Booz & Company

1. Beijing, 25 September 2009 Booz & Company General Aviation Implementation Support (GAIS) Executive Summary (Revised) 1st Revision: October, 2010 Final Revision: October, 2011 This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

2. Purpose of Document • The intent of this document is to provide a detailed handover of all analysis and materials relating to regulatory gap studies on Executive Summary as part of deliverables for General Aviation Implementation Support (GAIS) project funded by the US Trade Development Administration (USTDA) • The study focuses on drawing general aviation (GA) regulatory experience and insights from the U.S. because: • The U.S. has the most established and successful GA industry with a mature regulatory system that increases GA capacity and efficiency while maintaining safety • ACP is an U.S. organization with its members consisting of FAA and key GA aircraft and equipment manufacturers with global presence. ACP member firms are best able to share GA regulatory, management, technological and operational experiences from the U.S. • Analysis has been conducted and completed by Booz & Company with active contribution from Civil Aviation Administration of China (CAAC), Development Research Center of the State Council (DRC), Aviation Industry Corporation of China (AVIC), ACP members and other key stakeholders • For further information please contact: • Mr. Paul Fiduccia (PFiduccia@aol.com) • Mr. Frank Yu (Dongfang.yu@ge.com) • Mr. Kevin Wu (kevinwu@textron.com) • Dr. Edward Tse (edward.tse@booz.com) • Mr. Yang Guang (guang.yang@booz.com) • Mr. Timothy Wong (timothy.wong@booz.com)

3. This is one of the seven sets of deliverables developed for ACP GAIS project ACP General Aviation Implementation Support (GAIS) List of Deliverables Executive Summary 1 2 3 4 5 6 Safety Module General Aviation Airport Module Airworthiness Module Flight Standards Module Operators Module GA Associations Module Main Module GA Safety Regulation GA Airport Regulations Airworthiness Regulations Flight Standards Regulations Regulatory Constraints for Operators Roles of GA Associations Safety Oversight Organizational Structure GA Airport Planning & Design Type and Production Certifications Mechanics GA Aircraft Ownership Case Studies Sub - Module Safety Performance Measurement GA Airport Funding Aircraft Registration and Certification Pilots GA Operating Cost Safety culture and promotion

4. In China, GA refers to all civil aircrafts activities other than public aircraft transportation activities NON EXHAUSTIVE Three Main Categories of General Aviation Flight Activities* Definition of General Aviation General Aviation China: General Aviation refers to all civil aircrafts activities other than public aircraft transportation activities. Including flight operations associated with industrial, agricultural, forestry, fishery and construction, and other purpose operations such as medical and sanitation, emergency rescue, Meteorological sounding, ocean monitoring, scientific experiments, education and training, culture and sports etc. Public Service Economic Construction Consumer Aviation Agriculture Aerial Photography Training and Sports Forestry Mine Exploration Tourism FAA: General aviation (GA) refers to all flights other than military and scheduled airline flights, both private and commercial. Meteorology Petroleum Services Business Travel Disaster Relief Others2 Private Use ICAO: General aviation comprises all aircraft that are not operated by commercial aviation or by the military. Others1 Non scheduled commercial operations3 (*) CAAC categorization (1) Others include aircraft seeding, pest control, farming and emergency rescue (2) Others include remote sensing, power line services and industrial associated applications (3) Non scheduled commercial operations include air taxi and air charter operations Source: Committee of General Aviation Specialist of China Aviation Industrial Base (CAIB), CAAC and Booz Allen analysis

5. Executive Summary aims to consolidate key regulatory analysis findings and recommendations of GAIS • The main objectives of Executive Summary and Regulations Module are to: • Provide a brief overview of the background and methodology for GAIS project • Consolidate key regulatory gap analysis findings and recommendations • Cross check against recommendations made in GARA I report to help consolidate future development efforts (by combining both GARA I and GAIS recommendations) • More detailed analysis and information are contained in deliverables for respective modules

6. Executive summaryAppendix

7. Report on Catalyzing Growth in China's GA Sectoridentifies nine areas where changes in policy and infrastructure are required • Develop a safety regulatory system specific to GA • Support development of new general aviation airports and improve existing infrastructure • Improve access to airspace and management of airspace resources to improve safety and efficiency • Enhance pilot training system and increase number of pilots • Strengthen the supply eco-system and industry collaboration • Improve general aviation operating environment • Enhance initial and continuing airworthiness regulatory regime to safeguard GA operational safety • Encourage development of GA support services to improve operational safety and efficiency • Provide better GA financing alternatives Key Areas Development Objectives Action Plan and Items Safety Airport • Expected key outcomes • Issues/ obstacles • Useful references • Specific action items • Lead stakeholders • Participating stakeholders • Implementation timeline Airspace Pilot Aircraft Manufacturer Operator Airworthiness and MRO Supporting Functions Financing Source: ACP, Booz & Company analysis 6 Booz & Company

8. GAIS project aims tosupport CAAC in conducting regulatory gap analysis by drawing practices and lessons from the U.S…. ACP Proposed GAIS Project Framework Why Drawing Lessons from the U.S. GA Experience? • The U.S. has the most established and successful GA industry with a mature regulatory system that increases GA capacity and efficiency while maintaining safety • ACP is an U.S. organization with its members consisting of FAA and key GA aircraft and equipment manufacturers with global presence. ACP member firms are best able to share GA regulatory, management, technological and operational experiences from the U.S. • Gap analysis findings • Workshop materials production • Feedback • Ideas/ suggestions for test areas Conduct Regulatory Gap Workshops GAIS Project Regulatory Gap Analysis Support Test Area Implemen-tation • Capture post implementation lessons learned (not part of GAIS scope) Note: GAIS = General Aviation Implementation Support project

9. … in order to recommend policy and regulatory changes required to increase GA capacity and efficiency while maintaining safety Main Scope of the Regulatory Difference Analysis between the U.S. and China • Conduct analysis on differences of overall general aviation regulatory system in the U.S. and China to identify opportunities to increase efficiency and capacity while maintaining GA safety for the following six areas (main modules) • Safety • GA airport • Airworthiness • Flight standards • Operators • GA associations • Conduct surveys and interviews with the following stakeholders to identify and define key issues: • CAAC • GA operators (through GA associations and direct access) • Flight training institutions • ACP members • Conduct analysis and highlight FAA or US best practices • Prioritize and recommend changes required

10. U.S. has a policy and regulatory system that encourages GA airport infrastructure development critical to enable and support GA growth GA Airport Infrastructure Regulatory Difference (Summary) GARA I benchmarkstudy identified that airport and airspace are two critical infrastructure that enable GA growth Primary Airports Airports Serving Scheduled Airlines Commercial Service Airports All permanent GA airport development need to seek approval and be Part 139 certified Public -use airports Reliever Airports Temporary landing facilities do not contribute to the growth of GA as they do not promote investment and long term use General Aviation Airports General Aviation Airports Other Private-use airports Temporary Landing Strips No 14CFR Part 139 certification required • Privately owned and used airports are not regulated as they only may be used for slow and simple aircraft for which the requirements for safe operation are only a clear landing area do not justify resources for providing oversight • China lacks appropriate policy and regulations to enable and encourage GA airport development • No private-use GA airports Underdeveloped GA airport infrastructure to enable GA growth Source: Booz & Company analysis

11. U.S. GA policy and regulatory system finds a balance between risk and regulatory resources while enabling GA development Overall GA Policy and Regulatory System Difference (Summary) Main GA categories Non-scheduled Part 135 Non-scheduled Part 135 General Aviation General Aviation Commercial Aerial Works Air taxi Instructional Non commercial Appropriate level of policy and regulations for different GA segments Corporate • China has no separation of different GA segments as in the case of U.S. • As compared to the U.S. China lacks appropriate regulations for private and recreational GA segments Private and business GA segments Business Personal Recreational Underdeveloped Private,Business and Transportation GA Segments Note: Business GA - Business purpose (non salaried pilot. Pilot is the manager) Corporate GA: Business purpose (professional, salaried pilots) Source: Booz & Company analysis

12. Module 1: For safety regulations China lacks appropriate GA regulatory levels to encourage development of different segments Module 1: Safety

13. Module 1: China has not developed a GA safety performance measurement system based on GA activity, accident and incident data Module 1: Safety

14. Module 2: Airport policy and regulations primarily target at airports serving scheduled airlines and neglect GA airport needs Module 2: GA Airport

15. Module 2: Design requirements for GA airports are not as organized and targeted for different applications Module 2: GA Airport

16. Module 3: Main gaps for airworthiness are in the areas of amateur built aircraft, validation of type certificate and guidancematerials Module 3: Airworthiness

17. Module 3: Current aircraft registration and certification process can be simplified and duration required can be shortened Module 3: Airworthiness

18. Module 4: Flight standards regulatory differences appear in General Aviation Pilots and Flight Instructors areas Module 4: Flight Standards

19. Module 4: CAAC has more detailed mechanic certification system with multiple disciplines and aircraft type ratings Module 4: Flight Standards Note： 1) Separate qualification requirements for different types under same category align with EASA practices. CAAC monitors EASA closely and adjust requirements as appropriate 2) Longer duration and on the job training requirements also aligns with EASA standards (COMMISSION REGULATION (EC) No 2042/2003). Applicants with secondary school education and above needs 2 years on the job training, while those without needs 3 years on the job training duration in order to qualify as a certified mechanics 3) CAAC Advisory Circular (AC-66R1-01 Clause No.6) recognizes non civilian aircraft maintenance experience. However since both civilian and military maintenance scope and requirements differ, there is a need for mechanics to be reassessed and recertified 4) Maintenance licensing requirements for both general aviation and commercial aviation follow similar guiding principles. However, CAAC differentiate piston helicopter, piston aircraft, turbo helicopter and turbo aircraft (similar to EASA). There is a need to reapply for license for individuals who transfer from GA to commercial aircraft maintenance. Due to better compensation and career prospects, more mechanics choose air carrier maintenance instead of GA maintenance

20. Module 4: Current pilot system has not specified the GA certification, resulting in the difficulty of encouraging the growth of GA pilots Module 4: Flight Standards

21. Module 5: Operators face many regulatory constraints resulting in high cost of aircraft ownership and operation Module 5: Operators

22. Module 6: GA associations development in China is yet to be able to influence regulatory reforms and industry growth General Aviation Related Associations in the U.S. (Non-Exhaustive) Main General Aviation Associations in China China General Aviation Association International • Led by CAAC • Registered at Ministry of Civil Affairs Stakeholder Level National North West General Aviation Association Regional/ Voluntary Group • Established in March, 2009 • Based in Xi’an Yanliang Aviation High-tech Zone • It now has 41 members covering from manufacturers to operators and other relative organizations Arizona Airports Association Manufacturing/ Maintenance GA Airport/ Infrastructure/ FBO Operators/ Users General Aviation Industry Value Chain Source: CCAA, NWGA, Booz & Company analysis

23. Module 6: We recommend CAAC adopts a more coordinated approach to encourage GA association development in China Recommended Initiatives to Guide Coordinated GA Association Development in China Comments • The development of associations related to GA is still in its infantry stage in China • For immediate term CAAC should coordinate and spearhead the development of a national level GA association in China • In a long run China GA associations should be able to influence GA development: • Encourage and strengthen self regulation of GA industry • Recommend policies that enable GA development (e.g. airport infrastructure, manufacturing and operations, pilots and mechanics training) • GA associations should be at the equal level with the airline associations 1 • Encourage formation of local chapters of international GA associations International • Coordinate and support formation of a national level GA association • Establish specific interest groups such as flight schools, manufacturing etc. 2 Level of Associations National • Encourage formation of regional chapters of CCAA to lead regional activities 3 Regional/ Voluntary Group Manufacturing/ Maintenance GA Airport/ Infrastructure/ FBO Operators/ Users General Aviation Industry Value Chain

24. Module 6: GA associations should play greater roles in supporting future safe and sustainable GA development as in the case of U.S. 1 2 3 Representation and Advocacy Capability and Capacity Development Outreach & Community Safeguard Interest of GA Users • All associations safeguard interest of GA users through lobbying with government stakeholders Build GA Safety Capability and Capacity • Some associations facilitate building of safety capability and capacity • Many joint FAA and GA industry committees are always working on safety issues and GA development issues Create Greater Awareness of GA • Some associations create greater awareness of benefits of GA • GAMA Publication • AOPA GA serves America • EAA AirVenture Museum Support Policy and Regulatory Development • All associations support regulatory review and development • Very large amount of association staff and member. personnel, resources work with FAA on a continuous basis Promote Technology Advancement • Some association promote GA technology advancement and innovation to improve safety and efficiency, e.g. Embry Riddle University GA Centre Support Community Services • Some associations support community services e.g. government disaster relief/ functions • Emergency Volunteer Air Corps on Disaster Relief Assist FAA in Providing GA Oversight Training • Some associations assist FAA in providing oversight on certain GA segment • e.g. EAA for light sports aircraft inspection and certification training Support Data Collection and Analysis • Some associations support the collection and analysis of statistical data • GAMA Statistics, Database • AOPA Statistics Source: Booz & Company analysis

25. For next steps we propose CAAC setup a General Aviation Task Force to spearhead implementation of recommended initiatives Main Roles and Responsibilities of General Aviation Task Force • Consolidate the efforts for all GA policy and regulation related activities within CAAC • Spearheading policy and regulatory reform activities within CAAC • Recommend and draft GA policy and regulations GA Policy and Regulation Making • Coordinate and communicate with the following CAAC’s internal stakeholders: • Senior management and decision makers • Various divisions and departments (e.g. airports, airworthiness etc.) • CAAC’s regional offices • Liaise and communicate with external government and industry entities Coordination and Communication Immediate next step is to conduct GA workshops • Roll out and ensure implementation of proposed regulatory reform, test areas and other identified initiatives • Work with the other government entities and the industry to safeguard implementation Safeguarding Implementation • Monitor and evaluate progress and effectiveness of various initiatives • Capture lessons learned and facilitate knowledge sharing Monitoring and Evaluation Source: Booz & Company analysis

26. Executive summaryAppendix GARA I status check

27. 0. Safety GARA I Development Area Safety

28. 1. Airport GARA I Development Area Airport

29. 2. Airspace GARA I Development Area Airspace Note: it was agreed that Airspace will not be part of GAIS project scope

30. 3. Pilot GARA I Development Area Pilot

31. 4. Aircraft Manufacturers GARA I Development Area Aircraft Manufacturers

32. 5. Operators and Private Owners GARA I Development Area Operators and Private Owners

33. 6. Airworthiness and MRO GARA I Development Area Airworthiness and MRO

34. 7. Supporting Functions GARA I Development Area Supporting Functions

35. 8. Financing GARA I Development Area Financing