1. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO THE AERONAUTIC INDUSTRY IN MEXICO : DEVELOPPMENT AND POTENTIAL

2. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO C O N T E N T Presentation The Global Aerospace Markets The Aerospace Industry in Mexico - At the glance - Challenges - The National Strategic Program of the Industry The FEMIA The ACQ (AeroClster de Quertaro A.C.) 3. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Claude Gobenceaux Managing Director of Messier Services Americas in Quertaro, company of the MRO division of Messier-Bugatti-Dowty, SAFRAN Group Member of 2 Mexican R&D Center External Evaluation Boards: - CIDETEQ (and former President of this board) - CIDESI. FEMIA - Federacin Mexicana de la Industria Aeroespacial: - Founding member (2007) - Member of the Board of Administration - President of the following FEMIAs Commissions: . Taxes, Customs and External Trade . Clusters . CENTA, National Center for Aerospace Technologies (temporary commission) President of the ACQ - Aero Clster de Quertaro, A.C. 4. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO SAFRAN SAFRAN is a high technologies global group with 3 main branches: - Aerospace (propulsion y equipment) - Defense - Security 55.000 employees More than USD 15 Billons sales Worldwide number one for: - Commercial aircraft engines (SNECMA GE cooperation for the CFM) - Helicopter engines (TURBOMECA) - Landing gears and braking systems (MESSIER-DOWTY-BUGATTI) - Harnesses (LABINAL) - Biometric and fingerprint systems (MORPHO Identification). 5. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO SAFRAN Since the early 80s, SAFRAN have been active in Mxico. Today: - 10 companies - 4.500+ employees - First Mexican employer of the aeronautic Industry - First French investor in Mexico (USD 1.3 Billon in the last 10 years) - Settled in 3 main areas: Quertaro, Chihuahua, Estado de Mxico / DF 25% increase per year in the last years (Turnover and Headcounts). Mxico is strategic for the SAFRAN Group - Entry to the United States market - Dollar area (Euro / Dollar Exchange Rate variance mitigation) - Close to BOEING, Group main customer SAFRAN is a FEMIA and ACQ active member. 6. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Worlds current Commercial market: - 550 Billion USD - Fleet: 20,000 aircrafts not grounded , average 18+ years old - Over 20,000 aircrafts must be replaced within 15 years + organic growth. Large aircrafts OEMs (BOEING and AIRBUS) : - Large aircrafts OEM are driving the industry market standards - 7,000* aircraft portfolio Vs. an average output capacity of 1,800 / year - Backlog orders: close to 4 years. Medium aircrafts OEMs (BOMBARDIER, EMBRAER, MITSUBISHI, SUKHOI, COMAC,) - Backlog orders: 5 years The Global Aerospace Markets 7. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Private planes and helicopters - Backlog orders: 3 years - Mexico is one of the very first private planes fleet in the world. Defense market: - Considered over 4-5 times the commercial aerospace one - Mexico entered in the Wassenaar Arrangement in 2012 (control of dual usage products). *Aerospace Market News The Global Aerospace Markets 8. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Over 270 companies: - 79% Manufacturing, 11% MRO & 10% D&E - Employment: 34,000+ in 18 States Exportations - 5.4 Billion USD in 2012 - Increase of 24% compared to 2011 - Almost 20% yearly growth rate since 2006 - Expecting over 15% growth in 2013 Aeronautics has been declared a strategic industry: the Pro-Areo has been presented in 2012 ( SE & Femias program) Public policies are directed to incorporate more suppliers and to enhance competitiveness of OEMs, Tiers 1 & 2. The Aerospace Industry in Mexico at the glance 9. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Investment (FDI & NDI): - Almost USD 20 Billion total investment - Expected USD 1.3 Billion FDI in 2013 - Strong program to promote FDI & NDI Mexico has been the largest aeronautics FDI worldwide recipient in last 4 years. Many major investments were announced in the last years. Actual worldwide ranking: 14th. 10th largest supplier to the US market with a quick improvement rate. The Aerospace Industry in Mexico at the glance 10. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Chihuahua (32) Nuevo Len (32) Sonora (45) San Luis Potos (5) Yucatn (3) Puebla (2) Coahuila (7) Baja California (59) Tamaulipas (11) Hidalgo (2) Quertaro (33) EDOMEX (9) Jalisco (11) Mxico City (12) Aguascalientes (2) Zacatecas(1) Durango (1) Guanajuato (3)Fuentes: Direccin General de Industrias Pesadas y de Alta Tecnologa, de la SE., ProMxico y FEMIA Mexico: Inhabitants: 114,000,000 Foreign Trade: 680 BUSD GDP : 1,042 BUSD The Aerospace Industry in Mexico at the glance Main Clusters 11. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO 0 2000 4000 6000 1058 961 1055 923 1271 1924 2466 2100 2700 3050 3470 1266 1342 1299 1674 2029 2728 3127 2700 3500 4500 5150 IMPORTS EXPORTS Source: DGIPAT with data from DGCE, * Figures in millions USD. The Aerospace Industry in Mexico at the glance 5.4 BUSD* * 2012 actual 12. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Direccin General de Industrias Pesadas y de Alta Tecnologa Large 28% Medium 43% Small 22% Micro 7% Structure by number of Employees Source: S.E Size No. de Employers Micro 1 - 10 Small 11 - 50 Medium 51 - 250 Large More than 251 *15 corporations with over 500 employees: 8 in Baja California, 2 in Chihuahua, 3 in Quertaro, 1 in Coahuila and 1 in Tamaulipas. The Aerospace Industry in Mexico at the glance * 13. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Suppliers of OEMs by aircraft model in Mexico Corporation Model # of suppliers # of suppliers in Mexico* Percentage Airbus 330-300 355 16 4.5 Airbus A380 399 20 5.0 Boeing 787 299 14 4.7 Boeing 747-400 354 12 3.4 Bombardier CRJ200 299 13 4.3 Embraer ERJ 135 279 17 6.1 * Identified suppliers not necessarily supply parts for the mentioned models Source: S.E. and AROSPACE DATABASE, PROGRAM TRACKER. The Aerospace Industry in Mexico at the glance * 14. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO To optimize the main competitive advantages which are: - Geographical positioning - Infrastructure connectivity - Same time zone working with USA and Canada - High capacity to react to product requirements (working flexibility). To increase supply of human talent to meet industry needs. Nota: as many engineers as in Germany are trained every year. To rationalize government incentives for R&D. To avoid waste of limited resources. Supply chain, certifications and bilateral agreements - To strongly develop the industrial aerospace supply chain - To continue developing company certifications (AS 9100, Nadcap,) - To review the aerospace bilateral agreement strategy: BASA with the USA, Canada. Challenges in the Aerospace Industry in Mexico 15. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO The National Strategic Program of the Aerospace Industry 2020 Pro-Areo Goals (1/2) To be within the 10 largest suppliers of the aerospace industry in the world in exports To reach over $12 billion USD in exports a year (from 5.4 in 2012 today) To have over 110,000 workers in the aerospace business (from 34,000) To reach 50% of local content. (2011) 16. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO The National Strategic Program of the Aerospace Industry 2020 Pro-Areo Goals (2/2) 17. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO 5 Pro-Areo Key Strategies (1/2) 1. Promotion and development of internal and external markets. - Defining niche markets - Creating the instruments to support a continuous growth - Industrial cooperation with Mexican institutions. 2. Strengthen and develop our aerospace industry capabilities - Supply Chain and local suppliers development - Cluster development. The National Strategic Program of the Aerospace Industry 18. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO 5 Pro-Areo Key Strategies (2/2) 3. Development of the necessary human ressources for the industry - Well defined technical and training programs - Education-industry links. 4. Development of the necessary technology - Test Laboratories - R&D centers (new materials, ). 5. Development of programs required to assist the growth of the industry - Institutional frame - Incentives and financing. The National Strategic Program of the Aerospace Industry 19. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO N FEMIA: Federacin Mexicana de la Industria Aeroespacial A Non-for-profit Association - Founded in November 2007 - 65+ Members - Represents 90% + of the headcounts of the sector - Represents 90% + of the exportations of the sector - Website: www.femia.com.mx Mission To represent the aerospace sector and to be the reference as a corporate association, supporting all strategic challenges within the sector, aiming the best benefits for its membership. 20. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO F Structure - Board of Directors chaired by President - supported by 3 Regional Vice Presidents and a General Director 9 Permanent Commissions - Internal Governance - National Strategic Plan - Education and Training -Taxes, Customs and International Trade - Incentives and Technological Development - Competitiveness - National Security - Clusters - Small and Medium Size Corporations - Plus temporary ones. 21. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Quertaro context In 2005 only 2 aerospace companies (ITR and GE) Bombardier and Safran arrived at the same time in 2006. Then other main players as Meggit, Heyroux-Devtek (PCC Group), Eurocopter (Airbus Helicopters), Strong governmental implication in the Cluster Development: proactive team. Strong Industry implication and networking Strong links between Authorities, Universities, R&D Centers and Industry. The AeroClster de Quertaro, A.C. (ACQ) 22. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO ACQ: origin and evolution (1/2) In 2008 was created the RIIAQ (Quertaro Aerospace Industry Network for Investigation and Innovation) which is an AERI (Strategic Alliance and innovation Network, Mexican CONACYT status) in order to launch the first Quertaro aerospace prospective studies In 2012 transformation of the RIIAQ in Asociacin Civil: el Aero Clster de Quertaro A.C. (ACQ) Today 25 ACQ members (out of which 17 are RIIAQ members). Soon 2 members from the Guanajuato State will be part of the Cluster. Industry leaded cluster. 6 Commissions. Internal Governance, HR, Supply Chain, R&D, Shared Services and Financing, Certification. The AeroClster de Quertaro, A.C. (ACQ) 23. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO ACQ: origin and evolution (2/2) Members, such as: - Bombardier, GE, Airbus Helicopters, Snecma, Snecma Services, Messier-Bugatti- Dowty, Messier Services, ITP/ITR, Aernova, Kuo, - Universities: UNAQ, UNAM, ITESM, IPN/CICATA, UAQ, - R&I centers: CIDESI, CINVESTAV, CIDETEQ, CIATEQ - Governmental entities CENAM, CONCYTEQ, - Permanent invited members: SEDESU and Quertaro SEP Are invited to join the ACQ: - All the new aeronautic companies arriving in Quertaro - Administrative entities (DGAC, AEM) - Technological Universities and schools, The AeroClster de Quertaro, A.C. (ACQ) 24. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO The ACQ mission - Extract from the status Integrar, coordinar, promover y defender los intereses generales de la industria en el Estado Disear, divulgar y ejecutar las polticas, programas e instrumentos para el fomento de la industria, en estrecha vinculacin con las autoridades y dems actores involucrados a nivel estatal, nacional e internacional. Impulsar, fortalecer y consolidar la Industria en el Estado a travs de 3 actividades fundamentales: Investigacin, Innovacin y Desarrollo. Seleccionar proyectos cooperativos y coherentes con las necesidades de la industria Estado de Quertaro. The AeroClster de Quertaro, A.C. (ACQ) 25. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Cluster Strengths (1/2) Geographical position Historical industrial city, social and safety climates International airport and good infrastructures, R&D Centers, Quertaro Authorities commitment to develop this Industry Quertaro Aerospace Industry organization and commitment Aeronautic Technical Trainings and Universities: - UNAQ: National Aeronautic University of Quertaro: engineers & technicians - ITESM: CEDIA - UNAM: works for the AEM - CONALEP: technicians with DGAC License - Good technological universities. The AeroClster de Quertaro, A.C. (ACQ) 26. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Cluster Strengths (2/2) 2 Dedicated Industrial Park (the first Aeronautic Park in Mxico) Orientation of R&D centers towards the industry First DGAC out of Mexico City One of the first 2 AEM (Mexican Space Agency) office out of Mexico LABTA (Laboratorio de Pruebas Aeronuticas) CENTA project (National Center for Aeronautic Technologies): President Pea Nieto Commitment initially for aeronautic composite materials The AeroClster de Quertaro, A.C. (ACQ) 27. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO WE ARE STILL YOUNG, WE JUST STARTING THE FLIGHT. JOIN US! WELCOME! 28. PROHIBIDA LA REPRODUCCIN TOTAL O PARCIAL DE ESTE DOCUMENTO Claude Gobenceaux SAFRAN / Messier-Bugatti-Dowty / MRO Division Americas Managing Director FEMIA Board Member AeroClster de Quertaro A.C. President Claude.gobenceaux@safranmbd.com THANKS!