How Aerolíneas Argentinas maximizes on their MRO capabilities

to remain successful in Latin America and globally

MRO LATIN AMERICA

January 13-14, 2015

Hilton Buenos Aires, Buenos Aires, Argentina

Eng. Marcelo Ariel González Kiryczun

Manager of Training, Certifications and Qualifications

Aerolíneas Argentinas S.A.

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Aerolíneas Argentinas presentation

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• Commercial air transport operator (RAAC Part 121 & 135) & its own MRO (RAAC/FAR Part 145)

• Created on December 7th, 1950 through Decree Nbr. 26,099 (Argentine state owned)

• Born from the merger of 4 airlines: Aeroposta, Zonda, Fama & Alfa (May 3rd, 1949)

• Skyteam member since August 29th, 2012

• Current “in service fleet” of 69 aircraft (73 aircraft projected IAW our business plan)

• Own simulators training center (CEFEPRA), 4 full flight simulators: Airbus A330/A340 (1), Boeing 737-700/-800 (2) and Embraer ERJ 190 (1)

• The business group is made up of 5 companies: Aerolineas, Austral, Aerohandling, JetPaq & Optar

Aerolíneas Argentinas S.A. air carrier & MRO

Air carrier curren fleet

Consist of 69 aircrafts, we expect to reach a total of

73 units soon, in accordance with our business plan

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• Airbus A340-200/-300, from 1999 to 2015

International flights fleet

7 units • Airbus A330-200, from 2013 to 2015

International flights fleet

4 units • Boeing 737-700/-800, from 2009 to 2015

Domestic & regional flights fleet

36 units

• Embraer E190, from 2010 to 2015

Domestic flights fleet

22 units

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Aviation industry forecast and Argentine MROs

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ICAO “Global & Regional 20-Year Forecast” (Passenger & Freighter)

Source: Global and Regional 20-year Forecast, ICAO Doc 9956

Total of 22,260 in 2010

Total of 40,923 in 2030

Only passenger and

freighter fleets considered

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ICAO “Global & Regional 20-Year Forecast” (Passenger & Freighter)

GROWTH

Source: Global and Regional 20-year Forecast, ICAO Doc 9956

Passenger & Freighter fleet (2010-2030)

Compound Annual Growth Rate "CAGR"

1,2%

4,0%

4,0%

3,5%

6,3%

3,1%

North America

Latin America

Africa

Europe

Middle East

Asia & Pacific

Passenger & Freighter fleet (2010-2030)

20 years total growth rate

28%

121%

121%

99%

237%

84%

North America

Latin America

Africa

Europe

Middle East

Asia & Pacific

2nd position

annual growth

(CAGR) 2nd position in

global growth

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OEMs Latin America & the Caribbean Forecasts (2014 to 2033)

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Latin America & the Caribbean forecast |(2014 to 2033)

Source: Previous sources average

Annual growth rate average: 4.4%

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• 171 Approved MROs worldwide

• 119 National MROs (Argentine)

• 52 Foreign MROs (5 regions)

Argentine Civil Aviation National Administration approved MROs

Source: www.anac.gov.ar (december 28, 2014)

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Argentine territory ANAC approved MROs

Source: www.anac.gov.ar (december 28, 2014)

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Aerolíneas Argentinas and Austral MROs

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Maintenance Repair & Overhaul organizations

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Aeronautical Repair Shop

ANAC approved (1B-114)

Under RAAC Part 145

Foreign Repair Station

FAA approved (AISY117C)

Under FAR Part 145

Aeronautic Maintenance

Organization for the Defense

Air Force approved (DIGAMC)

Under Military Regulations

Aeronautical Repair Shop

ANAC approved (1C-005)

Under RAAC Part 145

Foreign Repair Station

FAA approved (ASTY739M)

Under FAR Part 145

2 Main Stations (Ezeiza & Aeroparque airport)

1 Main Station (Aeroparque airport)

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Maintenance Repair & Overhaul organization

Our facilities are based on two main stations located at Ezeiza & Aeroparque Airport

Population of 1,600 maintenance people working for the MRO & air carrier

Ezeiza airport station:

• 3 Hangars, 17 component shops, laboratories, warehouses and support offices

• A total surface of 17,173 m2

• 2 hangars dedicated to heavy maintenance (wide & narrow body fleet)

• 1 hangar dedicated for line & minor maintenance (wide & narrow body fleet)

Aeroparque airport station:

• 1 Hangar, warehouses and support offices

• A total of 10,650 m2

• Dedicated for minor and heavy maintenance (narrow body fleet)

Population of 520 maintenance people working for the MRO & air carrier

Aeroparque airport station:

• 3 Hangars, component shops, warehouse and support offices

• A total surface of 10,500 m2

• Dedicated to minor and heavy maintenance (Embrarer ERJ 190 fleet)

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Ezeiza airport station (17,173 m2)

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MRO Component shops & laboratories

• Aircraft structures shop • Avionics shop • Chemical / metallographic laboratory • Composite material shop • Electric components shop • Emergency equipment shop • Engine accessories shop • Engine repair shop • Engines parts chemical processing • Engines shop • Flight controls shop

• Hydro-Pneumatic components shop

• Landing gear shop

• Metal fabrication shop

• Metrology

• Non-destructive test laboratory

• Oxygen & gaseous systems shop

• Seats / Slides shop

• Seat / miscellaneous shop

• Upholstery shop

• Wheels & brakes shop

We divide our shops into 6 main departments: Avionics, Hydraulics & pneumatics, Repairs, Electroplating, System components and Engines & accessories

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Aerolíneas Argentinas business plan and MRO strategies

In 2009 our management developed a new business plan based on market diagnostics, aviation industry forecasts & company status

Domestic & regional market diagnostic & Forecasts:

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Aerolíneas Argentinas S.A. Business Plan (2010-2014)

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Growth of Argentine air transport expected demand was based on:

1) Argentina and region expected economic growth

2) The recovery of the global air transport market

3) Total of passengers to be transported in Argentina with an annual increase of CAGR = 9,2%

4) Passengers to be transported by Aerolíneas with an annual increase of CAGR = 10,4%

6.4 7.5 8.1 8.7 9.6

15.1 16.5

18.1 19.7

21.5

0.0

5.0

10.0

15.0

20.0

25.0

2010 2011 2012 2013 2014Millio

ns o

f P

assen

gers

Total of Passengers vs Aerolineas Argentinas Passenger forecast

Aerolineas Argentinas Passengers Total of Passengers

Source: MIDT, Oliver Wyman

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Aerolíneas Argentinas S.A. Business Plan (2010-2014)

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• Our target segment was domestic & regional air traffic market

• Market was described as “competitive and not monopolistic”

• With an estimated total growth of 50% for the next 5 years

• Aerolineas Argentinas main competitors in 2009 were:

LAN, TAM, GOL, Andes, SOL, Pluna, Aerosur and others

• Aerolineas Argentinas market share increment was predicted

from 42% in 2010 to 46% in 2014

• 21.1 million of passengers to be transported in Argentina in

2015

• Latin America & the caribbean air traffic growth was predicted

• Latin America & the caribbean fleet growth was predicted

• Jet fuel price future increments were predicted as well

Source: MIDT, Oliver Wyman

Company status at the end of 2009:

• Aerolineas had the 42% of the domestic and regional market share

• In service fleet average age was about 19,4 years old (more than the region average)

• High maintenance & operational costs

• Highly diversified fleet and configurations, at least 7 different fleets

• High percentage of the company fleet was not in service, because of no previous investment

New business plan was based in the following strategic and tactic objectives

Strategic Objectives:

• Grow in our operation

• Achieve efficiency in our costs structure

• Improve our product

Tactic Objectives:

• Reduce fuel and maintenance costs

• Improve aircrafts technical reliability levels

• Reach a bigger number of airports (domestic, regional & international)

• Reduce average age of our fleet

• Increase our commercial competitiveness

• Gain a bigger market share and better strategic position

• Place our brand at a higher level 20

Aerolíneas Argentinas S.A. Business Plan (2010-2014)

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Based on business plan, new company mission, vision and values were reformulated in order to adapt our business to the needs of our country and to the region: Our mission “To connect Argentine people and contribute to the country integration and economic and social development, promoting our national territory as tourist, cultural and business destination” Our vision “To be pride and symbol company of the Argentine Republic, famous for Its efficient and transparent public management” Our values “Dynamics: permanent movement and continuous improvement” “Commitment: to everyone, inward and outward” “Closeness: feeling at home, everywhere”

Aerolíneas Argentinas S.A. Group Business Plan Mission & Vision

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In order to remain successful in Latin America and globally, our company adopted the following strategies:

• Renew our capabilities and approval certificates based on the needs of our air carrier

business plan

• keep previous capabilities and certificates during the fleet renewal process, and

surrender not necessary ones after fleet renovation accomplishment

• Take advantage of some of our previous capabilities, approvals (those from our

previous in service fleet), experience & knowhow in order to develop new business

• Increase our maintenance & training services offer for other customers in the region,

based on the market, air traffic and fleet growth; and our global position

• Increase our customers portfolio through sales promotion

• Generate strategic partnerships with others air carriers, MROs & training organization

• Improve our air carrier and MRO approved training program and maintenance training

offer in order to adapt this to our business plan needs

• Reorganize our organizational structure & personnel

Aerolíneas Argentinas S.A. & Austral MRO strategies

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• Improve our MRO operations, processes and administrative control through the

implementation of a robust system of maintenance, engineering and financial

management

• Implement an aggressive investment plan in order to improve our facilities, tools,

equipment and to achieve new scopes and capabilities, oriented towards the

business growth. We can mention the following:

1) A new hangar for MRO located at Aeroparque airport

2) A new heavy maintenance hangar for MRO located at Ezeiza airport

3) Engines & components shop restoration in order to achieve new scopes and capabilities

4) A new training & simulators center (CEFEPRA)

5) A new composite shop

6) Wheels and Brakes shop restoration

7) Surface treatment and electroplast shop restoration

8) NDT and inspection shop restoration (specialized equipment)

9) Achievement of Embraer ERJ 190 basic check approval (ANAC & FAA)

10) Achievement of Airbus A330-200/300 line and base maintenance approval (ANAC & FAA)

11) ETOPS certification approval (ANAC) through an implementation plan

Aerolíneas Argentinas S.A. & Austral MRO strategies

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Fleet renewal plan and process

To From

Approval “Part 145” & “Parts 121 & 135”

RAAC - FAR - EASA - DIGAMCE

Business fleet renewal plan

Plan objective was “turn an ancient highly diversified fleet into a more modern, more

consistent one, keeping our MROs capabilities during this process”

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RAAC

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Renewal fleet plan & its process description

The renewal of the fleet is in process and this plan was implemented in order to increase the number of aircrafts and to achieve standardization

Through out this process, our company has operated & maintained several aircraft types, keeping their capabilities including engines, APUs & components

As part of our strategies we took advance of our previous capabilities in order to offer maintenance and training services to other carriers in the region

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3 certificates 3 certificates 3 certificates 3 certificates

Business fleet renewal plan and process (in service fleet)

How we kept certificates & A/C types capabilities during fleet renewal process

3 certificates

7 types (53 units) 6 types (57 units) 6 types (57 units) 5 types (66 units) 7 types (69 units)

ANAC

FAA

EASA DIGAMC

ANAC

FAA

EASA

ANAC

FAA

EASA

ANAC

FAA

EASA

ANAC

FAA

Our customers

Tame, BoA &

Presidence

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Take advantage of some of our previous capabilities

We maximized our maintenance & training services offer during fleet renewal & incorporation process for the following:

• Aircraft types: Airbus, Boeing, Embraer & Mc Donnell Douglas models

• Engines types: General Electric, Pratt & Whitney & CFM International models

• APUs: Honeywell, Pratt & Whitney Canada & Hamilton Sundstrand

• Our aircrafts fleet components: pneumatics, hydraulics, mechanics, electrics & avionics

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Current MROs operations specifications and capabilities Rating Manufacturer Make/Model Limitation Agency MRO

Airframe Boeing B737-200 Line & Base Maintenance FAA, ANAC AR

Boeing B737-500 Line & Base Maintenance FAA, ANAC,

DIGAMC

AR

Boeing B737-700/800 Line & Base Maintenance FAA, ANAC AR

Mc Donell Douglas MD-80 Series Line & Base Maintenance FAA, ANAC AR

Airbus A340-200/300 Line & Base Maintenance FAA, ANAC AR

Airbus A330-200/300 Line & Base Maintenance ANAC AR

Airbus A318/A319/A320 Line Maintenance ANAC AR

Embraer ERJ-190 Line & Base (Basic Check) FAA, ANAC AU

Power Plant Pratt & Whitney JT8D-7 thru -17R Overhaul level 3 FAA, ANAC AR

Pratt & Whitney JT8D-200 Series Overhaul level 3 FAA, ANAC AR

General Electric CF34-10E Line Maintenance FAA, ANAC AU

CFM International CFM56-3 Specialized techniques &

Modules Maintenance

FAA, ANAC AR

CFM International CFM56-7B Specialized techniques FAA, ANAC AR

Modules Install & Removal ANAC AR

CFM International CFM56-5C Specialized techniques FAA AR

Modules Install & Removal FAA, ANAC AR

APU Allied Signal GTCP85 Up to overhaul ANAC AR

Honeywell 131-9 Limited Maintenance ANAC AR

Honeywell 331-350 Limited Maintenance ANAC AR

Hamilton Sundstrand APS 2300 Limited Maintenance ANAC AU

NDT Magnetic Particle FAA, ANAC AR

Eddy Current FAA, ANAC AR

Radiographic FAA, ANAC AR

Liquid Particle FAA, ANAC AR

Ultrasonic FAA, ANAC AR

Instruments Capability List AR & AU FAA, ANAC AR, AU

Altimeter Testing Capability List AR & AU FAA, ANAC AR, AU

Radio Capability List AR & AU FAA, ANAC AR, AU

Transponder Testing Capability List AR & AU FAA, ANAC AR, AU

Accesories Capability List AR & AU FAA, ANAC AR, AU

Landing Gear Capability List AR FAA, ANAC AR

Emargency Equipment Capability List AR FAA, ANAC AR

Capability List AU ANAC AU

Specialized Aerospace Welding ANAC AR

services Cylinder requalification facility US DOT &

ANAC

AR

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MRO heavy maintenance activity

Fleet heavy maintenance activity during last 5 years for: heavy checks, main repairs and new aircrafts fleet incorporation maintenance works

• C: heavy maintenance checks (AR narrow & wide body fleet)

• C1, C2: basic check 1 or basic check 2 (AU Embraer 190 fleet)

• R: main repairs (AR narrow & wide body fleet)

• E: maintenance works for new aircrafts incorporation (all fleet)

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MRO processed components

Components check, repair and overhaul during 2010 to 2013 period per every shop main department:

• Aircraft structures shop • Avionics shop • Chemical / metallographic laboratory • Composite material shop • Electric components shop • Emergency equipment shop • Engine accessories shop • Engine repair shop • Engines parts chemical processing • Engines shop • Flight controls shop

• Hydro-Pneumatic components shop

• Landing gear shop

• Metal fabrication shop

• Metrology

• Non-destructive test laboratory

• Oxygen & gaseous systems shop

• Seats / Slides shop

• Seat / miscellaneous shop

• Upholstery shop

• Wheels & brakes shop

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MRO approved training program courses

New Airbus A330

certification

Airbus A340 to

Airbus A330

differences

courses

Less training hours needed because of fleet standardization (renewal plan)

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Airbus A330 training program strategic plan

ESTACION PAIS FLOTA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA 1RA 2DA

INSTRUCTORES (CTyH) ARGENTINA A330 (PW/GE)

BASE (EZE) ARGENTINA A330 (PW)

BASE (EZE) ARGENTINA A330 (GE)

SAN PABLO (GRU) BRASIL A330 (PW) 6

LIMA (LIM) PERU A330 (PW) 1

STA CRUZ SIERRA (SRZ) BOLIVIA A330 (PW) 1

USHUAIA (USH) ARGENTINA A330 (PW) 2

RIO DE JANEIRO (GIG) BRASIL A330 (PW) 3

CARACAS (CCS) VENEZUELA A330 (PW) 3

MIAMI (MIA) EEUU A330 (PW) 7

BOGOTA (BOG) COLOMBIA A330 (PW) 5

IGUAZU (IGR) ARGENTINA A330 (PW) 2 1

RIO GALLEGOS (RGL) ARGENTINA A330 (PW) 1 2

CORDOBA (COR) ARGENTINA A330 (PW) 1 1 1

BARILOCHE (BRC) ARGENTINA A330 (PW) 1 1

SANTIAGO (SCL) CHILE A330 (PW) 2 2

MONTEVIDEO (MVD) URUGUAY A330 (PW) 2

EL CALAFATE (FTE) ARGENTINA A330 (PW) 1

CANCUN (CUN) ARGENTINA A330 (PW) 3

NUEVA YORK (JFK) EEUU A330 (PW/GE) 6

DICMES-QUINCENA ENE

9 (2 cursos)

AGO SEP OCT NOV FEB MAR ABR

147 (7 Cursos)

286 (14 Cursos)

MAY JUN JUL

1 2

1

2

We established two main objectives and their time frame goal:

Domestic/Regional operation: Base + GRU, LIM, SRZ, USH, GIG (before August 2013)

Regional/International operation: To fly from Buenos Aires to New York in december 15th, 2013

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New MRO maintenance, engineering and financial control software

In order to improve our MRO management & financial control system, we adopted AMOS and SAP systems:

AMOS System:

• Powerful integrated software that permits to carry out maintenance, engineering & logistics processes

• This system will let us improve our MRO operations and processes control

• At present we are in the implementation phase (next 8 months)

SAP System:

• We implemented Enterprise Resource Planning “ERP” system for MRO & air carrier

• It will improve our administrative and financial control & operations

• 22 month were needed in order to implement the system

• 150 people were involved in this project

• This implementation was part of Aeroíneas Argentinas investment program directed to company software renewal plan (11 million dollars of investment)

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MRO maintenance services for other customers

During past 5 years period, we provided maintenance & training services to several air carriers and MROs of the region:

Our offer is based on:

• Our global strategic location (South America)

• Availability of our facilities for operators (hangars at both Buenos Aires main airports)

• Previous achieved capabilities (IAW fleet renewal plan)

• Air carriers of the region needs

• Our certificates and approvals

• Our Maintenance Training Center & qualified instructors

• Our maintenance personnel experience and knowhow

• Our simulator training center (4 full flight simulators)

• Our partnerships and commercial alliances (present and futures)

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At present our company is going through an aggressive investment process,

oriented towards the business growth and market opportunities in our

country and region

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New hangar for MRO located at Aeroparque station

A new hangar and shops were built in Aeroparque station in order to support and maintain Embraer 190 fleet (22 airplanes) and offer third party maintenance services

• Built and restored in 2011 year

• More than 1.16 million dollars of investment

• 2200 m2 of total surface

• 44 meters length and 50 meters wide

• Wheels & brakes shop

• Oxygen & gaseous systems shop

• Main & emergency batteries shop

• Composite materials shop

• Cleaning area

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Embraer 190 Basic Checks approval

As part of capabilities maximization we achieved “E190 Basic Checks” certification

Investment:

• 2.5 million dollars invested for specialized tools & equipment

• 1.8 million dollars invested for assumed spares and aeronautics materials

• 54 thousand dollars for in order to improve and adapt facilities

• 2,100 training hours & 200 maintenance professionals involved in the process

Expected Profits:

•100 thousand dollars of economic saving for each in company Basic Check

• First Embraer 190 Basic Check: February 2013

• Maintenance services are offered to other air carriers of the region and the world

In order to increase our scope, capability and maintenance services offer; we have started the construction of a new hangar at our Ezeiza airport MRO station

• Under construction since May 13th, 2014

• To be finished in no more than 18 months (before August 2015)

• Whole investment of more than 50 million dollars

• 20,000 m2 of total surface

• Designed with room enough to easily accommodate one Airbus A380 aircraft

• 6,000 m2 destined for an robotic automated warehouse

• Conditioned air heating system designed to minimize environmental impact

• Five tons capacity cranes, support shops and tooling,

• Technical library and Maintenance records warehouse

• Dining room, offices and meeting rooms

• New training classrooms

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New heavy maintenance hangar in building process (New hangar 5)

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New heavy maintenance hangar in building process (New hangar 5)

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It easily accommodates one Airbus A380 aircraft (New hangar 5)

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Robotic automated warehouse (New hangar 5)

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New training classrooms (New hangar 5)

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Engine shop restoration

• Engine shop restoration in process

• 2.2 million dollars of investment

• Consisting of shop refurbishment, tools &

specialized equipment incorporation

• 5 bays for engine maintenance

• To extend scope for our engines and

APUs maintenance capability

• Maintenance services offered

• In strategic partnership with other MROs

P&W JT8D-200 Series

P&W JT8D Old series

MD-80 & Boeing 737-200

CFMI CFM56-3

Boeing 737-300/400/500

CFMI CFM56-7B

Boeing 737-700/800

CFMI CFM56-5C

Airbus A340-200/300

In order to increase our scope, capability and maintenance services offer

We have started our engine shop restoration:

GE CF34

Embraer ERJ 190

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Non destructive test, surface treatments, composite & wheels/Brakes shops

Looking forward in our investment plan & MRO capabilities maximization process we restored following shops:

• MRO Ezeiza airport station

• 2.7 million dollars of investment

• In order to process our fleet parts &

increase our scope and capabilities

• Implementation of new equipment for

Electroplate processes

• New NDT Inspection tools & equipment

• Stands, benches, cranes, offices &

environmental system

• Composite clear room & equipment

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Questions?

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Eng. Marcelo Ariel González kiryczun

Manager of Training, Certifications & Qualifications

Aerolíneas Argentinas S.A.

(54-11) 4480-5146/5012

mgonzaki@aerolineas.com.ar

www.aerolineas.com.ar