Market Update: PMA & DER - AACO and DERs by Jeremy Remacha … · global region leverages PMA/DER...
Transcript of Market Update: PMA & DER - AACO and DERs by Jeremy Remacha … · global region leverages PMA/DER...
Market Update: PMA & DERAACO & IATA Technical Forum
Jeremy RemachaSenior Advisor
October 2019 I Kuwait
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Agile. Global. Independent.
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3Source: Alton analysis, CAPA
Today’s commercial air transport fleet consists of approximately 32,000
aircraft which will grow to over 46,000 in the next 10 years
MARKET UPDATE: PMA & DER
Narrowbody Jet
Regional Jet
Turboprop
Widebody Jet
52%
23%
10%
15%
9,080
60%
12%
11%
17%
7,200
63%
5%
11%
21%
9,820
57%
15%
20%
8%
2,260
49%
4%3%
44%
2,300
2029
2019
Growing to 46,600 aircraft by 2029
3.8% CAGR
35%
17%
34%
14%
1,440
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4,5005,300
9,100
7,200
2,300 2,300 1,400
8,600 8,800
10,600
9,400
3,1003,900
2,200
China Rest of Asia North America Europe Latin America Middle East Africa
2019 2029
Fleet numbers rounded to nearest hundred
Source: Alton analysis
Over the coming decade, the Middle East is estimated to add more than
1,600 aircraft to the fleet; a 5.3% annual growth rate
MARKET UPDATE: PMA & DER
2019-2029 Net
Fleet Growth+4,100 +3,500 +1,500 +2,200 +800 +1,600 +800
Annual Growth
Rate 6.7% 5.2% 1.6% 2.7% 3.1% 5.3% 4.5%
2019 - 2029 Fleet Forecast by Region
Global
Fleet Size 32,000 46.500
CAGR 3.8% p.a.
5Source: Alton analysis, CAPA
Globally, total fleet retirements peaked at over 700 events in 2012 as oil
prices spiked; retirements will steadily increase in the coming decade
MARKET UPDATE: PMA & DER
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200
400
600
800
1,000
1,200
An
nu
al R
etire
me
nts
Narrowbody Jet Widebody Jet Regional Jet Turboprop
Historical Forecast
Commercial Aircraft Fleet Retirements (2000 - 2029F) Alton Insight▪ Typical aircraft life is approx. 25 years;
there was a large spike in aircraft
deliveries in the late 1980s
▪ Airline retirement decisions are
primarily driven by fuel prices and
airline financial health
▪ In the early 2000s, the surge in
retirements spawned the aircraft tear-
down/part-out industry; was very
disruptive to OEM new parts sales
▪ Growth of the used surplus material
(USM) market has had a negative
impact on PMA growth
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$12
$15
$20$17
$4
$7
$3
$27$29
$26 $27
$8
$17
$6
China Rest of Asia North America Europe Latin America Middle East Africa
2019 2029
Source: Alton analysis
Given the fleet age demographics and outsized proportion of widebody
aircraft, the Middle East’s MRO demand growth rate will be world’s fastest
MARKET UPDATE: PMA & DER
2019-2029
Growth Rate9.0% 7.2% 3.1% 4.6% 6.3% 9.2% 8.0%
2019 - 2029 MRO Forecast by Region(USD billion)
Global
MRO Spend $77B $141B
CAGR 6.2% p.a.
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Global
MRO Spend $77B $141B
CAGR 6.2% p.a.$31
$19$13
$8 $6
$62
$28$24
$13 $13
Engine Components Line Airframe Modifications
2019 2029
Note (1): Figures are escalated based on Alton’s view of new/USM mix as well as OEM new and USM price escalation
Source: Alton analysis
Engine and component MRO represents the largest MRO segments by
spend; modifications will experience the largest CAGR
GLOBAL FLEET AND MRO FORECAST
2019-2029
Growth Rate7.2% 4.2% 6.0% 5.1% 8.4%
2019 - 2029 MRO Forecast by Region
(USD billion)
8Source: Alton analysis
~$39.4
$9.9
$7.0
$3.2
$0.8
OEM New Alternatives
2019 OEM New Material Demand vs. Alternatives (USD$ Billion)
~$20.9B
In 2019, Alton estimates that operators spend ~$39B in OEM new parts and an additional $21B on
alternative material solutions
MARKET UPDATE: PMA & DER
OEM Manual
Repairs
Used
Serviceable
Material
DER Repairs
PMA
Alton Insight
▪ In order to control and reduce material spend,
airlines must have a comprehensive OEM
alternative strategy
▪ PMA parts, DER repairs, and surplus material
are valuable material sourcing solutions that
drive tangible cost savings and improve part
availability
▪ Recent IATA & CFM/GE agreement have
provided protections against OEM alternative
material solution discriminatory practices
▪ As long as certain airlines continue to have
restrictive PMA/DER policies, Lessors will
continue to include conservative language in
their lease agreements
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20
40
60
80
100
120
OEM New New Surplus UsedServiceable
surplus
As Removed/Unserviceable
PMA
Surplus material usage has risen sharply over the past decade, driven by
tangible cost savings and minimal perceived risk
MARKET UPDATE: PMA & DER
Typical Material Price Bands, By Part Type
Lower
Perceived Risk
Higher
% OEM Catalogue
List Price (CLP)
OEM Catalogue List Price
10Source: Alton analysis
Numerous regional factors influence operator PMA/DER acceptance,
demand and consumption
MARKET UPDATE: PMA & DER
46 - 56%
28 - 38%
4 - 7%
5 - 8%12 - 18%
Alton Insight▪ Virtually every major carrier in each
global region leverages PMA/DER as an
OEM alternative to some extent
▪ Key consumption factors include the
following:
1. Fleet age (operators of older fleets tend
to consume more)
2. Mix of lease vs owned (operators of
owned fleets tend to consume more)
3. Airline technical capability & experience
4. Historic airline technical procurement
practices and company culture
Estimated PMA/DER Demand by Global Region
3 - 6%
11Source: Alton analysis
Jonathan M. Berger: https://www.linkedin.com/pulse/revenge-engine-pma-jonathan-m-berger/
Revenge of the Engine PMA: “The perfect storm”
MARKET UPDATE: PMA & DER
New engine teething pains driving high
volume of unscheduled shop visits
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Mature engine routine shop visits at
an all time high
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Reduced retirements and part-outs
limiting surplus part availability
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Engine piece part supply chain unable
to meet demand to support production
and MRO
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1. Engine piece parts shortages
(MRO and production)
2. Limited MRO slot availability
3. Engine shop visit TAT delays
4. New aircraft delivery delays
5. Lack of surplus engine material
6. Higher shop visit costs
7. Higher spare engine lease
costs
8. Grounded aircraft (gliders)
Industry Impact
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TODAY’S PANELISTS
Mohamed SamiAccountable Manager – EgyptAir
Maintenance & Engineering
Jim O’SullivanVice President - Sales &
Business Development
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Jeremy Remacha+41 763 841 149