International Suppliers Center ISC Coping successfully with strategic changes in the aerospace supplier industry Executive Supplier Forum Berlin, 2014 Industry growth is unprecedented with excellent opportunities for OEMs and suppliers, especially in emerging regions/markets Total fleet size by region [# A/C] 1) 3.1% 1.5% 1.5% 8.010 5.5% 8.810 4.390 6.590 CAGR 2012-2032 3.6% 2012 2012 1.530 2012 2032 14.750 CIS 2032 5.090 Europe 2032 North America 1.130 5.6% 41,240 4.4% 4.350 3.790 2012 1.830 1.280 2032 Asia Pacific 20,310 2012 2032 Latin America 2012 2012 2032 MEA 2032 World 1) Wide bodies and single aisles (incl. regional jets) Source: Boeing Market Outlook 2013-2032; Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 2 New players in emerging markets are positioning themselves in the Large Commercial Aircraft (LCA) market Major aircraft programs over time 600 550 Legacy players A380 500 B747-8 450 Seat capacity 400 B747-400 B777-300 A340-600 350 300 A350-1000 A350-900 A330-300 Airbus Boeing Expanding players Bombardier Emerging players Suchoi Embraer Comac B777-8X 250 200 150 B737-800 Embraer 195 Dash 8Q-400 Dash 8Q-300 CRJ100 ERJ145 0 1985 CS300 1990 1995 Embraer 190 CRJ900 Embraer 175 Embraer 170 B737max8 C919 A320neo CS100 A320 100 50 B787-8 x4 CRJ1000 Suchoi Superjet ERJ135 ERJ140 2000 2005 2010 2015 2020 Year of first flight Source: Airbus; Boeing; Bombardier; Embraer; Comac; Suchoi; Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 3 In the short term, significant industrial challenges lie ahead as rampup curves have steepened significantly Rate development of major Airbus programs 550 Rate increase 500 20 p.a. 450 Rate increase 180 p.a. Single aisle A320 Wide body A330/340 A320 neo A350 Rate per year 400 350 300 4-year transition period in major aircraft programs 250 Rate increase 200 Rate increase 150 20 p.a. 5 p.a. 100 50 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Year Source: Airbus; ICF; Flight International; TEAL; Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 4 There are four key success factors that will shape the aerospace supplier industry in the coming years Suppliers' key success factors Go global to capitalize on new market opportunities and lower cost baseline Manage your supply chain to enable successful production ramp-up 1 2 3 4 Innovate to foster technology push and to secure competitive edge Become lean to increase efficiency and to decrease working capital Source: Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 5 1| Aerospace with development similar to Automotive – Suppliers need to manage their sub-tiers much closer than in the past Supply Chain Management – Automotive and Aerospace analogies Level Automotive industry Vehicle In the 1970' In the 1990' In the 2010' OEMs Tier-1 Subsystems Tier-2/3 Steering Components Parts Raw material Aerospace industry Aircraft Subsystems Components Parts Raw material Source: Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 6 2| Suppliers will need to become lean along the entire production process to increase efficiency and to decrease working capital Lean production – Selected examples Final assembly Component handling Single part production Source: Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 7 3| Lower labor costs, customer proximity and currency issues are key drivers for production moving to emerging markets Globalization – Shift of focus to emerging regions 3.3% 3.3% 3.7% Washington Central US Southern California Quebec Connecticut United Kingdom France Russia Germany Eastern Europe Spain Japan China 1.9% Southeast US North Africa Mexico India 2.2% UAE 4.8% Malaysia Singapore 5.0% Brazil Major A&D investments 2000-2011 in Manufacturing [EUR bn] 23 20 Established A&D Clusters Major A&D investments 2000-2011 in R&D and Engineering [number of investments] 27 15 10 9 MEX RUS 18 18 9 Emerging A&D Clusters x% Manufacturing growth rates CAGR 2009-2020 Source: Roland Berger CHN IND USA USA IND RUS CHN 6 5 5 UK FRA GER Presentation_ILA_27_10_2014_ENG.PPTX 8 4| OEMs will only be able to trigger incremental improvements while innovative step changes will be driven by key suppliers Supplier driven innovations – Selected examples 3D printing eTaxi Fuel Cell Source: Roland Berger Presentation_ILA_27_10_2014_ENG.PPTX 9