Creating Successful New Business Concepts From Old Ideas Jet Parts Engineering, Inc. Steve Johnson

Outline Blending Strategies Opportunistic Mixing Recycle the Old Old to New Todays PMA Old Ideas Implementation – Internal and External Effect on Industry PMA Application Old to New Old Slide Outline Blending Strategies Opportunistic Mixing Recycle the Old Old Ideas on PMA Intra-Company and External Company Partnerships

Old to New NBA NFL Two 15-minute halves 3 consecutive fouls, opponents receive a point No 3-point line No shot clock NFL No game clock Player substitutions were prohibited No communication from the sideline was allowed Players from both teams could grab their opponents’ facemasks at will Old Slide Info NBA Two 15-minute halves, with 5 minutes' rest If either side makes 3 consecutive fouls, opponents receive a point Out of bounds ball must be thrown into play by the person first touching it Additional changes to shot clock, 3 point line and hand checking NFL No time clocks Quarterback can’t throw a pass unless he’s at least 5 yards behind the line of scrimmage Offense begins some plays just a yard from the sideline and is penalized for throwing more than 1 pass during a series of downs Player substitutions are prohibited No communication from the sideline is allowed Players from both teams can grab their opponents’ facemasks at will

Old to New - Blending Strategies Merge the Best of Two Different Business Ideas Old Slide Info With a blend strategy we take the best parts of two different business ideas and merge them together to create a new concept that is better than the old concepts were independently.

Opportunistic Mixing of Quantitative and Qualitative Information Takes two opposing beliefs – Existing ideas are tried and tested through experience Current methods and data validate existing approach Adds to the breadth and depth of our conversion of Old ideas to New Qualitative Approach Highly experiential with the appearance of lacking in data and detail Quantitative Approach Highly analytical but may appear to lack in real life perspective

Recycle Some ideas have been the mainstay of our businesses and strategies but they have become stale, overused or are no longer relevant as they once were Some of these may need to be recycled just as we do with paper and plastics and metal Through the recycling process we rebrand the practice or idea and create a new and better product than what we had before We’ve all heard of his name—the great automobile innovator and entrepreneur, Henry Ford. What a lot of people don’t know is that before he became famous for his automobile and $5 workday, Henry Ford was a debtor who filed bankruptcy twice. How many times has the idea of the Ford Mustang been “recycled”?

PMA Today 2015 PMA Market was about $550 million with a 1.7% penetration PMA Market last 5 year average of $500+ million At 40% savings from OEM total savings of $1.67 billion last 5 years 2018 projection of $770 million Three aspects: logistically (part availability) as well as technically (reliability) and commercially (Warranty improvement – this is a stretch but let’s discuss). What other influences on OEMs other than service level, How did they change their behavior to combat PMAs (Longer term contracts, use their IP to lock in business, others??? Got some of them into MRO business????) Old Slide Info: Over last 25 years what has the savings been to the industry? 2012 PMA Market is $460 million PMA Market last 5 year average of 400 million At 40% savings from OEM total savings of $800 million last 5 years (I think the math comes out to be 1.33 Billion not 800 million (40 % savings means PMA is 60% of OEM price. OEM price would have been 400/.6=666.66 666.66-400= 266.66 / year savings 266.66*5 = 1.33Billion total)) 2018 projection of $770 million – what will the cost savings be then? Have PMA companies influenced OEM service levels? Three aspects: logistically (part availability) as well as technically (reliability) and commercially (Warranty improvement – this is a stretch but let’s discuss). What other influences on OEMs other than service level, How did they change their behavior to combat PMAs (Longer term contracts, use their IP to lock in business, others??? Got some of them into MRO business????)

Old Ideas Related to PMA PMA parts are bogus or inferior Airline contracts should exclude PMA No warranty on PMA Internal organizational matters PMA parts cannot be used on leased aircraft Old Slide Info: PMA parts are bogus parts PMA parts cannot be used on leased aircraft Airline contracts exclude PMA parts from being used PMA parts are inferior to OEM parts PMA company warranties are inferior to OEM warranties History of PMA was negative Our management prohibits us from using PMA parts We don’t have the internal processes or infrastructure to approve and accept PMA parts Our civil aviation authority has restrictions on PMA, DER repairs etc. Safety and reliability may be in question if we use PMA parts

Leasing – Old Concept Lower perceived value Reduced remarketing opportunity Financiers push airlines to reject PMA Leasing community's reluctance towards PMAs Which brings us back to… Leads to… Leasing – Old Concept Resulting in… Because…

Leasing – New Concept Opportunistic Mixing Blending Legacy carriers credit improving + Carriers pushing to allow PMA Opportunistic Mixing Quantitative: Leasing companies losing residual value Qualitative: Allowing PMA, increases market size, raising residual value Lessors incentivized to break the vicious cycle by allowing PMA

Leasing – Old Concept Lower perceived value Reduced remarketing opportunity Financiers force airlines to reject PMA Leasing community's reluctance towards PMAs Which brings us back to… Leads to… Leasing – Old Concept Resulting in… Because…

How Do You Get the Benefit Change An Old Idea Into Something New: Establish Partnerships Intra-company External Old Slide Info: Having Changed An Old Idea Into Something New, How Do You Get the Benefit: The new idea should be structured with the idea of establishing partnerships whether with a department within your organization or with an external organization outside your company Intra-company partnerships External company partnerships

Intra-Company Examples PMA project identification PMA implementation at airlines Airline engineers find solutions using PMA or DER repairs IT & technology Win/Win relationships workers and departments Old Slide Intra-Company Partnerships Slide that was deleted What Are Intra-Company Partnerships? Partnerships that occur within or take place between branches, departments or employees of a company These partnerships can be set up as policies, guidelines and practices between groups or individuals They are meant to hold departments, groups or individuals accountable to support and build better communication channels and agreed upon higher performance levels These partnerships can be written or unwritten depending on the given situation The idea is to improve each organization through better departmental and individual performance Departments are driven by different functions and characteristics like: data, costs, quality, engineering etc.

External (B2B) Examples PMA development contracts Engineering cooperation between PMA companies and Airlines/MRO Airline leasing agreements Long term purchasing contracts Repair contracts Joint ventures Distribution agreements Gov’t relationships Civil Aviation Authority agreements and relationships Manufacturing and technology contracts Competitor relationships Old Slide Info: With new robust ideas internally, company’s can look to refine external relationships including: PMA development contracts Engineering cooperation between PMA companies and Airlines/MRO Airline leasing agreements Long term purchasing contracts Repair contracts Joint ventures Distribution agreements Gov’t relationships Civil Aviation Authority agreements and relationships Competitor relationships Manufacturing and technology contracts

So what is the end result of “new” ideas! PMA Industry accelerates growth OEM’s improve customer service and part availability OEM’s limit their price increases and “deal” with their operator customers