MRO 2006

1
READY FOR TAKEOFF An Overview Of The Global
Military Aircraft MRO Market Presented
by Hal Chrisman, Principal AeroStrategy LLC
2006 Military Maintenance, Repair Overhaul
Conference and Exhibition April 25, 2005
Phoenix, AZ
Ann Arbor, Michigan Amersham,
U.K. www.AeroStrategy.com
2
Agenda
The Military MRO Market
Key Trends And Issues
3
The Current Military Aircraft Fleet Exceeds
38,000 Aircraft
2006 Active Military Aircraft Fleet Total 38,610
By Maturity
By Mission
New
8
Mature
Old
51
41
Sources AeroStrategy analysis, MILICAS, HELICAS
4
Over 60 Of The Fleet Is In North America And
Europe
2006 Active Military Aircraft Fleet Total 38,610
Source AeroStrategy analysis, MILICAS,
HELICAS Note There are 143 total unknown aircraft
5
The F16, UH1, UH60 And C130 Are The Largest Fleets
2006 Active Military Aircraft Fleet Total 38,610
Sources AeroStrategy analysis, MILICAS, HELICAS
6
Over 40 Of The Engine Fleet Is In North America
General Electric Engines Are 36 Of The Active
Fleet
2006 Active Military Engine Fleet Total 70,164
By Region
By OEM
Africa
Snecma
Other
5
Unknown
3
3
Latin America
lt1
Turbomeca
6
6
General
Middle East
Honeywell
Electric
7
North
9
36
America
44
Asia Pacific
16
Pratt Whitney
20
Europe
Rolls Royce
21
23
Sources AeroStrategy analysis, MILICAS, HELICAS
7
Several Factors Will Shape The Military Fleet
Outlook
Network Centric Warfare
Factors Influencing Fleet Outlook
Shifting Missions
Aging Fleets
More Civil Platforms
Budget Constraints
8
Retirements Are Forecast To Outpace Deliveries
Resulting In Fleet Shrinkage
Source AeroStrategy analysis Figures exclude
non-Western aircraft
9
AeroStrategys Analysis Covers Four Main Segments
Of Military Aircraft MRO

• Study Scope Excludes
• Logistics / logistics management expenditures
• Training
• Major modification and aircraft rebuild programs
• Weapon systems ordinance maintenance
• Unmanned Aerial Vehicles
• Non-western aircraft

10
Global Military Aircraft MRO Spending Exceeds
56 Billion
2006 Military MRO Market Total 56.4 B
Engine Overhaul 7.8 B
Component 9.2 B
Field Maintenance 28.0 B
Airframe Heavy 11.4 B
Source AeroStrategy analysis Figures are for
western aircraft only
11
North America Is By Far The Largest Geographic
Market
2006 Military MRO Market Total 56.4 B
Source AeroStrategy analysis Figures are for
western aircraft only
12
Fighter And Attack Aircraft Drive Airframe
Maintenance Spending
2006 Military Airframe MRO Market Total 11.4 B
Source AeroStrategy analysis Figures are for
western aircraft only
13
Engine MRO Spending Is 7.8 Billion The F100-200
And F404 Are The Largest Markets
2006 Military Engine MRO Market Total 7.8 B

• The top ten engines account for 58 of demand
  i.e., market is fragmented
• The largest markets are for fighter engines
  F100-200, F404 and F110-100
• The T56 is the fourth largest marketand one of
  the few free market engine MRO markets

Source AeroStrategy analysis Figures are for
western aircraft only
14
Flight Deck Avionics Are The Single Largest
Component MRO Category
2006 Military Component MRO Market Total 9.2 B
Source AeroStrategy analysis Figures are for
western aircraft only
15
28 B In Field Maintenance Spending Is Driven By
Fighters
2006 Military Field Maintenance Market
Total 28.0 B

• The number of field maintenance personnel
  required varies considerably by aircraft type
• In excess of 80 of field maintenance is
  performed by uniformed personnel

Source AeroStrategy analysis Figures are for
western aircraft only
16
The Military Aircraft MRO Market Will Reach 62.3
Billion By 2016
Global Military Maintenance Market Forecast 2006
2016 (B)
B
62.3
56.4

• Overall market growth of 1 per annum is
  anticipateddespite fleet shrinkage
• A key assumption is the impact of agingwhich
  increases MRO demand 2 per year

17
Agenda
The Military MRO Market
Key Trends And Issues
18
There Are Several Key Issues That Will Shape
Military MRO
1
Performance Oriented Contracts
19
In the US, The Major Emphasis Is On Performance
Based Logistics Contracts
US PBL Contract Examples
Source AeroStrategy research
20
The U.S. Naval Inventory Control Point (NAVICP)
Is A PBL Pioneer
F/A 18 Current And Pending PBL Contracts
NAVICP PBL Contracts (all platforms)
Source NAVICP
21
PBL Contracts Are Changing The Nature Of
Government-Supplier Relationships
OLD MODEL
NEW MODEL
Source AeroStrategy research
22
In The International Market, There Is Also
Growing Use Of Performance Oriented Contracts
International Market Performance-Oriented
Contract Examples
Source AeroStrategy research
23
Lean Transformation Is A Second Key Trend Shaping
The Military Aircraft MRO Market
OKC ALC Lean Initiative

• 500M 10-year lean initiative
• Partnered with Batelle Institute and Standard Aero

Source AeroStrategy research
24
Several Factors Are Facilitating The Convergence
Of The Civil And Military Markets
Factors Facilitating Market Convergence
MILITARY MRO 56 B
COMMERCIAL MRO 46B
Source AeroStrategy Commercial MRO includes
civil rotary wing, air transport, and business
aviation markets
25
Prognostics And Diagnostics Are A Fourth Key
Military MRO Trend
Source Lockheed Martin
26
Key Messages

• More than 38,000 military aircraft generate in
  excess of 56 billion in MRO activity in 2004
• Global MRO spending is set to grow at a 1 rate
  through 2016, reflecting a net contraction of the
  active fleet
• Several critical trends will shape the MRO market
• Performance oriented contracts
• Lean transformation
• Civil / military market convergence
• Prognostics and diagnostics

27
Thanks For Your Attention!
www.AeroStrategy.com