Paris Air Show 2019 - Impressions And Opinions Or Aerospace and - PowerPoint PPT Presentation

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Aerospace & Defense PTI Technologies Inc. Paris Air Show 2019 - Impressions And Opinions Or Aerospace and Defense In An Age Of Uncertainty 16 July 2019 1 1

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – UNCERTAINTY IN THE MARKET � The 2019 Paris Air Show was really all about uncertainty - we saw eight key topics driving the discussion • The continued grounding of 737 MAX - when it will return to service • What will happen with new aircraft orders – what is health of commercial aircraft cycle, is slowdown this year a sign of the future, what are impact of trade issues • The changes in regional aircraft market – Bombardier and Embraer exit, so what happens now with MRJ and COMAC • New aircraft model introductions – will we see NMA or will Boeing opt for NSA, will we see the new A321 XLR, or maybe others • Consolidation continues – Raytheon/UTC merger, Boeing acquires EnCore, Rolls Royce acquires Siemens eAircraft business, Mitsubishi acquires CRJ • There is a growing demand for fighter aircraft – aging fleets, higher levels of defense spending • Electric, hybrid and eVTOL aircraft – how close to reality are these • Urban mobility – when will we see this, who are the key players 2 Company Private 2 2

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – BY THE NUMBERS* � Exhibitors • Over 2,453 exhibitors from 49 countries (2017 – 2,381/48) o Includes 150 Start-ups from 21 countries � Visitors • 139,840 trade visitors from 185 countries (2017 – 142,000) � Delegations • 276 Official Delegations from 98 countries and 7 International Organizations (2017 – 290/98) o 171 Official Defence Delegations from 88 countries and 7 organizations - including 16 foreign ministers, 48 chiefs of staff and 18 vice ministers or secretaries of State o 124 civilian delegations - including 9 ministers � Total Orders • $140B worth of contracts signed (2017 - $150B) * Data from SIAE.FR 3 Company Private 3 3

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. BOEING – 737MAX AND MORE � Boeing came to the show with a more humble approach • Focus on 737 MAX safely returning to service, need to rebuild trust � 737 MAX • 390 MAX aircraft at 92 airports - 120+ more aircraft built but not delivered • 300 flights with new MCAS software and new training material for crews • Maintenance/engineering support, spares and EIS/training teams • Reimbursements to airlines could reach $1.4B (Oct) (plus costs for fix) • Other issues from grounding - airlines refusing to pay lessors (41% of fleet is leased), the longer the grounding - more maintenance comes due • IAG LOI for 200 MAX aircraft (BA, Vueling) - Airbus challenging the LOI Pressure on Boeing for all-new narrowbody (6,504+ A320neo’s/ 5,008 MAX’s)? � � NMA - no announcement at the show regarding the NMA • Boeing NMA design focus - 20% more seats or 20% more range that 757 family • Launch variant may be the 275 seat NMA 7-X configuration � 777X - first 777-9 flight delayed until Oct/Nov (GE9X), 344 B777X ordered � Boeing continuing acquisitions (vertical integration) - focus on avionics next 4 Company Private 4 4

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – MARKET FORECASTS � Boeing 2019 Commercial Market Outlook • 44,040 new aircraft valued at over $6.8T over the next twenty years • 32,420 will be single-aisle (73.6%) – up from a forecast of 31,360 last year • Asia Pacific accounts for 17,390 of the 44,040 new aircraft • Deliveries of 2,240 regional jets during this time • Global fleet of 50,660 aircraft by 2038 (25,830 today) � Forecast International predictions for large jet transports • 30,171 aircraft (worth $4.91T) will be produced over the next 15 years • Annual production rates increase from 1,691 in 2019 to 2,127 in 2029 (but with a dip starting in 2030). • Airbus market share at 47.7% and Boeing’s share at 48.1% � IBA freighter conversion market • Strong 2018 with 87 P2F conversions (up from 75 in 2017 and 70 in 2016). • Most were older Boeing aircraft (25 B737-400, 23 B757-200, 27 B767-300) • Rest were A330-200/300 conversions. • Global P2F fleet will grow from 611 aircraft today to 879 by 2024 5 Company Private 5 5

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – MARKET HEALTH � Aviation sustainability was a major topic • Joint statement by CTO’s of Airbus, Boeing, Dassault, GE, R-R, Safran and UTC • Laid out each company’s goals towards sustainability in aviation • Reduced engine noise, alternative fuels, lower weight / more efficient engines, electrification of aviation, lighter weight materials and improved aerodynamics � Speculation about when current order bubble will burst - what will cause it to burst • Geopolitical uncertainty, trade war lead to worldwide recession? • The MAX grounding led to capacity reduction – when MAX flies again capacity will grow rapidly – will this create overcapacity? • Potential aircraft imports tariffs in US and retaliatory measures in Europe? � Recent European rules for defense development restrict involvement by non-EU countries – what consequences if U.S. companies aren’t allowed to participate � The continuing saga of Brexit is a critical issue for the aerospace market • Airbus - “No Deal Brexit” will lead to the collapse of the UK aerospace industry, • Lack of customs procedures, logistics, standards - major business and cost impact. • Even EASA approvals will be impacted and UK companies will have to transfer their DOA, POA and MOA into the EU to continue 6 Company Private 6 6

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – THE ORDERS � Orders, Options, Purchase Rights and Conversions • Airbus – launch of the A321XLR (Middle of Market) o A220 (50) A320 (65+35, 253C), A321XLR (132, 74C), A330 (30), A350 (0) • Boeing o 737-800BCF (35+25), MAX (200), 787 (25), 777 (1), 777F (11) • ATR – 42/72 (58 +35 +35), 42 STOL (17) • Embraer – 175E1 (22+19), 195E2 (17+20) • Mitsubishi – SpaceJet100 (15) • De Havilland Canada – Q400 (6) 7 Company Private 7 7

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. PARIS 2019 – THE ORDERS Engines Big Winners – Airlines opting for more LTA’s to maintain engines. � For Safran (part of CFMI) - shift from 12% on LTA’s today to 30%+ by 2025 • P&W o GTF Sales – over 297 engines (with backlog of 10,000+ engines) – JetSMART – 85 A320neo’s – Chinese airlines/lessor – 74 A320neo’s – VivaAerobus – 41 A320neo’s – SMBC Aviation – 20 A320neo’s – Middle East Airlines – 4 A321XLR – Undisclosed airline – 28 A320neo’s – Undisclosed lessor – 35 A320neo’s (plus 5 options) – Delta Airlines – 5 new A220-100 • CFMI o Indigo – LEAP 1A for 280 aircraft ($20B incl. maintenance plans) o AirAsia – LEAP 1A for 100 aircraft + expand RPFH agreement to engine fleet ($23B) o Avolon – LEAP 1A for 70 aircraft ($2.06B) o Peach Aviation – LEAP 1A for 10 aircraft ($294M) o Colorful Guizhou Air – 12 year LEAP 1A maintenance ($500M) o Zhejiang Loong Air – 12 year LEAP 1A Maint./40 engines ($800M) o CDB Aviation – LEAP 1A for 45 aircraft ($1.3B) o ALAFCO – LEAP 1A for 30 aircraft (and for 20 option aircraft) 8 Company Private 8 8

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 ESCO Engineered Solutions PTI Technologies Inc. CONSOLIDATION CONTINUES � Four major deals announced around show • Raytheon / UTC merger - $74B aerospace and defense provider • Boeing acquisition of EnCore - extend into aircraft interiors • Rolls Royce / Siemens eAircraft - extend capabilities for hybrid/electric • Mitsubishi Aircraft acquisition of CRJ – network, facilities, customers � Michael Richter, managing director for Lazard • $120B deals in 2018 - YTD2019 almost 130 deals – very robust environment • OEM’s – don’t like pricing issues from suppliers gaining strength and breadth, but want stronger supply chain to deliver at increasing rates • Suppliers – expand reach, competitiveness against larger suppliers/OEM’s, resources in face of workforce shortages and gain capital for investments • Pools of capital competing to get an asset, driving volume and pushing prices beyond expectation. • Literally still hundreds, if not thousands of companies extremely interesting from an M&A perspective . 9 Company Private 9 9