Downloaded 86 times
Uploaded byICF
Latin American MRO Market Update & Industry Trends
The document provides a comprehensive overview of the MRO (Maintenance, Repair, and Overhaul) market and industry trends, particularly in Latin America, forecasting a growth in the global MRO market to approximately $96 billion by 2025. Key insights include a projected annual growth rate of 4.1% driven by strong air travel demand, increases in aircraft fleet, and a significant rise in spending on modifications. Additionally, the report highlights challenges posed by currency fluctuations, oil prices, and the competitive landscape of MRO suppliers in the region.
More Related Content
Similar to Latin American MRO Market Update & Industry Trends
Latin American MRO Market Update & Industry Trends
- 1. 0 MRO Market Update& Industry Trends Presented by: Jonathan M. Berger Vice President ICF International jberger@icfi.com May 15-18, 2016 Puerto Rico
- 2. 11 Today’s Agenda MRO Forecast LatinAmerican Aviation Outlook Trend Watch: The Mod Squad New Technology Aircraft MRO Investment in Latin America
- 3.
- 4. 33 The current commercial air transportfleet consists of over 27K aircraft; over half are narrowbody 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. 44 The combination of strongair travel demand and the need to replace ageing aircraft will drive fleet growth at a healthy 3.4% annually Source: ICF analysis: CAPA 2015 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. 55 Continued low fuel costscould reverse aircraft retirements trends Source: CAPA, Airline Monitor, ICF analysis Potential Impact: MRO Suppliers: Increased spend on older airframes & engines Surplus Market: Reduced part-out “feed stock” - OEMs: Improved new part sales - Distributors: Improved used part values / pricing - Operators: Increased material costs Commercial Air Transport Annual Aircraft Retirements 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 0 200 400 600 800 1,000 1,200 # Retirements Retirement as % of installed fleet % Installed Fleet 1990-99 Average: 191 2000-09 Average: 473
- 7. 66 Current commercial air transportMRO demand is $64.3B; with Asia equivalent to North America and Europe in market size Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation 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 Commercial Air Transport Global MRO Demand
- 8. 77 The global MRO marketis expected to grow by 4.1% per annum to $96B by 2025 Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation Engine and component MRO markets remain the largest segments Modifications market will see the strongest growth (e.g. interiors, connectivity) Airframe market slows due to reduced man-hour intensity and increased check intervals as new fleets are introduced $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 Commercial Air Transport MRO Demand Growth $USD Billions
- 9. 88 The current Latin Americanfleet consists of over 2,100 aircraft; with more than 50% narrowbody Source: CAPA 2015 Narrowbody Jet Widebody Jet Turboprop Regional Jet 2,123 Aircraft 8% 51% 16% 25% By Aircraft Type By Country Brazil Mexico Colombia Chile Venezuela Panama Other 2,123 Aircraft 28% 17% 7% 21% 11% 6% 6% 5% 2015 Latin American Commercial Air Transport Fleet
- 10. 99 The Latin American MROmarket is expected to grow to approx. $6.3B by 2025, at 5.7% per annum Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation Modifications is the fastest growing MRO segment in Latin America MRO spend on widebodies in Latin America will nearly double by 2025 as the fleet increases by 56% $0 $1 $2 $3 $4 $5 $6 $7 2015 2025 Modifications Airframe Line Component Engine 36% 25% 13% 20% $3.6B $6.3B 5.1% 4.0% 5.2% 6.6% CAGR 5.7% Avg. 8.2% 40% 24% 17% 12% 7% 10-Year Global Latin American MRO Demand Growth $USD Billions
- 11.
- 12. 1111 Four external macro-economic forces arehaving a significant impact on Latin American operators and the broader MRO supply chain The “CRABS” Currency Exchange Rates Global Commodity Prices China’s Economic SlowdownFuel Costs Source: ICF analysis
- 13. 1212 The dramatic increase inoil & gas market supply and reduced demand for commodities has led to a strong 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 analysis The “CRABS”: Countries with economies that are heavily dependent on commodity exports Global Currency Exchange Rates vs USD % Value Change, April 2014 – April 2016 Russian Ruble -87.1% Brazilian Real -62.2% S. African Rand -35.8% Can Dollars -23.6% Aus Dollars -20.4% Euro -16.9% British Pound -15.5% Indian Rupee -10.3% Japanese Yen -9.0% Chinese Yuan -4.8% -100% -90% -80% -70% -60% -50% -40% -30% -20% -10% 0% 10% B R C S A
- 14. 1313 Despite ongoing challenges inBrazil, the majority of Latin American economies continue to show positive growth Note: All GDP Growth are calculated based on constant price (nation currency) Source: IMF Economic Outlook April 2016, ICF analysis United States Brazil 0.0% 2.0% 4.0% 0.0% 2.0% 4.0% 6.0% 0.0% 5.0% 10.0% 0.0% 5.0% 10.0% 0.0% 5.0% 10.0% 0.0% 2.0% 4.0% -2.0% 0.0% 2.0% 4.0% -5.0% 0.0% 5.0%
- 15. 1414 Driven by the significantdrop in fuel costs and consolidation, the airline industry is achieving record profitability Source: EIA; ICF analysis These are the good ol’ days; for some… Global Airline Profitability, 1996 - 2016F -$30 -$20 -$10 $0 $10 $20 $30 $40 $USD Billions $36.3B Asia Pacific, $6.6B North America, $19.2B Europe, $8.5B Middle East, $1.7B Latin Am. / Africa = $0.3B
- 16. 1515 Despite significant headwinds, Latin Americancarriers have demonstrated impressive management skills Source: Company websites, IATA (Dec 2015), ICF analysis United States Brazil $ Billions -$0.5 $0.0 $0.5 $1.0 $1.5 Latin America Airline Net Profit 7% 3% 0% 5% 10% Operating Net 4% -2% -5% 0% 5% Operating Net 2015 Latin American Carrier Operating and Net Income Positive operating income demonstrates that airlines are doing a good job in managing what is in their control However, net income has clearly been negatively impacted by currency exchange rates (out of their control) 5% -5%-10% -5% 0% 5% 10% Operating Net -2% -44% -60% -40% -20% 0% Operating Net 12% -10%-15% -5% 5% 15% Operating Net
- 17.
- 18. 1717 Modifications growth is drivenby airlines seeking differentiation in the cabin and customer experience Modifications demand includes labor and material spend *Passenger-To-Freighter Conversions **Airworthiness Directives / Service Bulletins Source: ICF analysis, constant 2015 US$ MRO modification market growth drivers include: Latest lie-flat seats are now the minimum standard Premium economy Wi-fi, on-board connectivity Coming soon: ADS-B Mod program Capacity (ASM/K) increase Commercial Air Transport Modifications Forecast $2.7 $4.9 $0.6 $1.1 $0.4 $0.5 $0.4 $0.4 $0.3 $0.5 $0 $1 $2 $3 $4 $5 $6 $7 $8 2015 2025 AD/SB** PTF Conversions* Painting Avionics Upgrades Interiors $4.4B $7.4B 0.0% 3.7% 6.9% 5.9% CAGR 5.3% Avg. 3.6% $USD Billions
- 19. 1818 Cabin “densification” has emergedas cost effective strategy for airlines to increase capacity and drive bottom line growth 2015 - 2025 Capacity Bridge 0 2 4 6 8 10 2025 ASMs Increased Seat Density Longer Stage Lengths Fleet Growth 2015 ASMs Available Seat-Miles (ASMs), Trillions 6.2T 8.8T 84% 8% 8% 12 Seats 16 Seats 130 Seats120 Seats Total = 150 Seats Total = 164 Seats Example: Delta A320 Interior Modification Program New seats, outlets, IFE, overhead bins Space-saving galleys to add a row of seats Source: ICF analysis, delta.com 18 Seats18 Seats
- 20. 1919 Trend Watch: New TechnologyAircraft
- 21. 2020 Over 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 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 Source: ICF analysis Latin America +531% -70% -17% 257 854 1,064 1,043 2015 2025 +232% -2% -76%
- 22. 2121 Over the next decade,MRO spend on new technology Airbus A350 & Boeing 787 aircraft will double every three years Source: ICF analysis; Forecast in 2015 $USD, exclusive of inflation, includes Boeing 787 and Airbus A350 10-Year MRO Spend for New Technology A350 and 787 Aircraft $ USD Billions $0.35 $0.46 $0.47 $0.52 $0.53 $0.62 $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 Africa Latin America Middle East North America Europe Asia Pacific +2000%
- 23. 2222 New technology aircraft challenge traditionalMRO 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 Source: ICF analysis
- 24. 2323 Challenge: How best torealize 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 Stakeholder Battle: Who will control and benefit most from the operating data IP? Operators Lessors OEMs MRO Suppliers 767: 10,000 Yr 1 Yr 10 ~ 137TB ~11TB 777 787 ~ 28MB < 1MB Transmittable Data (MB/Flt) A/C Data Generated (TB/Year) ~1,100% Aircraft Health Monitoring and Data Generation Outlook
- 25. 2424 Trend Watch: MRO Investmentin Latin America
- 26. 2525 The Latin American MROSupplier Landscape largely consists of airframe MRO suppliers, with limited component capabilities Source: ICF analysis United States Brazil
- 27. 26 For questions regardingthis presentation, please contact: Jonathan M. Berger Vice President Aerospace & MRO jberger@icfi.com +1 404.819.7669 THANK YOU! May 15-18, 2016 Puerto Rico
- 28. 2727 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 Aerospace & MRO advisory services
- 29. 2828 ICF is oneof the world’s largest and most experienced aviation and aerospace consulting firms Airports • Airlines • Aerospace & MRO • Aircraft 53 years in business (founded 1963) 80+ 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 sector and public sector assignments Backed by parent ICF International (2015 revenue: 1.13 billion USD) Global presence –– offices around the world joined in 2011joined in 2007 joined in 2012 joined in 2014 New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong
- 30. 2929 Acronyms A/C =aircraft AD/SB = airworthiness directives/service bulletins AHM = aircraft health management ASM = available seat-mile CAGR = compound annual growth rate CRABS = Canada, Russia, Australia, Brazil, and South Africa Gen = generation IFE = in flight entertainment IP = intellectual property M&A = mergers and acquisitions Mod = modification MRO = maintenance, repair, and overhaul OEM = original equipment manufacturer USD = United States dollar