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Strategy Analysis Syndicate 6 – MBA Weekday The Airvolution

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Meet the Consultants

Mduduzi Magubane

Tembisa Maphike

Simphiwe Ralethe

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Nobatembu Dyantyi

Nompumelelo de Bees

Tumelo Mahange

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Sivuyile Makiza

Nondumiso Nsibande

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01 Company Background 02 Problem Statement 03 Market Analysis 04 Strategic Recommendations & Timelines 06 Conclusion

Agenda

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Addressing concerns of the board

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Company Background

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“To foster an environment which stimulates and inspires the team at Sling Aircraft to create the finest, most loved, practical, safe and reliable aircraft in the world” While contributing to the growth, happiness and personal fulfilment of all stakeholders.

“To become the world’s most loved and respected aircraft manufacturer as a consequence of the outstanding qualities of our people, products and ideas.”

Leadership

Excellence

Courage

Family

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Striving for excellence is at the core of Sling Aircraft.

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Key issues

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Preparation for the upcoming board meeting to set Sling Aircraft up for success considering the below key issues: Ill-defined roles & responsibilities amongst board members Reactive process to managing and scaling production capabilities Adoption and enhancement of the new ERP system to manage stock, deliveries and orders Processes & systems not properly documented

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Problem Statement

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Sling Aircraft has experienced good growth over the past 15 years and is in a financially strong position. The executive team would like a strategy that will help them move the needle while leveraging on their capabilities and strengths. The consultants are tasked to: Identify the next product to grow the business 5-or-6seater aircraft. Develop product development strategy and business model. Identify potential markets to venture into.

Ansoff Matrix

EXISTING PRODUCTS MARKET PENETRATION MARKET DEVELOPMENT NEW PRODUCTS PRODUCT DEVELOPMENT DIVERSIFICATION INCREASING RISK

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“ Recognise when the right place and the right time fuse, and take advantage of the opportunity ” Ellen Metcalfe

Situational Analysis

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Recommendation

6-Seater

Congested Market  Limited space ( luggage+people ) Not marketable commercially

Niche Market Commercial & Personal Use Airvolution Experience from a marketing perspective Target Persona – high net worth individuals & businesses

Cost of production Certification from SACAA Risk of moving far from existing market

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Alt 2: 8-Seater

Alternatives and recommendations

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Market Analysis

Threats Strong established players in the certified plane space with a track record and clientele. The likes of  Bombadier  have already invested heavily in Asia for a stronger market presence and after sales service.

Opportunities Access to a new market. Cost effective 6-seater plane, with good range, great fuel economy and building a name into the commercial as well as High Networth segment of the market.

Weaknesses New to certified plane market, need to establish a name and clientele.

Strengths Flight stability, Cost effective, Flight Range. Fuel Efficient, Long cruise machine with a growing market and a  15-year pedigree.

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Market Analysis

Ansoff Matrix

Macro-Economic Environment According to The Economist , America, China and India will be the dominant economies by 2026 by either Exchange rate or Purchasing Power Parity rates, whilst Europe will decline across both measures. As the world recovers from the impact of COVID 19 and trade and travel resumes, improved disposable incomes will bode well for the industry.

Market Growth Prospects COVID has had a positive impact on demand. Market grew by 0,5% overall in 2020 with a CAGR of 3% from 2021 -2026 Asia-Pacific showed the highest growth rate in General Aviation at 5%

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Bullseye

Unique

High Wing benefits of T206H Turbo Stationar with Range of the Cirrus SR22T

Lecturer

Convenience

Can land virtually anywhere . Multi-purpose cabin space with removable rear seats

Network

Niche

Suitable replacement for the much-loved Cessna 210 which is no longer in production .

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The Sling design

Friendly, Spacious Modern design, with a powerful and efficient Rotax engine .

The case for change

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Competition Analysis – 6 Seater

Convenience

Inconvenient

Expensive

Affordable

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5 – seaters

6- seaters

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AIRCRAFT

Strategic Recommendations & Timelines

“Due to the growth in high-net-worth individuals and ultra-high-net-worth individuals globally, there has been an increase in demand for private travel, subsequently driving the procurement of helicopters and business jets with enhanced cabin interiors”

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Business Model Partnership & External Investment

Rationale

Finance

Proposed Model

Value Proposition

The company owns the IP that it can leverage into for new markets and for product development Potential customers in the targeted market segment are profitable Product offering doesn’t deviate too far from that of current or past products.

Investor to acquire shares in NewCo called Airvolution Use existing facility to manufacture experimental aircraft parts whilst setting up a new manufacturing facility for new product development. Evaluate the distribution market and pre-sell the aircraft to the target market

Our value proposition is based on developing an aircraft that is targeted at high net worth (HNW) individuals who are also business owners. The aircraft should cater for both private and commercial use by the targeted market segment.

Disaggregation and ring-fencing new product development to an external company. Establish a NewCo (Airvolution) for the new market segment 6-seater product development with an external funding for product development and certification. Investor to be preferably USA based with interests in aviation and facilities for testing and FAA certification

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Market Growth Analysis – Market Overview

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The GA Market was valued at USD 19.91 billion in 2020 Supporting text here. When you copy & paste, choose "keep text only" option. CAGR of about 3% (2021 -2026) Supporting text here. When you copy & paste, choose "keep text only" option. In the USA 90% of registered civil aircraft are GA aircraft. North America with highest market share Growth is driven by mature aviation infrastructure Text here

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Market Performance and Measurement

Prices of AV fuel

High net worth individuals demand for private travel

Market Performance and Measurement

Health of global economy & Growth in regional tourism

Technonolgy disruption

Private charter travel

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Hybrid Product Development Strategy

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Phase 1 Design & Manufacturing

Phase 2 Market Segmentation

Phase 3 Certification and Promotion

Design, manufacture and assemble a 6-seater experimental aircraft locally, with 2 seats that can be removed to increase baggage space. Make use of existing facilities to design and manufacture components in order to manage costs. Test and perfect the designs based on market analysis and feedback on what the market would like to see in such an aircraft.

Promote the aircraft as a proposed certified aircraft for both leisure, recreational and commercial use  in existing and emerging markets to HNW. Conduct surveys on the market segment for inputs to the aircraft and input into the design prior to certification. Pre-sell the aircraft to the target market

Form a partnership with an investor in another company in the USA for FAA certification and distribution Set up a marketing and sales dept that This can benefit the company through, economies of scale if output increases and promotion in emerging markets .

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Strategy

Mark Baker, President of the Aircraft Owners and Pilots Association (AOPA). He cites that, “there is an increase in general aviation (GA). This can be attributed to GA’s competing on convenience, the number of public airports compared to commercial airports, convenience of safety from being in a large aircraft with many people as opposed to a small aircraft with family”. We have considered the Ansoff Matrix in understanding risks associated with new product and market development

RISK

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Product Development Considerations

Complexity

The aircraft doesn’t move away too much from the company’s current product range which makes it easy for type certification for the pilots

Compatibility

The aircraft enters a market that was widely dominated by the Cessna 210 that is no longer in production with new design and technology

Relative Advantage

The new 6-seater aircraft is substantially better value for money when considering the range, comfort and durability.

Divisibility

Manufactured as an experimental aircraft and marketed as a certified aircraft, it is easy to persuade customers in to take a series of short steps in appreciating the product first before commercializing it.

Communicability

Designing and testing as an experimental aircraft with inputs from targeted customer segments allows Sling to communicate the benefits of the aircraft whilst it is still in its development phase.

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Addressing the board’s concerns

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Addressing concerns of the board

Strategy Operational Excellence & Safety 1 Identify suitable equity partner in the US for distribution & certification purposes. Thereby reducing costs and complexity for Sling Aircraft Distribute the FAA certified 6-seater from the US facility. Take learnings from FAA safety requirements and apply them to the experimental aircraft to ensure cross fertilization of knowledge. Manufacturing & Operations  People Management  2 Adopt current ERP system  for  NewCo . The current system is working efficiently  Training and upskilling of staff  Human Resource Management Market Penetration 3 Entering certified aircraft market requires a new marketing approach. Sponsoring influencers and YouTubers will not be effective. Need to market for both Commercial/Business  and Personal/Leisure use. Marketing Effective Strategy Implementation 4 Leadership  & Governance : Leadership willingness  &  buy in at board  level   Get the Right Leadership, employees and size  for NewCo .  Enhance current recruitment, training and development to ensure alignment  Change Management Project Management Champion & Integration Manager   Organisational Design

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Business Continuity

Feasibility Technology

Viability Business Processes

Usability, Desirability People

DESIGN & INTERACTIVITY

ORGANIZATION BEHAVIOR

MANUFACTURING

Finances

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Marketing Goals

tRHERE AT SL NOT SELLARPLANES. WE SELL FREEDOM, AN EXPERIENCE, LIFESTYLE!

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Customer Acquisition

Customers to commit and make the purchase, to increase sale and profit.

Brand Loyalty

Become the certified aircraft of choice To exploit customer lifetime value. Grow with the customer.

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Brand Credibility

Very important for luxury goods and the higher income market

Brand Awareness

New to the 6-seater and certified aircraft market.  Competing against the very popular and successful incumbent: Cessna and Cirrus.

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Marketing Mix 6P’s

PRODUCT – Sling 6-Seater FAA certified Both leisure and commercial Bigger cabin and luggage capacity Cabin with all the necessary bells and whistles

PRICE Customer not very price sensitive In Asia-Pacific may be more important

PROCESS Electronic Processes Technological Processes Direct Activities Indirect Activities

PEOPLE High Net Worth individuals and businesses Seeking aircraft for both business and leisure Buyers require to buy off the floor/shelf and not have to assemble

PROMOTION Multi-channel strategy: Air-shows/Exhibitions Search Engine Optimization Paid Media: Display Ads, Social Media Platforms, Search Ads, Retargeting

PLACE Existing Markets North America SA & Europe Australasia Africa (excluding SA) & South America Explore new market-Asia/India

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The Airvolution Experience

THE AIR VOLUTION In true Sling fashion Mike and James will fly the new Sling 6 to Oshkosh and around the world! SLING AIRCRAFT THE WORLDS MOST CUSTOMER CENTRIC AIRCAFT https://wwwslingaircraftcom

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TEST FLY! TO ENTER THIS NEW MARKET, WHILE IN ITS EXPERIMENTAL PHASE THE SLING 6 WILL BE LOANED OUT, FREE OF CHARGE TO TARGETED COMPANIES AND INDIVIDUALS TO GET THEM HOOKED! https'/wwwslingaircraft.com

The Airvolution Experience

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MORGAN HOFFMAN - PROFESSIONAL GOLFER & PRIVATE PILOT MORGAN HOFFMANN (26) MORE THAN 300 HOURS I CERTIFICATES: PPL I INSTRUMENT STUDENT MORGAN HAS FLOWN HIMSELF TO PROFESSIONAL TOURNAMENTS BREITLING SLING-6 CAN ALSO SPONSOR A HOLE IN A PGA MASTERS TOURNAMENT TO FURTHER PROMOTE THE AIRCRAFT TO HNW WITH MORGAN AS AN AMBASSADOR MORGAN CAN ENJOY THE SLING-6 WITH THREE OF HIS GOLF MATES WITH THE 2 SEATS REMOVED AND THEIR GOLF CLUBS AND FLY TO ENJOY A GAME OF GOLF.

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Timeline

Our two-year action plan

2022

AUG

SEP

OCT

NOV

2023

DEC

JAN

FEB

MAY

MAR

APR

JUN

JUL

AUG

SEP

OCT

NOV

DEC

JAN

FEB

MAY

MAR

APR

Design & Development of experimental Aircraft

September 2021

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Marketing – Airvolution Experience

June 2022

Investment - Partner

September 2022

Setup production facility

Jan 2023

Launch FAA Certified Aircraft

May 2023

Take orders from Customers

Oct 2022

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Financials: Projections

Estimated  Operating Expenses  of R12 million per annum ($800k) Certification to be completed by 2022 at a cost of R100 million ($66 million) Projections of 100 orders for 6 seater planes to be sold from beginning of 2023   Industry has seen 37 planes sold of a similar model in last Financial Year  Estimated 100 reasonable as new  and experimental in nature

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Summary of Financial Highlights: Revenue:              Airvolution Experience:            2021: $250 000           2022: $275 000  (+10% increase Year on Year)        2023: $302 500 (+10% increase Year on Year)       6-Seater Planes:                               2021: $0            2022: $0          2023: $116 512 500 (*incl. FY 2022 orders)  Total Net Income/Loss:                 2021: -$4 146 338               2022:-$ 4 849 825                  2023: $ 15 392 860

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Financials:

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Notes: Sales/Production: Certification to be achieved in 2022 Increased plant capacity to be achieved  by the end of the 2022 in  Property, Plants and Equipment additions  will be made. ​ Free cashflows: $17 million can be expected at the end of 2023 for possible reinvestment ​ ​ ​ *Please refer to the appendix for detailed financial statements ​

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Liquidity: Liquidity is expected to dip in the 2022 as a result of increased plant capacity. Liquidity above the industry norm  in 2023(Sling  2021 1:34)  as a result of the first sales of the 6-seater planes Profitability: Significant sales growth will be seen  as first sales orders for planes will be  made early 2023. Gross profit margin declines significantly as cost of new planes rises Return on Equity expected to be higher than industry norms as a result of the higher risk taken with experimental planes *

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Financial Ratios

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Funding

Bullseye

R15 mil.

Per the briefing, the Executives indicated there is R15,000,000 to start off. Will be funded from own resources  Budget an additional R3m for the Marketing effort via 'The Airvolution Experience'

Lecturer

R200 mil.

The FAA Certification @ $7,067,787 (R100,000,000) Factory setup Cost, plant and equipment $3,533,894 (R50,000,000) Operational Expenses $3,533,894 (R50,000,000) - over 12 months

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Initial Development & Production (Non – Certified)

Once market has been established

Equity Partner

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Risk Mitigation Strategy

Recommendations Risk associated Risk (High, Moderate, Low) Risk Mitigation Strategy Development of the market for the 6-Seater Developing an experimental aircraft and not finding a market High Develop in-house as an experimental aircraft without external funding. Delays in the certification process Delayed customer deliveries High Factor in additional lead times U Equity Partner Not being able to raise the necessary capital to carry the project through Moderate Sling Aircraft executives to potentially list their company on the JSE or raise funds amongst their network 6-Seater product development Safety compliance and liability cover Low Comprehensive cover Test-Fly Experience Total loss of the aircraft and fatalities Low Customer criteria & requirements i.e., no. of hrs. flown, test-pilot certification, instrument rating

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Conclusion

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Decision on an aircraft that will ensure growth New Market What type of aircraft? Funding the new aircraft What funding model can we implement? Situa tion Complication Question/s Answers Do we certify immediately? 6-seater Look for an equity partner Start as an experimental aircraft Target HNW individuals & companies Get a US-based production partner for FAA Certification Certified Aircrafts How do we reach the new customers? The Airvolution Test Fly Ambassador Split the risk

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“If you want to be a businessman, you have to look at the money first. Because if the money doesn’t work, nothing works.” Mike Blyth

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Thank You

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Projected Income statement

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Projected Cash Flows

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Projected Balance Sheet