1. Asia Pacific Airline Training Symposium The Business of Aviation Training: Set for Takeoff (? Or !) 8 September 2009Steve Mann Project Director CAPA AeroPark

2. Why invest in training? (Answer: To prepare for the unexpected and uncertain)! 8 Sept 09 APATS 2009 Hong Kong 2 Source: http://www.pilotfriend.com/humour/jokes/cartoons.htm Your trial period is over! Please register to continue using this software Your trial period is over! Please register to continue using this software OK

3. Aviation Training covers a wide spectrum of disciplines, in an ever-changing environment 8 Sept 09 APATS 2009 Hong Kong 3 Safety & Security Technical Skills Commercial SkillsSoft Skills Pilot Training Maintenance Eng. Customer Service Aircraft Leasing Revenue Management Airline/Airport Management Leadership Fares and Ticketing IT Air Traffic MgmtAviation Law Cabin Crew Training Safety Management Systems Sales Airport Charges Airline Finance & Accounting Industry Health Regulation Cost Pressure Industry Learning Environmental Societal Trends

4. Aviation Mgmt 1 wk Aviation Mgmt 1 wk Training caters to different markets, from more expensive, regulated training for the few to short courses for the many 8 Sept 09 APATS 2009 Hong Kong 4 Course Cost/Length Potential No. of Students CPL Pilot Ab Initio 1 ½ yrs Lic. Aircraft Maintenance Eng 2 yrs ATCO Ab Initio 10 mths Aviation Degree 3/4 yrs Aviation Degree 3/4 yrs Cabin Crew 3 mths Cabin Crew 3 mths Pilot Type Rating 3 mths Fares & Ticketing 1 wk Fares & Ticketing 1 wk Regulated Airport Operations 3 mths Airport Operations 3 mths

5. The industry which supplies training is also fragmented from traditional in-house to external 8 Sept 09 APATS 2009 Hong Kong 5 In-house Advantages of In-house: Core to product/reputation Control over quality Instant access Lack of scale external providers Scale provides low cost Ability to in-source work for revenue Arguments against In-house: Do not need to own and run, LCCs Not always best quality in-house Cost of instant access, breeds waste 3 rd party providers growing scale Larger 3 rd party volume reduces cost Lack of commitment, marginal pricing OEMs Specialist Training Organisations Specialist Training Organisations Service Organisations Service Organisations Governments Universities/Trade Colleges/ Academies In-source

6. After a period of strong growth, the aviation industry responded with unprecedented aggression to the crisis 8 Sept 09 6 Source: ICAO, IATA 197119751980198519901995200020052010f Traffic Change Capacity Change 2008 – 2010 forecast APATS 2009 Hong Kong Differential Traffic-Capacity

7. Emerging markets grew strongly in the past decade in line with their economies 8 Sept 09 APATS 2009 Hong Kong 7 CAGR% 2000 - 08 10.5% pa 10.2% pa 14.5% pa 7.3% pa Source: Centre for Asia Pacific Aviation Analysis, Boeing, IMF, Indian DGCA China RPK China GDP Indexed India RPK India GDP Indexed

8. Emerging markets are strongly represented in recent aircraft deliveries 8 Sept 09 APATS 2009 Hong Kong 8 Source: Centre for Asia Pacific Aviation, Ascend Jun 09, CAT Magazine Annual Training Survey Apr 09 (all sims) China India Brazil UAE Mexico

9. Training industry development in emerging markets lag their aircraft deliveries 8 Sept 09 APATS 2009 Hong Kong 9 Note: Proxy for training industry development, sims per aircraft ordered from Jan 06 – Jun 09; Does not take aircraft/sim type into account Source: Centre for Asia Pacific Aviation, Ascend jun 09, CAT Magazine Annual Sim Survey Apr 09 China India Brazil UAE Mexico

10. However, LCCs accounted for almost all growth this decade, 22% in 09 vs 7% in 2000 8 Sept 09 APATS 2009 Hong Kong 10 Source: Centre for Asia Pacific Aviation and OAG Seats m

11. A recovery in confidence looks well established, for example in the US 8 Sept 0911 US Leading Economic Indicators Jan 06 – Jul 09 Source: Conference Board USA Leading Economic Indicators APATS 2009 Hong Kong

12. And Asia is recovering strongly World Bank President Zoelick said he now expected Chinas economy to grow by nearly eight percent in 2009 … higher than the World Banks official forecast of 7.2% AFP, 2 Sept 09 Hong Kongs exports and economy may fully recover by the middle of next year as global growth resumes, said Edward Leung, the chief economist at the government backed Hong Kong Trade Development Council Bloomberg,3 Sept 09 Bank of Japan Governor Masaaki Shirakawa said on Monday the Japanese economy is showing signs of recovery, though uncertainty over the outlook remains high Reuters, 31 Aug 09 …official data showed India's economy grew 6.1 percent in the three months to June, signalling the country was emerging from the negative effects of the global downturn AFP, 2 Sept 09 Economists more upbeat… In the second quarter, Singapore emerged from a recession, posting a 20.7% jump in GDP Straits Times, 2 Sept 09 8 Sept 09 APATS 2009 Hong Kong 12

13. The slowing rate of decline in passenger traffic is starting to look like a sustained trend… 8 Sept 09 APATS 2009 Hong Kong 13 Source: Centre for Asia Pacific Aviation and IATA ACI total passenger number growth: Jul-08 to Jul-09 International demand, capacity & load factors: Aug-2008 to Jul-2009 Source: Centre for Asia Pacific Aviation and ACI

14. The Middle East has maintained growth reportedly at weak yields 8 Sept 09 APATS 2009 Hong Kong 14 IATA airlines RPK growth by region: Jul-08 to Jul-09

15. Usually a lead indicator, the rate of decline for freight traffic is also slowing, albeit at poor yield 8 Sept 09 APATS 2009 Hong Kong 15 Source: Centre for Asia Pacific Aviation and ACI ACI total cargo volume growth: Jul-08 to Jul-09

16. A recent survey by CAPA found the majority saw profitable growth returning in 12-18 months 8 Sept 0916 Fastest Growth next 12 months: China (85%) Middle East (76%) India (43%) Rest of Asia (33%) Slowest Growth next 12 months North America (72%) Western Europe (64%) Eastern Europe (36%) = Africa (36%) Source: Centre for Asia Pacific Aviation Survey, Sept 09 APATS 2009 Hong Kong

17. Current priorities are not a surprise: demand, cash and costs 8 Sept 09 APATS 2009 Hong Kong 17 Source: Centre for Asia Pacific Aviation Survey, Sept 09

18. Over the medium term, people and environmental issues are added to demand, cash and costs as key issues 8 Sept 09 APATS 2009 Hong Kong 18 Source: Centre for Asia Pacific Aviation Survey, Sept 09

19. Over the long term, Asia Pacific and the Middle East will see the greatest growth in traffic and fleet size 8 Sept 0919 Source: Boeing Current Market Outlook 2008 to 2028; Centre for Asia Pacific Aviation Analysis APATS 2009 Hong Kong

20. Urbanisation, the motor of Chinese growth, is set to continue to drive growth 8 Sept 09 APATS 2009 Hong Kong 20 * * 205020452040203520302025202020152010200520001995199019851980197519701965196019551950 13%14%16%17% 19%23%27%31%35%40%45%49%53%56%60%63%66%70%73% Urbanisation % 13% China : Total Population (000s) Chinese Urbanisation (1950 – 2050f) Source : United Nations, World Urbanization Prospects: The 2007 Revision

21. And the BRICS countries will climb up the rankings of aviation nations over the next 20 years 8 Sept 09 APATS 2009 Hong Kong 21 Source: ACI Sept 08

22. Take the Indian example: even with current surplus capacity, the skilled manpower requirements are significant. How strongly will demand snap back? 8 Sept 09 APATS 2009 Hong Kong 22 Source/Note: CAPA Analysis, Personnel numbers DGCA 2009, IMF GDP forecasts to 2014. Assumes 3% attrition rate for pilots and maintenance personnel and 8% for cabin crew, 2% per annum productivity improvement (or outsourcing) in maintenance personnel 2008 Complement Additional reqmt 2014 in high growth case Additional reqmt 2014 in low growth case

23. Company positions are rewritten during a downturn with new winners emerging 8 Sept 09 APATS 2009 Hong Kong 23 Source: Corporate Executive Board

24. As we look towards recovery on the horizon, how prepared are you? After the biggest shock to the aviation industry ever, growth will return and with it, the skills shortage Choices ahead: – Impact of the changing business models and strategies as legacy carriers evolve No longer the traditional lifelong airline man; different backgrounds, skills Narrowing the scope of proprietary vs open or shared, cf R&D Challenging the autarky to keep up with the LCCs Constrained capital – Realign to respond to growth shifting to emerging markets (especially BRICS countries) Need for cost effective models, eg the $2,000 Nano car? Is the export model of training sustainable? – Renewed focus on employability Great marketing emphasis on self-funded students? Degree courses, continuous learning? non traditional career pathways? internationally recognised accreditation? Greater mobility – Evolving regulatory environment, eg EASA, MPL Impact of the Environmental New Age – Need for greater scale, broader discipline and market coverage to provide more compelling offer to major airlines Functional silos or broader training service provider covering more disciplines? Further consolidation, cross border activity? 8 Sept 0924