The document provides an overview and trends in the commercial aviation MRO market. Key points include: 1) The global commercial aircraft fleet is expected to grow at 3.4% annually to over 37,000 aircraft by 2025, driven by emerging market growth and new technology aircraft. 2) The global MRO market is forecast to reach $96 billion by 2025, growing at an average annual rate of 4.1% as airlines invest profits in fleet maintenance and modifications. 3) Modifications are the fastest growing MRO segment as airlines invest in premium cabins, connectivity, and other customer experience upgrades to drive revenue.

1. 0
MRO Market Update & Industry Trends
Presented by:
Jonathan M. Berger
Vice President  Aerospace & MRO Advisory
jberger@icf.com
October 18-20, 2016
Amsterdam, Netherlands

2. 11
Today’s Agenda
Bizarro Aviation
MRO Forecast
Trend Watch:
 Aircraft Cabin Interiors
 New Technology Aircraft
 Virtual Reality

3. 22
“Bizarro Aviation”

4. 33
Four external
macro-economic
forces are having a
significant impact
on the aviation
industry and the
MRO supply chain
Source: ICF analysis
The “CRABS”

5. 44
The dramatic increase
in oil & gas market
supply and reduced
demand for
commodities has led
to a strong 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: USForex, ICF analysis
The “CRABS”: Countries with economies that are
heavily dependent on commodity exports
Global Currency Exchange Rates vs USD
% Value Change, September 2014 – September 2016
Russian Ruble
-37.6%
Brazilian Real
-24.6%
S. African Rand
-19.1%
Can Dollars
-15.3%
Aus Dollars
-12.5%
Euro
-11.7%
Indian Rupee
-7.8%
Chinese Yuan
-7.8%
-50%
-40%
-30%
-20%
-10%
0%
10%
B
R
A
S
C

6. 55
Commercial aircraft
OEM production
backlog remains at
historical record
levels driven by:
Source: CAPA, ICF Analysis
Commercial Aircraft OEM Production Backlog
0%
10%
20%
30%
40%
50%
60%
70%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Order
Backlog
Backlog/
% Active Fleet
 Emerging market growth
 Low interest rates
 Previously high oil and
commodity prices
 Introduction of new
technology aircraft/engines

7. 66
Low fuel costs
appear to be
reversing aircraft
retirements trends
Source: CAPA, Airline Monitor, ICF analysis
Industry Impact:
 MRO Suppliers - Positive:
Increased spend on older
airframes & engines
 Surplus Market - Negative:
Reduced part-out “feed
stock”
- OEMs: Improved new
part sales
- Distributors: Improved
used part values /
pricing
- Operators: Increased
material costs
Commercial Air Transport Annual Aircraft Retirements
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
200
400
600
800
1,000
1,200
# Retirements
Retirement as %
of installed fleet
% Installed
Fleet
1991-1999 Average: 203
2000-2009 Average: 473

8. 77
Airline return on
invested capital
(ROIC) is clearly
correlated with the
drop in fuel costs
Source: IATA, ICF Analysis
Fuel Price as a % of Airline Operating Expenses
17%
22%
28% 30%
36%
28% 28%
31%
33% 33% 32%
28%
20%
0
20
40
60
80
100
120
0%
10%
20%
30%
40%
% of Airline
Operating
Expenses
Crude Oil
Price/BBL

9. 88
Airline return on
invested capital
(ROIC) is clearly
correlated with the
drop in fuel costs
Source: IATA, ICF Analysis
Fuel Price and Global Airline Return On Invested Capital (ROIC)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
$0
$20
$40
$60
$80
$100
$120
$140
Jet Fuel Price
($/barrel) Airline ROIC (%)
Airline ROIC
Jet Fuel Price
$$$

10. 99
Driven by low fuel
costs and
consolidation,
airline the industry
is on target to
achieve record
profitability in 2016
of almost $40B USD
Source: IATA, ICF analysis
These are the “good old days: - for
some airlines…
Global Airline Profitability, 1996 - 2016F
-$30
-$20
-$10
$0
$10
$20
$30
$40
$USD
Billions
$39.4B
Asia Pacific, $7.8B
North America, $22.9B
Europe, $7.5B
Middle East, $1.6B
Latin America, $0.1B
Africa, ($0.5B)

11. 1010
However, profit
margin
improvement has
been largely limited
to carriers in North
America and
Europe
Source: IATA, ICF Analysis
-1.8%
-4.7%
0.1%
2.3%
1.0%
-0.9%
3.4%
4.7%
0.7%
1.5%
3.0%
-0.4%
15.4%
8.4%
5.6%
2.6% 2.8%
-1.1%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
2008
2012
2016F
Global Airline EBIT Margin by Region
…but not all – many airlines continue
to struggle

12. 1111
Brexit has clearly
had an impact on
European airline
stock performance;
specifically UK
based carriers
Source: Company websites
Share Performance of European Airlines Since Brexit
23 June 2016 – 13 October 2016
SAS, -6.3%
Lufthansa, -15.2%
Ryan Air, -16.2%
Norwegian, -16.5%
Wizz, -23.2%
Air France-KLM, -
24.8%
IAG, -28.1%
Easy Jet,
-41.5%
-50% -40% -30% -20% -10% 0%

13. 1212
Follow the Money:
Airlines are
spending their hard
earned profits in
three primary areas
Source: Company Reports, ICF Analysis
Airline Profit Spend Analysis
Labor,
20%
Capex,
38%
Investors,
42%
Profit Sharing
15%
Wage
Increases
5%Fleet
23%
Equity
Investments
5%
Other capex
10%
Debt
Repayments
16%
Stock Buy-
Back &
Dividends
26%
1. Labor ~ 20%:
 Profit sharing
 Wage increases
2. Capex ~ 38%:
 Fleet renewal & cabin
upgrades
 Facilities, offices, lounges
 Equity partner investments
3. Investors ~ 42%:
 Stock buy-backs
 Dividends
 Debt repayment

14. 1313
After positive signs
in 2014, air cargo
supply continues to
exceed demand
Source: IATA, ICF Analysis
0.4%
-0.9%
0.6%
5.0%
2.3%
2.1%
6.0%
3.0%
3.7%
5.4%
6.3%
6.3%
-2%
0%
2%
4%
6%
8% Traffic (FTK)
Capacity (AFTK)
Global Freight Traffic (FTK) and Capacity Growth (AFTK)
Year-Over-Year Percent Change
- $$$

15. 1414
$0
$5
$10
$15
$20
$25
$30
$35
$40
Amazon Quarterly Revenue
Amazon is very well
positioned to lead a
major disruption of
the air cargo industry
Source: Amazon SEC Filings
Amazon’s Growing Revenue & Shipping Costs
0%
2%
4%
6%
8%
10%
12%
14%
Shipping Costs as a
Percentage of Revenue
$B
USD

16. 1515
March of the Middle
East Titans:
Middle East carriers
have been very
effective in
capturing valuable
business passenger
traffic from
European secondary
airports
Source: OAG Data, ICF Analysis
European Secondary Airports
Average Number of Seats per Departure in 2016
“…Lufthansa’s Frankfurt hub has lost nearly a 3rd of its market
share on routes between Europe and Asia since 2005, with
more than three million people now flying annually via Gulf
hubs” – The Economist
363
408 400 400 394
370
343
400 400
306
180
148
128
146
121
163
149
117
135
149
100
150
200
250
300
350
400
450
500
Gulf Carriers Non-Gulf Carriers

17. 1616
MRO Forecast

18. 1717
The current
commercial
air transport fleet
consists of over
27K aircraft; over
half are narrowbody
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

19. 1818
The combination of
strong air travel
demand and the
need to replace
ageing aircraft will
drive fleet growth at
a healthy 3.4%
annually
Source: ICF analysis: CAPA 2015
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

20. 1919
Current commercial
air transport MRO
demand is $64.3B;
with Asia equivalent
to North America
and Europe in
market size
Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation
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 Commercial Air Transport Global MRO Demand

21. 2020
The global MRO
market is expected
to grow by 4.1% per
annum to $96B by
2025
Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation
 Engine and component MRO
markets remain the largest
segments
 Modifications market will see
the strongest growth (e.g.
interiors, connectivity)
 Airframe market slows due
to reduced man-hour
intensity and increased
check intervals as new fleets
are introduced
$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 Commercial Air Transport MRO Demand Growth
$USD
Billions

22. 2121
The current
European fleet
consists of over
6,700 aircraft; with
almost 60%
consisting of
narrowbody
Source: CAPA 2015
Narrowbody
Jet
Widebody
Jet
Turboprop
Regional
Jet
6,746
Aircraft
11%
59%
12%
18%
By Aircraft Type By Country
United
Kingdom
Russia
Germany
Turkey
FranceIreland
Spain
Others
6,746
Aircraft
28%
17%
7%
21%
11%
6%6%
5%
2015 European Commercial Air Transport Fleet

23. 2222
The European MRO
market is expected
to grow
to approx. $21.3B
by 2025, at 2.3% per
annum
Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation
 Modifications is the fastest
growing MRO segment in
Europe
 MRO spend on engines will
experience the largest
absolute growth
$0
$5
$10
$15
$20
$25
2015 2025
Modifications
Airframe
Line
Component
Engine
39%
22%
15%
16%
$17.0B
$21.3B
1.0%
2.5%
2.7%
2.3%
CAGR
2.3% Avg.
3.0%
39%
23%
17%
13%
8%
10-Year Global European MRO Demand Growth
$USD
Billions
7%

24. 2323
Trend Watch:
A New Golden Age of Aircraft
Cabin Interiors

25. 2424
Modifications growth
is driven by airlines
seeking differentiation
in the cabin and
customer experience
Modifications demand includes labor and material spend
*Passenger-To-Freighter Conversions
**Airworthiness Directives / Service Bulletins
Source: ICF analysis, constant 2015 US$
MRO modification market
growth drivers include:
 Premium lie-flat seats are
now the minimum standard
 Premium economy
 Wi-fi, on-board connectivity
 Coming soon: ADS-B Mod
program
 Capacity (ASM/K) increase
Commercial Air Transport Modifications Forecast
$2.7
$4.9
$0.6
$1.1
$0.4
$0.5
$0.4
$0.4
$0.3
$0.5
$0
$1
$2
$3
$4
$5
$6
$7
$8
2015 2025
AD/SB**
PTF Conversions*
Painting
Avionics Upgrades
Interiors
$4.4B
$7.4B
0.0%
3.7%
6.9%
5.9%
CAGR
5.3% Avg.
3.6%
$USD
Billions

26. 2525
Cabin “densification”
has emerged as cost
effective strategy for
airlines to increase
capacity and drive
bottom line growth
2015 - 2025 Capacity Bridge
0 2 4 6 8 10
2025 ASMs
Increased
Seat Density
Longer Stage
Lengths
Fleet Growth
2015 ASMs
Available Seat-Miles (ASMs), Trillions
6.2T
8.8T
84%
8%
8%
12 Seats 16 Seats
130 Seats120 Seats
Total =
150 Seats
Total =
164 Seats
Example: Delta A320 Interior
Modification Program
New seats, outlets,
IFE, overhead bins
Space-saving galleys
to add a row of seats
Source: ICF analysis, delta.com
18 Seats18 Seats
Cabin Upgrades:
 Slim seats
 Slim lavatories
 Slim galleys
 Slim coat closets

27. 2626
Trend Watch:
New Technology Aircraft

28. 2727
Over 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
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
Source: ICF analysis
Europe
+531%
-70%
-17%
612
4,045
5,689
4,487
2015 2025
+561%
-21%
-74%

29. 2828
Over the next
decade, MRO spend
on new technology
Airbus A350 &
Boeing 787 aircraft
will double every
three years
Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation, includes Boeing 787 and Airbus A350
10-Year MRO Spend for New Technology A350 and 787 Aircraft
$ USD Billions
$0.35
$0.46
$0.47
$0.52
$0.53
$0.62
$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
Africa
Latin America
Middle East
North America
Europe
Asia Pacific
+2000%

30. 2929
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
Source: ICF analysis

31. 3030
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
 Stakeholder Battle:
Who will control and
benefit most from the
operating data IP?
 Operators
 Lessors
 OEMs
 MRO Suppliers
767: 10,000
Yr 1 Yr 10
~ 137TB
~11TB
777 787
~ 28MB
< 1MB
Transmittable Data
(MB/Flt)
A/C Data Generated
(TB/Year)
~1,100%
Aircraft Health Monitoring and Data Generation Outlook

32. 3131
ICF believes that
virtual reality (VR)
technology will be
as disruptive to
MRO training as 3D-
printing is to parts
manufacturing
Training 2.0: Virtual Reality

33. 32
For questions regarding this
presentation, please contact:
Jonathan M. Berger
Vice President  Aerospace & MRO Advisory
jberger@icf.com  +1 404.819.7669
THANK YOU!
October 18-20, 2016
Amsterdam, Netherlands

34. 3333
 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 Aerospace &
MRO advisory services

35. 3434
ICF is one of the
world’s largest and
most experienced
aviation and
aerospace
consulting firms
Airports • Airlines • Aerospace & MRO • Aircraft
 53 years in business (founded 1963)
 80+ 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 sector and public sector assignments
 Backed by parent ICF International (2015 revenue: 1.13 billion USD)
 Global presence –– offices around the world
joined in 2011joined in 2007 joined in 2012 joined in 2014
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong

36. 3535
Acronyms
 AD/SB = airworthiness directives / service bulletins
 AFTK = Capacity Growth
 ASMs = Available Seat-Miles
 BBL = oil barrel
 CAGR = compound annual growth rate
 CRABS = Canada, Russia, Australia, Brazil, and South Africa
 EBIT = Earnings Before Interest and Taxes
 FTK = Global Freight Traffic
 IP = intellectual property
 MRO = maintenance, repair, and overhaul
 OEM = original equipment manufacturer
 PTF = Passenger-To-Freighter
 ROIC = return on invested capital
 VR – virtual reality