1. APEC Transportation Ministerial Meeting April 27, 2009, Page 1 Lufthansa Technik Philippines APEC Transport Ministerial Meeting Financial Downturn - Effects and Strategies in Aviation Business

2. APEC Transportation Ministerial Meeting April 27, 2009, Page 2 Lufthansa Technik Philippines  Founded in 2000  Joint venture between Lufthansa Technik AG (51 %) and MacroAsia Corporation (49 %)  Main facility at Manila’s Ninoy Aquino International Airport and Line Maintenance Stations in Cebu, Clark and Davao  Exclusive technical provider for Philippine Airlines  Specialized in Airbus Heavy Maintenance  Approved by EASA, FAA, CAAP and other authorities  Revenue:238 million USD  EBT:16.2 million USD  Employees:2,812 (2008) About Lufthansa Technik Philippines Clark Manila Cebu Davao

3. APEC Transportation Ministerial Meeting April 27, 2009, Page 3 Lufthansa Technik Philippines Product Portfolio LTP Line Maintenance Small and medium repairs during operation that must be done on a daily, weekly or monthly basis Heavy Maintenance Thorough check of all areas of the aircraft. Requires up to several weeks of ground time. Aircraft component services Repair of single aircraft components for internal and external customers Fleet Management Taking responsibility for the reliable and safe operation of an external fleet

4. APEC Transportation Ministerial Meeting April 27, 2009, Page 4 Lufthansa Technik Philippines Customer Base

5. APEC Transportation Ministerial Meeting April 27, 2009, Page 5 Lufthansa Technik Philippines Financial Downturn  Air transport market growth follows closely to world GDP  Passenger and freight traffic declined heavily in 2008 -6.2% -19.2% -1.4% -17.2% -2.6% -19.8% +3.1% -6.1% -5.7% -23.0% -8.4% -28.1% Passenger Freight

6. APEC Transportation Ministerial Meeting April 27, 2009, Page 6 Lufthansa Technik Philippines Implications to Aviation Industry Growth  In a long term, aviation industry has ever been a steadily growing market  MRO sector will be affected with a certain time-delay

7. APEC Transportation Ministerial Meeting April 27, 2009, Page 7 Lufthansa Technik Philippines Global Market Changes Europe  Following loss of major maintenance contracts in 2008 and 2009, SR Technics announced the closure of its Dublin operations, as it would not be further possible to fill the resulting capacity gaps. “This restructuring adapts the business to address the customers’ changing needs and priorities in the current market environment.” said SR Technics  Sabena Technics plans to reduce manpower by a third. Asia  Hong Kong-based MRO provider HAECO is heavily building up capacities  Singapore Airlines Engineering is building a new maintenance facility in Clark, Philippines

8. APEC Transportation Ministerial Meeting April 27, 2009, Page 8 Lufthansa Technik Philippines Implications to Aviation Business - operational  Freight and Passenger capacities are being cut sharply  Aircraft utilization and fleet sizes are declining  Aircraft are being parked  Checks are being reduced  Minor maintenance events like painting are being postponed

9. APEC Transportation Ministerial Meeting April 27, 2009, Page 9 Lufthansa Technik Philippines Implications to MRO industry - financial  Customers are very price sensitive  Importance of operational aspects is decreasing  Importance of commercial aspects became decisive factor  Increased pressure upon contract extensions by customers & competition  lower revenue  Cost recovery cannot further be assured for every maintenance contract  Increasing outstandings and receivables

10. APEC Transportation Ministerial Meeting April 27, 2009, Page 10 Lufthansa Technik Philippines LTP Strategy Mid & Long term instruments (LTP preferred strategy)  Preparation for the post-crisis phase  Ensure Quality and Safety  Stick with highly qualified personnel  Use free capacities to further training  Enhancement of efficiency and productivity Short term instruments  Cut of cost  Flexible assignment of capacities

11. APEC Transportation Ministerial Meeting April 27, 2009, Page 11 Lufthansa Technik Philippines LTP Strategy Ensure Quality  In aviation industry, safety is of capital importance  For a provider of technical services, safety equals quality  How to achieve:  Standardized processes  Explicit working procedures and documentation  High degree of qualification  Ensure awareness about safety and quality in the entire company  Visualization  Training

12. APEC Transportation Ministerial Meeting April 27, 2009, Page 12 Lufthansa Technik Philippines LTP Strategy Stick with highly qualified Personnel  LTP strongly invests in internal training  International qualification standards must be met  Qualification from a statue of graduate to highest level for a mechanic requires at least 4,5 years of internal training  LTP employs currently 342 Level A, 695 Level B, 454 Level C and 151 Jr. Mechanics  Long term qualification stands above short term business cycles Minimum 12 months Minimum 24 months 6 months Jr. MechanicC Mechanic B MechanicA Mechanic

13. APEC Transportation Ministerial Meeting April 27, 2009, Page 13 Lufthansa Technik Philippines LTP Strategy LEAN is a key measure for higher efficiency & productivity and secures competitiveness in a global market  Standardized work processes ensure productivity and quality  Streamlined production processes Material and work flow follows predefined processes  Collaboration Interfaces between employees are clearly defined and visualized  Continuous Improvements Employees are encouraged to continuously reassess their work processes. Even little changes are being implemented  Respect for the people and their individual development boosts collaboration and motivation

14. APEC Transportation Ministerial Meeting April 27, 2009, Page 14 Lufthansa Technik Philippines LTP Strategy Use key advantages of the Philippines  English language  Passion to learn  Willingness to adopt to changing customer requirements  Team orientation

15. APEC Transportation Ministerial Meeting April 27, 2009, Page 15 Lufthansa Technik Philippines Conclusion  By sticking with high quality standards,  by continuously improving efficiency and productivity,  and by combining the strength of Philippine/German Partnership, Lufthansa Technik Philippines is well prepared to grow in boom times and to stay in times of crisis.

16. APEC Transportation Ministerial Meeting April 27, 2009, Page 16 Lufthansa Technik Philippines Thanks for your attention!