Global MRO Commercial Fleet Dynamics & Trends .Global MRO Commercial Fleet ... Boeing, Airbus,...

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Transcript of Global MRO Commercial Fleet Dynamics & Trends .Global MRO Commercial Fleet ... Boeing, Airbus,...

  • October 18-19, 2017: Miami, USA

    Global MRO Commercial Fleet

    Dynamics & Trends

  • 1

    TODAYS AGENDA

    Global Fleet Demographics

    Commercial Air Transport Fleet Forecast

    Fleet Growth Risks & Implications

  • 2Source: CAPA, Alton analysis

    Todays commercial air transport fleet consists of approx. 27,000

    aircraft, with Asia recently surpassing North America

    GLOBAL FLEET DEMOGRAPHICS

    Narrowbody Jet

    Regional Jet

    Turboprop

    Widebody Jet

    51%

    24%

    9%

    16%

    8,040

    61%

    11%

    10%

    18%

    6,952

    63%

    5%

    10%

    22%

    8,147

    59%

    17%

    14%

    10%

    1,87841%

    17%

    28%

    14%

    1,174

    39%

    7%

    3%

    51% 1,505

  • Fleet growth is driven by GDP and the so-called Disneyland factor

    (the rate in which a countrys population enters the middle class)

    GLOBAL FLEET DEMOGRAPHICS

    3Source: CAPA, USDA ERS, Alton analysis

    Fleet and GDP Growth by Region (1997 2017)

    10%

    7% 7%

    6%

    5%

    3%

    3.8%

    4.4%4.2%

    2.5%

    1.8%

    2.2%

    0.0%

    0.5%

    1.0%

    1.5%

    2.0%

    2.5%

    3.0%

    3.5%

    4.0%

    4.5%

    0%

    2%

    4%

    6%

    8%

    10%

    12%

    14%

    Middle East Asia Pacific Africa Latin America Europe North America

    % Fleet growthGDP

    Avg. GDP

    Growth/yr

    Avg. Fleet

    Growth/yr

  • 4Source: CAPA, Alton analysis

    Over the past 25 years, the global fleet has grown at a rate of 5.1%,

    with narrowbody aircraft accounting for over 55% of todays fleet

    GLOBAL FLEET DEMOGRAPHICS

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    1992 1997 2002 2007 2012 2017

    Widebody Jet

    Turboprop

    Regional Jet

    Narrowbody Jet

    20%

    10%

    13%

    57%

    Global Fleet Count (1992 2017) Global Fleet Count (1992 2017)

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    1992 1997 2002 2007 2012 2017

    Other

    Embraer

    Bombardier

    Boeing

    Airbus

    33%

    43%

    8%

    7%

    9%

  • 5Source: CAPA, Alton analysis

    Record high OEM backlog continues to drive investor interest and

    M&A activity in MRO providers and OEM supply chain

    GLOBAL FLEET DEMOGRAPHICS

    0

    200

    400

    600

    800

    1,000

    1,200

    1,400

    1,600

    1,800

    2,000

    10 Year Backlog by OEM

    Others

    Embraer

    Bombardier

    Boeing

    Airbus40%

    45%

    46%

    49%

    52%48%

    41%

    46%41%

    41%

    35%

    39%

    39%

    42%

    51%

    27%

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    4,000

    4,500

    10 Year Backlog by Region

    Widebody Jet

    Turboprop

    Regional Jet

    Narrowbody Jet

  • 6Source: CAPA, Alton analysis

    Fleet retirements are down from peak levels

    GLOBAL FLEET DEMOGRAPHICS

    $66B

    Alton Insight

    Typical aircraft life is approx. 25

    years; there was a large spike in

    aircraft deliveries in the late 1980s

    Increased retirements was also driven

    by high fuel prices and uneconomic

    50-seat regional jets

    Low fuel prices and a strong traffic

    growth environment contributed to

    the slowdown in retirements rates

    The surge in aircraft retirements

    spawned the aircraft tear-down/part-

    out industry (very disruptive to OEM

    new parts sales)

    0.0%

    0.5%

    1.0%

    1.5%

    2.0%

    2.5%

    3.0%

    0

    500

    1000

    1500

    2000

    2500

    3000

    3500

    Aircraft Retired

    % Fleet

    Avg. 464

    Avg. 144

    Avg. 601

    Avg. 294

    % FleetTotal Aircraft

  • 7Source: Boeing Forecast (excludes turboprop), Alton analysis

    Over the next 20 years, the global fleet is projected to grow by 3.7%

    to over 45,000 aircraft

    23,480

    5,920

    17,560

    23,470

    0

    10,000

    20,000

    30,000

    40,000

    50,000

    2016 2036

    Growth (50%)

    46,950

    Replacement (37%)

    Retained (13%)

    GLOBAL FLEET DEMOGRAPHICS

    20 Year Fleet Projection by Aircraft Type

    64%

    69%17%

    19%

    11%

    6%

    8%

    6%

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    35,000

    40,000

    45,000

    50,000

    2016 2036

    Freighter(2.7%)

    Regional Jets(0.1%)

    Widebody(4.3%)

    Narrowbody(4.1%)

    Type CAGR

    Total CAGR

    (3.7%)

    20 Year Fleet Projection by Aircraft Type

  • 8

    FLEET GROWTH RISKS & IMPLICATIONS

  • 9Source: IATA, Alton analysis

    Is the airline industry really post-cyclical?

    FLEET GROWTH RISKS & IMPLICATIONS

    $66B-6%

    -4%

    -2%

    0%

    2%

    4%

    6%

    8%

    Financial CrisisSept. 111st Gulf WarOil Crisis

    Global Airline Net Profit Margin

    8 years 6 years 2 years 7+ years

  • 10Source: Boeing, Airbus, CAPA, Alton analysis

    Concentration of widebody orders

    FLEET GROWTH RISKS & IMPLICATIONS

    $66B

    Alton Insight

    The big 3 Middle East airlines account

    for 522, or almost 25%, of total

    widebody orders

    Demand has been unexpectedly weak

    for the very large aircraft (VLA)

    market segment

    Emirates accounts for 142 A380

    orders and operates almost half of the

    global fleet of 216 aircraft delivered to

    date

    The 747-8 appears to be destined for

    freighterhood

    9%

    7%

    6%

    78%

    Emirates (209) Qatar (169)

    Etihad (142) Others (1,815)

    2,335

  • 11Source: Federal Reserve, Alton analysis

    Are interest rates the new fuel price?

    FLEET GROWTH RISKS & IMPLICATIONS

    Alton Insight

    OEMs Negative: Customer financing costs

    increase; more difficult to sell new aircraft

    MROs - Positive: Used aircraft stay in

    service longer so volumes increase

    Airlines - Neutral: Inclined to retain more

    used aircraft; aircraft overall cost more to

    own and lease, so incremental less capacity

    Lessors Neutral: Cost of financing

    increases; value of new aircraft incrementally

    less, value of used aircraft incrementally

    more

    Parts Traders Negative: More difficult to

    source used aircraft

    Financial Investors - Negative: Value of

    outstanding bonds decline

    US Interest Rates: 2007 thru 2020

    0.0%

    0.5%

    1.0%

    1.5%

    2.0%

    2.5%

    3.0%

    3.5%

    4.0%

    4.5%

    5.0%

    Historic Forecast

  • 12

    SUMMARY &

    CONCLUSION

    Overall, the state of the aviation industry is strong

    Airbus C-Series investment is an industry game changer

    Over-concentration of widebody orders in the Middle East

    Limited market demand for the very large aircraft (VLA) segment

    Interest rates are the new fuel cost

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  • 14

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