2011YEAR-END REVIEW AND FORECAST · PDF file of the nearly $50 billion global MRO market....

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Transcript of 2011YEAR-END REVIEW AND FORECAST · PDF file of the nearly $50 billion global MRO market....

  • The U.S. aerospace industry booked a relatively strong

    performance in 2011, remaining one of the most significant

    contributors to the national economy. Despite persistently

    sluggish market conditions around the globe, annual sales are

    expected to top $218 billion in 2011, marking the eighth

    consecutive year of growth. The industry’s robust workforce also

    points to the vital role played by aerospace in the U.S. economy.

    Directly and indirectly, aerospace employs more than two million

    Americans. Strong aircraft orders and the rollout of major new

    products have contributed greatly to the industry’s performance.

    At year’s end, annual sales are expected to be up across the

    board in 2011. Civil and military aircraft, missiles and the space

    sector are all expected to top their respective 2010 totals.

    Given that the demand for aftermarket products and services

    is closely tied to upstream market conditions, the U.S. aircraft

    maintenance, repair and overhaul (MRO) sector also experienced

    somewhat of a resurgence in 2011, capturing a significant share

    of the nearly $50 billion global MRO market. Absent a major

    economic downturn, the U.S. MRO market is expected to regis-

    ter a 3.8 percent compound annual growth rate (CAGR) over the

    next five years.

    2011YEAR-END REVIEWAND FORECAST

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  • After a disappointing 2010, the U.S. civil aircraft sector

    returned to a growth position. U.S. civil aircraft sales

    are expected to total $49.7 billion in 2011, a 3.2 percent

    annual increase. Looking forward, the sector is likely to

    grow at a CAGR of some 3.4 percent during 2011-2013.

    Orders for civil aircraft are expected to rise sharply in

    2011, reaching nearly $107 billion, a gain of 23 percent.

    The amount is far below the recent high of $224 billion in

    2007, but is well ahead of the 2009 low of $23 billion.

    Industry drivers in 2011 include several factors that have

    influenced the market for a number of years, such as the

    aging U.S. regional jet fleet and a growing demand for

    fuel-efficient aircraft that has been driven by persistently

    high and variable fuel prices. The introduction of new

    aircraft has also created demand in the commercial

    segment.

    The U.S. large commercial aircraft market continues

    to ramp up at a respectable pace, yet sagging airline

    demand in the U.S. and Europe means that manufactur-

    ers will necessarily depend more heavily on exports to

    Asia, the Mideast, and other fast-growth markets. The

    U.S. civil industry will be lifted as Boeing ramps up 787

    and 747-8 production, now that the two new aircraft have

    entered into service over the past few months.

    The key market driver in 2012 will be the price of fuel.

    High fuel prices create demand for new fuel-efficient

    aircraft, while at the same time eroding airlines’ ability

    to purchase new planes. This situation places renewed

    emphasis on developing commercially viable alternative

    fuels, which could potentially dampen the volatility of fuel

    costs faced by operators while lessening the global airline

    industry’s environmental impact. The U.S. is a leader in

    alternative aviation fuel research and development, and

    U.S. producers have successfully completed test flights

    using fuels from a variety of feedstocks and are moving

    toward commercial production.

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    Aerospace Industry Sales

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    Civil Aircraft

  • $199.5 $208.9 $210.6 $218.1 $217.7

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    2012(E)2011(P)201020092008

    $30.2

    $43.2

    $23.2

    $54.7

    $48.2

    $29.4

    $45.0

    $24.2

    $58.9

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    $66.5

    $49.7

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    KEY Related Products & Services

    Space

    Missiles

    Military Aircraft

    Civil Aircraft

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    Aerospace Industry Sales By Product Group

    The U.S. military aircraft sector expanded by nearly 6.7

    percent over last year, with sales estimated at $66.51

    billion. The Department of Defense ordered more F/A-18

    E/F Hornets and V-22s for the Navy and Marine Corps.

    Future sales also look promising, as exemplified by the

    $35 billion contract awarded to Boeing to build 179 KC-

    46A refueling tankers.

    While 2011 was a strong year for military aircraft,

    domestic purchases are expected to decline in the

    coming years due to federal deficit reduction measures.

    These measures are likely to become even more

    significant factors as much of the U.S. military aircraft

    fleet nears maximum service-life limits. Anecdotally,

    ground crews have pointed out that today’s pilots

    are now flying the exact same equipment as did their

    fathers. The recent grounding of several combat wings

    due to equipment stress is impacting U.S. combat

    readiness. The current U.S. Air Force fleet, whose

    planes are on average more than 23 years old, is the

    oldest in USAF history. Many transport aircraft and aerial

    refueling tankers are more than 40 years old, and it is

    expected that some may reach the 70-80 year mark

    before they are finally retired.

    As the U.S. increasingly seeks foreign buyers of military

    aircraft, it faces competition from other nations that are

    targeting the same opportunities. A case in point is the

    The U.S. civil rotorcraft market is diverse, with the bulk of

    new deliveries coming from mature production lines. The

    market encompasses emergency medical service (EMS)

    providers, offshore oil and gas exploration, and law en-

    forcement applications. Following two years of significant

    decreases in sales, U.S. civil helicopter shipments are

    expected to increase to 454 aircraft in 2011, representing

    an annual increase of 5.3 percent. This upward trajectory

    is expected to continue into 2012 as demand deferred

    during the economic downturn reaches the market.

    Military Aircraft

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  • The U.S. aerospace industry continued to show

    reasonable international strength in 2011 despite the

    lingering effects of the global economic downturn. In

    2011, the industry contributed $87 billion in export sales

    to the domestic economy. The industry’s positive trade

    balance of $57.4 billion places aerospace in the lead,

    representing the largest positive trade balance of any

    manufacturing industry.

    U.S. aerospace exports are expected to increase to

    nearly $90 billion in 2011, up 12 percent after falling for

    two years. The increase is due primarily to strengthened

    civil exports, which are expected to grow by 14 percent

    in 2011, reaching nearly $77 billion. U.S. aerospace

    imports are also expected to increase in 2011, driven

    primarily by increased purchases of foreign aircraft

    engines and engine parts. Overall, aerospace-related

    imports are expected to reach $29.6 billion, an increase

    of 12 percent.

    In recent years, Near- and Middle Eastern governments

    have steadily increased purchases of U.S. military

    aircraft. Most recently, the sale of 24 refurbished F16-C/

    Ds to Indonesia, along with the possibility of other sales,

    came out in President Obama’s announcement that the

    U.S. will expand its military ties in Southeast Asia. As

    tensions rise with Iran and Syria, the UAE has stepped up

    purchases to secure its borders and maintain the abil-

    ity to deliver its recent $304 million purchase of “bunker

    busting” weapons in response to Iran’s nuclear program.

    Additionally, Saudi Arabia bought 85 F-15E fighter jets

    valued at $29.4 billion and the Iraqi government has

    agreed to purchase 18 U.S. F-16 fighters, worth about $3

    billion.

    Trade

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    2011 EXPORTS 87.0

    2011 SURPLUS 57.4

    2011 IMPORTS 29.6

    2007 PEAK 60.6

    2007 PEAK 97.2

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