ICF International | icfi.com ICF 2015 00

MRO Market Forecast & Trends

3 November 2015 - Singapore

Presented by:

David StewartVice President, ICF Internationaldavid.stewart@icfi.com

ICF International | icfi.com ICF 2015 1

MRO Market Forecast

Takeaways

Trends

ICF International | icfi.com ICF 2015 2

MRO Market Forecast

Agenda MRO Market Forecast & Trends

ICF International | icfi.com ICF 2015 33

Of the 27,500 global fleet, 25% is located in Asia Pacific where the share of turboprops and regional jets is much smaller

MRO MARKET FORECAST

Source: ICF International

Narrowbody Jet

Widebody Jet

Turboprop

Regional Jet

6%

16%

23%

56%

Narrowbody Jet

Widebody Jet

Turboprop

Regional Jet

14%

17%

18%

51%27,500Aircraft

7,100Aircraft

2014 Global Fleet 2014 Asia Pacific Fleet

ICF International | icfi.com ICF 2015 44

The Asian fleet will see a large growth over the next decade and the second fastest growth globally of 4.7% CAGR; +4,200 A/C

MRO MARKET FORECAST

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2014 2024

Africa

Middle East

South America

Europe

Asia Pacific

North America

Air Transport Fleet Growth 20142024

Source: ICF International, ACAS September 2014

3.8%

2.7%

4.7%

1.4%

5.3%

4.8%

27,500

37,900CAGR

3.2% Average

~7,15025%

~11,35030%

Highlights

Air travel growth of ~3.8%

~19,000 aircraft deliveries

~8,600 aircraft retirements

AsiaPacificAsia

Pacific

ICF International | icfi.com ICF 2015 55

The current air transport MRO market is $62.1B; Asia Pacific accounts for ~27% of global demand (~$16.9B)

MRO MARKET FORECAST

Engines

Components

Line

Airframe

Modifications

15%

17%

22%

40%

6%North

America

Asia Pacific

Europe

Middle East

South America

Africa

29%

27%

27%

7%

6% 4%

2014 Global MRO Demand

Source: ICF InternationalForecast in 2014 $USD, exclusive of inflation

$62.1BTotal

$62.1BTotal

By MRO Segment By Region

ICF International | icfi.com ICF 2015 66

$60.7B

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2014 2024

Modifications

Heavy Airframe

Line

Components

Engine

The global MRO market is expected to grow to $90B by 2024, at 3.8% per annum

MRO MARKET FORECAST

Global MRO Spend 20142024 ($B)

15%

17%

22%

40%

13%

17%

24%

38%

6%

8%

Highlights

Average growth is forecast to be 3.8% CAGR

The strongest drivers of growth are the engine and component markets

Reduced labor intensity of airframe heavy checks as the fleet renews and increased intervals

Aircraft upgrades (e.g. interiors, winglets) drive high modifications growth

2.6%

3.7%

4.5%

3.5%

5.9%

CAGR

3.8% Average

$90B

$62.1B

Source: ICF InternationalForecast in 2014 $USD, exclusive of inflation

ICF International | icfi.com ICF 2015 77

Over the next decade, MRO growth will be 3.8% with Asia Pacific and China driving this growth.

MRO MARKET

Source: ICF analysisForecast in 2014 $USD, exclusive of inflation * absolute growth in annual spend

US$ Billions

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

2014 2024

Africa

Eastern Europe (Incl. CIS)

Latin America

Middle East

China

Asia/Pacific (Excl. China)

Western Europe

North America

2014-2024 Annual MRO Spend By Region

6.8%

1.7%

1.2%

CAGR

3.8% Average

$62.1B

$90.1B

6.7%

5.2%

6.1%

6.4%

4.9%

Africa

E. Europe

L. America

M. East

China

APAC (ex. China)

W. Europe

N. America

Highlights

Highest % growth rates are the Middle East and China regions

Highest absolute growth (in $ terms) in Asia Pacific and China

2024 annual spend in China and Asia Pacific combined $12B higher than in 2014

$5.8B

$11.1B

$11.2B

$18B

ICF International | icfi.com ICF 2015 8

Agenda MRO Market Forecast & Trends

Trends

ICF International | icfi.com ICF 2015 9

The aftermarket has evolved from being an afterthought to a market of significant importance and a revenue opportunity

TRENDS

1980 2000 Post-2000s

Airlines

Maintenance mainly a cost centre

LCCs drive new approach to managing maintenance -increased outsourcing

Limited focus on aftermarket; Rolls-Royce ahead of the game

Significant growth of point-of-aircraft sale MRO contracts by OEMs to recover design/ development costs

OEMs

MROs Supply mostly in-house

few large airline MRO suppliers and hugely fragmented independent sector

Growth of integrated component services

Globalization of demand

The aftermarket has evolved from a cost centre to a highly competitive market

http://www.lexingtonlaw.com/blog/finance/ways-airline-travel-empty-bank-account.html/attachment/airliner-landing-in-stormy-weatherhttp://www.lexingtonlaw.com/blog/finance/ways-airline-travel-empty-bank-account.html/attachment/airliner-landing-in-stormy-weather

ICF International | icfi.com ICF 2015 10

Engine OEMs have the most mature and strongest OEM position across the main air transport aftermarket segments

TRENDS

55%

35%

2% 0%

20%

25%

44%

82%

25%

40%

54%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Engineoverhaul

ComponentO&R

AirframeHeavy

Linemaintenance

Non-OEMMRO

Airline in-house

OEM

Source: ICF International

Highlights

OEMs tend to have the strongest share in the more material intensive markets (e.g. engine overhaul)

Component OEM market share lower than engine OEMs

Aircraft OEMs have an almost non-existent position in the airframe-related aftermarket

Air Transport Supply (2015)

ICF International | icfi.com ICF 2015 11

The ramp up and introduction of new generation aircraft creates the opportunity to change the aftermarket supply chain

TRENDS

Source: ICF International

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Aircraft deliveries (units)Highlights

New aircraft with higher reliability, lower manhours and complex technology change the business case for establishing MRO capability

especially with greater airline focus on financial returns

This is a catalyst to change the MRO supply model.

Creating new opportunity for OEMs and aftermarket providers

Mature Aircraft

New Generation Aircraft

ICF International | icfi.com ICF 2015 12

ICF believes there are three key trends that are defining the future of the Aftermarket

TRENDS

Control of operational data

Control of the Workscope

Control of the Assets

Critical to success in market participation and in gaining operational feedback for design and reliability improvement

Critical to success in driving parts choice and aftermarket margins

Critical to success in growing integrated service market

ICF International | icfi.com ICF 2015 13

A key challenge for aviation stakeholders is how best to realize value from the terabytes of data being generated

TRENDS:

Source: ICF Analysis

Number of AHM Parameters

767: 10,000

A320: 15,000

787: 100,000

777 787

~ 28MB

< 1MB

Transmittable Data(MB/Flt)

Aircraft Data Generation(TB/Year)

2012 2022

~ 137TB

~11TB

~1,100%

increase

DATA

Data ownership versus data access and use are of great concern to operators, and data processing business models are unproven (except at engine OEMs?)

ICF International | icfi.com ICF 2015 14

Aircraft OEMs are vying to use their leverage to become the arbiters of data for the connected airline

TRENDS:

Boeing EDGE: Information Services , the

Digital Airline and Gold Care brands

Notable Aircraft Health Management (AHM)

successes

Services by Airbus: Including E&M e-

solutions

Airbus Smarter Fleet partnership with IBM

- integration of e-solutions

Boeing View of AHM System Architecture

Aircraft OEMs believe that their scale and position in the market make them a natural middleman for data aggregation and analysis

DATA

ICF International | icfi.com ICF 2015 15

Control of workscope is key to input decisions hence the historic focus on this by engine OEMs and the former PMA War

TRENDS: WORKSCOPE

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Engine

Materials80%

Labour20%

Airframe

Materials20%

Labour80%

Components

Ma