1. www.engineering-ru.com Ready to serve the world Russian MRO market reality Speaker: Vladimir Perekrestov CEO v.perekrestov@e-mro.aero Aircraft Maintenance Russia and CIS 8th international conference Moscow, Russia, 20-21 February 2013

2. www.engineering-ru.com Ready to serve the world Content Development of Western-built aircraft MRO market in Russia Russia&CIS MRO market Advanced market segments Competition in market of core products and services Characteristics of Russian MRO market Conclusion

3. www.engineering-ru.com Ready to serve the world Development of Western-built aircraft MRO market 1992 – Airbus A 310 was the first western-built aircraft to be operated in Russia 1996 – First time when Russian company gained EASA Part 145 approval 2004 – First С-Check maintenance on Airbus A 320 Family was implemented in Russia 2005 – 2006 –Soviet-built to Western-built large-scale fleet replacement in Russia 2005 – 2008 – High demand for engineering and technical personnel to perform maintenance on aircraft and parts 2006 – Establishing the first EASA Part-147 approved training center to provide engineering and technical personnel training services 2011 – Cancellation of customs duties on western-built aircraft spare parts 2011 – First D-Check maintenance implemented on Airbus A 320 Family in Russia 2012 – First Redelivery Check performed on Boeing 737 CL in Russia 2012 – Establishing the consignment stock of commercial western-built aircraft spare parts in Russia

4. www.engineering-ru.com Ready to serve the world Number of western aircraft in Russia/Other CIS fleets CISRussian Federation *Source AeroTransport Data Bank, October 2012 Wide-body aircraftNarrow-body aircraftRegional aircraftTotal RF8938778554 CIS2515657238 Total 114543135792

5. www.engineering-ru.com Ready to serve the world MRO market Russia and CIS, USD M* * 2012, estimate made by Engineering Holding Wide body A/C Regional A/C Narrow body A/C BaseLineModificationsComponentsEngineTotal Market volume Russia and CIS, USD M 2323571613936441 787

6. www.engineering-ru.com Ready to serve the world The World’s MRO providers: MRO providers in Russia and CIS market: competition MRO providers in Russia and CIS: Analysts are forecasting competition increase among organizations which provide MRO services on the territory of Russia Vostok Technical Service

7. www.engineering-ru.com Ready to serve the world MRO market in Russia and CIS, capability High Low High Up-front capital investments required Labor share of total cost Cabin interiors Evacuation Equipment Wheels & brakes Fire protection & Oxygen Batteries Landing Gear Thrust Reverser APU Hydraulics Electric Power Fuel Cabin Systems Air system Avionics Current marketPotential market ? Source: ICF SH&E Analysis Line Base Maintenance Engineering Engine

8. www.engineering-ru.com Ready to serve the world Breakdown of Total Airline Costs – From World Experience Typical Airline Cost BreakdownTypical Airline’s MRO Cost Breakdown Annual airline maintenance spend as a % of total cost will fluctuate year-to-year based on timing of major visits (e.g. D-checks & engine overhauls), fleet age, size, mix and the price of fuel Maintenance costs typically range between 7%-14% of an airline’s operating budget Source: Form 41 & ICF SH&E Analysis Maintenance 9%

9. www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market : Planning & IT Airlines’ insufficient maintenance planning horizon and insufficient IT support: Failure to plan preparation for maintenance checks (aircraft spare parts and labour resources) Increasing maintenance TAT Maintenance costs increase Only 5 customers of Engineering Holding develop and provide long-term (1-2 years) maintenance plans

10. www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: spare parts stocks & supply chain management Absence of market players who own large aircraft spare parts stocks on the territory of Russian Federation and insufficient supply chain management: Minimum spare parts stocks for the most demanded aircraft types Poorly developed aircraft parts-out business A J Walter Aviation &

11. www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: additional services Insufficient Airlines’ attention to the technical aspects such as: Aircraft interior and cabin equipment repair AC delivery/redelivery AC documentation and records keeping

12. www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: changing aircraft fleet structure Airlines fleet renewal: Russian operators reduce their Boeing 737 CL fleet Reducing average age of aircraft Reducing maintenance checks man-hours Demand for modern aircraft maintenance

13. www.engineering-ru.com Ready to serve the world Conclusion: Opportunities to reduce airlines’ maintenance expenditures Improvement of maintenance planning horizon Implementation of proper IT solutions Increase of aircraft maintenance outsourcing share in segments where in-house maintenance is not cost effective Growth of aircraft spare parts stocks in Russia Improvement of supply chain management efficiency

14. www.engineering-ru.com Ready to serve the world Thank you for your attention!