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22ndnd Aero Engine Parts: Repair or Replace Aero Engine Parts: Repair or Replace ConferenceConference

Paris Paris –– 1111thth February 2004February 2004

Parked Aircraft FleetParked Aircraft Fleet

Clifford A Brown, Managing DirectorClifford A Brown, Managing Director

International Aviation Services GroupInternational Aviation Services Group

INTRODUCTIONINTRODUCTION

Airline PerformanceAirline PerformanceAirline Fleet ChangesAirline Fleet ChangesAircraft parked Aircraft parked

Candidates for RTSCandidates for RTSCandidates for Parting outCandidates for Parting out

Impact for Airframe MROImpact for Airframe MROImpact for Engine MROImpact for Engine MRO

AIRLINE PERFORMANCEAIRLINE PERFORMANCE

Midwest Midwest ––$13m$13mHawaiian Hawaiian --$35m$35mKorean Korean --$153m$153mUS Airways US Airways ––$446m$446mDelta Delta --$773m$773mAMR AMR --$1,200m$1,200mUAL UAL --$2,800m$2,800m

$5.42 Billion Losses

FailuresFailuresJetMagicJetMagicAtlasAtlasShoroukShorouk????????????

$5.42 Billion Losses

WHO IS NEXT?WHO IS NEXT?

AIRLINE FLEET CHANGES AIRLINE FLEET CHANGES --veve

Meridiana Meridiana –– dropping BAE146sdropping BAE146sJazz Jazz -- dropping BAE146sdropping BAE146sAir Canada Air Canada –– dumping good B737dumping good B737--200s200sTHY THY –– dropping 8 B737dropping 8 B737--400/400/--500s500sUnited United -- retiring 13 B767retiring 13 B767--200s200sBA BA –– what to do with B767what to do with B767--300ERs300ERsAmerican American –– dropping 74 F100sdropping 74 F100sUS Airways US Airways -- dropping 40 F100sdropping 40 F100sNorthwest Northwest –– may drop RJ85 fleet before June 2007may drop RJ85 fleet before June 2007

AIRLINE FLEET CHANGES +veAIRLINE FLEET CHANGES +ve

Meridiana Meridiana –– picking up A319spicking up A319sAxis Axis –– picking up B737picking up B737--300s300sSkyEurope SkyEurope -- picking up 4 B737picking up 4 B737--500s500sSlok Air Slok Air –– picking up 10 B737picking up 10 B737--200s200sPIA PIA -- picking up first of 8 B777picking up first of 8 B777Lufthansa Lufthansa –– leasing in A340s / A330sleasing in A340s / A330sWizz Air Wizz Air –– Leasing in 9 A320sLeasing in 9 A320sHelvetic Helvetic –– picking up 11 F100picking up 11 F100Jetsgo Jetsgo –– picking up 18 F100picking up 18 F100Tiger Airways Tiger Airways –– A319 / B737NGA319 / B737NGNippon Cargo acquiring B747FsNippon Cargo acquiring B747Fs

UPSTARTSUPSTARTS

Ocean Airways Ocean Airways –– Italy and FranceItaly and FranceAdam Air Adam Air –– Indonesia (B737Indonesia (B737--400s)400s)Fenix Wings Fenix Wings –– Columbia (B757s)Columbia (B757s)Sky Airways Sky Airways –– Thailand (B737Thailand (B737--400s)400s)Air One Air One -- India (EMB145s)India (EMB145s)Platinum Air Platinum Air –– Canada (F100s)Canada (F100s)Star Flier Star Flier –– Japan (B737NG / A320)Japan (B737NG / A320)One2Go One2Go –– Thailand (B757s)Thailand (B757s)Armavia Armavia –– Armenia (ATRs)Armenia (ATRs)Fly Niki Fly Niki –– Austria (A320 / A321)Austria (A320 / A321)Sodel Airlines Sodel Airlines –– Finland (Saab2000)Finland (Saab2000)FlyMe FlyMe –– Sweden (B737Sweden (B737--300s)300s)FairLine FairLine –– Austria (Saab340 / 2000)Austria (Saab340 / 2000)

CONCLUSIONSCONCLUSIONS

Recovery Timescales……….Recovery Timescales……….

AVIATION ECONOMIC RECOVERY IN 2005 ?

Recovery Dependent Recovery Dependent on:on:Passenger loads being Passenger loads being maintainedmaintainedYields on airfares Yields on airfares increasingincreasingReduction in oil and fuel Reduction in oil and fuel pricespricesIncreases in USA & Increases in USA & European GDPEuropean GDPIncreases in disposable Increases in disposable incomeincomeIncreases in consumer Increases in consumer confidenceconfidence

PARKING TREND

PARKED JET AIRCRAFT HISTORY

0

200

400

600

800

1000

1200

1400

Jan-

00

Apr-0

0

Jul-0

0

Oct

-00

Jan-

01

Apr-0

1

Jul-0

1

Oct

-01

Jan-

02

Apr-0

2

Jul-0

2

Oct

-02

Jan-

03

Apr-0

3

Jul-0

3

Oct

-03

Jan-

04

ITS NOT FLYING SO WHAT?

A320 A320 (case in point)(case in point)

94 Parked94 Parked17 Stored17 Stored57 Available57 Available61 Marketed61 Marketed3% Float = Liquidity

Parked ?Parked ?Stored ?Stored ?Available ? Available ? Marketed ?Marketed ?

3% Float = Liquidity

WHATS PARKED NOW

Number Parked

% of fleet

0 - 5 5 - 10 10 - 15

15 - 20

20 - 25

25+

Stage II NB 468 41% 0 0 0 11 66 391Stage III NB 1074 11% 179 67 113 122 243 350Stage II WB 51 48% 0 0 0 0 7 44Stage III WB 589 14% 7 35 94 91 209 153Regional Jets 259 9% 21 18 105 50 22 43Turbo-Props 2027 23%Total 4468 16% 207 120 312 274 547 981

WHATS WILL NOT RETURN TO SERVICE

Number Parked

% of fleet

0 - 5 5 - 10 10 - 15

15 - 20

20 - 25

25+

Stage II NB 468 41% 0 0 0 11 66 391Stage III NB 1074 11% 179 67 113 122 243 350Stage II WB 51 48% 0 0 0 0 7 44Stage III WB 589 14% 7 35 94 91 209 153Regional Jets 259 9% 21 18 105 50 22 43Turbo-Props 2027 23%Total 4468 16% 207 120 312 274 547 981

NOT RETURNING TO SERVICE

020406080100120140160180200

F100

F70

MD80

/MD9

0L1

011

DC10

MD11

B727

B737

Stg

IIB7

37 S

tg III

B747

B757

B767

B777

A300

A310

A320

A330

A340

Scrapped Parked

CHANGES IN LAST 12 MONTHS

•• Changes in numbers of stored aircraft in the Changes in numbers of stored aircraft in the last 12 months are as follows:last 12 months are as follows:

Type Jan 03 Dec 03 Change % FleetA310 28 49 21 21%B717 22 1 -21 1%B747 120 149 29 14%B767 55 85 30 9%

•• Trend will continue…………Trend will continue…………

ENGINES AT THE END OF ECONOMIC LIFE CYCLE

JT9D-59A

CF6-50E2

CF6-80

CF6-50C2

RB211-524

JT9D

CF6-6RB211-22B / 524

JT9D-7JT8D-217 / -219

CF6-50ALF502JT8D-9 / -15 / -17

JT8D-9 / -15 / -17

DC10L1011B747-200 / -

300

MD80A300 / A310

BAE146DC9 / F28

B737-200

ENGINES REACHING THE END OF ECONOMIC LIFE CYCLE IN 5

CF6-50E2

CF6-80

CF6-80ARB211-524

JT9D

JT9D-7RPW2037 / PW2040

JT9D-7JT8D-217 / -219

CF6-50CFM56-3TAY620 / 650

B767-200 / -

300

B757B747-200 / -

300

MD80A300 / A310

B737-300/-400/ -500

F100

ESCALATING RETURN TO SERVICE COSTS

Calendar based Calendar based maintenance eventsmaintenance eventsFDDSFDDS modsmodsRFDSRFDS modsmodsADsADsCPCP & Environmental CPCP & Environmental inspectionsinspectionsSI itemsSI itemsEngines calendar resilientEngines calendar resilient

050100150200250300350400

Year1

Year2

Year3

Year4

CPCP SI C Check Hard Times

OPERATORS WANT CHEAP FUEL

•• There is There is only so only so much an much an airline airline can do to can do to try and try and get cheap get cheap fuelfuel

FUEL PRICES COULD IMPACT RETIREMENTS

Gas prices are a big Gas prices are a big unknown and the unknown and the deployment of Iraq’s deployment of Iraq’s reserves has yet to reserves has yet to clearly manifestclearly manifestIn the meantime we In the meantime we can only guess at can only guess at what reasons the oil what reasons the oil companies will companies will come up with for come up with for high gas prices.high gas prices.

CONCLUSIONSCONCLUSIONS

Further operators will go into bankruptcyFurther operators will go into bankruptcyNumber of stored aircraft will continue over the next 12 Number of stored aircraft will continue over the next 12 months and then decline;months and then decline;Operators moving to use younger aircraft with maintenance Operators moving to use younger aircraft with maintenance honeymoon;honeymoon;A greater number of Stage II NB and 20+ year Stage III NB A greater number of Stage II NB and 20+ year Stage III NB aircraft will be scrapped each month over the coming 24 aircraft will be scrapped each month over the coming 24 months;months;Stage II WB and Stage III WB over 20+ years will be scrapped;Stage II WB and Stage III WB over 20+ years will be scrapped;Boeing and AI will still fuel over supply of aircraft by 550 Boeing and AI will still fuel over supply of aircraft by 550 ––600 aircraft per year;600 aircraft per year;

THERE ARE WORSE JOBS IN AVIATION!!THERE ARE WORSE JOBS IN AVIATION!!

QUESTIONSQUESTIONS

International Aviation Services Group

Module D, Jenner Road, Gatwick Airport, West Sussex, RH10 9GA, UK

Tel: +44 (0) 1293 456105 / 6Fax: +44 (0) 1293 456107Email: info@iasg.co.uk