NEWS & MEDIA

MEDIA RELEASE:

DENEL TO PRODUCE BOEING AIRPLANE PARTS

Johannesburg, South Africa, July 1, 2002. - Global aerospace giant, The Boeing Company awarded Denel Aviation, a division of South Africa's Denel Group, a contract to manufacture airplane parts for the Boeing 747 and its other commercial airplanes.

This contract signing ceremony was attended by Ambassador Tom Pickering, Boeing senior vice president of International Relations and Max Sisulu, deputy chief executive of Denel.  It is estimated that 400 parts per month will be manufactured for Boeing over a period of nine years.

The agreement also includes Boeing supplied capital equipment.  Boeing will transfer capital equipment along with ownership to Denel Aviation.  This capital equipment includes more than a dozen milling and turning machines, Shotpeening machine and several Coordinate Measuring machines that will be used to validate and test the high quality of parts that are a requirement on Boeing Aircraft.  Boeing will also assist Denel to set-up, streamline operations and obtain Boeing's quality accreditation.

'We intended for Denel Aviation to obtain high volume type work from Boeing, involving a low number of different parts, which allows us to benefit from significant economies of scale over the longer term,' says Max Sisulu. 'Denel benefits from lean manufacturing cell production and high volume production technology.  Importantly, there is the advantage of acquiring the coveted Boeing accreditation.'

According to Max Sisulu, the agreement is exceptional on account of The Boeing Company's commitment for its long-term success and their investment and support to make it happen.

'The Boeing Company believes that the measure of a company is not only the quality of its products and services, but also the strength of its partnership with the communities it serves,' said Doug Groseclose, senior vice president International Sales-Commercial Airplanes.  'We are extremely proud to have a role in the success and growth of Denel Aviation.'

Denel Aviation was down-selected to become a Boeing supplier after an extensive process of audits, workgroup meeting, bidder boards and submission proposals.

The parts production and transfer of capital equipment to Denel's manufacturing facility at Kempton Park (adjacent to Johannesburg International Airport) positions Denel Aviation as one of the prime South African parts production suppliers for Boeing.

'Denel has outstanding aerospace capabilities and a strong commitment to become part of our supplier chain,' says Pickering.  'Obviously we hope this agreement - with its parts manufacturing work and technical training and assistance program - opens the door to further improve South Africa's and Denel's competitiveness in aircraft manufacture.'

Initially Denel Aviation will produce 96 part numbers for mostly Boeing 747, as well as Boeing 767 airliners - around 400 parts per month.  Production is expected to commence towards the end of 2002.

'This agreement with The Boeing Company is the first contract of this kind between Denel Aviation and the USA,' says Max Sisulu.  'Given the fact that the US represents the largest aerospace market in the world, I am confident that our relationship with Boeing will open doors to further business opportunities there and elsewhere.'

The agreement stems from Boeing's Strategic Partnership Agreement with the Department of Trade and Industry (DTI).  As part of its Industrial Participation commitment to DTI on South Africa's acquisition of Boeing 737-800 aircraft, the Boeing Company initiated the process of identifying local industry participants, resulting in this significant Denel contract.

Released by Denel Aviation and The Boeing Company.