Aviation Maintenance Industry Update Christian A Aviation Maintenance Industry Update Christian A. Klein Executive Vice President Aeronautical Repair Station Association Aviation Council of Pennsylvania 37th Annual Pennsylvania Aviation Conference Latrobe, Pennsylvania Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

Overview ARSA and Industry Overview. State of the Industry. Risks and Opportunities. ARSA Action for Industry. Moving the Ball Forward. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

ARSA Background: About the Association The trade association for the global aviation maintenance industry. Based in Alexandria, Virginia (across the Potomac River from Washington, D.C.). Regular members are companies that hold FAA part 145 certificates or equivalent certification from a civil aviation authority. Membership also includes airlines, manufacturers, other companies with interest in maintenance, schools, individuals. More than 400 members representing 520+ certificates. Managed by law firm of Obadal, Filler, MacLeod & Klein, PLC. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

ARSA Background: What Do We Do? Regulatory advocacy, compliance assistance, and training. Legislative advocacy/lobbying. Public relations for aviation maintenance industry. Workforce development (policy, promoting industry careers, supporting recruitment, training). Services to reduce member costs of doing business. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

ARSA Background: Industry Profile Maintenance Industry National Footprint: 186,000 repair station employees. $44 billion in total maintenance sector econ impact. Positive balance of trade (more work comes here than we send overseas) Pennsylvania ARSA Member Locations: Maintenance Industry Footprint in PA: 3,200 repair station employees, $424 million in annual economic impact. 19 repair stations w/ EASA approval underscores international trade impact. AgustaWestland Philadelphia Corp. Action Research Corporation NFF Avionics Services, Inc. Quality Aviation Instruments, Inc. BCB Aviation Inc. Rieker Instrument Company, Inc. Carson Helicopters, Inc. Triumph Brands, Inc. Lord Corporation Triumph Controls LLC Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

State of the Industry Air travel growing globally due to per capita GDP growth, globalization. Will continue to grow steadily, but modestly (revenue passenger kilometers expected to grow 6% per year over next two decades). Major growth factor is increasing wealth in developing countries: 6.2 billion people (85% of world population) will become middle class in the next two decades. Largest gains (opportunities) in Africa, Asia, Middle East and Latin America. Other factors affecting growth: open skies agreements/deregulation, improvements in service quality, addition of new routes. For airlines, improved capacity management -> increased passenger load factors + lower jet fuel prices = higher yields, ROI, and stronger balance sheets. “[T]he most favorable market conditions that commercial aircraft manufacturers have experienced”, but preference for larger aircraft means headwinds for smaller aircraft manufacturers. Total global MRO spend in 2017 is $75.6 billion, will rise to $84.9 billion by 2022 and to to $109.2 billion by 2027. New technologies will stretch heavy maintenance intervals, but newer engines (which operate at higher temps and pressures) will require more maintenance. Relative mix of component and line maintenance won’t change. Outlook generally positive: If growth continues, bigger global fleet will require more maintenance; if growth slows and fewer new planes are added, older aircraft will require more maintenance. Source: Oliver Wyman 2017 Global Fleet & MRO Market Assessment (prepared for ARSA) Look for shift in relative distribution of passenger traffic from North America to China. ME airlines will gain long-haul share. This past year, non-Boeing/Airbus aircraft made up only 17% of all deliveries, a significant decline from a high of 29% in 2009. Smaller aircraft manufacturers are likely to see even stronger headwinds as they lack the scale and offerings to meet the desire for larger aircraft. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

Risks and Opportunities: 2017 ARSA Survey 46% of ARSA members report unit margin/profitability has increased in past two years (vs. 33% reporting decrease). 59% expect revenue and markets to grow (vs. only 8% expecting contraction). 55% expect to add workers (vs. one percent planning layoffs). But 82% report difficulty finding qualified technical workers over past two years. ARSA estimates c. 11,000 open positions at U.S. repair stations; if those positions go unfilled, industry could miss out on $1.95 billion in economic activity in 2017. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

Risks and Opportunities: 2017 ARSA Survey Biggest threats identified by members: Regulatory costs/burdens. Difficulty finding and retaining technical talent (tie). 3. Availability of maintenance information (aka, repair manuals or instructions for continued airworthiness). 4. Inconsistencies between national regulatory systems. 5. Restrictions on international trade and markets. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

ARSA Action for Industry Challenge/Opportunity Recent ARSA Action Reducing regulatory costs/burdens. Leading FAA Aviation Rulemaking Advisory Committee (ARAC) to leverage Trump administration focus on regulatory reform. Fighting for repair stations in FAA reauthorization. Expanding online regulatory training. Technician shortage. Pursuing amendments to FAA reauthorization bill to: Enhance value of 14 CFR part 65 repairman certificates. Create new grant program to support collaboration between aviation companies, schools, and government. Direct GAO report to study causes of, solutions to skills gap. Aerojobs.org website. Availability of maintenance information. Supporting member efforts to improve access to maintenance data to support DOD contracts. Inconsistencies between national regulatory systems. Participating in EASA STeB to improve coordination between U.S. and European regulators. ICAO engagement. International market access/reducing barriers to trade. Fighting to prevent anti-trade language in FAA bill. Guidance to clarify duty-free status of parts imported for repair. Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

Moving the Ball Forward Join ARSA. Use regulatory tools (publications, training, etc.) to improve your efficiency and compliance. Attend meetings and conferences (March 14-16 is ARSA Legislative Day & Symposium). Engage with government (collectively and individually) by meeting with lawmakers, hosting them at your facility, etc. Respond to requests for information (surveys). Follow us on Twitter (@ARSAworks, @caaklein, @LevantoAir). Support your local technical schools! Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com

Keep in Touch… Christian A. Klein Executive Vice President Tel. 703.739.9543 Email christian.klein@arsa.org Twitter @caaklein Sept. 27, 2017 Copyright © 2017 Obadal, Filler, MacLeod & Klein, P.L.C. 703 299 0784 • http://potomac-law.com