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1. Beijing, 25 September2009 Booz & Company General Aviation Implementation Support (GAIS) General Aviation Airport Module (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 General Aviation Airport Module 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 (yang.guang@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. 9 ∑ 19,653 ∑ 19,930 Airports is an essential infrastructure to enable and support GA development Number of Airports by Usage and Certification (as of 31 December 2008) • In the U.S. majority of airports are private use airports and non-Part 139 certified public use airports that serve GA (i.e. 98% of the total 19,653 civil airports in the U.S.) • In China, the total number of general aviation airports and temporary take-off and landing locations was 398 (69 general aviation airports and 329 temporary take-off and landing locations) (end 2007 statistics) • However, temporary landing facilities do not contribute to the growth of GA as they do not promote investment and long term use. Fully capable, permanent GA airport infrastructure is required • Based on U.S. experience, for larger GA sector the following is needed: • Government financial support for GA is primarily for GA airport development improvement • China current programs on commercial airport improvement should also include ability of GA to use those improved or newly added airports • Commercial airports have to accept GA traffic at the same time commercial operation are conducted • Commercial airports need GA facilities such as FBOs, fuels and aircraft services Civil public use Part 139 560 Civil public use Non-Part 139 4,642 3% 24% Total Civil Private Use Airports 14,451 Large number of non-Part 139 and private use airports 74% Number of Airports by Type Stolports 82 Balloonports 14 Gliderports 35 Ultralight flightparks 139 Seaplane bases 503 1% 3% Heliports 5,568 0% 28% 0% 0% Large number of heliports Airports 13,589 This includes 277 military airports 68% Source: FAA Fact Book 2008, Booz & Company analysis

6. 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

7. Summary of observations and recommendations for Module 2: GA Airport (1/2) Module 2: GA Airport

8. Summary of observations and recommendations for Module 2: GA Airport (2/2) Module 2: GA Airport

9. Executive summaryGA airport regulationsGA airport planning and designGA airport fundingAppendix

10. GA Airport Module aims to identify policy and regulatory improvement opportunities to support GA infrastructure development • The overall objective of GA Airport Module is to identify policy and regulatory improvement opportunities to support development of new general aviation airports and improve existing infrastructure in China • The scope of the module includes conducting regulatory difference analysis between the U.S. and China GA airport system, and recommend improvement measures in the following areas: • Overall GA airport policy and regulations • GA airport planning and design • GA airport funding

11. China has positioned airports as a public-use infrastructure that must be co-funded by the government and operational revenues Airport Management Philosophies • Free public facilities at the government expense • Financially supported by a general tax levies and revenue • Government is obliged to provide airport services if not provide by private interests • Viewed as a profit making venture • Should be self-sustaining and unsupported by local tax funds • Must adopt a fee and rate structure that would assist in recovering revenues Pure Welfare Model （公益性） Pure Business Enterprise Model (营利性) Public-Use Model （公共性） • The State Council has enforced a revised “Civil Airport Management Regulations” in July 2009 • The regulations clearly defined airports as a “public-use” infrastructure which has a combination of both pure welfare and profit driven business characteristics • The requirements for airport development and operation management (such as decision making, budgeting, supporting airport operations, and collection of revenue) reflect the defined positioning should reflect that management philosophy adopted Source: CAAC, Booz & Company analysis

12. P This is similar to the U.S. where about three quarter of GA airports in the U.S are subsidized based on a survey conducted FAA Center of excellence for General Aviation Research (CGAR) General Aviation Airport Funding Strategies Study Proportion of Subsidized Airports Proportion of Different Types of Subsidized Airport Subsidized only for CIP Non-subsidized(1) 26% 10% Subsidized only for operation 66% Subsidized for both Operation and CIP 74% Subsidized(2) Sample Size = 588 GA airports in the U.S. in different regions 1) Non-subsidized GA Airport - Airport with ability to generate adequate revenue to cover all normal expenses for its operation, administration, and maintenance, and for the local share of federal and/or state funded capital improvement projects (matching funds) 2) Subsidized GA Airport - All others Source: Embry Riddles CGAR Research, Booz & Company analysis

13. In China the States Council decrees and civil aviation regulations regulate civil airport development and construction universally Civil Aviation Regulations Decrees by the State Councils • 民用机场管理条例 (civil airport management regulations) • 《关于建设机场和合用机场审批程序的若干规定》的通知 (Approval procedures for civilian and joint civilian/military airport development/construction) Planning and Development • CCAR-158 民用机场建设管理规定 (civil airport development management) • CCAR-165 民航专业工程质量监督管理规定 (Civil aviation engineering project quality management rules) • 国务院、中央军委关于保护机场净空的规定 (Navigable airspace protection requirements) Design and Construction • CCAR-97FS-R1 航空器机场运行最低标准的制定与实施规定 (Minimum standards for aircraft operating at airports) • CCAR-97FS-R2 中国民用航空总局关于修订《航空器机场运行最低标准的制定与实施规定》的决定 (revision of CCAR-97FS-R1) • CCAR-139CA-R1 民用机场使用许可规定 (civil airport certification) • CCAR-137CA-R2 民用机场专用设备使用管理规定 (civil airport equipage management) • CCAR-139-II 民用运输机场应急救援规则 (Emergency and rescue procedures for civil airports) • CCAR-140 民用机场运行安全管理规定 (Safety management system for civil airports) • CCAR-252FS 民用机场和民用航空器内禁止吸烟的规定 (Non-smoking requirements for airports and aircraft) • CCAR-331SB-R1 民用机场航空器活动区道路交通安全管理规则 (Road safety within civil airport) • 国务院、中央军委关于加强机场地面安全措施的通知 (Enhance ground safety and security at airports) • 国务院、中央军委《关于军民合用机场使用管理的若干暂行规定》的通知 (Management of joint military and civil airports) Operation

14. Current policy and regulatory systems have several gaps that constrain the development of GA airport infrastructure in China CHINA Key Issues Related to China General Aviation Airport Regulations 1 2 3

15. 1 Planning The U.S. has a system based airport planning approach at federal, regional, state and local government levels including GA airports U.S. System Based Approach to Airport Planning in the U.S. FEDERAL REGIONAL STATE STATE/LOCAL • State Law • Provides authorities and sets requirements for local planning • National Plan of Integrated Airport System (NPIAS) • Identifies airports that are eligible for federal funding and estimates the amount of funding required to meet the needs • Regional Aviation System Plan • Guides development of airports in different states • State Transportation Plan • Guides development of the state transportation system (aviation, land transport etc.) LOCAL STATE • Comprehensive Plan • Determines where growth occurs • State Aviation System Plan • Guides development of the state air transportation system LOCAL The NPIAS and state/local aviation master Plans include GA airports receiving government funding • Development Regulation/Zoning • Determines how growth occurs LOCAL • Airport Master Plan & Airport Layout Plan • Guides future development of the airport: identifies needed improvement projects LOCAL • Permitting Process • A formal process for ensuring that individual projects follow requirements set out in development regulations and guiding principles set our in the comprehensive plan • Communications and critical decision flow • FAA AC150/5070-6B Airport Master Plan • provide guidance on the preparation of master plans Source: Booz & Company analysis

16. 1 Planning NPIAS identifies airports that are significant to national air transportation and estimates the infrastructure development needs Description of NPIAS (National Plan of Integrated Airport System) Background of NPIAS Purpose of NPIAS Contents/Requirements of NPIAS • The Federal Airport Act of 1946 established the requirement for the formulation and annual revision of the five-year National Airport Plan (NAP) • The requirements for the plan has been developed and revised for several times during the past 60 years • Section 47103 of Title 49 of U.S.C. directs the Secretary of Transportation to maintain a plan (NPIAS) for developing public-use airports in the United States • The NPIAS is used by Federal Aviation Administration (FAA) management in administering the AIP. • It supports the FAA’s goals identified in the Flight Plan for safety and capacity by identifying the specific airport improvements that will contribute to achievement of those goals • The plan shall include the type and estimated cost of eligible airport development necessary: • to provide a safe, efficient, and integrated system of public-use airports • adequate to anticipate and meet the needs of civil aeronautics • to meet the national defense requirements • to meet identified needs of the United States Postal Service • The plan shall consider the needs of each segment of civil aviation and the relationship of each airport to: • the rest of the transportation system in the particular area • forecasted technological developments in aeronautics • forecasted developments in other modes of intercity transportation General aviation airports are part of NPIAS Source: NPIAS, Booz & Company analysis

17. 1 Planning In China Civil Airport Management Regulations have not placed due emphasis on the GA airport development CHINA The State Council’s Civil Airport Management Regulations • There are no regulations covering specifically GA airports and private airport development • CCAR 158 requirements primarily target at the needs of airports serving scheduled commercial airlines • There is also no emphasis on national GA airport system development plan • As the result, GA airports have not been featured in both National Civil Airport Development Plan and 11th Five Year Plan Source: Civil Airport Management Regulations, Booz & Company analysis

18. 1 Planning CCAR 158 requirements target primarily at public transport airports and are restrictive to encourage GA airport development CHINA CCAR 158 Civil Airport Development Management Regulations • Section 73 of CCAR 158 stipulates that the same planning and development requirements are applicable to GA airports • CCAR 158 requirements are more applicable to government funded public transport airport development in accordance with National Civil Airport Master Plan. They are too restrictive to stimulate GA airport development Source: CCAR 158, Booz & Company analysis

19. Applicants Local Department of Transport (or Aeronautical Bureau) FAA 1 Planning The airport planning and development approval process in China is time consuming as compared to the U.S. Process of Airport Planning and Development Approval in China Process of Airport Planning and Development Approval in California Local Government (Province Equivalent) Airport Construction Plan Application • Submit “Site Approval Form” with some other required items Application Regional Aviation Administration Primary Examination CAAC • Check whether the application is complete in 10 working days • Process the application Review and Approve Examination NDRC Approval • Notice FAA when the applicants get the approval File Notification to FAA State Council Repeated for all 3 planning phases Approval of Airport Construction Plan Military Time Time Min: 15 workings days, Mean: 30 working days; Max: 45 working days Usually 2 year, at least 1.5 years The process is repeated for all three phases: Airport site selection, preliminary feasibility study, final feasibility study Source: CCAR 158, California Department of Transport, Booz & Company analysis

20. 1 Planning The planning approval process is onerous even for temporary landing strip serving light aircraft CHINA EXAMPLE Zhejiang Hengdian GA Temporary Landing Area Approval Process and Timeline From Site Selection to Approval form Military ≈ 19 months Support from CAAC ≈ 21 months Other Approvals ≈ 13 months Temporary landing facilities do not contribute to the growth of GA as they do not promote investment and long term use Project Background • Applicant: Hengdian Group • Fleet: 10 units of Y5, 2nits of Y12, 2 units of Haiyan 650C • Investment: RMB 44.5 million • Scope: Runway (non precision 600m), taxiway, hangar, office building and provisions for future facilities Source: Zhejiang Construction Information Port, Booz & Company analysis

21. 2 Design FAA has established comprehensive airport engineering, design, and construction standards through issuance of series 150 advisory circulars FAA Airport Engineering, Airport Design, and Airport Construction Standards Source: FAA

22. Airport Geometry Surface Gradient and Line of Sight Runway Design Site Requirements for Navaid and ATC Facilities Taxiway and Taxilane Design Runway and Taxiway Bridges The Effects and Treatment of Jet Blast Wind Analysis Runway Design Rationale Taxiway and Taxilane Design Rationale Runway and Sitting Requirements Taxiway Fillet Design Airport Reference Point Computer Program Compass Calibration Pad Airplane Data Small Airport Building, Airplane Parking and Tiedowns Declared Distance 2 Design AC 150/5300-13 provides general design standards and recommendations for all airports FAA Key Elements covered by Airport Design Advisory Circular AC 150/5300-13 Airport Design • Purpose: The advisory circular contains the Federal Aviation Administration’s (FAA) standards and recommendations for airport design • Applicability: • The standards and recommendations contained in this advisory circular are recommended by the FAA for use in the design of civil airports • For airport projects receiving Federal grant-in-aid assistance, the use of these standards is mandatory • At certificated airports, the standards and recommendations may be used to satisfy specific requirements of FAR Part 139, Certification and Operations: Landing Airports Serving Certain Air Carriers, Subpart D. Core Appendix Source: FAA Airport Design Advisory Circular AC150/5300-13, Booz & Company analysis

23. 2 Design AC 150/5390-2 Heliport Design provides standards for heliport design and development in the U.S. FAA Why Is the Construction of Heliports Important Descriptions of AC 150/5390-2 Heliport Design • The modern helicopter is one of the most versatile transportation vehicles known to man • The helicopter has the capability of providing a wide variety of important services to any community that integrates this aircraft into its local transportation system • In addition to their service in the transportation of people, helicopters have proven to be useful to their communities in the following ways: • Disaster Relief. • Air Ambulance Services • Police Services • Moving High-Value Assets • The most effective way for a community to realize the benefits of helicopter services is by developing or permitting the development of places where helicopters can land and take off • This advisory circular (AC) provides recommendations for heliport design and describes acceptable requirements to develop a heliport, including: • General aviation heliports • Transport heliports • Hospital heliports • This AC applies to anyone who is proposing to construct, activate or deactivate a heliport • This AC is not mandatory and does not constitute a regulation except when Federal funds are specifically dedicated for heliport construction Source: AC 150/5390-2 Heliport Design, Booz & Company analysis

24. 2 Design China has implemented standards for airport design and construction under GB and MH document series NON EXHAUSTED

25. 2 Design Ground Equipment of General Aviation Aerodrome is the main guidance materials on GA airport design Ground Equipment of General Aviation Aerodrome Applicability • Ground equipment of general aviation aerodrome GB/T 17836-1999 was issued by General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in 1999, with participation/inputs from CAAC • The standard stipulates minimum equipage recommendations for GA airports serving fixed wing aircraft, helicopters • It aims to enhance the standard management of GA airports, ensure flight safety and improve the quality and efficiency of aerial work • It does not cover broader GA airport design standard requirements for other GA applications (e.g. flying clubs, gliders, balloons etc.) Source: Ground Equipment of General Aviation Aerodrome, Booz & Company analysis

26. 2 Design The standard classifies GA airport into different types and set different requirements Classification for GA Airports Main Requirements GA Airport for Fixed-Wing Aircrafts • Main technical indicators of flight zone • Runway • Runway shoulder • Runway Strip • Taxiway • Parking Apron • Visual air navigation aid • Indicator sign • Flight zone surface mark • Lights • Fire fighting device • Communication Navigation Equipment • Meteorological Observation Equipments • Auxiliary Equipments • Permanent GA airport • Fixed, based and long-term • Temporary GA airport • Seasonally or emergency • Surface level Heliports • The heliport on the ground or water • Elevated Heliports • The heliport on top of high buildings • Helideck • The heliport on the offshore building Heliports Source: Ground Equipment of General Aviation Aerodrome, Booz & Company analysis

27. 2 Design Current CAAC Technical Standards for Flying Area of Civil Heliport does not prescribe specific requirements by applications Civil Heliport Technical Standards Applicability • This standard is applicable to heliport technical standards • It is not applicable to the landing area requirements for helicopters conducting aerial works at remote areas • Unlike FAA’s AC 150/5390-2 Heliport Design, it does not stipulates requirements for heliports by application • GA heliports • transport heliports • hospital heliports

28. 3 Operation FAA only requires airports serving air carrier operations to obtain airport operating certificates under Part 139 certification Airports that Must be Certificated Under 14 CFR Part 139 Airport Operating Certificates (AOC) • 14 CFR Part 139 requires FAA to issue airport operating certificates to airports that: • Serve scheduled and unscheduled air carrier aircraft with more than 30 seats • Serve scheduled air carrier operations in aircraft with more than 9 seats but less than 31 seats; and • The FAA Administrator requires to have a certificate • Compliance with 14 CFR Part 139 is mandatory for airports serve air carrier operations covered by the regulation • Airport Operating Certificates serve to ensure safety in air transportation • 14 CFR Part 139 establishes 18 areas of safety standards (e.g. runway surfaces, training requirements for aircraft rescue and fire fighting personnel, development of an airport emergency plan and a wildlife hazard management plan) • To obtain a certificate, an airport must agree to certain operational and safety standards/ requirements (depending on the size of the airport and the type of flights available) • FAA can issue certain exemptions to airports that serve few passengers yearly and for which some requirements might create a financial hardship Note: Scheduled Operation — any common carriage passenger-carrying operation for compensation or hire conducted by an air carrier for which the air carrier or its representatives offers in advance the departure location, departure time, and arrival location. It does not include any operation that is conducted as a supplemental operation under 14 CFR Part 121 or public charter operations under 14 CFR Part 380; Unscheduled Operation — any common carriage passenger-carrying operation for compensation or hire, using aircraft designed for at least 31 passenger seats, conducted by an air carrier for which the departure time, departure location, and arrival location are specifically negotiated with the customer or the customer's representative. This includes any passenger-carrying supplemental operation conducted under 14 CFR Part 121 and any passenger-carrying public charter operation conducted under 14 CFR Part 380 Source: FAA, Booz & Company analysis

29. 3 Operation GA airports and heliports are exempted from Part 139 certification but obligated to meet contractual obligations if receiving federal funds Airports Exempted from Part 139 • Does not apply to GA airports because they do not serve air carrier operations ( unscheduled operations of air carrier aircraft with more than 30 seats and scheduled operations of air carrier aircraft with 10 to 30 seats) • Operators of general aviation airports that accept Federal grant funds or the transfer of Federal property for airport purposes must agree to contractual obligations under FAA Airport Compliance Program • These obligations require the recipients to maintain and operate their facilities safely and efficiently and in accordance with specified conditions. The obligations may include use of airport revenue, proper maintenance and operation of airport facilities, protection of approaches, land use compliance and others as agreed • While FAA does not certificate general aviation airports under the revised Part 139, the regulation contains many safety procedures and practices FAA recommends for use at all airports GA Airports Alaskan Airports • Does not apply to Alaskan airportsthat: • Do not serve air carrier aircraft with more than 30 seats; or • During time periods when the airport is not serving air carrier aircraft with more than 30 seats • Heliports are not required to be certificated under Part 139 because: • Heliports typically are used by general aviation operators and serve very few air carrier operations • There are very few helicopters that can seat more than nine passengers, and fewer still are used for scheduled passenger operations • While certification is not required, FAA encourages heliport operators to follow Advisory Circular (AC) 150/5390-2, Heliport Design (or obligated to comply with AC 150/5390-2 if they receive federal grants) Heliport Note: In addition to the above GA airports and heliports, airports serving scheduled air carrier operations only by reason of being designated as an alternate airport as well as airports operated by the United States (such as military bases) are also exempted from Part 139 certification Source: FAA, Booz & Company analysis

30. 3 Operation Though exempted from Part 139 certification GA airports are subject to licensing requirements imposed in respective states (1/2) U.S. EXAMPLE Virginia States Airport Licensing Requirements Public-use Airport • Public-use airports are licensed for several reasons, including a requirement that they have sufficient financial responsibility to adequately protect public safety and investment • The Public-use Airport License is issued in two parts, Part 1 is a formal certificate, and Part 2 provides information concerning runway configuration, length and width • Licensing of private-use airport, heliport or landing area within five miles of a public-use airport is mandatory • It is a one-time process designed to provide public review (to be conducted by Virginia Department of Aviation) of an individual's desire to build or locate a private-use airport on private property, to ensure no conflict with airspace of public use facility • FAA’s approval of airspace is part of the review process • There is no fee charged to license a private-use airport, and owners of other private-use airports are only required to register their airports with the Department of Aviation Private-use Airports Within Five-Miles of a Public-use Airport Private-use airports not within five miles of public-use airports • Owners of private-use airports not within five miles of a public-use airport are only required to register their airports with the Department. Source: Booz & Company analysis

31. 3 Operation Unlike the U.S. currently there is no exemption on registration and compliance resulting in too stringent requirements for GA airports CCAR Part 139 Airport Certification 1 1 • No exemption on airport certification • No clear definition of temporary landing area and its requirements 2 • CAAC needs to provide a clear definitions of “other basic requirements” • All the requirements should be listed clearly in the regulation (Items in red are not applicable to GA airports) 2 Source: CCAR 139 CA-R1, Booz & Company analysis

32. GA Airport Funding In the U.S. public-use airports that serve civil aviation are eligible for Federal Airport Improvement Program funding Types of Airports and Airport Activities Definition of Airport Categories • The only airports, or portions thereof, eligible for AIP funding are public use airports that serve civil aviation (and must be included in the NPIAS) • A public-use airport is an airport open to the public that also meets the following criteria: • Publicly owned, or • Privately owned but designated by FAA as a reliever, or • Privately owned but having scheduled service and at least 2,500 annual enplanements Note: 1) Nonhub airports - locations having less than 0.05 percent of the U.S. passengers, including any nonprimary commercial service airport, are statutorily defined as nonhub airports. 2) Reliever airports are airports designated by the FAA to relieve congestion at Commercial Service Airports and to provide improved general aviation access to the overall community 3) The remaining airport, while not specifically defined in Title 49 USC, are commonly described as General Aviation Airports. Source: FAA, Booz & Company analysis

33. GA Airport Funding Department of Transport of different states also provide aid programs and loans to support GA airport development CALIFORNIA EXAMPLE Main State Aid Programs for Airports in California Local Airport Loan Program • Provides a $10,000 per year entitlement to eligible publicly-owned, public-use airports for expenditure at the sponsor’s discretion Annual Credit Grant • The Local Airport Loan Account is a revolving fund that was initiated with seed money from the Aeronautics Account. As principal and interest payments are returned to the Loan Account, additional loans can be provided to airports • To be eligible for the loan, the airport must be owned by an eligible public agency (e.g., a city, county or airport district) • Loans are available for revenue generating projects such as hangers and fueling facilities • Loans can be made for airport development projects also • Finally,loans can be made to assist the sponsor with the local match for an AIP Project • Generally, the term of a loan will vary between 8 and 17 years depending upon the amount of the loan • Assist General Aviation (GA) airports in meeting the local match for federal Airport Improvement Program (AIP) grants • The state grant is 2.5% of the AIP amount. Eligible projects must benefit GA and be included in the Capitol Improvement Program (CIP) element of the California Aviation System Plan AIP Matching Grant • Acquisition and Development (A&D) grants are for eligible projects subject to programming and allocation by the CTC • An airport land use commission (ALUC) can receive funding to either prepare or update a comprehensive land use plan (CLUP) Acquisition and Development (A&D) Grants The sole funding source for these grants is excise tax revenues on general aviation (GA) gasoline (18¢ per gallon) and for jet fuel (2¢ per gallon) Source: California Department of Transportation, Booz & Company analysis

34. Typical Sources of Airport Revenues Operating rental/ lease revenue sources Airport operational income revenue sources Non-aeronautic revenue sources • Hangar rental • Hangar land lease • Passenger terminal building structured lease • Aircraft landing fees • Aircraft parking/ tie down fees • Airport Equipment Use Fees • Motor Vehicle Parking Revenue • Fuel sales/ flowage fee revenue • Business Parks • Golf course • Vehicle parking • Car dealers • Rental car agencies • Campground/RV parking • Agricultural Lease • Mineral rights • Field sports • Special activities and events catering to both aviation and non-aeronautical interests GA Airport Funding GA airports in the U.S. exploit different revenue sources by imposing charges to their fund development and operation Initiatives to Increase Revenue of GA Airports Surveyed (Sample Size: 588 GA Airports) % of respondents Build More T-hangars Raise Hangars Rental Rates Raise fuel prices or flowage fee Develop more land for real estate (aviation related) Build more corporate hangars Develop more land for real estate (non-aviation related) Other Hangar is the main revenue generating initiative Source: Embry Riddles CGAR Research, Booz & Company analysis

35. GA Airport Funding The U.S. Department of Transport sets policy on airport fees to safeguard the interest of air carriers and other aeronautical users U.S. EXAMPLE Principles Applicable to Airport Rates and Charges • In general, the Department of Transportation relies upon airport proprietors, aeronautical users, and the market and institutional arrangements within which they operate, to ensure compliance with applicable legal requirements. Direct Federal intervention will be available, however, where needed. Local Negotiation and Resolution • Rates, fees, rentals, landing fees, and other service charges (‘‘fees’’) imposed on aeronautical users for aeronautical use of airport facilities (‘‘aeronautical fees’’) must be fair and reasonable • Federal law does not require asingle approach to airport rate-setting Fair and Reasonable Fees Prohibition on Unjust Discrimination • Aeronautical fees may not unjustly discriminate against aeronautical users or user groups • The airport proprietor mustapply a consistent methodology inestablishing fees for comparableaeronautical users of the airport. Requirement to be Financially Self-Sustaining • Airport proprietors must maintain a fee and rental structure that in the circumstances of the airport makes the airport as financially self-sustaining as possible • In accordance with relevant Federal statutory provisions governing the use airport revenue, airport proprietors may expend revenue generated by the airport only for statutorily allowable purposes Requirements Governing Revenue Application and Use Source: RIN 2120–AF90 Policy Regarding Airport Rates and Charges, Booz & Company analysis

36. Specific Civil Aviation Fund for Airport Construction Public Civil Airports are important infrastructure of public benefits and serve the development of national wealth and society The fund will focus on safety facilities, non-developed area, and middle to small size airports The source of fund is the fee of civil airport construction charged from the passengers Mainly address the needs of public transport airport GA Airport Funding China has established a national fund for civil airport development but it should be extended to cover GA airports Applicability of Airport Development Fund • It covers public transport airport only • New airport Project: new civil airport, military and civil airport expansion • Existing airports: there are six categories covering the construction and maintenance work of airport facilities • Others: Other construction projects that represent the activities of the government and other lost of fixed assets of airport due to natural disaster Source: Specific Civil Aviation Fund for Airport Construction, Booz & Company analysis

37. GA Airport Funding In China, some operating costs are not very transparent and difficult to capture thus fee related policies are essential GA Operator Interview Findings AIRSPACE “We have canceled our Aircraft Management function due to it is very difficult to apply for the airspace usage - you’ll need relationship with the military” PENSION COST “After restructuring, some of the GA companies carry heavy burdens on giving out pensions to a large group of people” AVIATION GAS “Its difficult to get aviation gas in China - we sometimes go to the military office to get gas” AIRPORT “Most of the GA companies needs to share airport facilities with air carrier - the usage control of the airport is limited - hence aircraft utilization rate is low resulting in relative high costs” Source: Interview findings

38. We recommend six initiatives that will help develop and improve current GA airports in China Key Areas Key Recommendations Expected Benefits 1 • Develop regulations or guidance materials for GA airport development (both government or private driven investment) • Develop GA airport design requirements that align with different segments (temporary landing strips, heliport, flying clubs etc.) and applications • Clearer regulatory requirements with regard to GA airport development • Avoid oversized or over equipped GA airports 1.1 GA Airport Regulations 1.2 2 • Integrate GA airport planning and development into future national airport system planning process • Simplify the current GA airport planning and approval process, shorten approval lead time and produce guiding materials GA Airport Planning 2.1 • System approach to national GA airport development plan • Shorter lead time for GA airport development approval 2.2 3 • Conduct feasibility study on a dedicated funds for GA airport development • Develop policies to guide airport and airspace usage fees for GA operation • Adequate funds to support GA development • Fair and equitable usage fees for GA operators and users 3.1 GA Airport Funding 3.2 Source: Booz & Company analysis

39. 1.1 We have also drawn up high level descriptions of necessary tasks for each of the recommended initiatives Initiative 1.1: Develop Regulations or Guidance Materials for GA Airport Development Initiative Key Objectives • Develop regulations or guidance materials for GA airport development • Establish systemic regulatory system to support GA airport development • Provide guidance materials to help on any possible obstacles during the GA airport development Task 1: GA Airport Regulatory System Task 2: Develop or Improve Regulations Task 3: Develop Guidance Materials • Refer to FAA airport regulatory system or China public airport regulatory system • Identify the required regulations for GA airport development • Refer to FAA regulations if the identified required regulations are missing in China • Develop appropriate regulations for GA • Study the regulations that need to be improved identified in task1 and find the development needs • Improve these regulations • Refer to the advisory circulars of FAA that are relevant to airport development • Draft the GA airport development guidance material Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • NDRC • Regional/local government • Military • ACP and GA airport operators • Clearer regulatory requirements with regard to GA airport development • Set up steering committees/work groups for each task • Draft detailed scope and work plan

40. 1.2 It is necessary to develop GA airport design requirements that align with different segments and applications Initiative 1.2: Develop GA Airport Design Requirements That Align With Different Segments and Applications Initiative Key Objectives • Develop GA airport design requirements that align with different segments (temporary landing strips, heliport, flying clubs etc.) and applications • Understand the different needs for different GA segments and applications • Provide the GA airport design requirements for different segments Task 1: Understand Needs for Airport Task 2: Develop Airport Design Requirements • Segment GA activities appropriately into different segmentations and applications • Study the specific needs for airports of different segments and applications • Understand different needs for different segments and applications of GA airports • Refer to FAA’s airport design requirements for different segments and applications of GA activities • Based on understanding for different needs for airports and FAA’s example, develop airport minimum design requirements • Public • Rotorcraft • Recreational, etc. Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • GA airports operators • CAAC • Standardization Administration • Avoid oversized or over equipped GA airports • Set up steering committees/work groups for each task • Draft detailed scope and work plan

41. 2.1 CAAC needs to implement a system based approach towards GA airport planning and development Initiative 2.1: Integrate GA Airport Planning and Development into Future National Airport System Planning Initiative Key Objectives • Integrate GA airport planning and development into future national airport system planning process • Provide clear national GA airports development plan • Promote GA airport development Task 1: Understand Current Status Task 2: Differentiate GA Airports Task 3: Integrate GA Airport Planning • Study current GA airport status including distributions, ownership, operation and financial situations in China • Identify the role and responsibilities that GA airports should take in the future (e.g. transportation, public duties, medical and emergency/ disaster relief functions) • Based on the identified roles and responsibilities that GA should take in task 1, identify the differences between GA airports and public airports • Identify the development needs based on current status and capability for GA airports • Based on different roles that public airports and GA airports should take, set the development target for each sectors • Develop the overall airport planning including both GA airports and public transport airports Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • GA airports operators • CAAC • Regional Aviation Administrations • Local Government • System approach to national GA airport development plan • Set up steering committees/work groups for each task • Draft detailed scope and work plan

42. 2.2 Simplifying the current GA airport planning and approval process will improve effectiveness and efficiency Initiative 2.2:Simplify the Current GA Airport Planning and Approval Process Initiative Key Objectives • Simplify the current GA airport planning and approval process, shorten approval lead time and produce guiding materials • Clarify ad define approval requirements and process for general aviation airports • Provide guidelines on minimum design standards for general aviation airport planning, development, construction and operation • Define registration and certification requirements for GA airports Task 1: GA Airport Development Approval Task 2: GA Airport Approval Materials Nil • Work with stakeholders to clarify and define approval requirement for GA airport development • Regional/ local government investment • Private sector investment • Conversion of military airports • Classification and usage of GA airports • Document processes and procedures • Issue public consultation • Consolidate and prepare a clear guidance material on GA airport planning, develop and construction approval processes and related administrative requirements • Nil Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • NDRC • Regional/local government • Military • ACP and GA airport operators • Shorter lead time for GA airport development approval • Set up steering committees/work groups for each task • Draft detailed scope and work plan

43. 3.1 The feasibility of a dedicated funds to support GA airport development will be able to meet long term needs Initiative 3.1:Conduct Feasibility Study of a Dedicated Funds for GA Airport Development Initiative Key Objectives • Conduct feasibility study on a dedicated fund for GA airport development • Clarify the needs for a dedicated fund for GA airport development • Generate reliable capital sources for GA airport development fund • Study the feasibility for a dedicated fund for GA airport development Task 1: Define the needs for the funds Task 2: Find the reliable capital sources Task 3: Conduct Feasibility Study • Work with GA airports operators to understand current airport operations and financial status • Define how much it needs and what is the best way to fund GA airport • Work with the management of current civil airport fund to see whether it is possible to share the fund for GA airports development • Refer to FAA’s practice to establish the fund from some specific airport related tax • Consolidate the information gained • Follow the standard process to conduct feasibility study for approval for GA airport fund Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • GA airport operators • CAAC • Tax Bureau • Management of Civil Airport Fund • Adequate funds to support GA development • Set up steering committees/work groups for each task • Draft detailed scope and work plan

44. 3.2 Fair and equitable usage fees for GA operators and users help GA industry develop healthily Initiative 3.2:Develop Policies to Guide Airport Usage Fees for GA Operation Initiative Key Objectives • Develop policies to guide airport usage fees for GA operation • Provide airport and GA operator a clear guidance on airport usage fees • Help GA airports secure operating revenue • Help GA airport achieve self-financing Task 1: Understand the Cost Structure Task 2: Develop Guidance • Conduct a survey to understand the cost components and levels for GA airport usage charges • Work with selected GA airport operators to understand the cost structure of airport operation • Benchmark with the cost structure of GA airports in the U.S. • Based on the baseline information collected, work with relevant government authorities e.g. NDRC and military policy to develop the principles and guidelines for airport and airspace usage fees for GA operations • Conduct public consultation • Finalize the policy to guide airport and airspace usage fee for GA operation Stakeholders to be Consulted Expected Benefits Next Steps/Follow-up • GA operators • GA airport operators • Military • CAAC • Fair and equitable usage fees for GA operators and users • Set up steering committees/work groups for each task • Draft detailed scope and work plan

45. Executive summaryGA airport regulationsGA airport planning and designGA airport fundingAppendix

46. The U.S. has developed a very large number of airport infrastructure including GA airports Number of Existing Airports by Ownership and Use in the NPIAS Classifications and Definitions of Airports in NPIAS 19,815 Total U.S. Airports 5,190 Open to Public 14,625 Closed to Public 4,150 Public Owned 1,040 Private Owned 3,411 NPIAS Airport (Of the 5,190 existing public use airports, 65% are NPIAS) 3,356 Existing 3,254 Public Owned 102 Private Owned 383 Primary 139 Commercial Service 270 Reliever 2,564 General Aviation 562 are certificated for air carrier operation (non GA) Source: NPIAS, Booz & Company analysis

47. The U.S. Federal Government has set guiding principles for the development of the national airport system EXTRACTED FROM NPIAS 2009-2013 • The airport system envisioned in the first National Airport Plan in 1946, when civil aviation was in its infancy, has been developed and nurtured by close cooperation with airport sponsors including Federal, State, and local agencies. • The general principles guiding Federal involvement have remained largely unchanged; the airport system should have the following attributes to meet the demand for air transportation: • Airports should be safe and efficient, located at optimum sites, and developed and maintained to appropriate standards • Airports should be affordable to both users and Government, relying primarily on user fees and placing minimal burden on the general revenues of the local, State, and Federal governments • Airports should be flexible and expandable, able to meet increased demand and to accommodate new aircraft types • Airports should be permanent, with assurance that they will remain open for aeronautical use over the long term • Airports should be compatible with surrounding communities, maintaining a balance between the needs of aviation and the requirements of residents in neighboring areas • Airports should be developed in concert with improvements to the air traffic control system and technological advancements • The airport system should support national objectives for defense, emergency readiness, and postal delivery • The airport system should be extensive, providing as many people as possible with convenient access to air transportation, typically by having most of the population within 20 miles of a NPIAS airport • The airport system should help air transportation contribute to a productive national economy and international competitiveness Source: NPIAS

48. FAA has put in place a regulatory system governing planning, development, operation and management of airports FAA Regulatory System for Airports Certification, Development and Operation • 14 CFR Part 139 requires FAA to issue airport operating certificates to airports that • Serve scheduled and unscheduled air carrier aircraft with more than 30 seats; • Server scheduled air carrier operations in aircraft with more than 9 seats but less than 31 seats; and • The FAA Administrator requires to have a certificate. • This Part does not apply to airports at which air carrier passenger operations are conducted only because the airport has been designated as an alternate airport. Airport Related Regulations • There is a specific subchapter in FAR for airport: Subchapter F - Airport • Planning and Development related (including funding) • Part 150 Airport Noise Compatibility Planning • Part 151 Federal Aid to Airports • Part 152 Airport Aid Program • Part 156 State Block Grant pilot program • Part 77 Objects Affecting Navigable Airspace • Operation related • Part 153 Airport Operations • Part 155 Release of Airport Property from Surplus Property Disposal Restrictions • Part 157 Notice of Construction, Alteration, Activation, and Deactivation of Airports • Part 158 Passenger Facility Charges • Part 161 Notice and Approval of Airport Noise and Access Restrictions • Part 169 Expenditure of Federal Funds for Nonmilitary Airports or Air Navigation Facilities Thereon Source: FAA, Booz & Company analysis

49. These FAR regulations are supplemented by guidance materials and local government requirements Non-Exhaustive Airport Related Regulations and Guidance Development and Planning Land Acquisition Land Use Obstructions • FAA Order 5100.38C, Airport Improvement Program Handbook • FAA Advisory Circular 150/5070-6B, Airport Master Plans • FAA Advisory Circular 150/5070-7, The Airport System Planning Process • FAA Advisory Circular 150/5100-14D Architectural, Engineering and Planning Consultant Services for Airport Grant Projects • FAA Advisory Circular 150/5300-13, Airport Design • FAA Advisory Circular 150/5200-33A, Hazardous Wildlife Attractants On or Near Airports • FAA Order 5100.37B, Land Acquisition and Relocation for Airport Projects • FAA Advisory Circular 150/5100-17, Land Acquisition and Relocation Assistance for Airport Improvement Program Assisted Projects • FAA, Land Use Compatibility and Airports: A Guide for Effective Land Use Planning • Local government airport zoning regulations restricting the height of structures and objects of natural growth and otherwise regulating the use of property in the vicinity of an airport, e.g. • Airport Zoning Act and Ordinance • Building Codes • Housing Codes • 14 C.F.R. Part 77 (Objects affecting navigable airspace) • FAA, Land Use Compatibility and Airports: A Guide for Effective Land Use Planning Source: Booz & Company analysis

50. FAA provides oversight of airports through 3 key programs supported by standards and guidance materials Key FAA Airport Programs Relevant to General Aviation 1 2 3 Airport Compliance Airport Safety & Certification Environmental Program • Airport sponsors agree to certain obligations when they accept Federal grant funds or Federal property transfers for airport purposes. The FAA enforces these obligations through its Airport Compliance Program • GA airports receiving Federal grant funds are subject to the compliance requirements • The Airport Safety Program addresses general aviation airport safety, runway safety, airports certificated under 14 Code of Federal Regulations Part 139, and the Airport Safety Data Program, which makes airport information available to the public. • The program deals with the following issues: • Airshows • Open or Close an Airport or Runway • Part 139 Certification • Reducing Runway Incursions • Runway Safety Program • Safety Management Systems (SMS) • Signs and Marking • Wildlife Hazard Mitigation • The Airport Environmental Program helps airports implement the National Environmental Policy Act (NEPA) and other Federal environmental laws and regulations • The program focuses on: • Airport Air Quality • Voluntary Airport Low Emissions Program (VALE) • Airport Noise (Part 150 and Part 161) • Compatible Land Use • Environmental Records of Decision • Acquiring Land for Airports and Relocation Assistance • Wildlife Hazard Mitigation Supplemented by engineering, design and construction standards and guidance materials (planning, design, operation, funding and fees) Source: FAA, Booz & Company analysis