Middle East MRO Forecast 2010-2020

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  1. 1. Middle East MRO Forecast 2010 - 2020 Presented by: Chris Doan Chairman & CEO 2011 TeamSAI, Inc.MRO Middle East 2011 Conference Middle East and Surrounding Regions Lead Market
  2. 2. TEAMSAI20112/1/2011 1 Signs of Recovery SurfaceMiddle East Remains at the Center of Growth The storm seems to be clearing slowly! Analysts predict airline stock growth in 2011 Source: Aviation Week and Space Technology (1/19/2011) Middle Eastern maintenance providers are gearing up for expansion Source: Flight Global (1/24/2011) IATA: 2011 to be profitable for airlines, but minimal Source: IATA (12/14/2010)
  3. 3. TEAMSAI20112/1/2011 2 Are We at the Bottom of the Downturn? While the world fleet has continued to grow, newer, less maintenance intensive aircraft are showing their influence The contribution of the older vintages has been in decline as retirements have accelerated And the younger vintage aircraft have significantly lower unit costs In just 2 years time there has been a significant shift in the share of the younger vintage fleets As a result, the average MRO cost per aircraft per year has fallen 2008 -- $2.4M 2010 -- $2.1M 2010 should be the tipping point as fleet size and utilization increase to meet demand So the simple answer is that we think so! MRO Spend ($M) per Aircraft Vintage Jan-08 Jan-09 Dec-10 1970's $2.9 $2.5 $2.2 1980's $3.0 $3.0 $2.8 1990's $2.0 $2.1 $1.9 2000's $0.8 $0.8 $1.1 Grand Total $2.4 $2.4 $2.1
  4. 4. TEAMSAI20112/1/2011 3 Total global MRO is just starting a new growth cycle Preliminary estimates for the 2011 global MRO forecast indicate a return to positive, albeit small, growth (2.1%) Growth is expected to ramp slowly at 3.4% CAGR through 2015 and 4.4% CAGR through 2020 $45.7 $42.3 $43.2 $43.8 $44.4 $50.1 $65.3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 MRO Forecast -7.5% +4.4% +2.1% Source: TeamSAI analysis Understanding the year is important; understanding the decade is imperative
  5. 5. TEAMSAI20112/1/2011 4 AP CH IN ME LA&C EE Market ($B) (2010) $6.6 $2.4 $0.6 $2.4 $1.9 $1.8 Mkt Share (2010) 16% 6% 1% 6% 5% 4% CAGR (2010-20) 5.3% 9.6% 9.4% 5.3% 6.6% 9.8% NA WE AF $13.9 $11.0 $1.5 33% 26% 4% 1.6% 3.6% 3.5% Middle East is a Solid Growth Region and is Surrounded by Some of the Strongest Growth Regions $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 AP CH IN ME LA&C EE NA WE AF 2010 2020 Global CAGR 4.4%
  6. 6. TEAMSAI20112/1/2011 5 Population growth and the burgeoning middle class, particularly in the target regions, is what is driving our long term forecast Fleet growth forecast at 5.9% CAGR to 12,219 in 10 years (45% of global fleet) ME fleet is comparable in size to AF and EE but is expected to have more traffic ASM growth will increase at 6.7% CAGR over same period Long Term Fleet Growth Looks Solid Especially for Target Regions 2010 6,913 2015 8,995 2020 12,219 5.4% CAGR 6.3% CAGR ASM Growth
  7. 7. TEAMSAI20112/1/2011 6 Looking at Middle East and Surrounding Regions As the central location, Middle East is ideally situated to capitalize on the area growth 37% of the global MRO market surrounds the ME $15.4B in 2010 Regional CAGR is a very healthy 6.7% (2010-2020) Market is equivalent to that of Americas, but in 10 years time will exceed the share of the Americas by 14%
  8. 8. TEAMSAI20112/1/2011 7 ME MRO News from 2010
  9. 9. 2010 TeamSAI, Inc. Trends and Strategies
  10. 10. TEAMSAI20112/1/2011 9 Airline Financial Results Intensifies the COST Focus Profits have been elusive in many regions, and the Middle East has had its troubles too Surrounding regions like Asia have been most profitable though The quest for profitability drives business behavior Revenue focused innovation is evident Cost improvements are needed at every turn For MRO value stream, this means Motivation toward best value Outsourcing will continue to grow Supply chain innovation will be imperative Preparing for a new generation of technology Consolidation will be important to value creation Value-oriented innovation will be rewarded Source: IATA and Energy Information Administration
  11. 11. TEAMSAI20112/1/2011 10 Outsourcing Continues to Grow and Expand 0% 20% 40% 60% 80% 100% HMV (Check) Engines Components Line Tech Support Global Outsourcing Note: Outsourced MRO includes work outsourced to independent MROs or to OEMs but not work done by operator-affiliated MROs Benefits Provides total cost advantage Offers more flexibility to operators Shift risks and costs away from airline Gives independent MROs opportunity to form credible network with extensive capabilities Regulation could temper outsourcing growth somewhat, but large players will adapt Airline interest in outsourcing aligns with their desire to seek out best value Technical Support Services Includes all back office functions such as engineering, planning and supply chain Early stages of the emergence of Tech Services outsourcing Lately, larger carriers are recognizing the leverage of outsourcing these services
  12. 12. TEAMSAI20112/1/2011 11 The Transformation of the Value Stream Represents a Dramatic Shift Toward Best Value Innovations Airline / Operator MRO Labor key decision guidelines for choosing maintenance services/outsourcing Material Turn time Performance Quality Engineering Technical Services Supply Chain Planning Direct Maintenance Airline will manage core operations (flying) outsource maintenance as it chooses, basing outsourcing decision on key guidelines M&E Customer service Scheduled service Core Operations Planning Marketing Etc. focus: cost MRO must identify new market needs and value added services that support airline requirements reinvent the business model to position itself to meet needs develop business processes to optimize service focus: value The airlines unrelenting focus on cost continues to drive change New Value Stream Engineering Technical Services Supply Chain Planning Direct Maintenance M&E
  13. 13. TEAMSAI20112/1/2011 12 Market Ups and Downs Aside, Airlines are Focused on STAYING in the Black MROs must do everything possible to help customer meet this goal Value-oriented innovation will be rewarded Top-to-bottom value chain assessment will identify optimum cost structure Outsourcing Non-Core Activity Supply Chain Innovation New Technology Introduction Consolidation
  14. 14. TEAMSAI20112/1/2011 13 Taking the Lead What are necessary to maintain the market growth? Create the Value Doing to You
  15. 15. TEAMSAI20112/1/2011 14 Thank You To Our Partners
  16. 16. TEAMSAI20112/1/2011 THANK YOU!