Doing Business with Chinese Aerospace Companies

1 Current Role

• Vice President / Regional General Manager, Asia Pacific • Co‐Chair of the US‐China Aviation Cooperation Program (ACP) MAC • Board Member of the 2 China JVs

Pui Ho, PhD

2 “China one the most difficult countries to do business with” ex‐Boeing President China

3 Source: Boeing Passenger traffic within Asia #1 in the world 20‐year CMO

2014 Air Traffic Added Traffic 2015‐2034 Annual Growth %

Asia Pacific 3.4X 6.2% China 3.3X 6.2% North America 2.4%

Europe 3.3%

Latin America 6.6%

Middle‐East & Africa 6.2%

CIS 4.3%

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 RPKs (Revenue Passenger Kilometers), billions Source: Boeing Asia fleet size will overtake N. America by 2017 20‐year CMO

2014 Fleet Size Added Fleet 2015‐2034 2034 Fleet Size

Asia Pacific 2.8X 16,180 China 3.1X 7,330 North America 9,350

Europe 7,560

Latin America 3,620

Middle‐East & Africa 5,130

CIS 1,720

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Fleet Size (No. of Pax Aircraft) “….Asia‐Pacific market will grow the fastest in the future, as the economic growth here is the fastest in the world” American Airlines CEO Doug Parker 6 Many indigenous aircraft programs…

7 Auto industry JVs are very successful in China

8 Embraer‐Avic HAFEI … and many OEM JVs in China Airbus‐Avic Legacy Final Assembly A320 Final Assembly Harbin Tianjin Parker‐Avic FACRI Eurocopter‐Avic HAFEI Existing In Work Just Sold Boeing‐Avic Flight Control Sys C919 Helicopter Sub‐/Assembly Xi’an Composite Manufacturing Harbin Tianjin UTC‐Avic EM Rockwell Collins‐Avic Electrical Power Sys C919 Bluesky Xi’an Diamond Aircraft‐ Cessna‐Avic CAIGA Flight Simulation Shandong Bin Ao Aircraft Tianjin Industries Honeywell‐Avic FACRI Aircraft Final Assembly Shijiazhuang Aircraft Final Assembly Flight Control Electronics Binzhou Dagao C919 Parker‐Avic NEIAS FACC‐Avic Xi’an Fuel & Hydraulic Sys C919 Composite Manufacturing GE Aviation‐Avic CARERI Aircelle‐Avic XAIC Nanjing Zhenjiang Avionics C919 Nacelle Final Assembly C919 Honeywell‐Avic NEIAS Rockwell Collins‐Avic Shanghai Xi’an LETRI Environmental Control Sys Sikorsky‐Changhe Aircraft P&W‐Avic Engine XAE Nanjing Surveillance Products C919 Industries Corp‐ Shanghai Wuxi Xinsheng Aviation Airfoil Manufacturing Rockwell Collins‐CETCA UTC‐Avic NEIAS Liebherr‐Avic Industry Ind. & Dev. Co. Xi’an Helicopters Final Assembly Com. & Nav. Solutions C919 Vapor Cycle Machines Landing Gear C919 Chengdu Nanjing Shanghai Changsha Boeing‐China Eastern Safran‐Air China Honeywell‐Hunan Boyun P&W‐AVIC Airlines‐Shanghai Airport New Materials‐Changsha Authority CFM56 Maintenance Xinhang Wheel & Brake Engine components Chengdu Zhuzhou Aircraft MRO Wheels & Brakes C919 Shanghai Thales‐CETCA Changsha Honeywell‐Taeco Eaton‐Comac SAMC In‐Flight Entertainment C919 Safran‐Xinyi APU MRO Chengdu Xiamen Tubing C919 P&W‐AVIC‐Chengdu Airfoil Manufacturing Shanghai Engine Co. Guiyang UTC‐Taeco P&W‐China Eastern Engine accessories Engine Sub‐systems MRO Airlines Chengdu Xiamen Engine MRO Shanghai Cessna‐Avic CAIGA Snecma‐Avic SAIC Hamilton Sundstrand‐ Avic Shaanxi Aero Aircraft Final Assembly Engine Components Electric Safran‐COMAC Zhuhai Zhuhai Component MRO EWIS Manufacturing C919 Xiamen Shanghai 9 IP concerns

IT Security concerns

Unfair local competition

Language, Culture, Distance

Unfamiliar territory, e.g. laws

Lack of transparency

Export compliance

Local costs increase Market & Opportunities

Partner’s lack of experience

Partner’s poor management

U.S. jobs concerns

Our hands are full

11 “The difference between Try and Triumph is the Umph” Anoynmous

12 Hit hard at target…

Asia Market

13 Parker awarded significant business…

New

COMAC ARJ21 COMAC C919 AVIC Aircraft MA700 COMAC LRWB Seats: 85 Seats: 168 Seats: 78 Seats: 300 Launch: 2003 Launch: 2009 Launch: 2014 Launch: 2015Q4 Orders: 315 Orders: 507 Status: EIS 2015 Status: Roll‐Out 2015 Status: JDP Status: RFI

Parker Content: Parker Content: Parker Content: Parker Content (Potential): • Fuel System • Fuel System • Flight Control Actuation • Fuel System • Flight Control Actuation • Flight Control Actuation System System • Flight Control Actuation System • Hydraulic System • Hydraulic System System • Hydraulic System • Inerting System • Fittings & Hoses (potential) • Hydraulic System • Swivel Joint, Fuel QD • Integrated Modular • Inerting System Cabinet/Electronics • Fittings & Hoses • Fuel QD, LG Hoses

… only Gold supplier for 9 consecutive years

14 Relationship Based (Not B&W)

Sense of Fairness (Give & Take)

Strong Gov’t (Understanding & Patience)

Stair‐Step Progress (Nothing is Impossible)

Bridge the Gap

15 “It is not an enormous gap but a gap nonetheless… What’s wrong with a bridge? Have we not done one before”

16 Thank You