Originally presented at Aviation Week's MRO Latin America Conference in Lima, Peru, ICF’s Jonathan Berger provides an overview of the current aviation maintenance, repair, and overhaul (MRO) market—both globally and in Latin America—the current trends and dynamics in the industry, and a forecast for the near and long term. For more information, please visit: http://www.icfi.com/markets/aviation/maintenance-repair-and-overhaul

1. 0
MRO Forecast and Market Trends
Presented by:
Jonathan M. Berger
Vice President  ICF International
jberger@icfi.com
January 21-22, 2016
Lima, Peru

2. 11
Today’s Agenda
MRO Forecast
Meet the Frackers!
The not-so-mighty-mighty
BRIC House
The Next Big Thing!

3. 22
MRO Forecast

4. 33
The current
commercial
air transport fleet
consists of over
27K aircraft
Source: CAPA 2015
2015 Global Commercial Air Transport Fleet
Narrowbody
Jet
Widebody
Jet
Turboprop
Regional
Jet
27,114
Aircraft
14%
53%14%
19%
By Aircraft Type By Global Region
North
America
Asia Pacific
Europe
Latin
America
Middle East
31%
27%
25%
8%
5% 5%
27,114
Aircraft

5. 44
The combination of
strong air travel
demand and the
need to replace
ageing aircraft will
drive fleet growth at
3.4% annually
Source: ICF International, CAPA 2015
10 Year Global Air Transport Fleet Growth
 Air travel growth of ~4.1%
 Fuel costs in $55/bbl range
 ~19,600 aircraft deliveries
 ~8,800 aircraft retirements
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2015 2025
Africa
Middle East
South America
Europe
Asia Pacific
North America
27,114
27% 32%
37,932
31%
25%
8%
26%
23%
8%
# Aircraft
3.8%
2.5%
1.6%
5.2%
5.3%
5.1%
CAGR
3.4% Avg.

6. 55
Current air transport
MRO demand is
$64.3B; with Asia
equivalent to North
America and Europe
in market size
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
2015 Global MRO Demand
Engines
Components
Line
Airframe
Modifications
14%
17%
22%
40%
7%
North
America
Asia Pacific
Europe
Middle East
Latin
America Africa
29%
28%
26%
8%
6% 4%
$64.3B$64.3B
By MRO Segment By Global Region

7. 66
The global MRO
market is expected
to grow by 4.1%
per annum to $96B
by 2025
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
10 Year Global MRO Demand Growth
 The strongest drivers of
growth are the engine and
component markets
 Reduced labor intensity of
airframe heavy checks as the
fleet renews and increased
intervals...offset in emerging
markets by increasing labor
rates
 Aircraft upgrades (e.g.
interiors, winglets) drive
high modifications growth $0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2015 2025
Modifications
Airframe
Line
Component
Engine
40%
22%
14%
17%
$64.3B
$96.0B
2.8%
3.6%
4.3%
4.4%
CAGR
4.1% Avg.
5.3%
41%
22%
16%
13%

8. 77
The current Latin
American
commercial
air transport fleet
consists of over
2,100 aircraft
Source: CAPA 2015
2015 Latin American Commercial
Air Transport Fleet
Narrowbody
Jet
Widebody
Jet
Turboprop
Regional
Jet
2,123
Aircraft
8%
51%
16%
25%
By Aircraft Type By Country
Brazil
Mexico
Colombia
Chile
Venezuela
Panama
Other
2,123
Aircraft
28%
17%
7%
21%
11%
6%
6%
5%

9. 88
The Latin American
MRO market is
expected to grow
to approx. $6.3B
by 2025, at 5.7% per
annum
Source: ICF International; Forecast in 2015 $USD, exclusive of inflation
10 Year Latin American MRO
Demand Growth
 Latin American MRO
growth is driven by
continued narrowbody
aircraft deliveries
 MRO spend on widebodies in
Latin America will also
nearly double by 2025 as the
fleet increases by 56%
 With the anticipated fleet
growth, the strongest MRO
spend areas will be for
engines and components $0
$1
$2
$3
$4
$5
$6
$7
2015 2025
Modifications
Airframe
Line
Component
Engine
36%
25%
13%
20%
$3.6B
$6.3B
5.1%
4.0%
5.2%
6.6%
CAGR
5.7% Avg.
8.2%
40%
24%
17%
12%
7%

10. 99
Meet the Frackers!

11. 1010
Breakthrough
technologies in
horizontal drilling
and hydraulic
fracturing (aka
fracking) resulted
in a US-led energy
revolution
Source: ICF International analysis
North American crude oil and natural gas
production have soared in recent years…
3,500
4,500
5,500
6,500
7,500
8,500
9,500
10 year growth = 105%
(7.45% CAGR)
Thousands
1,250
1,450
1,650
1,850
2,050
2,250
2,450
10 year growth = 66%
(5.22% CAGR)
Billion cu. ft.
U.S. Crude Oil Production
(Barrels / day)
U.S. Natural Gas Production
(Monthly marketed production)

12. 1111
The US energy
revolution has
completely upset
the global economic
and geopolitical
balance of power
Source: BP Statistical Review of World Energy June 2015, ICF International Analysis
…making the U.S. a global powerhouse in
energy production
728
579
177 173 162
135
109 108
83 73
0
100
200
300
400
500
600
700
800
[VALUE]11.5
10.8
4.3 4.2
3.7 3.6
3.3 3.1
2.8
0
2
4
6
8
10
12
14
Global Oil Production
(Million barrels / day as of June 2015)
Global Natural Gas Production
(Billions of cubic meters as of June 2015)

13. 1212
The potential for
sustained
reduction in oil
revenues could
further destabilize
many already
fragile economies
Source: BP Statistical Review of World Energy June 2015, ICF International Analysis
Low oil prices are exerting tremendous stress
on economies dependent on energy exports
Brent Crude Oil
Price, $ per barrel
$40
$60
$80
$100
$120
$140
$160 Venezuela
Iran
Nigeria
Ecuador
Iraq
Libya
Saudi Arabia
Angola
UAE
Qatar
Russia
Deficit
Surplus
Brent Crude Oil Price,
USD$ per barrel
National Government Fiscal Budgets’ Break-Even Oil Price
(2014)

14. 1313
Continued low fuel
costs will have
significant
repercussions
throughout the
aviation & MRO
supply chain
Source: EIA; ICF International analysis
Aviation fuel costs have dropped over 55%
during the past 24 months
U.S. Gulf Coast Jet Fuel Price per Gallon
$1.2
$1.4
$1.6
$1.8
$2.0
$2.2
$2.4
$2.6
$2.8
$3.0
$ USD
~55%

15. 1414
Continued low fuel
costs will have
significant
repercussions
throughout the
aviation & MRO
supply chain
Source: EIA; ICF International analysis
Aviation fuel costs have dropped over 55%
during the past 24 months
Global Airline Profitability
-$30
-$20
-$10
$0
$10
$20
$30
$40
$USD
Billions
$36B
North America
$19B
Rest of World
$17B

16. 1515
The Not-So-Mighty-
Mighty BRIC House

17. 1616
China’s seemingly
insatiable demand
for global
commodities was a
key driver of the
BRICS economic
growth
Source: IMF, World Economic Outlook Database October 2015, ICF International Analysis
After years of staggering GDP growth,
China’s economy has been steadily slowing
5%
7%
9%
11%
13%
15%
2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F2015F 2016F
China GDP Year-on-Year Growth (%)

18. 1717
Latin American
economies must
continue to diversify
away from
commodities in order
to minimize the
adverse economic
impact of plunging
commodity prices
Source: ICF analysis
Over the past 5 years, commodity prices
have plummeted more than 55%
Dow Jones Commodity Indices (DJCI)
(January 2011 Indexed to 100)
40
50
60
70
80
90
100
110
- 56.0%
Indexed
Values

19. 1818
Russian Ruble
-55.1%
Brazilian Real
-41.1%
S. African Rand
-34.1%
Mexican Peso
-25.9%
Can Dollars
-23.1%
Aus Dollars
-20.8%
Euro
-20.0%
British Pound
-12.8%
Japanese Yen
-11.9%
Indian Rupee
-7.8%
Chinese Yuan
-7.2%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
The dramatic increase
in oil & gas market
supply and reduced
demand for
commodities has led
to a stronger US Dollar
Source: Oanda historical exchange rates, ICF International Analysis
Global Currency Exchange Rates vs USD
 Partially offsets the positive
impact of low fuel costs for
operators
 Increases the cost of dollar
based flight hour agreements
(and parts/material in general)
 Cost of labor for in-country
MROs is cheaper driving up
margins for US dollar based
contracts
FOREX Impact
% Value Change
Jan. 2014 – Jan. 2016
B
R
C
S
I

20. 1919
Latin America GDP
growth continues
to be negatively
impacted by the
global economic
slowdown (more
specifically China
and commodities)
Note: All GDP Growth are calculated based on constant price (nation currency)
Source: IMF Economic Outlook Oct 15
United States
Brazil
0.0%
2.0%
4.0%
6.0%
0.0%
5.0%
10.0%
0.0%
5.0%
10.0%
0.0%
5.0%
10.0%
0.0%
2.0%
4.0%
0.0%
2.0%
4.0%
-2.0%
0.0%
2.0%
4.0%
-5.0%
0.0%
5.0%

21. 2020
While North
American carriers
are enjoying
historic profitability,
Latin American
carriers continue to
struggle
Source: Company websites, IATA, ICF International Analysis
Copa
Q3 2015 Net Profit: $6.2M
Q3 2015 Net Margin: 1.1%
AeroMexico
Q1-3 2015 Net Profit: $737M
Q1-3 2015 Net Margin: 5.9%
GOL
Q1-3 2015 Net Profits: ($788.7M)
Q1-3 2015 Net Margin: -44.3%
Avianca
Q1-3 2015 Net Profit: $112.M
Q1-3 2015 Net Margin: 3.4%
LAN & TAM (LATAM)
Q1-3 2015 Net Profits: ($203M)
Q1-3 2015 Net Margin: -2.7%
$ Billions
-$0.5
$0.0
$0.5
$1.0
$1.5 Latin America
Airline Profitability
Aerolinas Argentinas
Jan-Aug 2015 Net Profits: ($85.8M)
Jan-Aug Net Margin: -6.4%
United States
Brazil

22. 2121
March of the
Middle East Titans;
coming soon to an
airport near you!
Source: OAG Data, ICF International Analysis
European Secondary Airports
Average Number of Seats per Departure in 2015
Lufthansa’s Frankfurt hub has lost nearly a 3rd of its market share
on routes between Europe and Asia since 2005, with more than
three million people now flying annually from Germany to
other destinations via Gulf hubs – The Economist
333 328
354 354
324
370
339
354 354
264
174
141
121
140
111
153 150
109
121
148
100
150
200
250
300
350
400 Gulf Carriers Non-Gulf Carriers

23. 2222
The Next Big Thing…

24. 2323
ICF believes that
virtual reality (VR)
technology will be
as disruptive to
MRO training as 3D-
printing is to parts
manufacturing

25. 2424
 The US energy revolution has disrupted global
economics and geopolitics
 The economic slowdown in China has dramatically
impacted commodity export dependent BRICS
 Latin America’s exposure to commodity prices and
impact of currency exchange rates will continue to
drive economic headwinds in the region
 Virtual reality has the ability to transform the way
technicians are trained
In Summary…

26. 25
For questions regarding this
presentation, please contact:
Jonathan M. Berger
Vice President  Aerospace & MRO
jberger@icfi.com  +1 404.819.7669
January 21-22, 2016
Lima, Peru
THANK YOU!

27. 2626
 Market Research & Analysis
 Airline Maintenance Benchmarking
 M&A Commercial Due Diligence
 OEM Aftermarket Strategy
 Aviation Asset Valuations & Appraisals
 MRO Information Technology (IT) Advisory
 Strategic Sourcing & Supply Chain Mgt.
 LEAN Continuous Process Improvement
 Military Aircraft Sustainment
ICF provides a full range of MRO
advisory services

28. 2727
ICF is one of the world’s largest and
most experienced aviation & aerospace
consulting firms
 53 years in business (founded 1963)
 100+ professional staff
− Dedicated exclusively to aviation and aerospace
− Blend of consulting professionals and experienced
aviation executives
 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
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong
Aerospace
& MRO
Aircraft Asset
Advisory
Airline Advisory
Airports