MRO AMERICAS 2021April 2021

Tom Cooper, Vice President

THIS PRESENTATION INCORPORATES OLIVER WYMAN’S 2021–2031 GLOBAL FLEET & MRO MARKET FORECAST AND 2021 MRO SURVEY

BOTH OF WHICH ARE AVAILABLE AT OLIVERWYMAN.COMALONG WITH OUR RECENT AIRLINE ECONOMIC ANALYSIS

OLIVER WYMAN’S AVIATION, AEROSPACE & DEFENSE PRACTICE IS THE LARGEST AND MOST CAPABLE CONSULTING TEAM DEDICATED TO THE INDUSTRY

STRATEGY RESTRUCTURING & POST TRANSACTION

OPERATIONS TRANSFORMATION

Business turnaround & recovery

Cash management and financial resilience

PMI & Carve-out

Program Recovery and JIP

Footprint redesign & optimization

Target Operating Model & Workforce optimization

Change management, Empowerment & Leadership

Mega Trends & CEO agenda

Market forecast & business plan rebaselining

Aerospace Consolidation and Mergers & Acquisition

Go-to-markets & new business models in Aerospace

Climate & sustainable Aerospace

Innovation acceleration, CVC/VC & partnerships

R&T and Engineering efficiency

Sourcing & Procurement value

Logistics & Supply Chain optimization

Manufacturing & Industry 4.0

Digital Services & Aftermarket/MRO/RMU

Digital Transformation

OLIVER WYMAN’S AVIATION, AEROSPACE & DEFENSE PRACTICE IS THE LARGEST AND MOST CAPABLE CONSULTING TEAM DEDICATED TO THE INDUSTRYSTRATEGY RESTRUCTURING &

POST TRANSACTIONOPERATIONS TRANSFORMATION

IN 2019 WE ASKED IN THIS PRESENTATION IF A DOWNTURN WAS ON THE WAY; OF COURSE, WE HAD NO IDEA WHAT WAS TO COME

45%

71%

55%

44%

33%

50%46%

35%

43%

Manufacturing and/or supply chain capacity

MRO OEM Operator

54%

53%

53%

45%

29%

18%

14%

Passenger Demand

Jet Fuel Costs

Manufacturing and/or supply chain capacity

Labor costs/labor relations

Political Conditions

Trade Relations

Other

Jet FuelCosts

PassengerDemand

In the short term, various global risks could impact the growth of the commercial fleet and MRO demand

Fuel Prices

Labor Shortage

Global Trade Wars

Rising Interest Rates

Brexit

Over the next five years, which three factors are most likely to determine the direction of the MRO market? % of participants who selected each response

THE GLOBAL IN-SERVICE FLEET WAS ~4,000 AIRCRAFT SMALLER AT THE BEGINNING OF 2021 THAN IN 2019; LONG-TERM GROWTH IS FORECAST AT JUST 2.3 PERCENTGlobal Commercial Air Transport Fleet ForecastBy Aircraft Class/number of Aircraft

Global Commercial Air Transport MRO ForecastBy MRO Segment/US$ BN

WidebodyNarrowbody Regional Jet Turboprop

27,49223,714

31,29435,389

0

10,000

20,000

30,000

40,000

2019 2021 2025 2030

$82$68

$108$115

$0

$20

$40

$60

$80

$100

$120

2019 2021 2025 2030

Global MRO spend in 2021 is forecast to be 20% smaller than in 2019. Long-term growth is forecast to be 3.1% driven primarily by engines and components; airframe is forecast to remain nearly stagnant over the next decade

Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast

EngineAirframe Component Line

CAGR2019-2030

0.8%

4.6%

3.6%

1.7%

3.1%

CAGR2019-2030

3.3%

1.7%

0.4%

-0.6%

2.3%

THE NORTH AMERICAN FLEET BEGAN 2021 WITH 1,000 FEWER ACTIVE AIRCRAFT THAN 2019; LONG-TERM GROWTH IS FORECAST TO BE JUST 1.2 PERCENTNorth America Global Commercial Fleet ForecastBy Aircraft Class/number of Aircraft

North America Global Commercial MRO ForecastBy MRO Segment/US$ BN

WidebodyNarrowbody Regional Jet Turboprop

8,0336,993

8,535 9,190

0

2,000

4,000

6,000

8,000

10,000

2019 2021 2025 2030

$21$18

$24 $24

$0

$5

$10

$15

$20

$25

2019 2021 2025 2030

The acceleration in the retirement of older aircraft and those deemed to be undesirable in a post-COIVD environment are forecast to slow long-term MRO growth in North America to just 1.6 percent as the region emerges from COVID with a younger, more efficient fleet

Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast

CAGR2019-2030

2.0%

1.4%

-0.8%

0.8%

1.2%

EngineAirframe Component Line

CAGR2019-2030

0.6%

2.5%

1.7%

0.8%

1.6%

FLEET & MRO FORECAST – AGENDA

02 Fleet, Delivery, Production Forecast

03 MRO Forecast

Global Context and Recovery Scenarios01

04 MRO Survey Insights

05 Conclusion

GLOBAL CONTEXT AND RECOVERY SCENARIOS

01

THERE ARE FOUR PRIMARY DEMAND DRIVERS; DESPITE SECOND WAVE IMPACT IN CERTAIN LOCATIONS, TRAVELLER SENTIMENT BECOMES INCREASINGLY IMPORTANT Key air travel demand drivers

Epidemiological timeline Traveler sentiment Government restrictions Macro-economic impact

As vaccine roll-outs continue, herd immunity is increasingly becoming a key target for recovery, with demand expected to follow

Increase in COVID cases significantly depresses travel demand. Travel sentiment recovers with a delay.

Dependence on government and health authority guidelines.

Domestic travel likely to resume earlier. International travel likely to return in phases – “corridors”.

Rapid & cheap testing can help reduce mandatory quarantine measures.

The level of recessionary impact/damage affects return to travel.

Business travel likely to take longer to recover than travel for personal reasons.

Number of new cases, k1

0

100

200

300

400

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Africa Asia Central/South America Europe Oceania US

Note: 1 – 7 Day Moving AverageSource: Oliver Wyman Pandemic Navigator

IN Q4 2020 OLIVER WYMAN CONDUCTED A SECOND GLOBAL SURVEY GAUGING TRAVELER SENTIMENT IN REPRESENTATIVE GEOGRAPHIESAsked consumers about their… Conducted in 9 countries Monitored demographics

Survey respondentsWho traveled by airplane at least once in 2019

4,600US Canada

UK Spain

France Germany

Italy China

Australia

11%of total have airline elite status

21%of total have hotel elite status

Appetite to resume traveling

Changes in lifestyle and travel preferences

Air travel and hospitality preferences

COVID-19 travel experiences

20%

56%

24%

Ages 30–54

Survey 1 in early May 2020

Survey 2 in early October 2020Source: Oliver Wyman Traveler COVID-19 Survey Edition 2

Ages 18–29

Ages 55+

IN OCTOBER RESULTS, TRAVELERS INDICATED INCREASED COMFORT ACROSS ALL MODES AND ACTIVITIES – AIR TRAVEL COMFORT INCREASED FROM 43% TO 50%After outbreak ends and travel restrictions are lifted, how comfortable will you feel?Percentage of respondents

Transport modes

Take a flight +7

Rent a car +10

Take a long-distance train +8

Use public transportation +7

Use a rideshare +8

Activities

Stay at a hotel +12

Dine at a restaurant +14

Attend concert / sporting event +8

Attend convention / trade show +9

Take a bus tour n/a

Take a cruise n/a

28%

20%

32%

44%

46%

19%

18%

44%

43%

45%

48%

22%

32%

29%

26%

27%

24%

26%

24%

25%

26%

24%

50%

48%

39%

31%

27%

56%

56%

32%

32%

28%

28%

Uncomfortable Neutral Comfortable

Comfort change since May (pts)

Note: N=4,630 Source: Oliver Wyman Traveler COVID-19 Survey Edition 2; Oliver Wyman analysis

ASM COMPARISONS YEAR-OVER-YEAR (FEB20/FEB21) HIGHLIGHT THREE DIFFERENT SPEEDS OF RECOVERY AROUND THE WORLDPercent change in capacity (ASMS), February 2021/February 2020 (schedule date: 2/10/2021)

Europe -76.0%

North America -49.7%Canada -79.1%US -46.6%

World total

Departures -41.4%

Seats -42.5%

ASM -52.9%

Asia/Oceania -36.3%Asia -31.3%Oceania -72.7% Map Provided By:

14-day COVID-19 case notification rate per 100,000

< 20.0 60.0 - 119.920.0 - 59.9 120.0 – 239.9480.0 – 959.9240.0 - 479.9 > 960.0

Latin America -51.5%Caribbean -57.2%Central America -37.0%South America -57.3%

Africa/Middle East -59.5%Africa -57.5%Middle East -60.2%

Source: Source: OAG schedule data via PlaneStats.com

2019 Q1 Q2 Q3 Q4

OLIVER WYMAN HAS DEVELOPED A PASSENGER REVENUE RECOVERY MODEL TO FORECAST TIMING OF RECOVERY TO 2019 REVENUE LEVELSRevenue recovery index: Global roll-upBaseline (100%) represents 2019 industry revenue; worldwide results for currently impacted countries

Scenario outcomes

Implications AcceleratedShorter planning horizon, quick and predictable recovery

BaselineMulti-year horizon, more variable profile

ProlongedLonger horizon & most variability; requires maximum flexibility

Q1 Q2 Q3 Q4

Less likely More likely

Accelerated (mid-2022)Outbreak with early vaccine, steady recovery & GDP bounce-back

Baseline (mid-2023)Multi-wave outbreaks, vaccine in fall 2021, gradual recovery

Prolonged (early 2024)Large multi-wave outbreaks, no vaccine, slow recovery and GDP

2020 2021 2022 2023 2024

Expected vaccine distribution

0

20

40

60

80

100

120

Source: OW Pandemic Navigator, OW Forecasting and analysis

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

FLEET, DELIVERY, PRODUCTION FORECAST

02

THE GLOBAL IN-SERVICE FLEET CONTRACTED IN THE WAKE OF COVID-19, SEEING A DECLINE OF 16% THROUGHOUT 20202020 Fleet GrowthBy Event Type

~2,500 aircraft that were in–service at the start of the year remain in storage, minimally offset by 500 aircraft that were in-storage at the start of the year and are now operational

Only 776 new aircraft were delivered in 2020, a 44% reduction from 2019 and 57% reduction from 2018

1,966Aircraft Additions

(6,557)Aircraft Removals

27,8842020 In-Service

Fleet 23,2932021 In-Service

Fleet

-16%

21

IN 2020 THE GLOBAL FLEET SAW STRONG RECOVERY THROUGHOUT THE SUMMER, BUT GROWTH SLOWED SIGNIFICANTLY OVER THE FOURTH QUARTERGlobal In-Service Fleet Historical GrowthCount of Aircraft

• After achieving a long-term growth rate of 3.6% over the past decade—4.2% over the past five years—the global in-service fleet saw a decline of 55% in April 2020

• After most countries relaxed lockdown measures, the global fleet saw strong rebound growth, increasing by 56% from May through September

– Since that point, growth stagnated, averaging less than 1% month-over-month through the end of the year

1410 11 161512 13 17

25,000

18 190

5,000

10,000

15,000

20,000

30,000+4.2%

2020

WITH A RECORD NUMBER OF RETIREMENTS IN 2020, THE MIX WAS HEAVILY SKEWED TOWARDS WIDEBODY AIRCRAFT IN NORTH AMERICA AND WESTERN EUROPE2020 Retirement Composition1 v Fleet CompositionBy Class, Region

• Despite making up 1/3 of the global fleet, the total Asia region only made up 7% of total retirements in 2020

• In total, operators in North America and Western Europe made up over 80% of 2020 retirements

– This was driven by both age characteristics of those regional fleets and COVID-19 impact

Retirements Fleet

27% 19%

55%

27%

5%6%5%

13%

6%17%

Africa

India

Asia PacificChinaEastern Europe

Latin AmericaMiddle EastNorth AmericaWestern Europe

24% 22%

35%20%

41%58%

Retirements Fleet

NB OthersWB

1. Some portion of 2020 retirements estimate; actuals may take up to 12 months to be reportedSource: Oliver Wyman Analysis/AviationWeek Fleet Discovery

39.0

2024

33.436.8

30.6

34.6

2026

31.5

35.7

28.9

27.8

32.4

31.2

37.9

33.4

2029

30.4

27.5

20212019

28.2

January 2027April 2025 203020282022 2023

34.3

32.331.3

27.829.8

29.7

23.7

30.7 31.8 32.5 33.2 34.3 35.4

12.7

Post-Covid 2021 Forecast Post-Covid July ’20 Update Pre-Covid ForecastActuals

REVISED IN-SERVICE FLEET FORECAST SHOWS A STRONGER REBOUND IN 2023, AND CONFIRMS A STEADY RECOVERY AFTERWARDS; 9% GAP IN 2030 REMAINS2019A-2030F Global in-service fleet size – incl. cargo and passenger fleet# thousands of aircraft, as of Jan 31 each year

1. 2019 -2021 actual data, 2021 to 2030 forecast dataSource: Oliver Wyman analysis

NEW AIRCRAFT PRODUCTION IS EXPECTED TO RECOVER TO 2018 LEVELS BY MID 2025, WITH A DIFFERENT AIRCRAFT MIXAnnual Production and Deliveries

1,788

776

0

400

1,600

1,200

800

2,000

2,400

’18 ’19 ’20 ’21 ’30’22 ’23 ’24 ’25 ’26 ’27 ’28 ’29

1,386 1,404

2,102

1,637 1,633 1,6291,726

1,8041,899 1,972

2,085

2019 Forecast Production Deliveries(Future Production)

Deliveries(Undelivered1)

Actuals

Production and delivery levels will align by the end of 2024, as all excess inventory is fully cleared and progressively reintroduced into the market

1. Undelivered as of 12/31/2020

FLEET MIX DYNAMICS WILL CONTINUE TO EVOLVE OVER THE NEXT DECADE, WITHIN BOTH NARROWBODY AND WIDEBODY PLATFORMSNarrow-body fleet forecast 2020-2030F by platform# thousands of aircraft, as of January of each year

Wide-body fleet forecast 2020-2030F by platform# thousands of aircraft, as of January of each year

20252020 2022

14.2

2021

16.2

2023 2024 2030

16.3

18.1 18.6 19.1

22.7

A320 neoA320 ceo

737 CL

737 MAX737 NG

A220

C919Other

2020 2021

5.7

20252023

6.1

2022 2024 2030

4.45.0

5.76.3

6.6

Actual Actual

Source: Oliver Wyman Fleet & MRO forecast 2021-2031

787A350

A330 ceo

777777X

A330 neo

767Other

SINCE THE APRIL BOTTOM, GLOBAL FLIGHT HOURS HAVE INCREASED AT AN AVERAGE MONTHLY RATE OF 9% AND ARE NOW AT ~60% OF 2019 LEVELSMonthly Flight Hours - ActualsPre v Post-COVID, millions

Flight hour to flight cycle ratios ratios have seen significant change across all classes, with widebody aircraft being affected most significantly

5

0

1

4

3

7

2

6

J M MJ MF M A J J A O N JD F M SA J A O N D J FS

20202019

COVID-19 Impact

-75%

-49%

2019 Avg

Source: AWIN ADSB Data, Oliver Wyman Analysis

+9%

MRO OUTLOOK

03

COVID-19 WILL CAUSE AN EROSION OF $132B IN GLOBAL MRO SPENDING OVER THE NEXT DECADE COMPARED TO PRE-COVID EXPECTATIONS2019A-2030F1 Global MRO spendingIn billion $

109

73

2023

68

2025

50

2029

112

102

2021

108

83

2019

97

2020

91

93

2022

102

2026

104

96

2024

100

108 110

107

2027 2028

112

112

115

113

2030

Actuals Total - Pre-Covid Forecast

Total - Post-Covid 2021 Forecast

Total - Post-Covid July ’20 Forecast

1. 2019 actual data, 2020 to 2030 forecast dataSource: Oliver Wyman analysis

ALL MRO SEGMENTS WERE IMPACTED BY COVID-19, WITH OVERALL DEMAND FACING A 39% DROP IN 2020 AND 17% DROP IN 2021 COMPARED TO 2019 2018A-2030F1 MRO spending by segment US$ BN, by year

• Engine MRO will increase share to almost half of total MRO by 2030

• Airframe and engine MRO will see recovery growth first, benefited by deferred maintenance events coming due as aircraft re-enter service

18.1

14.614.1

12.1

2018

68.4

12.9

37.3

14.5

2019

82.9

23.2

7.9

10.1

2021

9.115.1

19.5

20232020

29.5

79.3

16.2

12.1

10.7

40.3

16.2

21.3

2022

48.5 49.1

21.3

18.1

14.1

108.5

21.6 21.6

18.9

2024

52.3

12.8

2025

54.4

23.0

104.1

20.6

16.8

102.0

90.7

35.1

17.9

50.3

114.7

2030

-17%

Engine Airframe Component Line

1.2019 actual data, 2020 to 2030 forecast data. Source: Oliver Wyman analysis

Covid-19 pandemic crisis

20

0

40

60

120

80

100

2019 2020 20302021 2022 2023 2024 2025 202920272026 2028 20312019 2022 20262020 2021 2023 2024 2025 20302027 2028 2029 20310

40

20

60

80

100

120

THERE IS A GREATER DOWNSIDE RISK IN THE LONG-TERM TO THE CURRENT BASELINE MRO FORECASTGlobal Commercial MRO Market ForecastForecast Scenarios, $BN

• The current baseline case assumes continued progress with vaccine distribution

• An accelerated recovery scenario would see a much faster recovery in 2021 and 2022

• A prolonged MRO recovery scenario could occur with disruptions in vaccine distribution or efficacy

Accelerated Baseline Prolonged

MRO SURVEY INSIGHTS

04

THE MAJORITY OF MRO SURVEY RESPONDENTS EXPECT MRO DEMAND TO RECOVER IN 2022, IN LINE WITH THE OLIVER WYMAN OUTLOOKAirlines were asked: When will overall MRO demand return to 2019 levels?

MROs were asked: When will overall MRO demand return to 2019 levels?

Airlines were generally more optimistic with half of respondents expecting maintenance demand to recovery before 2023, compared to just 39 percent of MRO respondents

6%

25%

17%25%

15%

8%

2H 2022

2H 20212%

2024

1H 2021

1H 2022

2023

2025 or laterUnsure

3%

18%

15%

33%

22%

5%

1H 20212H 2021

2025 or later

2024 1H 2022

2H 2022

2023

3%3%

Sample: 65 Respondents Sample: 60 Respondents

2022: 42% 2022: 33%

IMPACT TO U.S. MRO WORKFORCE HAS BEEN MODERATED BY SUPPORT PROGRAMS

Airlines and MROs were asked: what measures has your company taken to respond to COVID?

Government support has allowed US airlines to avoid significant headcount reduction

Maintaining payrolls throughout the COVID crises gives the U.S. a leg up for upcoming labor challenges

43%

26%

9%

37%

14%

9%Expand outside of traditionalaerospace MRO

Reduced Headcount

Pursued more military MRO

31%

29%

46%

43%

36%

47%

21%

17%

Parked/cannibalizationof older aircraft

Reduced Headcount

Increased use of green time

Decreased inventories

Used moderatelyHave not used Used significantly

93% 89%

40%

Reduced Headcountby region

Rest of World North AmericaWestern Europe

• In March 2020, the U.S passed the CARES Act with $25B in funding for airline payroll support

• $15B in additional aid was passed in December 2020 that allowed airlines to return more than 32,000 employees that had been previously furloughed

• Additional funding of $14B approved in March 2021 extends support through fall 2021

Airli

nes

MRO

s

A LACK OF INDUSTRY STABILITY AND MORE OUTSIDE COMPETITION HAS COMPOUNDED ALREADY PRESENT LABOR CHALLENGESUS Civil Aviation Maintenance Employment, thousands of employees

Which are challenges in securing aircraft technicians over the next five years?

How is your company attracting/retaining aircraft technicians?

Apprentice and technical school partnerships were the key paths identified to increase AMT labor supply

20212019 20202018

288279 296 273FAA Repair Station Air Carrier Parts Manufacturing/Distribution

After growing 3 percent annually from 2018-2020, US maintenance employment saw an 8 percent decline over the last past year

46% 38%

Lack of stability in the industry

Competition from other industries

Lack of qualified applicants

Reduction in long-term labor supply

Others

42% 40%

35% 40%

55% 29%

29%57%

Little to no challenge Moderate challenge Somewhat to very challenging

Partnerships with technical schools

Others

Apprentice programs

Increasing compensation

Internet-based recruiting platforms

35% 24%

37% 18%

28%

22%

13%

6%

4%5%

Little to Moderately effective Very effective Extremely effective

EXPANDING DIVERSITY EFFORTS IS AN ADDITIONAL WAY TO ATTRACT CANDIDATES AND IMPROVE THE LABOR SUPPLY, AS WOMEN REPRESENT ONLY 5 PERCENT OF AMTSWhat are your company's goals in pursuing diversity and inclusion efforts? (select top 3)

How would you rank your company on its progress toward diversity and inclusion goals?

12%

48%

33%

7%None/littleExcellent

Good

Average

76%

60%45%

28% 23%10% 9%

Increase retention

Supporting diversity and inclusion is

the right thing to do

Identify and develop leaders

from within

Improve decision making,

innovation, and problem

solving

Corporate-wide

requirements

A way to combat labor

shortages

Fulfill external

requirements with

customers or regulators

Only 10 percent of respondents view expanding diversity efforts as a way to combat labor shortages, and only 23 percent view these measures as a way to increase retention

CONCLUSIONS

05

CONCLUSIONS

• Reduced demand and payroll support programs have provided relief through COVID-19

• Must overcome perceptions of instability and competition from other industries

• Apprenticeships, technical school partnerships and expanding diversity efforts are key paths identified in addressing labor supply shortages

Labor availability will soon return as a critical challenge for MRO

• Innovative use of fleet cycling and deferred maintenance have kept aircraft flying

• Health and safety protocols have received the utmost attention and respect throughout the crisis

Airlines and MROs have shown incredible versatility to mitigate the affects of a once-in-a-century health crisis

Global fleet and MRO long-term growth has been negatively impacted

• North America and other mature markets are forecast to stagnate towards the end of the decade

• International passenger demand is not expected to recover until 2024

• There remains downside risk to both domestic and international demand if there are disruptions in vaccine efficacy and/or distribution

• An acceleration of aircraft retirements during the crisis has removed many older, less desirable aircraft from the global fleet

• Significant backlog of already produced aircraft is set to enter the fleet over the next two years

The smaller fleet that emerges from the pandemic in 2022 will be more lean and efficient

READ OUR LATEST FORECAST ON THE GLOBAL FLEET AND MRO SECTOR

Oliver Wyman and our parent company Marsh & McLennan (MMC) have been monitoring the latest events and are putting forth our perspectives to support you clients and the industries you serve around the world. Read the latest Global Fleet and MRO Forecast 2021-2031 for more information.

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