1Confidential

Small African Regional AircraftSouthern African Transport Conference: Towards a Desired Transport Future (Safe, Sufficient & Affordable)

11th July 2018, Wednesday [Denel Aeronautics: Lesetja RT Mogoba]

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Table Of Contents

1. Business Case & Aim

2. Design Developments

3. Partnership & Frameworks

4. Studies Advising Business Models

5. Funding & Capitalisation

6. Engagement Process

Design Suite, Structural Testing, Certification

5 Axis, High Speed Machining Thin web machining up to up to 6.5m

Honeycomb reinforced compositesDouble curvature complex panels

Sub and Main Assemblies up to 16m

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(SARA) Small African Regional Aircraft - Background

Denel Aeronautics Background• Denel SOC Ltd, through its Aeronautics division has been designing,

modifying and manufacturing Aircraft at the Kempton Facility for over 50 years.

• Denel SOC Ltd is the OEM for the Rooivalk Attack Helicopter, the Oryx Medium Transport Helicopter and the Cheetah Fighter Aircraft.

• Denel has world leading Aerospace capabilities and competencies including Design, Engineering, Advanced Manufacturing and Continued Airworthiness and Systems Integration

• Global OEM accreditations for Maintenance, Repair and Overhaul

Background of the Concept• Since 2012 Denel has been developing the concept of a Regional Aircraft

envisaged as a 21st century transportation system for Africa.• The concept is based on the study conducted by GE/Cessna/ASD Lab Tech

Team on the future community airliner concepts. • Launched publicly at the 2014 AAD Airshow, SARA has been adopted as a

potential National Flagship Programme by the Joint Aerospace Steering Committee (JASC) in line with National Macro Policies of NDP, IPAP, NIPP.

• In 2015, an independent Market Potential study was conducted by Lufthansa, co-funded by DTi, DPE, IDC and Denel.

• The market study confirmed a viable Business case for SARA in the market and its candidacy for National Flagship.• A 1:1 Scale Mock-Up has been built to facilitate 13 post graduate studies with UP, Wits, Rhodes, NWU

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1. Business Case & Aim

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SARA Aircraft Concept Summary

24 Seater with comfortable four-abreast seating (19 + 5 seats)

Passenger, Combi or Cargo Configurations for operational versatility.

Turboprop Regional aircraft, for increased operational cost efficiency

FAR 25 certification, Pressurised cruise at 25000ft above the weather in comfort

and speed and uninterrupted scheduled operations

Designed for short field performance, utilizing more airport infrastructure.

Supports point to point travel and decongestion of main hubs.

Laminar flow fuselage design features ensuring improved fuel efficiency

High Wing Short Take-off and Landing (STOL) design, operation on semi-

prepared airstrips. Support rural economic development (> 460 airstrips in RSA).

Performance Specifications

Take-off distance < 1000m

Design Cruise 300+ KTAS (556 km/h)

Economical Cruise 280 KTAS (519 km/h)

Primary mission 800km (24 pax),

Secondary mission 2700km (15 pax) Flying into Hub and Driving to DestinationFlying Point-to-PointFlying into Hub and Driving to Destination

Flying Point-to-Point

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Vehicle for National Benefits: It’s Not About an Aircraft

Social Economic Development (National)

• Sustainable jobs creation• Transformation of technical skill base• Rural economy development• Black industrialists development• Leverage Defence Industrial

Development For Commercial Economic Growth

Economic Growth & Development (National)

• Leverage African Economic Growth• African solutions for Africa• Enhance Regional mobility• Advance Global Competitiveness• International Smart Partnerships• Improve Regional integration• Knowledge-based economy• Export Revenue Growth• Enterprise development, Over 20 Companies• Export revenue from High technology Products• Drive Foreign Direct Investment

Industrial Development

• Diversify advanced manufacturing capability

• Deepen the inherent Industrial Base• Harness Technology spill over from

the Aerospace industry.• Drive Industrial Research &

Technology Development• Design/development skills transfer

OEM with Airframe Design Authority to reduce risk & certification timelines

PowerplantB.O.

Avionics B.O.

Landing Gear B.O.Comms Systems

B.O.

CockpitB.O. Electrical

B.O.

Commercial Growth

• Diversification of aftersales services suite (maintenance and life-cycle cost management)

• Harness existing manufacturing infrastructure

• Vehicle for multimodal transportation systems (supporting DoT Master Plan)

• Vehicle to effect M&A Strategies

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OR Tambo SEZ & CoE Aerotropolis: Final Assembly Line Scenario

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Universities in 2018: SARA Human Capital Development

8

University of PretoriaBEngHons - All Electrical Control Concept (Employee at Denel)

North-West University• MBA - Business Model for

SARA Operations• MEng - LEAN culture at a SA

Aviation Organisation

WITS UniversityMEng Students:Advanced Wing Design (STOL) (Employee at DAv)Aircraft Design Optimisation (Employee at DAv)

Rhodes UniversityCockpit & Cabin Fatigue Studies(2x MSc Students)

Wits UniversityEye-Tracking of Pilot During Landing (MEng Student)

North-West University• LEAN Manufacturing (PhD Student)• Supply Chain (local participation) (PhD Student)

Rhodes UniversityCockpit Ergonomics(2x MEng Students)

THRIP – Denel status:Present Human Capital Development• 3 Post Graduates Completed• 10 Post Graduates In-Process• 4 Employees

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Commercial Air Travel Driving Demand: Aircraft & MRO

Commercial Market: USD 254.6Bn in 2015

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SARA Best in Class and Operationally Cost Competitive

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Lufthansa Market Study Findings – Validated Business Case

Job Creation:• Non – recurring jobs during development phase: Direct jobs: 309 (200 new engineers)

• Recurring direct jobs during series production:o Airframe production: ~ 490 jobs p.a.o OEM integrator: ~ 80 jobs p.a

• (6x economic multiplier) = ~ 3500 jobs p.a.sustained for period of at least 10 years

Revenue:• Sales revenue: ~ R 5 bn p.a.• Export revenue: ~ R 3.5 bn p.a. (70%)• Enterprise development :> 20 SA companies• Breakeven: 200 SARA aircraft/10 years• Substantial National benefits• Estimated development cycle approximately 7 years

Market Growth & Replacement (12 – 40 PAX Aircraft):• 161 in Africa, 313 in 6 regions, at 9% penetration• 1500 Global demand, proportional over 20 years• Passenger peak within 800km distance, in 6 regions

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2. Design Developments

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SARA 1:1 Scale Fuselage Mock-Up (January 2018)

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• Engine Installation (1.7m ahead of wing L/E)• Engine cowling design• Air intake design• Engine installation structure

• Pax door installation• Geometrical definition • Structural concept

• Wing structure DDS Completed• Structural arrangement (ribs, spars and

control surfaces locations)• Flaps, Slats and Flaperons aerodynamic

definition (positioning for take off landing and cruise)

• Preliminary Empennage surface creation i.a.waerodynamic definition

• Investigation into mass penalty of non circular fuselage cross sectional shape

• Start of the development of a post processing analysis tool for fuselage components i.e. frames, stringers and skins

• Conceptual investigation on Aircraft overall lay-out (Extended fuselage) i.a.w finalized Engine installation & Empennage definition

• SARA Mock-Up Space allocation

• Technical enquiries in progress with OEMs as follows:• Pratt & Whitney Canada: PT6A-67R engine candidate• Hartzell Propeller: HC-B5M-bladed propeller

candidate• Cockpit Layout

• Flight Deck Concept 1 Layout done from pilot inputs• Engine Installation

• Concept 1 Engine Installation for PT6A-67R candidate done

• Aircraft Performance• Engine losses estimation for PT6A-67R candidate

established with engine deck• Take-off and Landing Performance estimates

completed for PT6A-67R combined with Hartzell HC-B5M 5-bladed propeller candidate

• Cruise Performance estimates completed for the above propulsion candidate

• Aircraft Mass & Balance• Mass & CG database & algorithm created• Component Mass Budget updated• CG estimates completed (various pax & fuel

configurations)• Empennage Aerodynamic Design

• Sizing of minimum required stabilizer areas completed (impact on overall layout of aircraft to be assessed)

Structure:Maturity A design, SAM models, initial loads & FEM

Systems:Flight Deck, Performance, Mass & C of G

Engineering & ESD: Technical Status

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17%

3%

50%

5%

7%

2%

7%

9%

Concept & Prelim design - cost breakdown

Engineering & Design Drafting Labour - Concept Design

Engineering & Drafting Tools - Concept

Engineering & Design Drafting Labour - Prelim Design

Engineering & Drafting Tools - Prelim

Wind Tunnel Models & Testing

Qualification & Certification Planning

RSA Commuter Route Flight Investigation

National & International Marketing Campaign

Concept & Prelim Design - Cost Breakdown

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3. Partnership & Frameworks

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Role Of SOC/Industry As Integrator

Role of Industry

• Market Integrator• Product integrator /Prime• HCD• Transformation• Enterprise development

Government

• Policy objectives• Departmental integration• NIP/DIP• Funding

OEMs

• MOUs• National SWOT• Market niches• Collaborative R&D• Benchmarking

Partnerships

• Collaborative research• Product complementation• Enterprise development

Extended Enterprises

• Increased capacity• Flexibility• Transformation

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Stakeholder Engagements Within Government, Industry, Academia

Stakeholder Period Agreement

1 THRIP Apr 2014 Joint funding to build 1:1 scale mock-up for Post Graduate studies

2 JASC Feb 2015 Co-funding for an Independent market study by DPE, DTi, IDC and Denel.

3 DST June 2015 Advanced Manufacturing Technology Roadmap Program endorse SARA and RV

4 DPE Feb 2016 Support to secure funding and Cabinet endorsement as National Flagship.

5 JASC Jun 2016 Confirmation to support endorsement of SARA as National Flagship.

6 FOSAD Jul 2016 Presentation to the Economic Cluster of DG’s, as part of national endorsement

7 AISI (DTi) Aug 2016 Supports several technology projects related to SARA

8 Gauteng IDZ Sep 2016 In partnership with City of Ekurhuleni and DTi, support SARA as anchor to establish Denel campus as IDZ/SEZ under the auspices of the Aerotropolis project

9 CSIR, IDC Oct 2016 Endorsement of SARA designated as a strategic program MOA’s to be signed

10 DoT, CAASA Nov 2016 Marketing, Certification Bilaterals support and incorporation into the Master Transportation Plan

11 Gauteng Province

Nov 2016 Premier Makhura confirms in-principle support of SARA into the next development phases, under the auspices of the Aerotropolis and Gauteng IDZ

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Stakeholder Engagements Within Government, Industry, Academia

Stakeholder Period Agreement

12 AISI March 2017 SARA Certification Readiness Review (Report) delivered

13 CSIR May 2017 MOA for exploring collaborative opportunities fully signed

14 RSA Universities May 2017 15 Universities indicated firm interest to contribute (Human Capital Dev’) to SARA via THRIP

15 BRICS June 2017 BRICS Business Council Manufacturing Working Group (BBCMWG) participation

16 Transnet June 2017 SARA Workshop : R&D and Advanced Manufacturing symbiosis

17 Cabinet July 2017 Draft Cabinet Memo inputs shared with DPE, for Minister: DPE approval August 2017

18 The dti July 2017 SARA workshop

19 GIDZ July 2017 Submission compiled by Denel/City of Ekurhuleni/GIDZ to the dti

20 City of Ekurhuleni August 2017 Executive Mayor visit – strategic meeting and facility tour to inform draft MOA

21 IDC August 2017 Draft Standard Joint Development Agreement inputs

22 JASC November 2017 TOR : Socio Economic Impact Study requirement initiation meeting

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Innovation Forum Process

Generate ideas that can improve

organisational products, services,

and business models.

Explore potential solutions and define

a final concept.

Identify and assess the problem or

need that is addressed by the

idea.

Development of a functional prototype.

Prove technical, economic and market

feasibility. User involvement is critical.

IdeaStrategically alignment?

Technically feasible?Does a need exist?

Problem/needKnown?

Significance?Existing solutions?

ProjectTechnical and economical

feasibility?Return on Investment?

Resources?

Project solutionTechnically proven?

Economically proven?Solution satisfactory?

Final SolutionValidated?

Lifecycle plan?Launch plan?

Transform the technological

potential of the invention into

economic value.

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4. Studies Advising Business Model

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The Role of National Aerospace Flagship Programs – Rooivalk

• Development cost: R6,2 billion Revenues of about: R22 billion

Exports of spin off companies, of R15,4bn Enablement of Defence Industrialization

Programmes: R7,1bn Alternative acquisition: R46 bn Skills development – increased national

competitiveness Project Management Engineering Systems Integration Certification Artisans

Technology spill overs / building blocks Airframe programmes Gas turbine production & MRO

Economic multiplier impact (incl. indirect & induced): R24.8 bn (Gripen research based)

Enterprise development Denel (DAe, DD, DLS), Aerosud, Paramount, TMA,

Grintek, CSIR

Performance Specifications• Power plants (each): 1,573kW• Maximum speed: 309km/h • Cruise speed: 278km/h• Operational ceiling: 20,000ft• Maximum range: 1,335km• Mission range: 940km • Endurance: up to 5hr

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Research Secured or Underway

AEROSPACE NATIONAL FLAGSHIP JASC Dept. Performance, Monitoring & Evaluation Cabinet Memo

SARA RELATED R&D PROJECTS Natural Fibre As Substitute For Composites Mass Mobility Transportation Composite Industrialisation Technologies Design For Additive (Aluminium based) Manufacturing Innovation Forum to support SARA Steercom and R&D Committee

TECHNOLOGY ECOSYSTEM APPROACH, ROLE &, REQUIREMENTS RSA FAR 25 Certification Readiness Lufthansa Consulting Group market feasibility NASA study & 140 local operators interviews

City of Ekurhuleni 10 point economic (master) plan Socio-economic impact study & ESD University and centres of excellence Human Capital Development progress

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5. Funding & Capitalisation

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SARA Way Forward: Partnerships for Funding & Development

Program Maturity and Progress

Secure Formal endorsement from SA government’s as a National Flagship Program.

Total development funding will be R5bn – R6bn over 7 years. To validate and mitigate risk, an initial tranche of circa

3% of the development funding is required for tollgate 1: Concept Design and tollgate 2: Preliminary Design.

Based on a Joint Development model, secure partners for funding R&D, Development and Advanced Manufacturing

post prototype manufacturing phase.

In parallel development stages Denel will develop a Business Plan, including a National Benefit Study, an

Industry Collaboration Model, a Detailed Project Plan and Joint Venture and Funding Models

The above will resolve risk (technical, cost, schedule), prove concept compatibility with performance requirements,

unlock industrial funding, and enable Letters of Interest from prospective customers.

Continental and Regional Collaboration Opportunities: African Solutions for Africa

Leverage smart partnerships of Government to Government and Business to Business collaboration for co

development, industrialisation, certification and production within the BRICS regions

Leverage unique African economic growth to facilitate funding mechanism (African Union, African Development Bank)

Regional integration and marketing collaboration with the continental aviation stakeholder cluster – AASA, AFRAA and

operators alike.

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Opportunities for Effective & Innovative Collaboration

African Solutions for Africa

OEM - Indigenous Complex systems (Rail, Aerospace, Defence)

SOC to SOC collaboration to drive Gov. developmental objectives

Support Implementation of the Integrated Transportation Plan

Collaborative research, harnessing pool engineering skills

Strategic Sovereign capabilities to harness technology spill overs

Key Government Macro-Policies

• National Development Plan (NDP)• New Growth Path (NGP) Framework• Industrial Policy Action Plan (IPAP)• National Infrastructure Plan (NIP),• Presidential Infrastructure Coordinating

Committee (PICC)• Private Sector Participation (PSP) Framework

Strategic funding for industrial research and development

Drive industrial research and technology Development

Unleash Niche Export Markets and Unique Partnerships

Deepen Industrial base in favour of Advanced Manufacturing

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Denel Proposal – Joint Development & Collaboration for PDR Phase

Denel proposal for scoping and funding model• Denel – OEM and Technical Authority• Transnet – R&D, Development and advanced manufacturing partner • Industrial Development Cooperation (IDC) – Industrialisation Funding partner• Government (DPE, DoT, DTi, and DST) and CSIR- R&D Funding partners

Modes of Contribution (Project Phases 1 – 6 circa R5bn – 6bn)• Financial – Hard currency funding support• Technical Human Resources – Engineering labour resources, design, development and certification at various skill

levels• Technical Infrastructure – Software and development tools and hardware, including testing facilities• Support Services Human resources – Finance, Legal, Business Development, Marketing, Human Resources, Integrated

Logistics Support, System Engineering and Obsolescence• Manufacturing Infrastructure – Existing infrastructure

Project Phase(Running Concurrently and not in series) Period Financial Tech.

HRTech Infra.

Support HR

Manuf.Infra.

1 Concept and Preliminary Design (PDR) 2 Years Yes Yes Yes Yes No

2 Detailed Design (CDR) 2 Years Yes Yes Yes Yes No

3 Prototype Manufacture and testing 3 – 5 Years Yes Yes Yes Yes Yes

4 Qualification and Certification (post CDR) 5 Years Yes Yes Yes Yes No

5 Log Support Development (post PDR) 5 – 6 Years Yes Yes Yes Yes No

6 Industrialisation 3 – 5 Years Yes Yes Yes Yes Yes

7 Serial Production Min 10 years Yes Yes Yes Yes Yes

8 After Sales Support Min 20 years Yes Yes Yes Yes Yes

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6. Engagement Process

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Contact Details

Mr Lesetja R T Mogoba

LesetjaM@DenelAero.co.za

+27 (0) 11 927 2248

Denel Aeronautics

Business Development Function

Senior Marketer: Diversification and Innovation

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Questions

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Thank You