Diamond Response to Kuebler Press Release of May 27th, 2008

La réponse de Diamond Aircraft aux accusations portées par Dr Kübler, administrateur judiciaire de Thielert, à l’occasion d’une conférence de presse, dans le cadre du salon aéronautique de Berlin, ILA 2008.

The Kuebler Press Release of May 27th, 2008, is grossly misleading and false with
regard to the statements made concerning Diamond Aircraft. They are obviously
intended to discredit Diamond and to deflect from the real issues at hand, specifically the
fact that:
-*1. Over 50 TAE powered Diamond aircraft are AOG due to lack of support and parts;
-*2. 60% of Diamond’s annual production of 500 aircraft is now stopped;
-*3. Diamond has over 30 completed airframes awaiting engines;
-*4. The price of operation of the TAE engine, NOT including unscheduled maintenance,
has risen from a TAE published hourly maintenance cost (April 2007) of under 13
USD / hr to approximately 85 USD / hr, based on TAE’s inability to cover the
previously absorbed Life Extension Program and Warranty costs and the latest parts
and replacement engine pricing and the failure of TAE to achieve the originally
expected and announced increased inspection intervals. This effectively makes the
engine, and TAE powered aircraft, commercially non-viable at the current point in
time.

We can’t speculate on the motives, but we question how one would reasonably expect to
attract either significant orders or investors with a now financially non-viable product and
a policy of bleeding a captive customer base. This is not fear-mongering – it is the
current factual situation and Diamond is pursuing all possible avenues to provide relief to
its customers. As these bear fruit, we will be communicating news to our customers. We
attempted constructive cooperation with Kuebler, making explicit sensible offers that
would have cost Diamond significant amounts of money and would have not required
cash infusion on the part of TAE; however, these offers were bluntly rejected. We remain
committed to finding the best solution for our customers and we would far prefer
constructive cooperation with TAE / Kuebler vs non productive public exchanges.

Some specific facts:

1. Kuebler: Kuebler accuses Diamond of conducting a “misinformation
campaign” to make customers feel “massively insecure”.

Fact: Diamond has distributed information to its customers that accurately describe
the current situation. The single information letter that describes the current situation
hardly constitutes a “campaign”. The interests of Diamond and its customers are the
same; those of the insolvency administrator and TAE are not. Diamond has no possible
motive to make its customers feel “massively insecure”.

2. Kuebler: “In actual fact, Diamond offered to buy a large quantity of engines
and spare parts – but at a price considerably lower than the price that would be charged
to end customers. That’s how Diamond tried to negotiate special conditions.”

Fact: This statement is intentionally misleading in that our offer was made prior to
publishing of the latest TAE price list and in that there was never any negotiation of more
favorable terms after the price list was published. Dr. Kuebler knows better, since he
personally conducted the meeting with senior Diamond management when our offer to
purchase all available parts and engines was made. At that point, there was no
discussion of price, as TAE could not then tell us what inventories were available. When
we subsequently received an offer to purchase a limited inventory of available individual
parts, for 1.2 Million USD, we advised Kuebler that these were of little use, as they did not
include complete kits that would allow continued operation of the engines.
We then submitted a list of parts, including complete engines, that we needed for all AOG
and soon to be AOG aircraft and never received an offer, other than the generally
published price list, that we received at the same time as all customers. Even then, we
considered purchasing engines and parts to support our customers, but were advised that
warranty would not exceed the minimum legal requirement and that this specifically
excluded the Life Extension Program costs (confirmed again today by a TAE official).
This means that when one purchases a new USD 50,000 2.0 liter engine, one is also
expected to bear the Life Extension Program costs that drive the operating cost to
astronomical levels. This is clearly not reasonable, even considering the current TAE
situation.
Additionally, we proposed that for the periodic customer component inspections required
under the Life Extension program, Diamond would fund the material costs if TAE would
provide the labor (which is paid by the government during the preliminary insolvency).
This was later also bluntly rejected, after publication of the parts price list, to which we
were referred.

3. Kuebler: “We also submitted a far reaching proposal to Diamond Aircraft for
the supply of new engines for the production of Diamond airplanes.”

Fact: This is simply false. We have received no such proposal. In fact, as part of
our initial meeting with Dr. Kuebler we also proposed that we would replace an existing
(prior to insolvency) finite production order with an indefinite long term production order
which would assist Kuebler in attracting investors. In return, we were expecting
acceptance of our offer regarding the Life Extension Program customer parts inspections,
under the terms described above.
Again, TAE is proposing to supply engines which require frequent and ridiculously
expensive factory-only support, with no guarantee that even this will continue long term.
It is unreasonable in the extreme.

4. Kuebler (May 23rd): “There are more than enough Thielert spare parts and
engines available and they will be supplied reliably against payment”.

Fact: The inference here is that aircraft are AOG due to an unwillingness to pay
for parts. Considering that TAE was in a liquidity crisis that lead to insolvency, the
statement “there are more than enough Thielert parts and engines available…” seems
ludicrous, when the supply of parts and engines was obviously depleted prior to
insolvency, presumably because TAE was unable to pay their vendors. When we
inquired as to the availability of the spare parts on the TAE price list we were advised that
the list was a “wish list” and that it did not infer availability. Most parts, we were advised,
would be produced upon order and against advance payment. If this is incorrect, may we
suggest that TAE publish a list of parts available for immediate, from stock delivery? How
many 1.7 liter engines are available to replace the grounded ones that failed due to
broken piston cooling nozzles? How many exchange gearboxes are available? Based
on the information available to us, we expect that customers will find that they will be
asked to purchase new 2.0 liter engines to replace defective 1.7 liter units, and that there
are insufficient cores to provide exchange gearboxes. Of course TAE will gladly supply
new gearboxes at over USD 16,000. We consider this clearly abusive towards our
customers.

In summary, in our initial meeting with Kuebler, we clearly stated three issues. First, that
our priority was support of the existing customers, second the resumption of shipment of
engines such that Diamond’s production could resume, and third that we ensured that
there was a viable market for TAE-powered aircraft, by treating the existing customers
fairly. Kuebler and TAE have so far failed miserably in making any attempt to realistically
address any of these points. Despite Diamond’s best efforts to improve the situation,
TAE’s attitude towards product integrity and customer support and service were
substandard even prior to the insolvency. The current situation is simply impossible. The
customers will ultimately decide the long term future of TAE – and in the absence of an
economically viable product, and of customers who trust the company, any company’s
future viability may be questionable.
Diamond Aircraft Industries Inc.