2010 TeamSai Global MRO Forecast 180419

8/8/2019 2010 TeamSai Global MRO Forecast 180419

1/21

TheGlobalMROForecast2010 2020

Presentedby:

ChrisDoanChairman&CEO

2010TeamSAI,Inc.MROAmericas2010Conference

Bullsvs.Bears


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TEAMSAI20104/20/2010

1

SignsofRecoverySurfaceItWontBeEasyorImmediate

Thestormseemstobeclearingslowly!

U.S.Airlinesseesignsofa

nascentindustryrecovery

butthat

they

will

maintain

costandcapacitydiscipline

fornow

Source: ATWDailyNews(3/10/10)

AirbusandBoeing

announceintentionto

increasethe

monthly

productionrate

A320familyand787

Source: AviationInteractive(3/10/10)

FAAscalesbackrecovery

predictions

annual

aviation

forecast

revisedtoreflectaslower

demandrecovery

Source: AviationDaily(3/10/10)


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TEAMSAI20104/20/2010

2

GlobalMROspendwillbedown7.5%in2010,to$42B

Thedriversofthechangeareimportanttounderstand

Fleetchangealonedrivesa4.2%

drop,duetocapacityreduction

Utilizationdropdrivesmarket

downfurther(down9%fortheyear)

Airframe,component,andline

costshave

fallen

bringing

the

marketdownanother1.4%

EngineMROdrivesa1.6%increase

Andlast,laborrateshaveeased

downeversoslightly

FirstaReviewoftheMRODriversfor2010

newdeliveries=$1,833M

+1,128a/c

stored/retired =$(3,751M)

783a/c

Fleet2009 + Deliveries Retirements Stored Fleet 2010

19,330 +1,128 399 384 19,675

Thenextlogicalquestion areweatthebottomyet?


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TEAMSAI20104/20/2010

3

AreWeattheBottomoftheDownturn?

Whiletheworldfleethascontinuedto

grow,newlessmaintenanceintensive

aircraftareshowingtheirinfluence

Thecontribution

of

the

older

vintages

has

been

indeclineasretirementshaveaccelerated

Andtheyoungervintageaircrafthave

significantlylowerunitcosts

In

just

2

years

time

there

has

been

a

significant

shiftintheshareoftheyoungervintagefleets

Asaresult,theaverageMROcostperaircraft

peryearhasfallen

2008 $2.4M

2010

$2.1M

2010shouldbethetippingpointasfleet

sizeandutilizationincreasetomeet

demand

Sothesimpleansweristhatwethinkso!


5/21TEAMSAI20104/20/2010

4

TheBearShouldGiveWaytotheBull

$45.7$42.3

$50.1

$65.3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

MROForecast

7.5%+4.4%

Understandingtheyearisimportant;understandingthedecadeisimperative


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5

Populationgrowthandtheburgeoningmiddleclassiswhatisdrivingourlong

termforecast

Fleetgrowthforecastat3.3%CAGRto27,303in10years

ASMgrowthwillincreaseat5.1%CAGRoversameperiod

Unita/cutilizationratesremainhigh

Largeraircraft

%

more

seats

Longerroutes

LongTermFleetGrowthStillLooksSolid


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6

MROIndustryOutlookhasContinuedShifttotheRight

Globalgrowthisexpectedtomaintaina

4.4%CAGRthrough2020

$42.3B

industry

will

grow

to

$65.3B

over

10yearforecastperiod

2010down7.5%from2009

Engineremainslargestsegment


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7

AP CH IN ME LA&C EE

$6.6 $2.4 $0.6 $2.4 $1.9 $1.8

16% 6% 1% 6% 5% 4%

5.3% 9.6% 9.4% 5.3% 6.6% 9.8%

NA WE AF

Market($B)(2010) $13.9 $11.0 $1.5

Mkt Share(2010)

33% 26% 4%

CAGR(201020

1.6% 3.6% 3.5%

NorthAmericaisExpectedtoRecoverMoreSlowly

thantheRestoftheWorld

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

NA WE AF AP CH IN ME LA&C EE

2010

2020


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8

LookingattheRegionsCombinedShowRelativeParityinTenYearsTime

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

Americas Europe Asia Middle East Africa

2010 2020

Americas Europe Asia Middle East Africa

Market($B)(2010) $15.8 $12.9 $9.7 $2.4 $1.5

Mkt Share(2010)

37% 30% 23% 6% 4%

Note: Americas=NorthAmericaandLatinAmerica&theCaribbean

Europe=WesternandEasternEurope;Asia=AsiaPacific,China,andIndia

CAGR(201020) 2.4% 4.7% 6.8% 5.3% 3.5%

Mkt Share(2020)

31% 31% 29% 6% 3%


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9

MidtermGrowthinNorthAmericawillbeSlow

LimitedaircraftareslatedforNAoperators

Allfleetclassesexpectedtocontractinnext5

years

Negative1.2%

CAGR

from

2010

to

2015

Thenapositive2.2%CAGRfrom20152020

Operatorsareunlikelytobringbacksome

parkedaircraft

Tightenedcapacityisexpectedtoprovide

thedisciplineNAairlinesneedtobring

thembacktoprofitability

NAmarket

growth

largely

mirrors

change

in

fleet

MarketisweightedtowardNBbecauseofits

relativesize

NorthAmericasMROespeciallyinfluencedbyfleetdecline


11/21

2010TeamSAI,Inc.

Trendsand

Strategies


12/21TEAMSAI20104/20/2010

11

AirlineFinancialResultsIntensifiestheCOSTFocus

Profitshavebeenelusiveinthelast

decade

Oneprofitableyear

Net$56.8B

in

cumulative

losses

Thequestforprofitabilitydrivesbusiness

behavior

Revenuefocusedinnovationisevident

Costimprovementsareneededateveryturn

ForMROvaluestream,thismeans

Motivationtowardbestvalue

Outsourcingwill

continue

to

grow

Supplychaininnovationwillbeimperative

Preparingforanewgenerationoftechnology

Consolidationwillbeimportanttovalue

creation Valueorientedinnovationwillberewarded Source: IATA and Energy Information Administration


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12

TheTransformationoftheValueStreamRepresentsaDramaticShift

TowardBestValueInnovations

Airline/Operator MRO

Labor

keydecisionguidelinesforchoosingmaintenanceservices/outsourcing

Material Turntime Performance Quality

Engineering

TechnicalServices

SupplyChain

Planning

DirectMaintenance

Airlinewill

managecoreoperations(flying)

outsourcemaintenanceasit

chooses,basingoutsourcing

decisiononkeyguidelines

M&E

Customerservice

Scheduledservice

CoreOperations

Planning

Marketing

Etc.

focus: cost

MROmust

identifynewmarketneedsand

valueadded

services

that

supportairlinerequirements

reinventthebusinessmodelto

positionitselftomeetneeds

developbusinessprocessesto

optimizeservice

focus: value

Theairlinesunrelentingfocusoncostcontinuestodrivechange

NewValueStream

Engineering

TechnicalServices

SupplyChain

Planning

DirectMaintenance

M&E


14/21TEAMSAI20104/20/2010

13

OutsourcingContinuestoGrowandExpand

0%

20%

40%

60%

80%

100%

HMV Check En ines Components Line Tech Support

Global North America

Note: OutsourcedMROincludesworkoutsourcedtoindependentMROsortoOEMsbutnotworkdonebyoperatoraffiliatedMROs

Benefits

Providestotalcostadvantage

Offersmoreflexibilitytooperators

Shiftrisks and

costs

away

from

airline

GivesindependentMROsopportunitytoform

crediblenetworkwithextensive capabilities

Regulationcouldtemperoutsourcinggrowth

somewhat,butlargeplayerswilladapt

Airlineinterestinoutsourcingalignswiththeirdesiretoseekoutbestvalue

TechnicalSupportServices

Includesallbackofficefunctions suchas

engineering,planningandsupplychain

Early stagesof

the

emergence

of

Tech

Services

outsourcing

Lately,largercarriersarerecognizingtheleverageof

outsourcingtheseservices


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TEAMSAI20104/20/2010

14

SupplyChainInnovationRepresentsSignificantOpportunity

MRO

Airline/Operator

OEM

Considerations

Airline Provider

onestopshop

obsolescence

management

notasresponsive

asinhousestock

income

statement

interestpenalties

sharedstock

arrangementsare

new

arrangements

partoffull

servicestrategy

extensivelogistics

networks

ensuring

availability

variety

of

partsoperatorPMA

policiesvary

OEMsinbest

positiontooffer

Approach(SCORTM

Processes) Plan

Source Make/Repair

Deliver

Return

MarketOpportunity

supplychain

accounts

for

60

90%

of

companycosts

2%improvementinprocessefficiency

forsupplychainprocessesproduces

3000% 5000%moreimpactthana2%

improvementinefficiencyforIT,HR,

finance,sales,etc.

90%

10%Sparecomponents

airlineowned

notairlineowned

Source: VZM

Supplychainimprovementsholdlargeopportunitytounlockvalue

OtherSuppliers


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TEAMSAI20104/20/2010

15

GivenSignificantFleetRenewal,FollowtheGrowthPlatforms

Newtechnologyairframesareforecasttomakeupanincreasingshareofthemarketoverperiod

Criticalfuture

capabilities

Compositeairframematerialrepair

Reengined NBrepair(includingGTF)

Dropinfuelenginerepair

Next

Generation

capable

avionics

repair/

automatedtestequipment

Intelligent/healthmanagementsystemsandtheabilityforMROstointerfacewiththesystem

Demandplanning Outsourcedinventorymanagement

Informationtechnologysystems

Training

Shifttonewaircraftdrivestheneedforimprovedofferingstailoredtotherealityofthenewfleetmix

l d f d d h l


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16

ConsolidationofandInvestmentinMROProvidershasPotential

toGenerateBetterValue

GlobalAerospace&Defense(A&D)M&A

2009 2010

value atlowest

level

in a

decade

overalldeals: $10B,54%vs 2008

causes: worriesaboutcosts,delays,fewer

militaryorders,lowerpassengernumbersand

reducedfreightmovements

nearterm:

expectsmall&strategic acquisitionsto

remaindominant

activityforecastfor$10$20B(leaning

towardhighendofrange)

volume atnear

record

levels

transactionsskewed towardsmallsize long term:

improvedconditionsfordealsizestogrowas

stockmarketclimbsandfinancingbecomes

easier

MROindustryacquisitionshavesteadilyincreasedaswellwith movement

towardbetterandfullerserviceoptions

GlobalM&A

AfterrecordlowM&Aactivityin2009,dealsexpectedtorisein2010

AsiahassignificantlyoutpacedEuropeandUSinQ12010

Misalignedexpectations

could

impede

recovery

ifrational

thinking

does

notprevail

Expert Opinions

OrionCapitalGroup

ForthelowermiddlemarketA&DM&A

activity,growthisexpectedtoskyrocket

asthe

industry

ditches

old

legacy

designs

andmovestowards newstandards.

PricewaterhouseCoopers

Aswelookaheadintothestartofanew

decade,

small

and

strategic

is

likely

to

remainthenameofthegameinthe

shorttermbutmajorrestructuringforces

arelikelytobefeltincreasinglystrongly

inthelongtermwithconsequent

implicationsfordealstrategiesand

values.

DisciplinemustbeappliedtotheM&A/investmentprocesstodrivevalue

ll d d l h l k


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17

BullsandBearsAside,AirlinesFocusistoReturntotheBlackMROsmustdoeverythingpossibletohelpcustomermeetthisgoal

Topto

bottom

value

chain

assessment

willidentifyoptimumcoststructure

Continuedpressuretooutsourcenoncore

activities

Supplychain

innovation

Newgenerationoftechnology

Consolidationtocreatevalue

Valueorientedinnovationwillberewarded


19/21

TEAMSAI20104/20/2010

18

TransformingtheMROBusinessModelAroundValueCreation

Understandingthe

decadeis

imperative!

Understandingtheyear is important!


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TEAMSAI20104/20/2010

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ThankYouToOurPartners


21/21

TEAMSAI20104/20/2010

THANKYOU!

2010 TeamSai Global MRO Forecast 180419

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