Aviation Industry and MRO Sector Trends Q1 2014

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Global Economic Growth
Regional Economic Indicators
Air traffic demand and forecast
Aviation / Aerospace Industry Dynamics,Growth rate
Fuel and crude oil price February 2014
New technology aircraft
New aircraft orders ,deliveries (Airbus vs Boeing)
Global Air Transport Fleet Growth and Forecast
Airline retirements
Airline operating cost structure
MRO sector growth ,demand and forecast by aircraft type and region
MRO costs and trends for 2014





Published in: Business, News & Politics

Aviation Industry and MRO Sector Trends Q1 2014

  1. 1. www.reyyandemir.comApril 2, 2014 www.reyyandemir.com AVIATION INDUSTRY MRO TRENDS SUMMARY Q1-2014
  2. 2. -4 -2 0 2 4 6 8 10 Real GDP growth (Annual percent change) Advanced Economies Emerging market and developing economies Global economic indicators show improvement… «Developing-country growth is firming, thanks to the recovery in high-income economies as well as moderating, but still strong, growth in China.» Source: IMF and World Bank DATABASE reyyandemir.com 2
  3. 3. 0 5000 10000 15000 20000 25000 30000 35000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Nominal GDP (Billions of U.S. dollars) The Euro area is out of recession… «The economies of the Middle East and North Africa region remain depressed.» Africa N.America Middle East Asia Pasific Europe S.America Source: IMF and World bank DATABASE reyyandemir.com 3
  4. 4. The size of aviation GDP footprint depends on country’s economic development (GPD per capita)… Aviation and Tourism GDP Source : http://www.benefitsofaviation.aero/Pages/default.aspxreyyandemir.com 4
  5. 5. 0 0,5 1 1,5 2 2,5 3 Billions Global Air Transport Passenger Carried 1980-2012 Passenger travel demand increased 396 % from 1981 to 2012… «It is expected to increase %5 over next 20 years, contributing the increases in aircraft production.» Source: http://databank.worldbank.org/data/views/reports/tableview.aspx and http://www.boeing.com/assets/pdf/commercial/cmo/pdf/Boeing_Current_Market_Outlook_2013.pdfreyyandemir.com 5
  6. 6. Source:http://www.iata.org/publications/economics/fuel-monitor/Pages/price-development.aspx Fuel costs, as an percentage of total operating costs of airlines have risen from an average of 13.6 % in 2001 to 31 % in 2013. reyyandemir.com 6 «Crude oil is expected to remain stable around $100/bbl in 2014 and 2015. Jet fuel is expected to average almost $125/bbl in 2014 (IATA)»
  7. 7. The investments in next-gen fuel efficient aircraft become very attractive for airlines operators. reyyandemir.com 1 71 14 12 20 118 -10 44 14 12 20 80 -20 0 20 40 60 80 100 120 140 A319 A320 A321 A350-900 A380 TOTAL Airbus Orders 2014 Gross Orders 2014 Net Orders 183 1 4 1 189 171 1 4 1 177 0 20 40 60 80 100 120 140 160 180 200 B737 B747 B777 B787 Total Boeing Orders 2014 Gross Orders 2014 Net Orders 7 Source:Boeing and Airbus «New technology fleet including A380, 747-8, 787, A350, A230NEO, 737MAX and 777X will grow significantly over the next decade.»
  8. 8. The “new technology” fleet grows hugely with significant implications for MRO suppliers. «The current civil air transport fleet is more than of 26,000 aircraft.» Regional Jet 17% Turboprop 15% Widebody jet 18% Narrow body jet 50% Source: FlightGlobal ACAS September 2013 Source:TeamSAU Regional Jet 17% Turboprop 15% Widebody jet 18% Narrow body jet 50% Total :32,900 by 2024 «In 2024, the fleet will grow to 32,900 , 3.6% CAGR growth rate expected.» reyyandemir.com 8
  9. 9. New aircraft will increase airline revenue by reyyandemir.com 9 «Promising ~%15 better fuel burn rate, lower potential carbon emissions costs and maintenance.» Source:Penton
  10. 10. Global Air Transport Fleet Growth 2013–2023 by - Region Source: FlightGlobal ACAS September 2013 0 2000 4000 6000 8000 North America 0 2000 4000 6000 8000 Europe 0 2000 4000 6000 8000 Middle East & Africa 0 2000 4000 6000 8000 Latin America 0 2000 4000 6000 8000 Asia Pacific 0 2000 4000 6000 8000 China & India 2013 2018 2023«Middle East fleet growth is the fastest of all world regions – at 5.6% CAGR through to 2023» reyyandemir.com 10
  11. 11. Air Transport Retirements 2014 – 2023 A320 Family 24% 737 Classic 14% 767 9% CRJ-200 9% 737NG 8% MD-800 8% ERJ-135 8% Others 20% «45-50% of new aircraft deliveries in the next 20 years will be for aircraft replacements.» Source: FlightGlobal ACAS September 2013 reyyandemir.com 11
  12. 12. Airline Operating Cost Structure Typical Airline Cost Breakdown Fuel 35% Labor& Benefits 28% Depreciation 5% Aircraft Rent 3% Others 14% Line 3% Components 3% Engines; 6% Modifications 1% Airframe 2% Source: ICF SH&E Analysis Typical Airline’s MRO Cost Breakdown Maintenance 16% reyyandemir.com 12
  13. 13. Line 20% Components 26% Engines 47% Modifications 7% 2013 Global MRO Demand by– MRO Segment Source: ICF SH&E Analysis «The current air transport MRO market is $60.7 billion.» reyyandemir.com 13 «Engine & Component MRO are the largest segments of the market.»
  14. 14. 2013 Global MRO Spend by– MRO Segment Source: ICF SH&E Analysis The Global MRO market is expected to grow to $89B by 2023, at 3.9% per annum. 10 15 13 20 24 364 6 9 12 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2013 2023 Line Components Engines Modifications Heavy Airframe MRO Market $60,9B by 2013 MRO Market $80,9B by 2023 reyyandemir.com 14 Engine Overhaul shows the strongest growth followed by Component MRO.
  15. 15. Difference in $ MRO Spend, 2023 vs. 2013 – By Global Region MRO spend growth will driven by Asia Pacific and Middle East more than $13B. Source: ICF SH&E 2,9 $0 $2 $4 $6 $8 North America 4,9 $0 $2 $4 $6 $8 Europe 6,4 $0 $2 $4 $6 $8 Middle East & Africa 2,8 $0 $2 $4 $6 $8 Latin America 7,1 $0 $2 $4 $6 $8 Asia Pacific 3,9 $0 $2 $4 $6 $8 China reyyandemir.com 15
  16. 16. Aviation Industry Summary More than 1,400 new aircraft will be delivered through 2023 As lon as fuel and component prices continue on their present trajectories, younger aircraft are going straight to part-out. Safety, fuel and technology will accelerate the need for MROs to build new capabilities Airbus and Boeing will preserve “The Duopoly” in the market Aircraft Retirement New MRO Capabilities OEM DuopolyNew Aircraft Deliveries reyyandemir.com 16Source: Aviation week
  17. 17. MRO Trends Summary  Air Transport Surplus Parts Market is ~$3 billion. centers in growth regions  Parting-out will accelerate .  Further component OEM licensed service .  Aircraft OEMs are fast becoming major MRO players threating to independent MROs.  Next-Gen aircraft introduction resulting barriers to MRO entry.  Operators having larger, with better bargaining power over MRO costs.  MRO market consolidation expectations in the next years.  New partnerships with OEMs  More focus around flexibility and speed Surplus Effect New StrategiesOEM & Airline reyyandemir.com 17 Source: Aviation week, TeamSAI, ICF SH&E
  18. 18. Thanks for your time. Feel free to contact me if you have any question. reyyandemir.com 18 www.reyyandemir.com reyyandemir@gmail.com +90 - 535 - 2346818 @reyyan_demir

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