Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

ICF MRO Market Forecast & Trends – Asia Pacific March 9-10, 2016 Airline E&M: China & East Asia

1,264 views

Published on

ICF International's Jonathan Berger delivered a presentation at the Airline E&M: China & East Asia conference in Hong Kong, China on March 9-10, 2016. The presentation provides a forecast for the maintenance, repair, and overhaul (MRO) industry and highlights trends in aircraft, operations. See appendix for acronyms.

For more information: http://bit.ly/1Y42p8U

Published in: Business
  • The 3 Secrets To Your Bulimia Recovery  http://ishbv.com/bulimiarec/pdf
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • The Bulimia Recovery Program, We Recovered, You CAN TOO! ●●● http://tinyurl.com/bulimia2recovery
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

ICF MRO Market Forecast & Trends – Asia Pacific March 9-10, 2016 Airline E&M: China & East Asia

  1. 1. 0 MRO Forecast and Market Trends Presented by: Jonathan M. Berger Vice President  ICF International jberger@icfi.com 9-10 March, 2016
  2. 2. 11 Today’s Agenda MRO Forecast New Technology Aircraft Impact Meet the Frackers! The Next Big Thing…
  3. 3. 22 MRO Forecast
  4. 4. 33 The current commercial air transport fleet consists of over 27K aircraft Source: CAPA 2015 Narrowbody Jet Widebody Jet Turboprop Regional Jet 27,114 Aircraft 14% 53%14% 19% By Aircraft Type By Global Region North America Asia Pacific Europe Latin America Middle East 31% 27% 25% 8% 5% 5% 27,114 Aircraft 2015 Global Commercial Air Transport Fleet
  5. 5. 44 The combination of strong air travel demand and the need to replace ageing aircraft will drive fleet growth at 3.4% annually Source: ICF International, CAPA 2015  Air traffic growth of ~4.1%  Fuel costs in $55/bbl range  ~19,600 aircraft deliveries  ~8,800 aircraft retirements 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2015 2025 Africa Middle East Latin America Europe Asia Pacific North America 27,100 31% 26% 37,900 27% 25% 8% 32% 23% 8% # Aircraft 3.8% 2.5% 1.6% 5.2% 5.3% 5.1% CAGR 3.4% Avg. 5% 6% 10 Year Global Air Transport Fleet Growth
  6. 6. 55 Current air transport MRO demand is $64.3B; Asia Pacific is now equivalent to North America and Europe Source: ICF International Engines Components Line Airframe Modifications 14% 17% 22% 40% 7% North America Asia Pacific Europe Middle East Latin America Africa 29% 28% 26% 8% 6%4% $64.3B$64.3B By MRO Segment By Global Region 2015 Global MRO Demand
  7. 7. 66 The global MRO market is expected to grow by 4.1% per annum to $96B by 2025 Source: ICF International; Forecast in 2015 $USD, exclusive of inflation $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2015 2025 Modifications Airframe Line Component Engine 40% 22% 14% 17% $64.3B $96.0B 2.8% 3.6% 4.3% 4.4% CAGR 4.1% Avg. 5.3% 41% 22% 16% 13% 10 Year Global MRO Demand Growth
  8. 8. 77 The Asia Pacific fleet consists of nearly 7,300 aircraft, with 37% (approx. 2,700 aircraft) in China Source: CAPA 2015 Narrowbody Jet Widebody Jet Turboprop Regional Jet 7,289 Aircraft 5% 59%13% 23% By Aircraft Type By Country China Japan Australia Indonesia South Korea Malaysia Other 7,289 Aircraft 37% 9%8% 26% 8% 4% 4% 4% 2015 Asia Pacific Commercial Air Transport Fleet
  9. 9. 88 The Asia Pacific MRO market is expected to nearly double to approx. $32.2B by 2025, at 6.0% per annum Source: ICF International; Forecast in 2015 $USD, exclusive of inflation 0 5 10 15 20 25 30 35 2015 2025 Modifications Airframe Line Component Engine 39% 23% 12% 19% $17.9B $32.2B 5.8% 4.6% 5.7% 6.8% CAGR 6.0% Avg. 6.9% 42% 23% 16% 12% 8% 10-Year Asia Pacific MRO Demand Growth
  10. 10. 99 Over the next decade, China and Asia Pacific region will drive absolute MRO spend growth Source: ICF International; Forecast in 2015 $USD, exclusive of inflation Difference in MRO Spend, 2025 vs. 2015 – By Global Region $ USD Billions $7.9 $6.4 $5.2 $3.2 $2.6 $2.2 $2.0 $1.2 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 Asia Pacific (excl China) China Middle East North America Latin America Eastern Europe (incl CIS) Africa Western Europe 71% 93% 103% 17% 73% 72% 85% 10% Percent Change:
  11. 11. 1010 2014 Top 10 Airframe MROs by Man-Hours Performed In Millions Among the top ten airframe MRO providers, ST Aerospace and HAECO account for 50% of man- hours performed in 2014 Source: Aviation Week 12.0 11.7 4.9 3.6 3.0 2.9 2.9 2.2 2.0 2.0 ST Aerospace HAECO AAR AFI KLM E&M Lufthansa Technik GAMECO Turkish Technic Evergreen Aviation Tech. Aviation Technical Services Sabena Technics
  12. 12. 1111 Impact of New Technology Aircraft
  13. 13. 1212 In the next decade, the global fleet of new generation aircraft fleet will grow by approx. 531% to nearly 19,000 aircraft 10-Year Fleet Forecast by Aircraft Generation 2,993 18,896 22,212 18,487 2015 2025 Global New Gen Mid Gen Old Gen Source: ICF International Old Gen: 727, 737 Classic, 747 Classic, DC10, L1011, A300 Mid Gen: 757, 767, 747-400, A320 Family, A330/A340, 737NG, 777, ERJ, CRJ New Gen:, 777X, 787, A350, A330neo, A380, E170/175/190/195, CRJ-7/9/1000, 737MAX Asia Pacific +531% -70% -17% 613 6,101 6,296 5,838 2015 2025 +895% -7% -61%
  14. 14. 1313 Over the next decade, MRO spend on new technology A350 & Boeing 787 aircraft will double every three years Source: ICF International; Forecast in 2015 $USD, exclusive of inflation, includes Boeing 787 and Airbus A350 10-Year MRO Spend for New Technology A350 & 787 Aircraft $ USD Billions $1.1 $1.6 $2.2 $2.6 $3.0 $3.4 $4.0 $0.5 $1.0 $1.6 $2.3 $3.3 $4.4 $5.8 $7.1 $8.4 $9.7 $11.1 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 RoW North America Europe Middle East Asia Pacific +2000%
  15. 15. 1414 New technology aircraft challenge traditional MRO sourcing strategies = Heavy C-Check= Light C-Check 767 A/C Age 1 2 3 4 5 6 7 8 9 10 11 12 787 Volume (C-checks) Intensity (man-hours) Days (Hangar) 767 8 95,000 136 787 4 33,000 47 Impact  Cost Savings: ~65% fewer routine airframe heavy maintenance man-hours drives an estimated savings of ~$3.5M  Asset Utilization: ~90 additional available flying days enables increased revenue generation potential 12 Year Heavy Maintenance Schedule *Based on 4,000 FH/yr utilization 767 C-check = 18mo, 4C = 72mo; 787 C-check = 36mo, 4C = 144mo Assumed industry standard labor man-hour rate Aircraft out of Service (AooS) calculated for C/4C/8C checks assuming industry standard MRO hangar productivity Return on investment challenges:  Facilities  Tooling & Equipment  Training  IT Systems
  16. 16. 1515 Challenge: How best to realize value from the disparate terabytes of data generated by new technology aircraft Source: ICF Analysis Number of AHM Parameters A320: 15,000 B787: 100,000 2012 2022 ~ 137TB ~11TB 777 787 ~ 28MB < 1MB Stakeholder Battle: Who will control and profit from the operating data IP?  Operators  Lessors  OEMs  MRO Suppliers Transmittable Data (MB/Flt) A/C Data Generated (TB/Year) 767: 10,000 ~1,100%
  17. 17. 1616 Meet the Frackers!
  18. 18. 1717 Breakthrough technologies in horizontal drilling and hydraulic fracturing (aka fracking) resulted in a US-led energy revolution Source: BP Statistical Review of World Energy June 2015, ICF International Analysis North American crude oil and natural gas production have soared in recent years… 3,500 4,500 5,500 6,500 7,500 8,500 9,500 10 year growth = 105% (7.45% CAGR) Thousands 1,250 1,450 1,650 1,850 2,050 2,250 2,450 10 year growth = 66% (5.22% CAGR) Billion cu. ft. U.S. Crude Oil Production (Barrels / day) U.S. Natural Gas Production (Monthly marketed production)
  19. 19. 1818 The US energy revolution has completely disrupted the global economic and geopolitical balance of power Source: BP Statistical Review of World Energy June 2015, ICF International Analysis …making the U.S. a global powerhouse in energy production 728 579 177 173 162 135 109 108 83 73 0 100 200 300 400 500 600 700 800 11.6 11.5 10.8 4.3 4.2 3.7 3.6 3.3 3.1 2.8 0 2 4 6 8 10 12 14 Global Oil Production (Million barrels / day as of June 2015) Global Natural Gas Production (Billions of cubic meters as of June 2015)
  20. 20. 1919 Continued low fuel costs will have significant repercussions throughout the aviation & MRO supply chain Source: EIA; ICF International analysis Aviation fuel costs have dropped by approx. 66% during the past 24 months… U.S. Gulf Coast Jet Fuel Price per Gallon $0.8 $1.3 $1.8 $2.3 $2.8 $ USD ~66% Decline
  21. 21. 2020 While Asia Pacific & North American airlines have enjoyed record profitability, other regions continue to struggle Source: IATA Global Airline Profitability, 2004-2016 $19 $7 $10 -$30 -$20 -$10 $0 $10 $20 $30 $40 $USD Billions $36B Rest of World North America Asia Pacific
  22. 22. 2121 China’s seemingly insatiable demand for global commodities was a key driver of global economic growth Source: IMF, World Economic Outlook Database October 2015, ICF International Analysis After years of remarkable GDP growth, China’s economy has been steadily slowing 5% 7% 9% 11% 13% 15% 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F2015F 2016F China GDP Year-on-Year Growth (%)
  23. 23. 2222 The fall in commodity prices have had a dramatic impact of economies dependent on commodity exports Source: Dow Jones Commodity Index Over the past 5 years, commodity prices have plummeted more than 55% Dow Jones Commodity Indices (DJCI) (January 2011 Indexed to 100) 40 50 60 70 80 90 100 110 - 56.0% Indexed Values
  24. 24. 2323 The dramatic increase in oil & gas market supply and reduced demand for commodities has led to a stronger US Dollar  Partially offsets the positive impact of low fuel costs for operators  Increases the cost of dollar based flight hour agreements (and parts/material in general)  Cost of labor for in-country MROs is cheaper driving up margins for US dollar based contracts  Buying/leasing aircraft becomes more expensive FOREX Impact Source: Oanda historical exchange rates, ICF International Analysis Russian Ruble -55.1% Brazilian Real -41.1% S. African Rand -34.1% Can Dollars -23.1% Aus Dollars -20.8% Euro -20.0% British Pound -12.8% Japanese Yen -11.9% Indian Rupee -7.8% Chinese Yuan -7.2% -60% -50% -40% -30% -20% -10% 0% 10% B R C S A The “CRABS”: Countries with economies that are heavily dependent on commodity exports Global Currency Exchange Rates vs USD % Value Change, Jan. 2014 – Jan. 2016
  25. 25. 2424 The Next Big Thing…
  26. 26. 2525 ICF believes that virtual reality (VR) technology will be as disruptive to MRO training as 3D- printing is to parts manufacturing
  27. 27. 2626  The Asia Pacific region continues to drive global MRO demand growth  The two largest global airframe MRO suppliers are headquartered in the Asia Pacific region  New Technology aircraft are creating both new challenges and opportunities for aviation stakeholders  The US energy revolution combined with the economic slowdown in China are having a significant impact on commodity export dependent CRABS  Virtual reality has the potential to transform the way technicians are trained In Summary…
  28. 28. 27 For questions regarding this presentation, please contact: Jonathan M. Berger Vice President  Aerospace & MRO jberger@icfi.com  +1 404.819.7669 THANK YOU! 9-10 March, 2016
  29. 29. 2828  Market Research & Analysis  Airline Maintenance Benchmarking  M&A Commercial Due Diligence  OEM Aftermarket Strategy  Aviation Asset Valuations & Appraisals  MRO Information Technology (IT) Advisory  Strategic Sourcing & Supply Chain Mgt.  LEAN Continuous Process Improvement  Military Aircraft Sustainment ICF provides a full range of MRO advisory services
  30. 30. 2929 ICF is one of the world’s largest and most experienced aviation & aerospace consulting firms  53 years in business (founded 1963)  100+ professional staff − Dedicated exclusively to aviation and aerospace − Blend of consulting professionals and experienced aviation executives  Specialized, focused expertise and proprietary knowledge  Broad functional capabilities  More than 10,000 private and public sector assignments  Backed by parent company ICF International (2014 revenue - $1.05B)  Global presence –– offices around the world joined ICF in 2011 joined ICF in 2007 New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong Aerospace & MRO Aircraft Asset Advisory Airline Advisory Airports
  31. 31. 3030  A/C = aircraft  AHM = Aircraft Health Management  CAGR = Compound Annual Growth Rate  CRABS = Canada, Russia, Australia, Brazil, and South Africa  GDP = Gross Domestic Product  IP = Intellectual Property  M&A = mergers and acquisitions  MRO = maintenance repair overhaul  OEM = original equipment manufacturer  RoW = Rest of World  USD = United States dollar Acronym Definitions

×