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Russian MRO market reality

Russian MRO market reality. Speaker: Vladimir Perekrestov CEO v.perekrestov@e-mro.aero. Aircraft Maintenance Russia and CIS 8 th international conference Moscow, Russia , 20-21 February 201 3. Content. Development of Western-built aircraft MRO market in Russia Russia&CIS MRO market

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Russian MRO market reality

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  1. Russian MRO marketreality Speaker: VladimirPerekrestov CEO v.perekrestov@e-mro.aero Aircraft Maintenance Russia and CIS 8thinternational conference Moscow,Russia, 20-21 February2013

  2. Content • Development of Western-built aircraft MRO market in Russia • Russia&CIS MRO market • Advanced market segments • Competition in market of core products and services • Characteristics of Russian MRO market • Conclusion

  3. Development of Western-built aircraft MRO market 1992 – Airbus A 310 was the first western-built aircraft to be operated in Russia 1996 – First time when Russian company gained EASA Part 145 approval 2004 – First С-Check maintenance on Airbus A 320 Family was implemented inRussia 2005 – 2006 –Soviet-built to Western-built large-scale fleet replacement in Russia 2005 – 2008 – High demand for engineering and technical personnelto perform maintenance on aircraft and parts 2006 – Establishingthe firstEASA Part-147 approved training center to provide engineering and technical personnel training services 2011 – Cancellation of customs duties on western-built aircraft spare parts 2011 – FirstD-Check maintenance implemented onAirbus A 320 Familyin Russia 2012 – FirstRedelivery Check performed onBoeing 737 CL inRussia 2012 – Establishing the consignment stock of commercial western-built aircraft spare parts in Russia

  4. Number of western aircraft in Russia/Other CIS fleets CIS Russian Federation *SourceAeroTransport Data Bank, October 2012

  5. MROmarketRussiaandCIS, USD M* Wide body A/C Regional A/C Narrow body A/C * 2012, estimate made by Engineering Holding

  6. MRO providers in RussiaandCIS market: competition MRO providers inRussiaandCIS: The World’s MRO providers: Vostok TechnicalService Analysts are forecastingcompetition increase among organizationswhich provide MRO serviceson the territory of Russia

  7. MRO market in RussiaandCIS, capability High Engineering Base Maintenance Landing Gear Line Cabin interiors Thrust Reverser Labor share of total cost ? Evacuation Equipment APU Wheels & brakes Electric Power Hydraulics Cabin Systems Fuel Fire protection & Oxygen Engine Air system Batteries Avionics Up-front capital investments required Low High Current market Potential market Source: ICF SH&E Analysis

  8. Breakdown of Total Airline Costs – From World Experience Maintenance costs typically range between 7%-14% of an airline’s operating budget Typical Airline Cost Breakdown Typical Airline’s MRO Cost Breakdown Maintenance 9% Annual airline maintenance spend as a % of total cost will fluctuate year-to-year based on timing of major visits (e.g. D-checks & engine overhauls), fleet age, size, mix and the price of fuel Source: Form 41 & ICF SH&E Analysis

  9. Characteristics of Russian MRO market: Planning & IT • Airlines’ insufficientmaintenance planning horizon and insufficient IT support: • Failureto planpreparation for maintenance checks (aircraft spare partsandlabour resources) • Increasing maintenance TAT • Maintenance costs increase Only 5 customersof Engineering Holding developand provide long-term (1-2 years) maintenance plans

  10. Characteristics of Russian MRO market: spare parts stocks & supply chain management • Absence of market playerswho own largeaircraft spare parts stocksonthe territory of Russian Federation and insufficient supply chain management: • Minimum spare parts stocks for the most demanded aircraft types • Poorly developed aircraft parts-out business & A J Walter Aviation

  11. Characteristics of Russian MRO market: additional services • Insufficient Airlines’ attention to the technical aspects such as: • Aircraft interior and cabin equipment repair • AC delivery/redelivery • AC documentation and records keeping

  12. Characteristics of Russian MRO market: changing aircraft fleet structure • Airlines fleet renewal: • Russian operators reducetheirBoeing 737 CL fleet • Reducing average age of aircraft • Reducing maintenance checks man-hours • Demand for modern aircraft maintenance

  13. Conclusion: Opportunities to reduce airlines’ maintenance expenditures • Improvement of maintenance planning horizon • Implementation of proper IT solutions • Increase of aircraft maintenance outsourcingshare insegmentswherein-house maintenance is not cost effective • Growth of aircraft spare parts stocksin Russia • Improvement of supply chain management efficiency

  14. Thank you foryour attention!

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