Aerospace Market OverviewAerospace Market Overviewa P&W Perspective

Craig Musson

COMPANY PRIVATEOctober 2007

Director, Commodity Management

Aerospace Market Overview, a P&W PerspectiveA dAgenda

• Titanium Applications in Gas Turbine Engines

• Aerospace Market Data & Forecasts

• Responding to our Customers’ Needs

COMPANY PRIVATE

Aerospace Market Overview, a P&W PerspectiveTitanium in Gas Turbine Engines

Titanium Base Alloys

Titanium in Gas Turbine Engines

• Strength to weight ratio• Strength to weight ratio• Durability• Manufacturability• Repair-ability• Thermal Stability• Thermal Stability

COMPANY PRIVATE

Aerospace Market Overview, a P&W PerspectiveE i M i l C % b W i h

OtherSheet12%

Other

Engine Material Content, % by Weight

8%12%

Castings25%S ll

20%

25%

Forgings

Superalloys50%

Titanium Forgings45%Structural

Castings and Seamless Rings

10%

30%

MATERIAL FORM10%

COMPANY PRIVATE

Anticipate continued use of Ti forgings, castings & sheet productsAnticipate continued use of Ti forgings, castings & sheet products

Aerospace Market Overview, a P&W Perspective

100% Other (Al, Composites…)ht

Steel

50%

% W

eigh

Ni & Co Superalloys

Titanium

0%1960 1965 1970 1975 1980 1985 1990 2000 2010 2020

COMPANY PRIVATE

Titanium use in Engines forecasted to remain constantTitanium use in Engines forecasted to remain constant

Aerospace Market Overview, a P&W PerspectiveRevenue Passenger Miles 1990 – 2011E

4 0

World Airlines

Revenue Passenger Miles 1990 2011E

3 0

3.5

4.0(RPM, trillions) ~7% annual growth

2 0

2.5

3.0

'00 '01 '02 03E 04E 05E 06E 07ERPM 2.12 2.03 2.04 1.99 2.13 2.24 2.41 2.56Yr/Yr % 7.7% -4.1% 0.3% -2.5% 7.5% 5.0% 5.0% 5.0%

1 0

1.5

2.0

0.5

1.0

COMPANY PRIVATE

0.090 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 07E08E09E10E11E

C i l Ai li P fit bilitAerospace Market Overview, a P&W PerspectiveCommercial Airline Profitability

$6.0

$9.0

-$3.0

$0.0

$3.0

-$9.0

-$6.0

U.S. carriers*International carriers

-$15.0

-$12.0

2005 2006 2007 2008

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Projected Projected* Excludes restructuring costsSource: ICAO history, IATA projections

F t d Ai ft M k t 2007 2026Aerospace Market Overview, a P&W PerspectiveForecasted Aircraft Market: 2007-202623,420 Total Aircraft

AFRICA

N. AMERICA

579MIDEAST1307L.

AMERICA56881350

ASIA/PACASIA/PAC8344 EUROPE

6151

WHILE GROWTH RATES ARE IMPORTANT, SO IS MARKET SIZE

• commercial passenger aircraft 95 seats and above

COMPANY PRIVATE

WHILE GROWTH RATES ARE IMPORTANT, SO IS MARKET SIZEASIA IS LONG TERM AN OBVIOUS WINNER

Aerospace Market Overview, a P&W PerspectiveAnnual Installed Engine Deliveries

# ENGINES DELIVERED

53,000 Total Engines Delivered, 2007-2026

Annual Installed Engine Deliveries

3000

3500>65K

# ENGINES DELIVERED

2000

250046-65K

1000

150018-45K

0

500

3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

12-18K

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2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

L Milit E i D li i 1985 2020Aerospace Market Overview, a P&W Perspective

500F100 F117 F119 F135 JSTARS T k All h

Large Military Engine Deliveries 1985-2020

350400450 F100 F117 F119 F135 JSTARS Tanker All other

200250300

50100150

01985 1990 1995 2000 2005 2010 2015 2020

COMPANY PRIVATE

Aerospace Market Overview, a P&W PerspectiveR di t O C t ’ N d

Raw MaterialSupplier ExpectationsP&W Reacts

Our Customer Expects….

Responding to Our Customer’s Needs

Supplier Expectations

Supplier “GOLD”

P&W Reacts

Lean & Flexible – A.C.E.

p

Spare parts < 1 week

Continuous ImprovementImproved ForecastingEngine O/H < 4 weeks

Lead-time Reduction

Reduce Costs

Buffer Strategy

Productivity &

New Engine < 20 wks

Affordability yStrategic Sourcing

y

Perfect QualityPerfect Quality –– 100% On100% On--timetime

COMPANY PRIVATE

Perfect Quality Perfect Quality –– 100% On100% On--timetime

Aerospace Market Overview, a P&W PerspectiveS• Titanium is, and will remain, ~30% of an engine’s weight.

Summary

• We anticipate a market softening over the next decadeReduction in Large Commercial Engines until 2016- Reduction in Large Commercial Engines until 2016

- Reduction in Military Engines until 2016 – JSF high rate productionp

• The demand for perfect quality, 100% on-time delivery, & affordability will continue, with relentless pressure on lead –a o dab ty w co t ue, w t e e t ess p essu e o eadtime reduction.

COMPANY PRIVATE

We must be lean, flexible, reduce costs & lead-times