Investment in African Aviation Infrastructure

1. Investment in African Aviation Infrastructure Presented to: THE AFRICAN NETWORK—TANCON 2008 by MICHAEL L. DWORKIN Michael L. Dworkin and Associates San Francisco, California 94104 www.avialex.com

2. AFRICA:20.4% of the Earth’s landmass14.2% of the Earth’s human populationThe world’s second largest and second most populous continent (11.7 million square miles/955 million people)

3. AFRICAN AVIATION: • With only 4.5% of the world’s air traffic • 25% of the world’s aircraft accidents! • The world’s highest aviation accident rate proportional to its air traffic. In other words, an air passenger is 30 times more likely to be involved in an aircraft accident in Africa than in North America!

4. AFRICAN ACCIDENT RATE: WHY? -Lack of oversight -Outdated air traffic and air navigation technologies; -Infrastructure deficiencies; -Poor ground handling; -Lack of training; -Attitude towards safety standards

5. REMEDIAL INITIATIVES: -African Civil Aviation Authority (AFRO-CAA) -Continent-wide safety authority -Modeled on US FAA and EU’s EASA -Unresolved Issue: Will member states relinquish traditional notions of sovereignty? -International Air Transport Association (IATA) -Operational Safety Audit (IOSA) program -Monetary Investment in Partnership for Safety (IPFS)-- emphasis on skill development -International Civil Aviation Organization (ICAO) -State Safety Program/Safety Management Systems Seminar and Workshop -281 participants -Representing 19 African States -African-Indian Ocean Comprehensive Implementation Program -World Bank -Working in conjunction with the International Civil Aviation Organization (ICAO) -Grants and credits to African countries that agree to work together to improve air safety -Withholding aid from countries that do not enforce world aviation safety standards

6. INVESTMENT OPPORTUNITIES: Improving Africa’s air safety record will require substantial efforts and resources. BUT: Against a backdrop of globalization, diversification, outsourcing, partnerships and joint ventures, spin-offs, mergers and acquisitions, consolidation, and even possible worldwide recession, Africa presents a unique opportunity. For example: 1. Airline Start-Ups 2. Aircraft Maintenance Repair and Overhaul (MRO)

7. AIRLINE START-UP • Case Study: Dana Air • Nigerian-based conglomerate—involved in: • Pharmaceuticals; • Plastics; • Bottled Water; • Rice and Milk Production; • Chemicals; • Motor Vehicles (KIA) and Motorcycles (Sterling); • Electronics (Philips) • Company Philosophy: • “Clients' interests always come first. With superior performance, service and creativity, we are uncompromising in our commitment to excellence. In every aspect of our work, we strive to find better solutions to client problems and to build lasting relationships. We will at all times conduct ourselves with integrity, dignity and honesty. The intense efforts, enthusiasm and dedication of our experienced personnel not only sets us apart but is key to our success. Therefore, we have created, and will strive to maintain, a unique environment that fosters excellence, originality, teamwork, and respect.” • Governing Principles: • Pursue excellence and integrity in work and client/contractor relationships • Commit absolutely to maintaining the highest degree of honesty and ethical standards • Believe that the ultimate measure of organizational success is in the degree of client satisfaction with the work product • Provide the most effective delivery of services through the creation and maintenance of multi-disciplined project teams designed around the client's requirements • Develop lasting business relationships between the client and Dana Group based on the utmost respect for individuals

8. DANA AIR, cont’d • Seeks to provide airline service that combines best elements of low cost carriers-- world class safety, on-time reliable services, with latest technology (on-line services) and the operational efficiency of new world carriers. • Seeks to attract leisure and business travelers from within Nigeria: -offering passengers fares lower than are presently available -bringing service to many under-served routes and communities -bringing the benefits of competition to Nigerian passengers -helping Nigerian regions grow as tourist destinations -flying to the highest operational and quality standards -bringing employment in the important aviation sector -be a symbol of pride for Nigeria • Also commencing a VIP Charter Service utilizing newly acquired business jets.

9. …AND GIVING SOMETHING BACK • Social Responsibility • Dana is a Sanskrit (and Pali) word meaning generosity or giving. In Buddhism, it also refers to the practice of cultivating unconditional generosity. • In 1995, Dana Group founded Sri Sai Vandana Foundation for Rural and Community Development, for the enhancement and development of rural populace in Nigeria, through programs of integration and uplifting of lives of society’s less privileged. The Foundation is involved in natural resource management, livelihood support or the building of a health and education infrastructure, with full support and participation of Central and State Governments and NGO’s.

10. AIRCRAFT MRO • MRO: An enterprise dedicated to the maintenance, repair and overhaul of aircraft, engines and components • Outgrowth of the fixed base operations (FBO’s) that were started back in the 1930’s as essentially “gas stations” for airplanes; • The dawning of the jet age in that late 1950’s and early 1960’s, signaled the beginning of airlines’ investment in their own maintenance infrastructure necessary to service their own fleets; • Airlines became the principal MRO’s—servicing not only their own fleets, but the fleets of others; • Divestitures of airline maintenance organizations and outsourcing of maintenance/engineering functions: -knee-jerk response to declining profitability of carriers -reduce costs -labor constraints -improve bottom line

11. AIRCRAFT MRO, cont’d The Result--OUTSOURCING: -Among the legacy carriers: -engine and component maintenance have been outsourced for some time; -there is an across-the-board migration of airframe maintenance to contract third party providers; and -line and other support functions are slowly migrating away from in-house airline accomplishment -Among start-up carriers: -maintenance functions are outsourced almost across the board -Outsourcing is not local, but global in nature -And technical competence within the airlines is diminishing

12. THE NEED FOR 21st CENTURY MRO’S • Airlines will continue to outsource. Today’s MRO outsourcing market is about $50 billion US per year • Integrated rather than fragmented • Information technology—maintenance management rather than simply “turning wrenches” • Competitive and/or advantageous labor rates • Quality • Safety • Profitable • Meet US FAA and EU EASA standards/ regulations/certification • Environmental awareness • Ab initio training—investing in people and creating job skills

13. OVERSEAS MRO GROWTH To date, most MRO growth has been in Asia. Why? -labor costs -development costs -expansion of air travel and air cargo within Asia and between Asia and the rest of the world -governmental cooperation

14. WHY NOT AFRICA? -Economic growth of the continent -Growth of air travel and air cargo -Continued operation of older aircraft -Emergence of start-ups and low cost carriers (LCC’S) -Continued outsourcing by airlines (and OEM’s) due to pressure to contain/control costs -Governmental support

15. WHAT IS NEEDED FOR ENTRY • Support of governmental entities and/or private investor(s); • Support of aviation management company with professional experience in forming and managing MRO’s or OEM/airline joint venture; • Building blocks: • Facilities • Tooling and Equipment; • Personnel and Training; • Systems and Manuals; • Certification; and

16. WHAT IS NEEDED FOR ENTRY, cont’d • Vision and Resolve • To meet globally accepted practices; • Meet US FAA and EU EASA regulations/requirements and certification; • To create not only the first state of the art facility on the Continent, but a world-class facility providing world-class quality services to airlines throughout the world

17. BENEFITS • Increased employment within the community/country/continent; • Education/training and creation of job skills for the local population; • Enhanced world perception; • Increased living standards; • Increased services and industries

18. CONCLUSION • WIN for the community • WIN for the country • WIN for the African Continent • WIN for the aviation industry • WIN for the traveling public • WIN for the employees • WIN for investors

19. Thank You Michael L. Dworkin and Associates 465 California Street, Suite 210 San Francisco, California 94104 www.avialex.com

20. Avialex® and the stylized logo are registered marks of Michael L. Dworkin