0 MARKET ANAYSIS SUMMARY............................................................................................................................................11

4.1 MARKET SEGMENTATION...........................................................................................................................................................114.2 MARKET SEGMENTATION NEEDS................................................................................................................................................114.3 MARKET TRENDS.......................................................................................................................................................................124.4 INTERNET MARKET GROWTH - BUSINESS-TO-BUSINESS..............................................................................................................134.5 AVIATION AND AEROSPACE INDUSTRY ANALYSIS.......................................................................................................................144.6 INDUSTRY PARTICIPANTS ON THE INTERNET ...............................................................................................................................184.7 COMPETITIVE ANALYSIS ............................................................................................................................................................194.8 OPPORTUNITIES .........................................................................................................................................................................224.9 THREATS AND RISKS ..................................................................................................................................................................24

5.0 MARKETING STRATEGY AND IMPLEMENTATION SUMMARY ...............................................................................24

5.1 COMPETITIVE ADVANTAGES.......................................................................................................................................................245.2 COMPETITIVE WEAKNESS...........................................................................................................................................................255.3 KEY STRATEGIES .......................................................................................................................................................................255.4 VALUE PROPOSITION .................................................................................................................................................................285.5 POSITIONING STATEMENT ..........................................................................................................................................................285.6 PROMOTION...............................................................................................................................................................................285.7 PRICING.....................................................................................................................................................................................295.8 SALES AND MARKETING PROGRAMS...........................................................................................................................................305.9 SALES FORECAST.......................................................................................................................................................................315.10 MILESTONES ............................................................................................................................................................................33

6.0 MANAGEMENT AND ORGANIZATIONAL SUMMARY ..................................................................................................34

6.1 MANAGEMENT TEAM.................................................................................................................................................................346.2 ADVISORY BOARD .....................................................................................................................................................................366.3 MANAGEMENT TEAM GAPS........................................................................................................................................................366.4 ORGANIZATIONALSTRUCTURE ...................................................................................................................................................386.5 PERSONNEL PLANS.....................................................................................................................................................................38

7 0 FINANCIAL PLANS 39


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AviaBid.com - The Internet's On-Line Aviation Auction Community and Business-to-Business Marketplace

1.0 Executive Summary

1.1 Venture and Mission

AviaBid.com aims to establish itself as a leading online destination for aviation and aerospace business-to-business (B2B).Currently, AviaBid.com operates and provides an aviation auction community environment for aviation enthusiasts, professionals,and business-to-business users on the web. AviaBid.coms 300+ members are able to auction and bid on items, post to communityforums, and browse and/or search through a broad range of aviation related links to other aviation-related websites.

We believe there is a significant opportunity to quickly establish ourselves as a major presence in the exchange market space.Significant and incremental returns can be achieved by capitalizing on the growth of this market by developing an effective,

efficient, and value added service for buyers and sellers.

Our mission is to expand on our current business model in order to establish a vertically focused on-line business-to-businessexchange for professional purchasing and selling organizations in the aviation and aerospace community. This community mayinclude original equipment manufacturers (OEMs), parts and service resellers, fixed based operators (FBOs), service providers,and aviation/aerospace consulting. This network of buyers and sellers will help facilitate effective and efficient communication,reduce purchasing and selling cycle-times, and open markets for all members of the community. Above all, AviaBid.com aims to addvalue to the buying and selling function for each of its members and to contribute to the their success in business.

1.2 Key Investment Considerations

We believe our plan identifies and addresses a significant business opportunity based on the following:

The Aerospace industry is huge. This industry currently generates about $500 billion in worldwide sales annually.

The B2B market is experiencing rapid growth. Revenues from Aerospace & Defense B2B transactions are projected to growfrom $547 million in 2000 to $14.5 billion in 2004. AviaBid.com has the potential to create great value through savings, andthe addition of value-added services, in an industry worth more than $50 billion in aftermarket volume alone.

The market is highly fragmented and is ready to take advantage of a vertically focussed online marketplace. The currentmarketplace contains thousands of small and medium size suppliers and buyers that will find value in a vertically focused

online trading community such as AviaBid.com.

A market leadership position remains attainable. We plan to provide a level of service that is not currently provided in thisindustry space. First to market is still attainable with several companies still talking about entering this space.

Management team brings experience. The entire team has senior level experience in supply chain management, brandedmarketing, and information technology. We bring a thorough understanding of how to manage the major elements of asuccessful online business-to-business exchange and marketplace.

Opportunities for creating value along the supply chain. Relatively new and exciting technologies are now available thatwill allow market makers, such as ourselves, to create value along the entire supply chain. Capitalizing on our experience insupply chain management, and our ability to move quickly in order to implement technology, we are in a good position toexecute a plan that will bring a branded level of service to small and medium sized suppliers and buyers looking for economies

of scale within their respective organizations.

We offer several exit strategies. We are prepared to focus our efforts on establishing a brand that closely links high qualityand reliable e-commerce, business-to-business integration, and the aviation/aerospace industry. Establishing and extending theAviaBid.com brand in this manner will help us establish strong valuations with an eye toward returning very impressivemultiples on the investors initial investment. Such returns may take the form of an acquisition, strong positive cash flows,and/or an initial public offering.


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1.3 Market and Opportunity

We target two markets within the aviation community the aviation consumer and the industrial buyer and seller. The commercial,or Business-to-Business segment of the market is by far the larger of the two markets in terms of potential revenue. This segment islooking for an effective and efficient medium to locate and/or sell products through the use of a vertically focused onlinecommunity. The conventional model for the trade of idle assets is inefficient. Traditionally, those looking to sell idle assets use aprotracted process of contacting potential buyers via phone or fax. Sellers can spend months looking for a buyer, let alone severalwho bid competitively. Likewise, buyers are confronted with a selection limited by a diffused pool of sellers and often find that theirsearches and auctions are time-consuming and fruitless. AviaBid.com's concept is to offer a faster, easier, and more efficient way tobuy and sell aviation related business surplus by becoming the central marketplace for companies who are looking to buy or selltheir excess inventory. The e-commerce model expands the pool of buyers and intensifies competition. Buyers bid against each otherin real-time, as if in a live auction, and the centralized marketplace enables those buyers to choose from an extensive worldwideselection. Sellers will also have the opportunity to compete on quotes requested by purchasing professionals and other buyersthrough a reverse auction format. In all, the buying and selling cycle is considerably shortened.

The consumer market will represent a smaller percentage of our revenue base, but will represent a much larger portion of ourmembership community. It is more focused on buying and selling relatively low priced items that meet the needs of the generalaviation community. The general aviation community also tends to exist in a more social context relative to the commercial aviationbusiness-to-business community. As such, AviaBid.com plans on providing an environment that promotes a relatively socialcommunication structure supported by special interest bulletin boards and value added and pre-qualified vendor offerings to enhancethe members online experience.

The opportunity to engage the aviation and aerospace industry with an online business-to-business presence is quite substantial.More and more businesses in this industry are beginning to recognize the potential for cost savings by virtue of participating in anonline exchange environment, which we aim to host. With respect to the aviation and aerospace market, Forrester Research predictsthat transactions, which are transacted through online business-to-business exchanges, are expected to grow substantially from $547million in year 2000 to $14.5 Billion by the year 2004.

B2B Aerospace & Defense Revenue Growth

$0.5$1.5

$6.1

$11.5

$14.5

$0

$2

$4

$6

$8

$10

$12

$14

$16

2000 2001 2002 2003 2004

Billions

Competition in this market is relatively thin. There are currently very few players, however, competition in this space is alsobeginning to intensify, and the window of opportunity will continue to close for those that move too slowly into this space.Establishing a foothold with the intent to dominate will assure our success; however, we do see a period of consolidation in the 12 to18 month horizon. After the consolidation period, the market will only support a handful of players. The rest will very likely be


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1.4 Product and Advantages

We aim to leveraging the power of e-commerce by connecting industrial aviation and aerospace purchasing and sellingorganizations. Our goal is to provide an environment that will allow our community members the ability to conduct onlinenegotiations, manage processes and workflow, check on outstanding transactions, establish their own virtual procurement system,and provide for store front and/or catalog management and search functions.

AviaBid.coms reverse auction will bring real business opportunities to suppliers by paving the way into accounts that hadpreviously been unattainable or closed because of traditional sales and purchasing channels. The application of our reverse auctionmodel for business-to-business transactions will have profound implications for markets. Purchasing programs will realize hugesavings from industry suppliers that have a greater opportunity to bid on purchasing requests in a vertically focused industrial

community.

Our traditional auction model promises to make buying and selling aviation goods, services, and capital equipment more efficient,convenient, and effective. Buyers and sellers do not have to plan for and/or wait for specific auction dates. Sellers have theadvantage of listing their goods and services at any time, from anywhere, and to a much broader audience of buyers this expandsthe sellers distribution of goods by several orders of magnitude. Buyers have the advantage of visiting a destination that is not outof the way. Auctions are held 24 hours a day, 7days a week, and 365 days a year. AviaBid.com auctions can be accessed from theconvenience of home or office.

AviaBid.com members will also find value in the amount of information provided during their visit to the site. Members will find awealth of aviation related content provided by members as well as our site content editors. Members will also be provided freecoverage of business and consumer oriented news and product information.

1.5 Management

Marco Santiago Jr., President, CEO

Marco Santiago Jr. launched AviaBid.com on August 3rd 1999. He is a graduate of Western International University, where he

studied information systems and business administration. Before attending Western International University, Marco attendedArizona State University, where he majored in aerospace engineering and applied mathematics. Before devoting himself full time tothe development of AviaBid.com as a venture, Marco studied in the Technology Management MBA program at the University ofPhoenix. He was employed as a programmer analyst for the Adaptive Broadband Corporation from August 1996 to February of2000. Currently, Marco is a senior consultant in the Customer Relationship Management (CRM) group at the Oracle Corporation.Marco is a licensed pilot and a former USAF Reserve and Arizona Air National Guard crew chief on C-5 and C-141 aircraft.

David McIntyre, Vice PresidentMarketing

David McIntyre has over eight years of management experience in the Internet and technology industry. David is currently the headof marketing and finance for Avnet Inc.s $2 billion Integrated Material Services (IMS) group. Avnets IMS group is a world-classsupplier of supply-chain logistics and utilizes EDI and the Internet for supply-chain integration. David leads his organization bydeveloping best in class supply chain integration for tier one customers including electronic forecasts, triggering, invoicing, andpayment. He currently negotiates these strategic partnerships by helping customers understand their total cost of ownership. Davidis the developer of the current Performa system utilized by Avnets global sales force and continues to lead his organization instrengthening profitability goals by implementing an activity based costing system. He is currently responsible for all strategic and

ti l k ti i l di d ti f A t Gl b l S l Ch i i P i t j i i A t D id k d


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Kim B. Bozik, Vice PresidentOperations and Community Logistics

Kim Bozik has over 12 years experience in product development, marketing and operations with Fortune 500 companies and anemerging technology company. He was a senior systems engineer with Honeywell for 8 years and was a key member of inertialnavigation equipment development for the space industry. For the past 4 years he has held product marketing, technical marketing,and marketing management positions with Intel, Motorola, and Three-Five Systems. Through these assignments he has successfullybrought semiconductor and liquid crystal display technologies to the marketplace. Currently, Kim is a senior strategic demandanalyst for Intel and is responsible for determining market trends and its effect on factory production and capital purchase needs.Kim's background also includes knowledge of the general aviation industry through a previous family flight instruction business. Heholds a Master of Science in Engineering Management from the University of South Florida and a Bachelors degree in ElectricalEngineering from the Florida Institute of Technology.

1.6 Financial Projections

Aviation related imports and exports have been on the rise since 1995. 1998 imports of aviation goods and services reached almost$22 billion while exports soared to almost $59 billion (General Aviation Manufacturers Association (GAMA). This trend isexpected to continue well into the 21st century, and represents a robust aviation economy in which to exploit the e-commerceinitiative. By almost every measure, the aviation and aerospace industry will continue to grow.

With respect to the aviation and aerospace industry, Forrester Research estimates that total transaction revenue is expected to top$14.5 billion for the online business-to-business space. We believe that the market is bigger if we include ancillary andcomplimentary goods and services that do not fall directly under the canopy of aviation and aerospace goods and services. Thesegoods and services may include office supplies and equipment, information systems equipment and services, engineering andconsulting, and other goods and services that potential members of our community may find convenient to buy and sell withouthaving to go to other online markets.

We have developed financial projections for the period of April 2000 through April 2004. Revenue for the year 2000 is projected tobe $3.1 million based upon a starting date in April, while revenue for 2001 is projected to be $24.4 million. Revenue for the years2002 through 2004 is currently based on an organic growth model, and is projected to be $46 million, $58 million, and $78 million,respectively. Organic growth is derived from forecasted industry growth rates.

We have supplied a brief financial projection table based on the following assumptions. A more detailed analysis may be found inthe financial section of the plan. The projections shown are based on us capturing 40% of the total business-to-business market andextracting a 1% or 2% on every transaction in the trading community. Values are in millions of dollars.

Revenue Projections ($Millions)

2000 2001 2002 2003 2004

TAM $500 $1,500 $6,100 $11,500 $14,500

1% Fee

40% $2 $6 $24 $46 $58

2% Fee

40% $4 $12 $49 $92 $116

1.7 Capital Required


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2.0 Company Summary and Keys to Success

AviaBid.com became a limited liability company in the state of Arizona on August 3, 1999. Before then, AviaBid.com was formallyknown as ArizonaSkyNet.com, a local aviation portal for the Arizona flying community. ArizonaSkyNet.com was established inSeptember of 1998. In January of 1999 ArizonaSkyNet.com added the Internets first online aviation auction application, which ranin beta mode until August of that year. AviaBid.com went online as a separate business entity on September 6th, 1999, and it iscurrently owned and operated by its principal investors.

2.1 Company Ownership

AviaBid.com became a limited liability company in the state of Arizona on August 3, 1999. It began operations onSeptember 6th, 1999, and it is currently owned and operated by its principal investors, Marco Santiago Jr. and DianaEckenburg.

2.2 Company Locations and Facilities

AviaBid.com is currently being run from the private residence of its principal operators in Tempe, Arizona. Currently,the website is hosted and serviced by AuctionShare.com Inc. of Jacksonville, FL.

2.3 Short Tem Objectives

1. To complete and extend the implementation of our business-to-business model within 60 days of capitalization.2. To register 10,000 individual business-to-business users by the end of the first fiscal year.3. To identify, pre-qualify, and partner with 5000 aviation and aerospace related suppliers of commercial and

consumer parts and services by the 3rd fiscal quarter after initial implementation.4. To register 5000 organizational buyers within the 3rd fiscal quarter of initial implementation.

These objectives will serve as an initial measuring stick of our success.

2.4 Keys to Success

1. Leverage community membership to attract high quality sponsors, advertisers, and value added offerings andservices through strategic partnerships.

2. Encourage repeat traffic by maintaining a high level of community trust, value added content, and high quality

auction listings and services.

3. Establish, strengthen, and maintain the AviaBid.com brand with aggressive marketing strategies. Thesestrategies include, but are not limited to, the use of print advertising in nationally branded and industry relatedpublications, aggressive and consistent participation in key trade shows, cross-linking with well establishedwebsites, targeted banner advertising, direct marketing, search engine listings, and the formation of partnershipswith key industry players.


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liquidity in the form of transactions within the exchange community. The virtuous circle continues and simply feedson itself.

7. We will maintain commercial neutrality as market makers. This means that the exchange must be perceived as aneutral third party by all other parties, as well as actually acting as a neutral body - we must benefit all players inthe industry that we serve.

8. Ensure the highest level of fairness and Integrity. AviaBid.coms organization, policies, and practices will bestructured to provide buyers and sellers of all types an unbiased and fair environment in which to conduct day-to-day business. One way of establishing a high level of integrity, and to insure commercial neutrality, is byestablishing a user advisory board that will provide a forum for key players in the industry to have adequate inputon policy without them having to have a controlling ownership or control on the principals or the board of

directors.

9. Encourage the building of community through the use of real time exchange information, news feeds, industryrolodexes, bulletin boards, discussion forums, industry newsletters, calendar of industry events, industry job searchand job ads, and classified advertising.

10. Partner with the right players in order to scale quickly. These partners may include, but not limited to, deep-pocket investors, industry buyers and sellers, existing broker intermediaries, infomediaries, content providers, ITvendors, and trading system software providers. These partnerships will be formed with a eye toward not letting

any one of them establish control of the market.

11. Operate as a virtual business - we will outsource as much of our operations as possible. This will have the effectof keeping staffing levels low, increase our ability to move quickly in response to changing market conditions, andremain flexible.

3.0 Products

Currently, AviaBid.com provides the auction functionality required for members to place aviation-related goods andservices for auction on the web. Users are allowed to post to community forums and browse and/or search through abroad range of aviation related links to other websites. AviaBid.com will also provide a business-to-businessenvironment through the use of market making mechanisms. Such mechanisms will support the use of dynamic pricingmodels, workflow processes and management, and messaging applications. In all, AviaBid.com will form a verticalnetwork of buyers and sellers in order to serve all members of the aviation and aerospace community. By providing arobust platform, we aim to ensure that buyers and sellers are optimally matched so that the buying and selling cycle isshortened, and organizations participating in this community get the best returns for the time and money invested in

their purchasing and selling organizations.


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3.1 Product Description

Business-to-Consumer and Person-to-Person Auctions

AviaBid.com currently provides its members the following features and services in its auction community:

Users may choose to be notified daily by e-mail of new and/or current auctions in their categories of interest. Thisallows users to browse listings on their own time.

Send e-mail to users automatically anytime a user registers, places a bid, lists an item, is outbid, or an auction inwhich they participated ends.

Daily status E-mails sent to all users with current bids and/or auctions. Track bids and display them during the auction and after it closes.

Automatic profanity filter allows filtering of unwanted words or phrases from both titles, descriptions and feedbackcomments.

Users have full control over their item listings. They can set starting bid, reserve price, quantity, auction length andmany other optional listing features.

Automatic Proxy Bidding on all auctions. Proxy Bidding allows users to place a maximum bid for an item. Thesystem will place bids on their behalf as necessary until they are the high bidder or that maximum bid is reached.

AviaBid.com utilizes usernames and an internal e-mail system to prevent unauthorized persons from "harvesting"

e-mail addresses from the auction site. This greatly reduces the possibility that users will be targeted by unsolicitede-mail campaigns (SPAM).

An advanced feedback system allows users to leave detailed feedback on other users. A letter grade scale, similarto a traditional school grade (A,B,C,D, or F), is used to rate users. This provides a more accurate assessment of thetransaction than a simple "positive" or "negative" rating system. Additionally, feedback can only be entered byusers actually involved in the transaction (i.e. winning bidder(s) and seller), therefore preventing potential systemabuse.

Users can enhance their listing descriptions by adding pictures and HTML.

Various auction types are available, including single item auctions and "Dutch" auctions.

Users can access their "Personal Page" from just about anywhere on the site. This allows users to view currentstats, such as auctions they have listed, auctions they are currently bidders in, account information and much more.

An easy to use "Re-list Auction" feature makes it simple for users to start the same auction again.

All details of an auction can be viewed including starting time, ending time, bid history, current bid, number ofbids, and much more!

Reserve price auctions are available. This allows users to set a minimum price they are willing to accept for anitem. The item does not sell unless bidding reaches this price. The reserve price is not disclosed to bidders.

A comprehensive Search System - Users have dozen of different ways in which to search the auction database, andin various selectable display formats.

Secure Payment Area to either set up an account or make a payment. AviaBid.com operates using the latest in SSLtechnology for secure transmissions.

Users listing items can select from a large array of listing options. Showcase and Featured auctions, which willgenerate premium revenues while options like icons, colored and bold listing titles enhance the users auction.

No limit on the number, size, or frequency of active listings.

Users are allowed to search a comprehensive database of aviation related websites. Users are also allowed to add tothis database AviaBid com reviews the link submitted in order to maintain the quality of the links


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Business-to-Business

Our business-to-business product offering will include a comprehensive suite of functionality which add value to

professional purchasing organizations, while at the same time expanding markets for organizations selling products andservices to the aviation and aerospace industry. Our plan is to implement a multi-layered architecture that supports acomprehensive commerce platform. This platform will enable community members to better manage and maximizetheir buying and selling processes.

Business-to-Business Market Making Architecture

AviaBid.com will provide the environment to help community members manage the selling and procurement functionsthrough the use of exchange technologies that enable organizations to optimize workflow processes such asrequisitioning, ordering, order tracking, shipping, billing, and payment. At the same time we aim to provide ourmembers the ability of report and perform analysis on these functions.

Central to the growth of this on-line market is our ability to provide a model that promotes dynamic pricing strategiessuch as reverse auctions, the ability to provide quote and bid processing function, and the ability to build and sustainrelationships that support fixed pricing models. If community members wish to sell items from comprehensive cataloglistings, then we will provide a suite of tools needed for these members to manage such content; while at the same time

id th h f ti lit d d t k th f t t

DHTMLXML

Email Fax Voice over IP Streaming Media

Suppliers

Thin ClientInterface

Relational Database Management System

Oracle 8i

Requisitions > Orders > Tracking > Shipping > Billing/Invoicing > Payment

Workflow Management

Content Tools

Catalog Creation and Management

Integrated ERP Application EnvironmentOracle 11i

Online Product Configuration

Multi-LanguageTranslation

DHTMLXML

Buyers

Thin ClientInterface

Quote and BidProcessing

Dynamic PricingForward and Reverse

Auctions

Fixed PricingRelationships

Catalog Search


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member will be negligible, since all that will be required in order to participate in this community is a standard industrybrowser.

Other Products Common to Both Online Environments

Provide its members the ability to receive targeted promotions from qualified venders. This service will be at thediscretion of the community member, who will be allowed to opt-out of such an arrangement.

Provide for a means of participating in closed auctions that are by invitation only. Member suppliers wishing to sellto specifically qualified buyers and resellers may start such an auction.

Provide for a yearly conference and show planner, and provide coupons for access to these shows, which will beprovided by industry partners.

Provide original content that is specific to the aviation consumer and professional. This content will serve toentertain and inform members and visitors of the market community.

3.2 Future Products

One of the more exciting plans for AviaBid.com is to make use of the increasing capabilities that broadband technologyoffers in order to facilitate live auction events from the physical space. AviaBid.com will partner with land basedauction houses in order to bring to its members an added channel in which to participate through the use of multi-mediatechnologies and applications. As high bandwidth infrastructures make themselves more readily available, AviaBid.comwill position itself to provide this service to its members. Doing so will strengthen and extend the brand equity ofAviaBid.com, while providing the physical partner with the opportunity to tap into AviaBid.com's membershipcommunity of buyers and seller.

3.3 Competitive Comparison

Currently, AviaBid.com enjoys the first mover advantage within its competitive space with respect to the auction. There

are no other online aviation auction communities in existence today that serve the aviation consumer market, and thereare few that have deployed the reverse auction functionality that lend itself to business-to-business buying and selling.Whats more, there are no online market makers in existence that integrate the supply chain between buyers and sellers.

Supply chain integration is considered to be the killer application for the business-to-business space. AviaBid.comwill take advantage of this opportunity in order to secure the market and raise barriers to entry as quickly as possible.AviaBid.com is focused on the aviation consumer at this point, but we are in the process of positioning and focusingourselves to become a vertically focused business-to-business destination as well.

Currently there are many aviation-related websites; however, none of them offer an auction-oriented experience. Thereare sites that do offer parts search and request for quote capability, but these sites do not employ the use of reverseauction functionalities needed to dynamically set prices for parts and/or services required by purchasing agents andorganizations. The competition has also failed to market themselves as a general destination for the aviation buyer andseller. Websites that are currently offering parts search and RFQ capability, as well as providing its users with theability to upload inventory are PartsBase.com, apls.com, Spec2000.com, ipls.com, AVSupport.com, FindParts.com,Avi-x.com, wsdn.com, and AirPartsLocator.com.


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members within the community and through the involvement of industry partnerships. This will allow AviaBid.com tobetter establish itself as the business-to-business destination within its aviation oriented vertical industry.

3.4 Technology

At this moment, AviaBid.com does not produce new technologies. For now, AviaBid.com relies on enablingtechnologies packaged by specialized technology providers in order to provide the auction function. AviaBid.com'sforward auction application is currently hosted on the technology provider's server at AuctionShare.com. AviaBid.comis an Active Server Page application, which connects to a SQL server database and runs on Windows NT Servers. Use

of an Application service provider, such as AuctionShare, reduced our initial cost of ownership and served to speed ourtime to market in order to capture the first mover advantage. Our philosophy is to outsource as much of the coretechnology functions as possible in order to reduce cost of ownership, time to market, and react more quickly to marketchanges. We will partner with our technology providers in order to close the product development loop as tightly aspossible.

AviaBid.com is currently evaluating exchange, content management, and supply chain technologies from severalindustry leaders, which include Oracle, Ariba, i2, Moai Technologies, and Vignette. We plan on working with leadingsystems integrators and application service providers in order to shorten the product development cycle, which will

allow us to get to market quickly.

Our business functions will be tightly integrated with the exchange technology and supported by Oracle's 11iapplications, which in turn, will be supported by their 8i relational database management system. This move will serveto scale our operations for anticipated growth. By partnering, and making use of Oracles technology, we will reduce thetechnical risks associated with the implementation of business information systems.


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4.0 Market Analysis Summary

We target two broad markets - the consumer aviation community, and the business-to-business community. Thecombined market is quite substantial, and represents a significant opportunity in which to exploit the e-commerceinitiative. Both market segments have shown strong growth over this past decade, and all indications point to continuedgrowth for this industry well into the next decade. Although the market, especially the business-to-business community,has been slow to embrace the advantages of e-commerce, they have recently done so with great enthusiasm because ofthe efficiencies that it promises. The target business-to-business customer is a global user, and is one that is looking formore efficient ways of conducting business. At the moment, the competition in this space is very thin. There are nodominant players, and the market is in its infancy.

4.1 Market Segmentation

General Aviation Consumer (person to person)

By far, the more numerous of our registration base will be the general aviation consumer. This group isgenerally comprised of general aviation aircraft owners, students and instructor pilots, recreational and sportpilots, and collectors of aviation memorabilia and historical artifacts. Strictly speaking, we are talking aboutthe non-professional buyer and seller. However, it must be said that the general aviation market; i.e., themarket that is defined below, is quite substantial.

General aviation is defined as all aviation other than commercial and military aviation. It is also one of ournations most important and dynamic industries, flying over 27 million hours (nearly two times the airlineflight hours) and carrying 145 million passengers annually. General aviation is relied on exclusively by morethan 5,400 communities for their air transport needs (scheduled airlines served about 600). Approximately 70percent of the hours flown by general aviation are for business and commercial purposes. (General AviationManufactures Association)

Professional and Commercial Buyers and Sellers Global Business-to-Business

Although this segment of the potential market will most likely represent a much smaller segment of theregistered user base, it will represent a much larger portion of the revenue generating membership. The globalbusiness-to-business and business-to-consumer market will be quite substantial, and represents a significantopportunity for us. This segment is made up of suppliers of parts and services in the areas of manufacturing,software, materials, insurance, catering and in-flight services, aviation training, aircraft and equipment leasing,finance, and space systems hardware and services.

4.2 Market Segmentation Needs

We target two markets within the aviation community the aviation consumer and the industrial buyer and seller. Theconsumer market represents one that is focused on buying and selling relatively low priced items that meet the needs ofthe general aviation community. The general aviation community tends to be more social in nature relative to the


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alone several who bid competitively. Likewise, buyers are confronted with a selection limited by a diffused pool ofsellers, and often find that their searches or auctions are time-consuming and fruitless.

Buyers looking for a good deal and sellers looking to open markets also face a diffused pool of prospects, whichincreases the buying and selling cycle time and adds to inefficiencies associated with the process. AviaBid.com'sconcept is to offer a central marketplace where aviation businesses can efficiently buy and sell goods and services(excess or otherwise), build an online storefront, participate in online forums and discussions, or search for industryrelated products, news, and information. Such an environment will serve to expand markets to many suppliers whileshrinking the procurement cycle for buyers. The e-commerce model expands the pool of buyers and intensifiescompetition. In the case of our auctions, buyers bid against each other in real-time, as if in a live auction, and thecentralized marketplace enables those buyers to choose from an extensive worldwide selection. Sellers will have theopportunity to compete on quotes that are requested by purchasing organizations and other buyers through a reverse

auction format. In all, the buying and selling cycle is considerably shortened.

4.3 Market Trends

Online Auctioning

Online auctions have become more popular than ever this past year. One has to only look to the two main online auctionaggregators AuctionWatch.com and InternetAuctionList.com to get a sense of how popular online auctioning has

become. These two sites display a robust list of online auction sites, with categories ranging from antiques tocommercial and capital equipment. Currently, there are well over 400 online auction sites, with a growing list of newones being added every month.

Online auction sites may be divided into two main categories person-to-person, and commercial or business-to-business auction sites. Although the person-to-person auctions have firmly established themselves as destinations for theconsumer oriented market, only recently, however, has the online auction model turned to serve the needs of thebusiness-to-business community. Online auctioning is expected to play a major role in how businesses turn idle andexcess inventories of capital equipment. Reverse auctions, for example, have the capability of opening markets for

suppliers of parts and services and facilitate the procurement of maintenance repair and operations and other services.Currently, there are very few players in this business-to-business arena.

Aviation and E-commerce

The aerospace industry currently generates about $500 billion in worldwide sales annually. In the United States theaviation and aerospace industry is experiencing one of the healthiest periods of growth in recent times. In 1998, thegeneral aviation industry recorded its highest industry billings in history $5.9 Billion up from $4.7 Billion in 1997

(General Aviation Manufacturers Association 1999 Annual Industry Review and Outlook Briefing). In the United Statesalone, aerospace industry sales reached $145.03 billion (Aerospace Industries Association of America 1998 Year endReview). These figures, when combined with the explosive and increasing relevance of E-commerce as a way of doingbusiness, present a huge opportunity for entrants of aviation related electronic commerce.

Over the past year there has been a growing population of aviation related E-commerce websites. Many of these sitesare little more than electronic storefronts for land based aviation supply stores Some of them are pure Internet entities


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4.4 Internet Market Growth - Business-to-Business

It is now generally accepted that Internet related commerce is playing a growing role in business-to-business andconsumer buying and selling, and within just a few years, will play a critical role in worldwide commerce in general.Currently, the Internet accounts for approximately $134.9 billion in commerce. In the US alone, the Internet is expectedto generate approximately $967.5 billion in commerce by the year 2002 (Giga Information Group). In addition, worldwide business-to-business E-commerce is expected to top $475.0 billion up from its 1997 estimated $8.5 billion(ActiveMedia).

Internet Related Market Growth Business-to-Business and Business-to-Consumer(Source: Giga Information Group)

The online auction community stands to play a major role in e-commerce. Forrester Research Inc., Cambridge, Mass.,

recently predicted that business-to-business online auctions will account for $52.6 billion in revenue by 2002. This is asubstantial part of the overall e-commerce picture. In an online article written by George Anders, staff reporter for TheWall Street Journal, David Beirne, of Benchmark Capital, was quoted as saying that the market could be as high as$380 billion in annual revenue by 2002. Such projections indicate that the time is right for heavy capital investments inonline business-to-business auction models, in particular, those that serve the growing aviation community.

U.S. Internet Commerce Forcast

0 200000 400000 600000 800000 1000000

1999

2000

2001

2002

Yea

r

Millions of Dollars

B to CB to B


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4.5 Aviation and Aerospace Industry Analysis

By almost every measure the aviation and aerospace industry is expected to grow rapidly over the next decade. Aircraftshipment and billing have been on the rise since the early 90's and will continue to do so. Imports and exports of aircraftand aerospace components continue to rise, which reflect a robust industry in which to exploit the business-to-businesse-commerce initiative.

4.5.1 Aircraft Shipment and Billing

General aviation shipments of new aircraft have been on a steady climb since the early 1990s, from 1021 units andslightly over 1.96 billion dollars in 1991, to 2220 units and 5.87 billion dollars in 1998. This represent a 117% increasefor units shipped and a 200% increase in revenue over the last ten years. Such increases in aircraft sales will sparkfuture demand for aircraft parts, services, and other aviation related goods much of which will be distributed andserved by e-commerce.

Source: General Aviation Manufacturers Association (GAMA)

Shipment of New U.S. Manufactured General Aviation and Factory Net Billings

0

1000

2000

3000

4000

5000

6000

7000

1990 1991 1992 1993 1994 1995 1996 1997 1998

Year

Unit(Thousands)andDollars(Millions)

Units Shipped

Billing Dollars $Millions


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4.5.2 Aircraft Fleet and Flight Hours

Although there has been a modest increase in the number of active general aviation aircraft flying, the number of hoursflown shows an upward trend on a per aircraft basis. In 1997, hours per aircraft flown per year stood at 144 hourscompared to 136 in 1994. This represents an increase in per aircraft usage, which may prompt an increase in demand forspare parts and services bought and sold in the open market. Again, this market is readily served by e-commercebusiness-to-business initiatives.

Source: General Aviation Manufacturers Association (GAMA)

4.5.3 Pilots Certifications and Aviation Support Personnel

The total number of pilots, which include students, private, commercial airline transport, helicopter (only), glider (only),lighter than air, recreational, instrument rated, and flight instructor pilots, have been on a gradual decrease, which hasmanifested itself in the prevailing increase for their demand.

General Aviation Active Aircraft and Flight Hours perAircracft per year

0

50000

100000

150000

200000

250000

1993 1994 1995 1996 1997Year

ActiveAircraft

(Estimated)

132

134

136

138

140

142

144

146

HoursFlownper

Aircraft

(Esimated)

Year

Active Aircraft(Estimated)Avg Hrs/Aircraft

Total Number of Pilots

200000

300000

400000

500000

600000

700000

800000

mberofPilots

Year

Total Pilots


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4.5.4 Import and Export of Aerospace Products

U.S. Imports of Aerospace Products (Millions of Dollars)1994 1995 1996 1997 1998

Total Imports $12,363 $11,509 $13,668 $18,134 $21,986

Military Aircraft 22 64 24 13 7Civil Aircraft 3787 3482 3924 4656 6319Transports 1361 972 823 1067 1899General Aviation 1711 1449 2136 2514 3432Helicopters 317 300 361 460 449Other 398 771 604 615 540

Aircraft Engines 2775 1828 2007 2987 3767Turbine 2691 1774 1937 2943 3729Piston 84 55 70 45 38

Aircraft & Engine Parts 5377 5745 7339 9904 11476

Spacecraft, Missiles,Rockets, &Parts

401 379 375 574 418

Source: Aerospace Industries Association, based on data from the U.S. Department of Commerce

U.S. Export of Aerospace Products (Millions of Dollars)1994 1995 1996 1997 1998Total Exports $37,373 $33,071 $40,270 $50,374 $58,960

Total Civil Exports 30,050 25,079 29,477 40,075 48,492

Complete Aircraft 17,737 12,275 15,111 23,112 29,119Transports 15,931 10,606 13,624 21,028 27,092General Aviation 598 593 598 946 794Helicopters 82 170 212 207 148Used Aircraft 1111 876 25 22 30Other Aircraft 14 29 84 97 81

Aircraft Engines 2386 1750 1996 2092 2758Turbine 2292 1661 1912 1995 2677Piston 94 89 84 97 81

Aircraft & Engine Parts 9628 10613 11965 14373 15845

Spacecraft, Satellite,&Parts

300 436 405 498 690

Source: Aerospace Industries Association, based on data from the U.S. Department of Commerce

US Aerospace Imports and Exports in Millions of

Dollars

$50,000

$60,000

$70,000

lion)

Aviation related imports andexports have been on the rise since1995. 1998 imports of aviationgoods and services reached almost$22 billion while exports soared toalmost $59 billion


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4.5.5 Aviation Industry Forecasts

By almost every measure, the aviation and aerospace industry will continue to grow. Below is a historical andforecasted outlook for all aircraft categories, active pilots, and hours flown from 1995 to 2010.

Project Number of Flight Hours

35

40

llions)

Projected Number of Active Aircraft

170

180

190

200

210

220

230

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Year

NumberofAc

tiveAircraft

(Thous

ands)

Projected Number of Active pilots

550

600

650

700

750

1995

1997

1999

2001

2003

2005

2007

2009

Year

ActiveNumb

erofPilot

(Thous

ands)

The number of active pilotsis expected to grow fromapproximately 616

thousand in 1997 to 735thousand in 2010. Thisdemand increase isconsistent with thecontinued growth ofInternational commerce.

Source: GAMA

The number of activeaircraft is also expected togrow by 12% over theperiod from 1999 to 2010,from 197 thousand toalmost 221 thousandaircraft.

Source: GAMA

Total hours flown willalso continue to


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The aviation industry will continue to grow in step with the demands placed on it by the growth of national and

international commerce. Such growth speaks well for the need to implement e-commerce systems in order to supportaviation related business exchanges, such as buying and selling aircraft parts and services.

4.6 Industry Participants on the Internet

The online auction space is relatively young, with a few exceptions eBay being one of them. The environment is suchthat there are many online auction sites, but most of them tend to be general auction sites. Few of them address the

specific needs of the aviation industry.

At the highest levels, the online auction space is dominated by nationally recognized brands such as eBay,Amazon.com, Yahoo, PriceLine.com, and uBid.com. These sites are mainly person-to-person auctions, and list a widevariety of items for auction. With respect to the business-to-business space, the trend is accelerating. New entrants areentering this space in all industries. The online business-to-business model is a much more complicated one, but is amuch more opportunistic one with respect to return on investment.

There are industry specific auction sites, which serve the needs of vertically focused industry groups. These business-

to-business sites tend to promote themselves as destinations for businesses to bid and/or liquidate idle inventory andhigh value capital equipment. Other players focus on the use of reverse auctions to facilitate procurement of goods andservices. This is typically done by getting vendors to competitively bid on request for quotes. The business-to-businessplayers in this group are TradeOut.com, ComAuction.com, Liquidation.com, iMark.com, Chemdex, PurchasePro, andVirticalNet.com, to name a few. Most recently, eBay has moved to participate in the business-to-business space with itsintroduction of eBayPro. None of these players focus on the aviation community.

Not all sites, which claim to facilitate matching buyers and sellers, use the online auction model. There are industryplayers, specifically aviation related, that serve as parts locator services, and provide request for quote (RFQ)

functionality. Websites that offer such services for the aviation community are Avsupport.com, Aeroparts Locator,Aviation Network Online, apls.com, Bcomm.com, Findparts.com, ILS, IPLS, PartsBase.com, Spec2000.com, andWSDN.

The number of participants in this industry will continue to grow. Given the enormous potential of the market, and withthe revenue numbers that industry expert project, there seems to be plenty of room for new entrants.


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4.7 Competitive Analysis

AviaBid.com participates in an industry space with very few competitors with respect to online aviation auctions andindustry market making exchanges. Those that do exist are relatively new, and none of the competitors enjoy any real orperceived dominance within the aviation industry. Below is a list of potential competitors and a description of theirperceived strengths and weaknesses.

AerospaceOnline.com a Community of VerticalNet.com

Strength

Vertical Net is considered one of the first business-to-business communities. They are a publicly traded company withsubstantial backing by partners from a wide variety of industries. AerospaceOnline.com is one of Vertical Net'svertically focused communities, Vertical Net established a well known brand with excellent technical, managerial,financial resources, and deep industry knowledge.

Weakness

Analyses of AerospaceOnline.coms website show that its dependence and association with Vertical Net seems to havediluted its focus with respect to the aviation auction. AerospaceOnline.com seems to share the auction application withother vertical communities within Vertical Net. Because of this it fails to deliver a true aviation auction experience.

Direct examination of its product offerings with respect to the auctions shows that it fails to organize its listings in anymeaningful manner with respect to aviation.

Aviation Exchangewww.avi-x.com

Strength

Aviation Exchange is an online aviation auction site similar to AviaBid.com. Aviation Exchange appears to be targetingthe person-to-person auction space. It has a professional look and feel, and appears to have a starting point to work

with.

Weakness

Aviation Exchange does not appear to be marketing itself in any meaningful manner. Their inventory seams to be low tonon-existent after many observational visits. Their interface does not allow for users to upload or view pictures of itemsfor auction, and they do not appear to be making efforts to develop a community atmosphere for members to generate orexchange industry related information. Aviation Exchange has not employed the use of a reverse auction applicationwithin its site in order to allow for competitive bidding against request for quotes. This implies a neglect to address theneeds of the business-to-business community.


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AVsupportwww.avsupport.com

StrengthAnalysis of AVsupport indicates that they are one of the most well rounded of the list of potential competitors on theInternet. AVsupport offers a wide array of fees based services to its users. Among the services that AVsupport offers itsmembers are free inventory uploads and listing, email based request for quotes, and Master Cross Reference and partssearch capabilities, to name a few. AVsupport is well served by a founder that does have industry related experience inparts and logistics.

Weaknesses

Like most of the competitors listed, AVsupport does not offer an online auction service to its members; however, they

do claim to be working on such a capability. Although they do offer a request for quote capability, it is notcommissioned based and is too narrowly focused on aviation parts. AVsupport does not market itself to the broaderaviation community.

Air Parts Locatorwww.aeropartslocator.com

Strength

Air Parts Locator is a very simple and free parts listing service. The interface allows users to list items and browsethrough its listings.

Weaknesses

Air Parts Locator is nothing more than a listing service. It has no search functionality, it lacks a robust list of categoriesin which to list, and has no revenue generating model to speak of.

Aircraft Parts Locator Servicewww.apls.com

Strength

APLS is a flat fee subscription based parts locator service that allows its members to upload inventory and search foraircraft parts through a variety of search criteria. APLS also has an RFQ system that allows users to send a request forquote via e-mail or fax.

Weaknesses

Although APLS does have a request for quote system, it does not allow for competitive bidding on these quotes. APLSis also too narrowly focused and does not plan to expand in order to serve the broader needs of the aviation and

aerospace community.


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PartsBase.com

Strength

By far the most substantial threat to us is PartsBase.com. In January they have deployed traditional and reverse auctionfunctionality for their website. Up until then PartsBase.com was primarily a parts locator service - In this respect itexcelled. PartsBase.com allows members to upload parts information by item, or allows users to send email fileattachments containing inventory information. The user interface is well laid out and provides visitors with an easy wayto search for parts. The site does appear to have a large membership base, which it will leverage into a significantplatform for business-to-business. Partsbase.com has recently made a successful initial public offering, as is expected toleverage the funds in order to extend its business model and to further promote itself.

Weaknesses

PartsBase.com is too narrowly focused on aircraft parts. Currently, it does not address the needs of the broader aviationand aerospace market.

Inventory Locator Service (ILS)www.ilsmart.com

Strength

ILS is considered an industry leader in the parts locator service. They have been in business since 1979, are one of thefirst to develop an electronic marketplace for the aviation community, and have significant experience in parts andlogistics. ILS has established long-standing and deep relationships with aircraft parts suppliers and purchasers.

Weaknesses

ILS does not appear to address the broader needs of the aviation community. They are highly focused on aircraft partsand do not seem to be in a position to quickly react in order to address the broader needs of the aviation community ifthey chose to do so. ILS does not have an online auction that takes advantage of the dynamic price model in order toachieve price equilibriums in the aviation market.

MyAircraft.com

StrenthMyAircraft.com will be a joint venture between Honeywell, United Technologies, and i2. It is targeted to go online bythe summer of 2000. MyAircraft.coms strength lies in the financial recources and brand recognition that is offered bythe two aerospace participants. They have the potential of bringing huge amounts of capital resources to bare on theimplementation and marketing of their exchange deployment.

Weaknesses

The collaboration between the two large companies may pose a problem for a speedy implementation. By virtue of theirsize, these companies may bring the unwanted inertia that is already built into their organizations, which may play asignificant role in reducing the speed and flexibility required to execute on internet time. These two companies alsohappen to be aerospace companies, and they may be perceived as non-neutral players in this space. This fact violatesone of the keys to the successful exchange the ability to host a neutrally biased exchange. We will differentiateourselves and exploit this apparent weakness in our marketing programs.


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AeroSpan.com

Strength

AeroSpan.com is a venture between AAR and SITA set to launch in the summer of 2000. AAR is a worldwide supplierof aircraft parts and components. SITA positions itself as the world leader in delivering integrated information systemsand telecommunications for the aerospace industry. Like MyAircraft.com, these two companies offer substantialresources to bare on the market. They apparently compliment each other with respect to the requirements needed toimplement a business-to-business exchange.

Weaknesses

Like MyAircraft.com, Aerospan.com is made up of two large companies, which may pose a liability with respect tospeed and flexibility. Since AAR is a big supplier of aerospace equipment, MyAircraft.com might also be perceived as

hosting a non-neutral exchange community. Again, this apparent conflict of interest can be taken advantage of in one ofour marketing campaigns.

4.8 Opportunities

Based upon an evaluation of the market, the needs of this market, and the current competitive offerings, we feel there isan unfulfilled need for a business-to-business presence that is focused on the broader needs of the aviation community.

Our forward auctions will be particularly desired by businesses seeking to turn excess inventory of capital goods andservices on the open market and who wish to get the best price through the use of such a dynamic pricing environment.For purchasing organizations that want to shorten the buying cycle, and for vendors of goods and services that wish toexpand their markets, our reverse auctions will offer the same dynamic environment in which to participate. Finally, wefeel that there is an opportunity to create efficiencies in the procurement cycle of the entire supply chain for the aviationcommunity.

Most buyers and sellers of aircraft parts seem to be fairly well served by features currently offered by our competitors(features such as request for quotes, parts search, and a database of maintenance and repair organization capabilities).

We believe that there are broader sectors of the aviation and aerospace community that is not yet being served by ourservices, and a significant opportunity exists for us to quickly move into this vast market. Whats more, none of theindustry competitors have deployed a component based open architecture supply chain management system the willserve the needs of small to medium size aviation and aerospace businesses. These are business entities that will findimmense value in a supply chain management system that will not require the purchase of expensive proprietarysoftware.

Sectors of the aviation and aerospace community that is not yet being served by a business-to-business presence on theInternet are:

Computer and Electronic/Electrical Systems and ComponentsInformation and Software Automation Systems and ServicesMaterials, Chemicals and Hardware ManufacturersGround Support/AirportTools/Machines and Test EquipmentInterior Equipment and Furnishings


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Fuel ServicesLegal ServicesConsulting and Special Services

Spacecraft and Launch VehiclesGround Station/Tracking, Telemetry and Control EquipmentSpace Systems, Subsystems, Components and EquipmentSpace InsuranceSpace Consultants and Special Services

These unfulfilled sectors offer fertile ground to exploit the first mover advantage for our forward and reverse auctionmodels, and our supply chain initiative.

Global Initiatives

Aviation, by its very nature, is a global industry. Organizations, large and small, need to be networked to the market sothat all players are able to extract value from a centralized marketplace. From a global perspective, the industry ishighly fragmented. We feel that we can play a value-added function in order to level the playing field for all members ofthe industry.


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4.9 Threats and Risks

It is possible that one or more existing competitors will react to our entrance into the business-to-business market.Because of their established market positions, a strong competitive reaction could be a formidable threat. Thecompetitive reaction that would be most threatening would be for one or more of our competitors to mobilize theirresources in order to establish a presence that attempt to penetrate additional aviation industry sectors which they do notyet focus on. However, because of our relatively small anticipated initial market share, we feel a swift competitiveresponse is unlikely, and there is a good chance that the competition may not respond at all.

If a competitive response does occur, it is most likely to be in the form of a strategic leveraging of existing, or as yet tobe developed relationships, in order to penetrate the market before we do. One of the consequences of such a move will

be for our competitors to raise barriers to entry, which we will not be able to overcome due to our limited resources.

VerticalNets AerospaceOnline.com, for example, has a very significant online presence. They do have an onlineauction that serve the aviation community; however, they do not deploy a reverse auction model for purchasingprofessionals to use, and they seem to lack the focus required to address the needs of the broader aviation community.This is one weakness that, if they so choose, can be easily remedied.

PartsBase.com also posses a threat to us. They have the required technology in order to extend into the broader reachesof the aviation market. This summer we anticipate the entrance of two more competitors - AeroSpan.com and

MyAircraft.com. These competitors are backed by corporations such as United Technologies, Honeywell, AAR, andSITA.

We feel, however, that the market is sufficiently large enough to accommodate several market players, and that themarket is still in its infancy.

5.0 Marketing Strategy and Implementation Summary

We plan to use a multi-pronged and layered approach in our marketing strategy. This strategy will serve to build ourbrand, aggressively support our customers through the use of leading technologies, market growth through promotion,aggressive sales, and pricing, and through the use of partnership strategies.

5.1 Competitive Advantages

In comparison to our primary competitors, we posses key competitive capabilities that will go a long way to ensuring

the success of our business. Particularly important are the following key advantages:

The time is right to be a small organization in an industry that rewards speed and execution. Our small size allowsus to move quickly and relatively unnoticed for the time being. This will allow us to fully develop our productwhile our competition looks the other way.

We posses the first mover advantage with respect to our target market. Currently, none of our competitors are

A i Bid Th I t t' O Li A i ti A ti C it d B i t B i M k t l


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Being a new entrant into this field has obvious disadvantages, but it also has advantages. We can design our businessfrom scratch and position ourselves to take advantage of recent changes in the market and the knowledge of the current

positioning of the other competitors. It also allows us to follow a fresh approach to business that is more appropriate tothe market needs of todays customers. Being a young, new, and forward looking company, we are in a position to adoptnew and innovative ideas, unlike some of our more established competitors.

Our competitive edge also lies in our ability to move fast to implement strategy. We employ the use of a technologyprovider to supply the auction application. This is a very important competitive consideration, since our technologyprovider specializes in auction applications. There is no need to waste valuable resources in upgrading and improvingthe technology, since our technology provider is committed to continuously improving their product for us as well ascustomizing it to fit our changing needs. Not having to expend such resources allows us to focus our energies for

developing sales and marketing strategies in order to penetrate and grow our market. The fact that we are a pureInternet company with no pre-existing organizational inertia means that we are able to move quickly in order to adjustto changing market conditions.

Our philosophy going forward is to outsource as much of the technology as possible through the use of well establishedapplication service providers (ASP's). We feel that it is important to concentrate on the business of establishing firmrelationships in the aviation community, nurturing these relationships, and leveraging these relationships in order tocreate and grow the exchange market of buyers and sellers.

Finally, our management team is a young but seasoned and committed group of professionals in the technology industrywith management and director positions in sales and marketing and strategic planning two of them are pilots with afond appreciation for aviation as well.

5.2 Competitive Weakness

Our financial position is a relative weakness. Lack of financial resources will limit our ability to implement, improve,

and extend our Internet and business applications as well as limiting our ability to execute our marketing strategy, andhiring much needed technology, sales, and administrative personnel.

Our brand is not well known to the industry. Being a new business means that we have yet to establish brandrecognition. The lack of brand recognition will make it more difficult to establish the credibility needed to formstrategic partnerships and acquire more customers in the business-to-business sector.

5.3 Key Strategies

Our strategy is to build a brand recognition that closely links e-commerce and e-content with aviation buying andselling. Our plan to implement AviaBid.com will be combined with a marketing plan that will support the brandbuilding strategy.

We believe that it is pure folly to try and build a solid brand name without supporting it with world class customeri d i t h l T thi d ill i l t t h l th t i li bl d l t th i

AviaBid com The Internet's On Line Aviation Auction Community and Business to Business Marketplace


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Finally, we will use existing but cutting edge technologies provided by best of bread technology providers in order toprovide a common trading hub, where multiple buyers and sellers can come together without compromising processes

and relationships among the industry participants.

5.3.1 Implementing the Brand Building Strategy

Our brand building strategy will focus on creating a strong association between aviation, e-commerce, and theAviaBid.com brand name and trademark. AviaBid.com will make creative use of the following media for building andstrengthening the brand equity:

Consistent participation in, and sponsorship of, industry trade shows

Cross branding and integrating complimentary services with strong industry partners

Consistent use of Internet advertising through the use of targeted and interactive banner ads to build awareness

Intense and broad advertising in industry related print periodicals and news letters

Sponsorship of air show events

Sponsorship of aerobatics and air racing teams with the use AviaBid.coms distinct trade mark logo

Sponsor and make charitable contributions to aviation academic scholarship programs

Participation and sponsorship of academic business research at major universities Selling and giving away branded merchandise Use of an online store to sell AviaBid.com branded merchandise we will use the services of StarBelly.com

to provide the customized store in order handle inventory and order fulfillment

5.3.2 Implementing Customer Service and Supporting Technologies

Aviabid.com will employ the use of component object model (COM) technologies that is easily maintainable and scalesto the needs of a fast growing and complex market community. In order to react to the needs of our community, we willmake use of enabling technologies provided by industry leading partners such as Oracle Service technologies. We willalso commit to staffing a call center around the clock with customer service professionals in order to meet theunexpected needs of our members.

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AviaBid.com - The Internet s On-Line Aviation Auction Community and Business-to-Business Marketplace

5.3.3 Implementing Market Growing Strategies

In order to capture, grow, and secure our target market, we will hire outstanding and best of breed sales people withexpert knowledge in one or more of the industry sectors outlined below. In addition, we will hire individuals with deepknowledge in the areas of logistics management and procurement processes. This will allow us to customize processessuch as online quoting and bidding, negotiations, auctions, web-based reporting, workflow management, and virtualprocurement systems.

The aviation and aerospace industry sectors that we will serve are:

Airframe, Engine, and Systems

Airborne Structural/Mechanical Components Computer and Electronic/Electrical Systems and Components

Information and Software Automation Systems and Services

Material, Chemicals and Hardware Manufacturers

Ground Support/Airport, Tools/Machines and Test Equipment

Interior Equipment and Furnishings

Insurance

Aircraft Leasing

Modifications/Completions/Overhauls

Catering and In-flight Services

Aviation Training

Software Engineering and Consulting

Cargo and Logistics Services

Aircraft and Aerospace Engineering

Legal Services

Consulting and Special Services

Spacecraft and Launch Vehicles

Ground Station/Tracking, Telemetry and Control Equipment Space Systems, Subsystems, Components and Equipment

Space Insurance

Space Consultants and Special Services

Companies that hold strong positions in the industry and who compliment our product offerings will be sought in orderto form strong strategic alliances and associate our brand with theirs. It will serve our advantage to cross brand withsuch companies in order to extend our message and grow our market.

Competitors that hold week positions but posses clients and/or complimentary technologies and human resources thatwill strengthen our position in the industry should be acquired. This will save us time and financial resources in the longrun that would otherwise be required in order to capture the market through competitive spending.

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AviaBid.com The Internet s On Line Aviation Auction Community and Business to Business Marketplace

5.4 Value Proposition

AviaBid.coms value proposition is based on the inherent benefit derived from the convenience of doing business on theInternet. Traditional auction houses required the hosting auction house to plan for and schedule an appropriate venue.For aviation related auctions, this implies holding the physical auction at an airport, which required buyers and sellers totake the time to travel to these airports this presents an inconvenience in most cases.

The online aviation auction model promises to make buying and selling aviation goods, services, and capital equipmentmore efficient, convenient, and effective. Buyers and sellers do not have to plan for and/or wait for specific auctiondates. Sellers have the advantage of listing their goods and services at any time, from anywhere, and to a much broaderaudience of buyers this expands the sellers distribution of goods by several orders of magnitude. Buyers have the

advantage of visiting a destination that is not out of the way. Auctions are held 24 hours a day, 7days a week, and 365days a year. AviaBid.com auctions can be accessed from the convenience of home or office.

AviaBid.com members will also find value in the amount of information provided during their visit to the site. Aspreviously noted, members will find a wealth of aviation related content provided by members as well as our sitecontent editors. Members will be provided free coverage of business and consumer oriented news and productinformation.

In all, AviaBid.com members and visitors will be provided with a well-rounded aviation related experience within the

context of an e-commerce environment.

5.5 Positioning Statement

AviaBid.com will position itself as the online aviation auction community and business-to-business marketplace. In theminds of the aviation community, we will be perceived as a destination for consumer and business-to-business buyingand selling. Unlike other aviation auction sites, AviaBid.com will provide a community environment for members to

network and post and/or access industry related market information, manage their purchasing programs, managerelationships, and expand their markets.

5.6 Promotion

Our promotion strategy will require a multi-dimensional and phased approach that involves introducing ourselves to themarket, developing awareness, cultivating partnerships and strategic relationships, and establishing and cultivating theAviaBid.com brand.

Currently, we are in the process of introducing ourselves to the market. This required us to launch a press release, whichwas met with good response from the market and resulted in a substantial increase in traffic to the website. We haveregistered with most of the worlds search engines and are in the process of adding ourselves to as many of the aviationrelate website directories as possible. AviaBid.com is also engaged in the use of several link and banner exchangenetworks. Through these methods alone, we have been able to generate average traffic levels of 6,000 visitors a month



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AviaBid.com The Internet s On Line Aviation Auction Community and Business to Business Marketplace

AviaBid.com plans on advertising on most of the major aviation periodicals and websites; however, because of limitedfinancial resource, for now we will limit ourselves to advertising in the Pacific Flyer Magazine. Pacific Flyer is amonthly publication with a circulation of over 100,000. The magazine features many aviation related articles and is a

magazine rich with aircraft and parts advertisement. Readers of this magazine fit our demographic target.

In the future, AviaBid.com plans to advertise on most of the major aviation and Internet related print publications. Suchpublications include Flying Magazine, Plane & Pilot, Aviation Week & Space Technology, Flight Training Magazine,Busineses2.0, The Industry Standard, Speed News, and other industry related publications that serve each of the sectorsmentioned is section 5.3.3. These highly regarded and branded national and international publications will exposeAviaBid.com to a broad aviation and Internet audience while building and maintaining the AviaBid.com brand.

Eventually, AviaBid.com will aggressively promote itself at aviation-related events such as air shows, aviation and

aerospace trade shows, and

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AviaBid Business Plan 04-10-00

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