ICF International’s Jonathan Berger originally shared this overview of the surplus part market at the ALTA CCMA Airlines and Suppliers Annual Meeting, Punta Cana, Dominican Republic, on May 18, 2015. To learn more, please visit: http://www.icfi.com/markets/aviation/maintenance-repair-and-overhaul

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Surplus Part Market Overview
May 18, 2015 – Punta Cana, Dominican Republic
Presented by:
Jonathan M. Berger
Vice President  ICF International
jberger@icfi.com

2. 1icfi.com/aviation |
ICF is one of the world’s largest and most experienced
aviation and aerospace consulting firms
 52 years in business (founded 1963)
 100+ professional staff
− Dedicatedexclusively to aviationandaerospace
− Blend ofconsulting professionalsand experiencedaviationexecutives
 Specialized,focused expertise and proprietary knowledge
 Broad functional capabilities
 More than 10,000 private and public sector assignments
 Backed by parent company ICF International (2014 revenue - $1.05B)
 Global presence –– offices around the world
Airports • Airlines • Aerospace & MRO • Aircraft Asset Advisory
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong

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Today, spending on air transport surplus parts is ~$3.5B
SURPLUS PARTS MARKET
Engines
Components
Airframe
5%
65%
30%
Air Transport Surplus Parts Market*
* Sales to end customers; excludes intra-dealer sales
Surplus material
for engines
predominantly
consist of piece
parts (e.g., LLPs)
Component surplus
are primarily rotables
LRUs; Demand is
driven by AOGs, BER
and provisioning
Typically
slow moving
structural parts
Source: ICF International
~$3.5B

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Annual retirements will exceed 1,000 aircraft by 2024;
2014 saw a significant drop-off in retirements however…
SURPLUS PARTS MARKET
Air Transport Annual Aircraft Retirements
Includes Turboprops
Source: FlightGlobal ACAS March 2015, Airline Monitor, ICF International Analysis
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
ICF
forecast
1990-99 Average 191
2000-09 Average 432
2010-24 Average 806

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SURPLUS PARTS MARKET
2003-2014 Total Retired Aircraft
(By Aircraft Category)
2003-2014 Total Retired Aircraft
(By Aircraft Type)
Source: FlightGlobal ACAS, ICF International Analysis
About 6,700 aircraft were retired between 2003-2014; of
which over half were narrowbody jets
Narrowbody
Jet
Turboprops
Widebody Jet
Regional Jet
~ 6,700
Retirements
727
737 Classic
737-1/200
DC-9
MD-80
747 Classic
A300 / A310
A320 Family
DC-8
DC-10
~ 6,700
Retirements
13%
9%
8%
7%
7%
6%4%4%3%
2%
54%
21%
19%
7%
Others
37%

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ICF forecasts 8,600 retirements through 2024, which will
drive 42% of deliveries, compared to the historical 20%
SURPLUS PARTS MARKET
Source: ICF International
Note: includes turboprops and regional jets
Air Transport Retirements
2014 – 2024
-
5,000
10,000
15,000
20,000
25,000
Composition of Demand
2014 – 2024
20,500 Deliveries…
…of which 8,600 to
offset retirements
…and 11,900
for new
growth
42%
58%
A320 Family
737NG
737 Classic
767
CRJ-1/2/400
MD-80
ERJ757
DHC6
747-400
~ 8,600
Retirements
20%
8%
8%
5%
6%
Others
35%
4%
5%
3% 3%3%
Retirements historically drove 20% of deliveries; ICF
estimates this % will double over the next 10 years

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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
00's Tech
90's Tech
80's Tech
70's Tech
60's Tech
Historical Air Transport Retirements By Technology Era
SURPLUS PARTS MARKET
Source: FlightGlobal ACAS, ICF International Analysis
The emphasis on retirements is shifting towards aircraft
that were manufactured during the 1980s
Percentage of
Retirements
2000s (e.g ERJ170s, A340-500/600s)
1990s (e.g.A320 Family, A330s, 737NG, 777s)
1980s (e.g A300/A310s, 757s, 767s, MD80s)
1970s (e.g BAe146s, 737 Classics, DC9s, DC10, L1011)
1960s (e.g 707s, 727s, 1-11s, F27s)
e.g. 707s, 727s
e.g. 737 Classics, DC9s, L-1011s
e.g. A310s, 757/767s, MD80s
e.g. A320, 737NG, 777

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Commercial aircraft OEM production backlog remains at
historical record levels
SURPLUS PARTS MARKET
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
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft.
Only includes passenger, freighter, quick change and combi operational roles
Source: Flightglobal ACAS, April 2015
Order
Backlog
Backlog/
Active Fleet
Commercial Aircraft OEM Production Backlog
 High oil prices
 Low interest rates
 Emerging market growth
 New Technology aircraft/engines

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Surplus dealers and MROs now obtain approx. 85% of
their inventory from parted-out aircraft
SURPLUS PARTS MARKET
54%
85%
26%
6%20%
9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2014
Aircraft Part-Out
Direct Purchase From Airline
Purchase From Surplus Dealer
Supplier Channels for
Obtaining Surplus Materials
 Increased component cost
per flight hour
agreements
 Leaner airline inventories
– fewer airlines own
inventory assets
 Improved material
planning (and MRO IT
capabilities)
 Growth of sophisticated
parts brokers & lessors
ICF Insight
Source: ICF International

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Surplus Market Overview Appendix
SURPLUS PARTS MARKET
 AOGs: (Aircraft On Ground) – Aviation industry term indicating an aircraft is out
of service for a technical reason.
 BER: (Beyond Economical Repair) – When the cost to repair an aircraft part
exceeds the replacement value cost.
 OEM: (Original Equipment Manufacturer) – A company whose products are
used as components in another company's product
 BRICS: Brazil, Russia, India, China, South Africa
 MRO: Maintenance, Repair, and Overhaul
 CAGR: Compound Annual Growth Rate

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Thank you!
For questions regarding
this presentation, please contact:
Jonathan M. Berger
Vice President – Aerospace & MRO
+1 (404) 819-7669
jberger@icfi.com