2015-2025 America Fleet and MRO America Market Forecast

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  • OLIVER WYMAN

    TURBULENCE AHEAD DISENGAGE THE AUTOPILOT

    2015-2025 GLOBAL FLEET & MRO MARKET FORECAST

    2015 MRO AMERICAS CONFERENCE

    David A. Marcontell

    Vice President

  • 1 OLIVER WYMAN 1 OLIVER WYMAN

    The respected TeamSAI Global Fleet & MRO Market Forecast, and related

    betterinsightTM market intelligence data, remains available at

    www.PlaneStats.com/betterinsight

    ~130 Dedicated CAVOK employees located

    in DFW and ATL

    (Supported by +250 Oliver Wyman

    aviation consultants)

    +70% of CAVOK staff hold FAA certification/license

    +2,300 years of combined airline operations expertise

    Oliver Wyman acquired TeamSAI and integrated the business into CAVOK, its aviation technical consulting and services practice

  • 2 OLIVER WYMAN 2 OLIVER WYMAN

    CAVOK expanded technical consulting & services capabilities

    Technical Consulting

    Certification, Compliance,

    Quality, & Safety

    Operations Performance

    Improvement

    Aircraft Acquisition &

    Conformity

    Program Development

    & Redesign

    Technical Data

    Auditing & Validation

    M&E Solutions

    Maintenance Program

    Management

    Technical Publications

    Management

    Engineering &

    Technical Services

    Reliability &

    CASS Support

    Aircraft Records

    Management

    Market Forecasting

    & Intelligence

    PlaneStats Schedule,

    Traffic & Financial Data

    betterinsight MRO

    Market Intelligence

  • Global Fleet &

    MRO Market Outlook

  • 4 OLIVER WYMAN 4 OLIVER WYMAN

    The global air transport jet and turboprop fleet will grow by more than 10,000 net new aircraft by 2025

    2015-2025 Global Fleet Forecast

    by Aircraft Class

    Key Fleet Forecast

    Growth Rates

    Global fleet will grow on

    average 3.7% annually over

    the full forecast period

    Passenger fleet is expected

    to grow at 3.8% annually

    Cargo fleet is forecast to

    grow by 2.3% annually

    Narrowbody aircraft will lead

    the growth

    Regional jets will actually

    decline in the mix

    13,124 16,949

    21,089

    4,686

    5,753

    7,181

    3,396

    3,222

    2,906

    2,721

    3,079

    3,232

    5.2%

    4.2%

    -1.0%

    2.5% 23,927

    29,003

    34,408

    4.5%

    4.5%

    -2.0%

    1.0%

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    35,000

    40,000

    2015 2015-2020CAGRS

    2020 2020-2025CAGRS

    2025

    Nu

    mb

    er

    of

    Air

    cra

    ft

    Forecast Year and Forecast CAGR

    Narrowbody Widebody Regional Jet Turboprop

    The growth outlook, however, varies widely from region to region

    3.9%

    3.5%

  • 5 OLIVER WYMAN 5 OLIVER WYMAN

    2015

    Fleet Size

    722

    A 5 pt spread in regional growth rates leads to a significant share shift over the decade ahead

    The mature North American and Western European markets will continue to

    undergo significant refleeting efforts during the next 10 years

    North America

    Europe

    Latin America

    & the Caribbean

    Africa / Middle East

    Asia Pacific / China / India

    0.9%

    2.8%

    4.7%

    5.5%

    6.1%

    7,420

    6,131

    1,720

    2,204

    6,452

    1,965

    997

    1,562

    5,235

    10YR

    CAGR

    2015- 2025

    Absolute Growth

  • 6 OLIVER WYMAN 6 OLIVER WYMAN

    2025

    Fleet Size

    A 5 pt spread in regional growth rates leads to a significant share shift over the decade ahead

    The mature North American and Western European markets will continue to

    undergo significant refleeting efforts during the next 10 years

    North America

    Europe

    Latin America

    & the Caribbean

    Africa / Middle East

    Asia Pacific / China / India 6.1%

    7,420

    6,131

    1,720

    2,204

    6,452

    8,142

    8,096

    2,717

    3,766

    11,687

  • 7 OLIVER WYMAN 7 OLIVER WYMAN

    The systematic elimination and replacement of older aircraft with new technology

    aircraft will drive significant change is the business for airlines and maintainers

    43% of all new aircraft deliveries will replace old technology aircraft over the forecast period

  • 8 OLIVER WYMAN 8 OLIVER WYMAN

    1970's 2%

    1980's 26%

    1990's 63%

    2000's 9%

    1970's 0.1%

    1980's 9%

    1990's 46%

    2000's 16%

    2010's 29%

    2015 Global Air Transport Fleet

    by Vintage

    2025 Global Air Transport Fleet

    by Vintage

    The significant move towards late generation aircraft, in addition to improving airline

    costs, will undoubtedly impact MRO dynamics

    The result is a staggering change in fleet mix by 2025

  • 9 OLIVER WYMAN 9 OLIVER WYMAN

    22% 19% 17%

    42% 45% 47%

    19% 18% 19%

    18% 18% 18%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    2015 2020 2025

    Forecast Year

    Airframe Engine Component Line

    The fleet dynamics of the period result in a forecast that tops $100 billion by 2025, a 4.1% average annual growth rate

    2015-2025 Global MRO Market Size Forecast

    by MRO Segment

    2015-2025 Global MRO Market Share Forecast

    by MRO Segment

    MR

    O S

    pe

    nd

    in

    2015 D

    oll

    ars

    ($

    US

    B)

    Mark

    et

    Sh

    are

    $14.5 $15.9 $16.7

    $27.9 $37.1

    $46.8

    $12.4

    $15.2

    $19.2

    $12.3

    $15.0

    $17.8

    1.9%

    5.9%

    4.1%

    4.0% $67.1

    $83.2

    $100.4

    1.0%

    4.8%

    4.7%

    3.5%

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    2015 2015-2020CAGRS

    2020 2020-2025CAGRS

    2025

    Bill

    ions

    Forecast Year and Forecast CAGR

    Airframe Engine Component Line

    Airframe Heavy Maintenance costs improve with the new technology while both

    Engine and Component sectors will take a larger share

    4.4%

    3.8%

  • 10 OLIVER WYMAN 10 OLIVER WYMAN

    $1.3

    Shadowing the fleet trends, large differences in regional growth rates will lead to a significant shift in MRO demand over the decade ahead

    Asia Pacific / China / India will be challenged to build the necessary infrastructure

    capable of handling the volume of MRO the combined region will demand

    North America

    Europe

    Latin America

    & the Caribbean

    Africa / Middle East

    Asia Pacific / China / India

    0.6%

    3.3%

    7.3%

    5.5%

    6.6%

    $20.0

    $17.9

    $3.2

    $7.5

    $18.3

    $7.0

    $3.3

    $5.3

    $16.5

    2015

    MRO Spend ($USB)

    10YR

    CAGR

    2015- 2025

    Absolute Growth

  • 11 OLIVER WYMAN 11 OLIVER WYMAN

    2025

    MRO Spend ($USB)

    Shadowing the fleet trends, large differences in regional growth rates will lead to a significant shift in MRO demand over the decade ahead

    Asia Pacific / China / India will be challenged to build the necessary infrastructure

    capable of handling the volume of MRO the combined region will demand

    North America

    Europe

    Latin America

    & the Caribbean

    Africa / Middle East

    Asia Pacific / China / India 6.6%

    $20.0

    $17.9

    $3.2

    $7.5

    $18.3

    $21.3

    $24.9

    $6.5

    $12.8

    $34.8

  • North American MRO Market

    Outlook

  • 13 OLIVER WYMAN 13 OLIVER WYMAN

    2015 PASSENGER TRAFFIC (RPK) GROWTH

    7.0%

    2015 CURRENT FLEET

    7,420

    4,100+

    2015-2025 AIRCRAFT DELIVERIES

    3,100+

    2015-2025 AIRCRAFT RETIREMENTS

    +0.9%

    2015-2025

    FLEET CAGR

    Passenger traffic is picking up; however, the fleet growth will be limited over the next 10 years as most deliveries are slated to replace aging aircraft

  • 14 OLIVER WYMAN 14 OLIVER WYMAN

    $4.6B in MRO from 70s and 80s vintage aircraft will be lost over the next 10 years; however, 90s, 00s and 10s vintage aircraft will see a $5.9B increase

    A320C/NEO

    737NG/MAX

    757

    CRJ

    777

    767

    ERJ

    EJET

    MD-80

    747

    737NG/MAX

    A320C/NEO

    777

    787

    CRJ

    767

    EJET

    A330C/NEO

    A350

    MRJ

    Top 10 North American Aircraft Families in 2015 Top 10 North American Aircraft Families in 2025

  • 15 OLIVER WYMAN 15 OLIVER WYMAN

    $1.00

    $2.00

    $3.00

    2,000 2,400 2,800 3,200 3,600 4,000 4,400 4,800

    $1.00

    $2.00

    $3.00

    2014 2015

    WTI Brent Jet A

    Oil prices have plummeted over the past year and could remain low over the short term. Many are concluding that this will cause airlines to alter fleet plans and drive an increase in MRO.

    Crude Oil Spot Price

    per Gallon

    Aircraft Profitability Curve

    Current Generation vs New Generation

    Sp

    ot

    Pri

    ce p

    er

    Ga

    llo

    n (

    $U

    SD

    )

    Jet-

    A S

    po

    t P

    rice p

    er

    Gallo