Middle East : Regional Fleet Developments Impact on MRO Demand

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Transcript of Middle East : Regional Fleet Developments Impact on MRO Demand

  • Confidential and Proprietary. Copyright 2013, Aviation Week

    Regional Fleet Developments & Impact On MRO Demand:

    MRO Middle East

    Brian Kough Director Forecasts & Analysis Aviation Week Washington, DC

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    Regional Fleet Developments & Impact On MRO Demand

    Fleet Trends & Outlook

    Middle East fleet changes

    Shorter Service Lives

    Upgauging cabin sizes

    The Duopoly continues

    Outlook for deliveries

    Patterns in fleet retirement

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    Regional Fleet Developments & Impact On MRO Demand

    MRO Implications

    Changes in aircraft economic life

    Other factors: Scrappers

    Middle East regional MRO forecast

    Strong CAGR relative to other regions

    Ten-Year MRO market of some $53 billion

    Things to think about right now

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    Regional Fleet Developments & Impact On MRO Demand

    Regional Fleet Trends & Outlook

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    Upgauging: A New Fact Of Life

    for the largest in class

    Increasingly, airlines are opting

    B737-800

    B777-300

    A330-300

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    The Duopoly: Airbus & Boeing

    Forecast Top Five New Aircraft Deliveries Middle East

    777-300 ER & Airbus families dominate the decades deliveries

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    Between them, Airbus and Boeing will command 93% of new deliveries to the Middle East through 2023

    The Duopoly: Airbus & Boeing

    Top Ten New Aircraft Deliveries Through 2023

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    A350-900 is projected to be the fastest-growing fleet, starting from a very low base; The 787-900 will maintain a steady presence

    Outlook For Deliveries

    Top Ten Fastest-Growing Middle East Fleets

    Compound Average

    Growth of In-Service

    Aircraft

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    More than 6,000 retirements 1993-2013 - 1/4 of world fleet; forecast retirements trend accelerating

    Patterns In Fleet Retirement

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    Patterns In Fleet Retirement

    Types Seen Retiring in Middle East Fokker 100: most not out until 2021

    MD80: most not out until 2020

    Airbus 320: the overall fleet grows, but older aircraft retire at rate of

    about 3 per year

    A300-600: out by 2017

    A310: most out by 2016

    747-400

    10

    A320

    B747

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    Patterns In Fleet Retirement

    11

    Boeing aircraft are retiring faster than Airbus aircraft

    and Airbus deliveries are outpacing Boeings.

    Retirements 2011 2012 Total Airbus 62 96 158

    Boeing 254 314 568

    316 410 726

    Deliveries 2011 2012 Total Airbus 536 585 1121

    Boeing 477 601 1078

    1013 1186 2199

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    Patterns In Fleet Retirement

    12

    Net 2012-2013 Airbus fleet growth: 1,014 aircraft Net 2012-2013 Boeing fleet growth: 610 aircraft

    Continuously growing worldwide fleet should more than compensate for somewhat younger retirements

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    Patterns In Fleet Retirement

    Safety As A Driver e.g., ADS-B/TCAS/GPWS Equipage costs versus residual value of

    the aircraft Non-compliant aircraft have limited

    utility

    13

    Fuel As A Driver Short-haul narrowbodies more sensitive

    to sustained fuel-price gains Some small number of cast-off U.S. RJs

    seen entering service in Africa, Eastern Europe; overall RJs are in steep decline

    Noise As A Driver Many older types banned

    Technology As A Driver Next-Gen, RNP Passenger amenities, IFE, etc. Global recession artificially cramped the

    most recent replacement cycle

    Fuel and technology are factors changing aircraft economic-life assumptions

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    1. More than 1,400 new aircraft will be delivered through 2023

    2. Middle East fleet will grow to nearly 2,500

    3. Larger airframes, wide-bodies will dominate at 68%

    4. Airbus and Boeing will preserve The Duopoly in this market

    5. So long as fuel and component prices continue on their present

    trajectories, retirements will make sense at younger aircraft ages

    6. Safety, noise, fuel and technology all will accelerate the need for

    MROs to build new capabilities

    14

    Fleet Summary

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    MRO Implications

    Regional Fleet Developments & Impact On MRO Demand

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    Changes In Aircraft Economic Life

    Increasingly, younger aircraft are going straight to part-out

    This aircraft was less than 13 years old

    upon retirement

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    152025303540

    1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

    NB+WB PASSENGER NB+WB FREIGHTER

    15

    20

    25

    30

    35

    40NARROWBODY JETS * WIDEBODY JETS *

    2,0002,000retirementsretirements

    4,0004,000retirementsretirements

    Changes In Aircraft Economic Life

    Jet aircraft economic service life may have peaked

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    Changes In Aircraft Economic Life

    Increasingly, younger aircraft are going straight to part-out

    CFM56 components are valuable and sought-after

    Airbus A320s are also popular, driven by component needs

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    Survivor Disappearing Corporation Merged FleetUnited Air Lines Continental Airlines 346Delta Air Lines Northwest Airlines 316Expressjet Airlines Atlantic Southeast Airlines 169US Airways America West Airlines 132Air India Indian Airlines 85Japan Airlines International Japan Air Systems 75China Southern Airlines Zhongyuan Airlines, China Northern, China Xinjiang 72China Eastern Airlines Shanghai Airlines 54Olympic Air Aegean Airlines 53Air China China Southwest Airlines 49SN Brussels Airlines Virgin Express 48Tuifly Hapag-Llyod Express, Hapag-Lloyd Flug 43Kingfisher Airlines Air Deccan 41Flybe Finnair 38Piedmont Airlines Allegheny Airlines 33

    Next:American Airlines US Airways 337

    Top 15 mergers in the past 10 years affected over 3,400 aircraft

    Consolidation Creates Bargaining Power

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    Average Fleet Size

    185201

    225

    115126

    146

    0

    50

    100

    150

    200

    250

    2000 2006 2012

    Top 50 OperatorsTop 100 Operators

    Number of Operators

    63

    75

    98

    30

    4248

    0

    20

    40

    60

    80

    100

    120

    2000 2006 2012

    50 or More Aircraft in Fleet100 or More Aircraft in Fleet

    Consolidation Creates Bargaining Power

    Operators worldwide have grown larger, with better bargaining power over MRO costs

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    On-Airplane MRO Cost

    $0.00

    $0.50

    $1.00

    $1.50

    $2.00

    1960 1970 1980 1990 2000 2010 2020

    Technology Year

    Cost

    $ /

    FH /

    1000

    LB M

    TOW Narrowbody

    Widebody

    Technology, Too, Has Chipped Away At MRO Oppty

    Technology has brought down aircraft life-cycle MRO costs

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    MRO Forecast: Middle East

    Aviation Week forecasts a $3.7 billion MRO market in 2014

    Engine Maintenance & Component categories are the largest share of the market

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    MRO Forecast: Middle East

    By 2023 the MRO market should grow to $6.9 billion, the result of a 7.3% CAGR

    $53 billion MRO opportunity over 10 years

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    MRO Forecast: Middle East

    Engine Maintenance shows the strongest absolute growth and CAGR follow by Components

    $ Billions

    2014

    2023

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    Take-Aways: Reshaped Fleet, New Imperatives

    1. Younger fleet suggests creative service offerings or packages may be inevitable to balance revenue stream

    2. Higher number of larger twins. Implications for MROs? Hangar space/shop space/tooling needs?

    3. Growth of leasing companies share of the overall aircraft portfolio

    will lead to more emphasis on margins; parting-out will accelerate unless OEMs adjust

    4. Newer, less diverse fleets will boost importance of competence on Airbus and Boeing

    5. Engine maintenance is largest share of MRO spending & expands more by 2023

    Regional Fleet Developments & Impact On MRO Demand: MRO Middle EastRegional Fleet Developments & Impact On MRO DemandRegional Fleet Developments & Impact On MRO DemandRegional Fleet Developments & Impact On MRO DemandUpgauging: A New Fact Of LifeThe Duopoly: Airbus & BoeingThe Duopoly: Airbus & BoeingOutlook For DeliveriesPatterns In Fleet RetirementPatterns In Fleet RetirementPatterns In Fleet RetirementPatterns In Fleet RetirementPatterns In Fleet RetirementFleet SummaryRegional Fleet Developments & Impact On MRO DemandChanges In Aircraft Economic LifeChanges In Aircraft Economic LifeChanges In Aircraft Economic LifeConsolidation Creates Bargaining PowerConsolidation Creates Bargaining PowerTechnology, Too, Has Chipped Away At MRO OpptyMRO Forecast: Middle EastMRO Forecast: Middle EastMRO Forecast: Middle EastTake-Aways: Reshaped Fleet, New Imperatives