PMA Parts & Leasing in International Markets With a Focus on Latin America

1. PMA Parts & Leasing in International MarketsWith a Focus on Latin America Jason Caldwell EVP Global Sales and Marketing March 31, 2011

2. Why Use PMAs? • Cost Savings • Availability • Product Improvements • Bottom Line: • More choice, more savings, better efficiency Wencor Group Confidential

3. Objections to PMA Use • “I don’t have the engineering staff to approve PMAs” • “The OEM says my warranty will be voided and my aircraft will fall out of the sky” • “My lease does not allow the use of PMAs” Wencor Group Confidential

4. The Lessor Argument • The use of PMA Parts ‘Devalues’ the A/C or Engine • The available lease market is diminished due to the quantity of airlines who do not want to utilize PMA • PMA parts have a lower cost, therefore, they reduce the value of the commodity • Regulatory authorities are unclear on PMA legitimacy • PMA parts impact aircraft reliability • Standard contract language cannot change Wencor Group Confidential

5. Objections to PMA Use • “My lease does not allow the use of PMAs” • Impact to the operators • Must weigh the higher cost of OEM replacement parts • Higher cost and inefficiencies of a dual stocking strategy • Possible monetary consequence of ignoring the prohibitive terms of the lease Wencor Group Confidential

6. Pushing PMAs in Leased Aircraft • Level I– Change the contract: Use purchase leverage to assure lowest total cost of ownership, not just lowest lease rate. Use groups or alliances to add negotiating power. • Level II– Know the real terms: What are the restrictions? All PMAs? Critical parts? LLPs? Components? Airframe? Interiors? License PMAs? Educate the decision makers! • Level III– Use PMAs for the interim, until lease expires. When lease is up, go to level I. Wencor Group Confidential

7. PMA Users With Leased AircraftA Few Examples Wencor Group Confidential

8. PMA Users With Leased AircraftA Few Examples Wencor Group Confidential

9. Lessors Allowing PMA Use • A Few Examples Wencor Group Confidential

10. Latin America & Caribbean vs World Economic Climate and Air TravelLatin American Airline FleetStrategy for Leasing Companies Wencor Group Confidential

11. Size Comparison Source: World Bank, ALTA airlines Wencor Group Confidential

12. Regional Comparisons Source: IMF, ALTA, U.S. DOT, AEA Wencor Group Confidential

13. Latin America Growth Outpaced US and Europe RPK CAGR 2004-2009 Source: ALTA, U.S. DOT, AEA Wencor Group Confidential

14. 2010 Industry Growth Source: IATA (exceptLatAm (ALTA) data point) Wencor Group Confidential

15. Consolidation 15 Years Ago vs. Today Wencor Group Confidential

16. Latin American Airline Fleets Wencor Group Confidential

17. Latin American Airline Fleets Wencor Group Confidential

18. Top Leasing Companies for Latin American Fleets Wencor Group Confidential

19. Latin American Market Wencor Group Confidential

20. Actions Airlines Can Take Meet with Lessors to discuss the importance of PMA use New Agreements Existing Agreements Utilize the arguments provided PMA suppliers would be glad to also participate in discussions Engage the assistance of alliance partners Use existing agreements as leverage Meet with Lessors together as a group Wencor Group Confidential

21. Engage The Leverage of Alliances Wencor Group Confidential

22. Leveraging the Alliance Wencor Group Confidential

23. Conclusion • Airlines view cost savings to be a major driver of PMA usage • Other benefits include: • Improved part performance or reliability • Just in time delivery • Airlines agree that safety, reliability, or ‘bogus parts’ are not an issue • Most don’t have safety/technical concerns, but also don’t want to be early adopters of engine hot section PMA parts • OEM/MRO and Lessor contract restrictions are cited to be major factors limiting PMA use • Airlines and PMA community can focus on three levels of PMA acceptance on leased Aircraft: • Change lease contracts to accept PMA– use leverage of new lease, and of alliances • Use PMA where contract restrictions allow (non-critical, components and airframe, license) • Use PMA until leases expire • Latin America case study shows some success Wencor Group Confidential

24. Appendix Wencor Group Confidential

25. Lessor Top Concernswith Use of PMA Parts Source: SH&E Survey Wencor Group Confidential

26. Nearly every lessor’s default policy is to not allow permit PMA parts; however, exceptions are made, depending upon: Lessee Credit Quality and Lease Return Conditions Fleet Size (bargaining power) Desired PMA Penetration Other exceptions are made if the transaction makes financial sense, and are more inclined to include: Sale/leasebacks Long-term leases Older aircraft Instances where the next lessee is known to accept the alternate parts Some lessors perceive lessees to have increasing leverage to utilize PMA parts due to: Increased acceptance of the safety and testing standards of PMA parts Shift in the supply/demand dynamic for aircraft (operators have more negotiating strength) Exceptions Wencor Group Confidential