ICF International's Jonathan Berger delivered a presentation at the Airline E&M: China & East Asia conference in Hong Kong, China on March 9-10, 2016. The presentation provides a forecast for the maintenance, repair, and overhaul (MRO) industry and highlights trends in aircraft, operations. See appendix for acronyms. For more information: http://bit.ly/1Y42p8U

1. 0
MRO Forecast and Market Trends
Presented by:
Jonathan M. Berger
Vice President  ICF International
jberger@icfi.com
9-10 March, 2016

2. 11
Today’s Agenda
MRO Forecast
New Technology Aircraft
Impact
Meet the Frackers!
The Next Big Thing…

3. 22
MRO Forecast

4. 33
The current
commercial
air transport fleet
consists of over
27K aircraft
Source: CAPA 2015
Narrowbody
Jet
Widebody
Jet
Turboprop
Regional
Jet
27,114
Aircraft
14%
53%14%
19%
By Aircraft Type By Global Region
North
America
Asia
Pacific
Europe
Latin
America
Middle East
31%
27%
25%
8%
5% 5%
27,114
Aircraft
2015 Global Commercial Air Transport Fleet

5. 44
The combination of
strong air travel
demand and the
need to replace
ageing aircraft will
drive fleet growth at
3.4% annually
Source: ICF International, CAPA 2015
 Air traffic growth of ~4.1%
 Fuel costs in $55/bbl range
 ~19,600 aircraft deliveries
 ~8,800 aircraft retirements
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2015 2025
Africa
Middle East
Latin America
Europe
Asia Pacific
North America
27,100
31% 26%
37,900
27%
25%
8%
32%
23%
8%
# Aircraft
3.8%
2.5%
1.6%
5.2%
5.3%
5.1%
CAGR
3.4% Avg.
5%
6%
10 Year Global Air Transport Fleet Growth

6. 55
Current air transport
MRO demand is
$64.3B; Asia Pacific
is now equivalent to
North America and
Europe
Source: ICF International
Engines
Components
Line
Airframe
Modifications
14%
17%
22%
40%
7%
North
America
Asia
Pacific
Europe
Middle East
Latin
America
Africa
29%
28%
26%
8%
6%4%
$64.3B$64.3B
By MRO Segment By Global Region
2015 Global MRO Demand

7. 66
The global MRO
market is expected
to grow by 4.1%
per annum to $96B
by 2025
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2015 2025
Modifications
Airframe
Line
Component
Engine
40%
22%
14%
17%
$64.3B
$96.0B
2.8%
3.6%
4.3%
4.4%
CAGR
4.1% Avg.
5.3%
41%
22%
16%
13%
10 Year Global MRO Demand Growth

8. 77
The Asia Pacific
fleet consists of
nearly 7,300
aircraft, with 37%
(approx. 2,700
aircraft) in China
Source: CAPA 2015
Narrowbody
Jet
Widebody
Jet
Turboprop
Regional
Jet
7,289
Aircraft
5%
59%13%
23%
By Aircraft Type By Country
China
Japan
Australia
Indonesia
South
Korea
Malaysia
Other
7,289
Aircraft
37%
9%8%
26%
8%
4%
4%
4%
2015 Asia Pacific Commercial Air Transport Fleet

9. 88
The Asia Pacific
MRO market is
expected to nearly
double to approx.
$32.2B by 2025, at
6.0% per annum
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
0
5
10
15
20
25
30
35
2015 2025
Modifications
Airframe
Line
Component
Engine
39%
23%
12%
19%
$17.9B
$32.2B
5.8%
4.6%
5.7%
6.8%
CAGR
6.0% Avg.
6.9%
42%
23%
16%
12%
8%
10-Year Asia Pacific MRO Demand Growth

10. 99
Over the next
decade, China and
Asia Pacific region
will drive absolute
MRO spend growth
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
Difference in MRO Spend, 2025 vs. 2015 – By Global Region
$ USD Billions
$7.9
$6.4
$5.2
$3.2
$2.6 $2.2 $2.0
$1.2
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Asia Pacific
(excl China)
China Middle East North
America
Latin
America
Eastern
Europe (incl
CIS)
Africa Western
Europe
71% 93% 103% 17% 73% 72% 85% 10%
Percent
Change:

11. 1010
2014 Top 10 Airframe MROs by Man-Hours Performed
In Millions
Among the top ten
airframe MRO
providers,
ST Aerospace and
HAECO account
for 50% of man-
hours performed in
2014
Source: Aviation Week
12.0
11.7
4.9
3.6
3.0
2.9
2.9
2.2
2.0
2.0
ST Aerospace
HAECO
AAR
AFI KLM E&M
Lufthansa Technik
GAMECO
Turkish Technic
Evergreen Aviation Tech.
Aviation Technical Services
Sabena Technics

12. 1111
Impact of
New Technology Aircraft

13. 1212
In the next decade,
the global fleet of
new generation
aircraft fleet will
grow by approx.
531% to nearly
19,000 aircraft
10-Year Fleet Forecast by Aircraft Generation
2,993
18,896
22,212
18,487
2015 2025
Global
New Gen
Mid Gen
Old Gen
Source: ICF International
Old Gen: 727, 737 Classic, 747 Classic, DC10, L1011, A300
Mid Gen: 757, 767, 747-400, A320 Family, A330/A340, 737NG, 777, ERJ, CRJ
New Gen:, 777X, 787, A350, A330neo, A380, E170/175/190/195, CRJ-7/9/1000, 737MAX
Asia Pacific
+531%
-70%
-17%
613
6,101
6,296
5,838
2015 2025
+895%
-7%
-61%

14. 1313
Over the next
decade, MRO spend
on new technology
A350 & Boeing 787
aircraft will double
every three years
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation, includes Boeing 787 and Airbus A350
10-Year MRO Spend for New Technology A350 & 787 Aircraft
$ USD Billions
$1.1 $1.6 $2.2 $2.6 $3.0 $3.4
$4.0
$0.5
$1.0
$1.6
$2.3
$3.3
$4.4
$5.8
$7.1
$8.4
$9.7
$11.1
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
RoW
North America
Europe
Middle East
Asia Pacific
+2000%

15. 1414
New technology
aircraft challenge
traditional MRO
sourcing strategies = Heavy C-Check= Light C-Check
767
A/C Age 1 2 3 4 5 6 7 8 9 10 11 12
787
Volume
(C-checks)
Intensity
(man-hours)
Days
(Hangar)
767 8 95,000 136
787 4 33,000 47
Impact
 Cost Savings: ~65% fewer routine airframe heavy maintenance
man-hours drives an estimated savings of ~$3.5M
 Asset Utilization: ~90 additional available flying days enables
increased revenue generation potential
12 Year Heavy Maintenance Schedule
*Based on 4,000 FH/yr utilization
767 C-check = 18mo, 4C = 72mo; 787 C-check = 36mo, 4C = 144mo
Assumed industry standard labor man-hour rate
Aircraft out of Service (AooS) calculated for C/4C/8C checks assuming industry standard MRO hangar productivity
Return on investment
challenges:
 Facilities
 Tooling & Equipment
 Training
 IT Systems

16. 1515
Challenge: How best
to realize value from
the disparate terabytes
of data generated by
new technology
aircraft
Source: ICF Analysis
Number of AHM
Parameters
A320: 15,000
B787: 100,000
2012 2022
~ 137TB
~11TB
777 787
~ 28MB
< 1MB
Stakeholder Battle: Who
will control and profit from
the operating data IP?
 Operators
 Lessors
 OEMs
 MRO Suppliers
Transmittable Data
(MB/Flt)
A/C Data Generated
(TB/Year)
767: 10,000
~1,100%

17. 1616
Meet the Frackers!

18. 1717
Breakthrough
technologies in
horizontal drilling
and hydraulic
fracturing (aka
fracking) resulted
in a US-led energy
revolution
Source: BP Statistical Review of World Energy June 2015, ICF International Analysis
North American crude oil and natural gas
production have soared in recent years…
3,500
4,500
5,500
6,500
7,500
8,500
9,500
10 year growth = 105%
(7.45% CAGR)
Thousands
1,250
1,450
1,650
1,850
2,050
2,250
2,450
10 year growth = 66%
(5.22% CAGR)
Billion cu. ft.
U.S. Crude Oil Production
(Barrels / day)
U.S. Natural Gas Production
(Monthly marketed production)

19. 1818
The US energy
revolution has
completely
disrupted the global
economic and
geopolitical balance
of power
Source: BP Statistical Review of World Energy June 2015, ICF International Analysis
…making the U.S. a global powerhouse
in energy production
728
579
177 173 162
135
109 108
83 73
0
100
200
300
400
500
600
700
800
11.6 11.5
10.8
4.3 4.2
3.7 3.6
3.3 3.1
2.8
0
2
4
6
8
10
12
14
Global Oil Production
(Million barrels / day as of June 2015)
Global Natural Gas Production
(Billions of cubic meters as of June 2015)

20. 1919
Continued low fuel
costs will have
significant
repercussions
throughout the
aviation & MRO
supply chain
Source: EIA; ICF International analysis
Aviation fuel costs have dropped by approx.
66% during the past 24 months…
U.S. Gulf Coast Jet Fuel Price per Gallon
$0.8
$1.3
$1.8
$2.3
$2.8
$ USD
~66% Decline

21. 2020
While Asia Pacific
& North American
airlines have
enjoyed record
profitability, other
regions continue
to struggle
Source: IATA
Global Airline Profitability, 2004-2016
$19
$7
$10
-$30
-$20
-$10
$0
$10
$20
$30
$40
$USD
Billions
$36B
Rest of World
North America
Asia Pacific

22. 2121
China’s seemingly
insatiable demand for
global commodities
was a key driver of
global economic
growth
Source: IMF, World Economic Outlook Database October 2015, ICF International Analysis
After years of remarkable GDP growth,
China’s economy has been steadily slowing
5%
7%
9%
11%
13%
15%
2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F2015F 2016F
China GDP Year-on-Year Growth (%)

23. 2222
The fall in
commodity prices
have had a dramatic
impact of economies
dependent on
commodity exports
Source: Dow Jones Commodity Index
Over the past 5 years, commodity prices
have plummeted more than 55%
Dow Jones Commodity Indices (DJCI)
(January 2011 Indexed to 100)
40
50
60
70
80
90
100
110
- 56.0%
Indexed
Values

24. 2323
The dramatic increase
in oil & gas market
supply and reduced
demand for
commodities has led
to a stronger US Dollar
 Partially offsets the positive
impact of low fuel costs for
operators
 Increases the cost of dollar
based flight hour agreements
(and parts/material in general)
 Cost of labor for in-country
MROs is cheaper driving up
margins for US dollar based
contracts
 Buying/leasing aircraft
becomes more expensive
FOREX Impact
Source: Oanda historical exchange rates, ICF International Analysis
Russian Ruble
-55.1%
Brazilian Real
-41.1%
S. African Rand
-34.1%
Can Dollars
-23.1%
Aus Dollars
-20.8%
Euro
-20.0%
British Pound
-12.8%
Japanese Yen
-11.9%
Indian Rupee
-7.8%
Chinese Yuan
-7.2%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
B
R
C
S
A
The “CRABS”: Countries with economies that are
heavily dependent on commodity exports
Global Currency Exchange Rates vs USD
% Value Change, Jan. 2014 – Jan. 2016

25. 2424
The Next Big Thing…

26. 2525
ICF believes that
virtual reality (VR)
technology will be
as disruptive to
MRO training as 3D-
printing is to parts
manufacturing

27. 2626
 The Asia Pacific region continues to drive global MRO
demand growth
 The two largest global airframe MRO suppliers are
headquartered in the Asia Pacific region
 New Technology aircraft are creating both new
challenges and opportunities for aviation
stakeholders
 The US energy revolution combined with the
economic slowdown in China are having a significant
impact on commodity export dependent CRABS
 Virtual reality has the potential to transform the way
technicians are trained
In Summary…

28. 27
For questions regarding this
presentation, please contact:
Jonathan M. Berger
Vice President  Aerospace & MRO
jberger@icfi.com  +1 404.819.7669
THANK YOU!
9-10 March, 2016

29. 2828
 Market Research & Analysis
 Airline Maintenance Benchmarking
 M&A Commercial Due Diligence
 OEM Aftermarket Strategy
 Aviation Asset Valuations & Appraisals
 MRO Information Technology (IT) Advisory
 Strategic Sourcing & Supply Chain Mgt.
 LEAN Continuous Process Improvement
 Military Aircraft Sustainment
ICF provides a full range of MRO
advisory services

30. 2929
ICF is one of the world’s largest and
most experienced aviation & aerospace
consulting firms
 53 years in business (founded 1963)
 100+ professional staff
− Dedicated exclusively to aviation and aerospace
− Blend of consulting professionals and experienced
aviation executives
 Specialized, focused expertise and
proprietary knowledge
 Broad functional capabilities
 More than 10,000 private and public sector
assignments
 Backed by parent company ICF International
(2014 revenue - $1.05B)
 Global presence –– offices around the world
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong
Aerospace
& MRO
Aircraft Asset
Advisory
Airline Advisory
Airports

31. 3030
 A/C = aircraft
 AHM = Aircraft Health Management
 CAGR = Compound Annual Growth Rate
 CRABS = Canada, Russia, Australia, Brazil, and South Africa
 GDP = Gross Domestic Product
 IP = Intellectual Property
 M&A = mergers and acquisitions
 MRO = maintenance repair overhaul
 OEM = original equipment manufacturer
 RoW = Rest of World
 USD = United States dollar
Acronym Definitions