MRO Forecast and Market Trends - ICF .0 MRO Forecast and Market Trends Presented by: Jonathan M

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Transcript of MRO Forecast and Market Trends - ICF .0 MRO Forecast and Market Trends Presented by: Jonathan M

  • 0

    MRO Forecast and Market Trends

    Presented by:

    Jonathan M. BergerVice President ICF International

    jberger@icfi.com

    January 21-22, 2016

    Lima, Peru

  • 11

    Todays Agenda

    MRO Forecast

    Meet the Frackers!

    The not-so-mighty-mighty

    BRIC House

    The Next Big Thing!

  • 22

    MRO Forecast

  • 33

    The current

    commercial

    air transport fleet

    consists of over

    27K aircraft

    Source: CAPA 2015

    NarrowbodyJet

    WidebodyJet

    Turboprop

    Regional Jet

    27,114

    Aircraft

    14%

    53%14%

    19%

    By Aircraft Type By Global Region

    North America

    Asia Pacific

    Europe

    Latin America

    Middle East

    31%

    27%

    25%

    8%5% 5%

    27,114

    Aircraft

    2015 Global Commercial Air Transport Fleet

  • 44

    The combination of

    strong air travel

    demand and the

    need to replace

    ageing aircraft will

    drive fleet growth at

    3.4% annually

    Source: ICF International, CAPA 2015

    Air traffic growth of ~4.1%

    Fuel costs in $55/bbl range

    ~19,600 aircraft deliveries

    ~8,800 aircraft retirements

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    35,000

    40,000

    2015 2025

    Africa

    Middle East

    Latin America

    Europe

    Asia Pacific

    North America

    27,100

    31% 26%

    37,900

    27%

    25%

    8%

    32%

    23%

    8%

    # Aircraft

    3.8%

    2.5%

    1.6%

    5.2%

    5.3%

    5.1%

    CAGR

    3.4% Avg.

    5%

    6%

    10 Year Global Air Transport Fleet Growth

  • 55

    Current air transport

    MRO demand is

    $64.3B; with Asia

    equivalent to North

    America and Europe

    in market size

    Source: ICF International; Forecast in 2015 $USD, exclusive of inflation

    Engines

    Components

    Line

    Airframe

    Modifications

    14%

    17%

    22%

    40%

    7%North

    America

    Asia Pacific

    Europe

    Middle East

    Latin America

    Africa

    29%

    28%

    26%

    8%

    6% 4%

    $64.3B$64.3B

    By MRO Segment By Global Region

    2015 Global MRO Demand

  • 66

    The global MRO

    market is expected

    to grow by 4.1%

    per annum to $96B

    by 2025

    Source: ICF International; Forecast in 2015 $USD, exclusive of inflation

    The strongest drivers of growth are the engine and component markets

    Reduced labor intensity of airframe heavy checks as the fleet renews and increased intervals...offset in emerging markets by increasing labor rates

    Aircraft upgrades (e.g. interiors, winglets) drive high modifications growth $0

    $10

    $20

    $30

    $40

    $50

    $60

    $70

    $80

    $90

    $100

    2015 2025

    Modifications

    Airframe

    Line

    Component

    Engine

    40%

    22%

    14%

    17%

    $64.3B

    $96.0B

    2.8%

    3.6%

    4.3%

    4.4%

    CAGR

    4.1% Avg.

    5.3%

    41%

    22%

    16%

    13%

    10 Year Global MRO Demand Growth

  • 77

    The current Latin

    American

    commercial

    air transport fleet

    consists of over

    2,100 aircraft

    Source: CAPA 2015

    NarrowbodyJet

    WidebodyJet

    Turboprop

    Regional Jet

    2,123

    Aircraft

    8%

    51%

    16%

    25%

    By Aircraft Type By Country

    Brazil

    Mexico

    ColombiaChile

    Venezuela

    Panama

    Other

    2,123

    Aircraft

    28%

    17%7%

    21%

    11%

    6%

    6%

    5%

    2015 Latin American Commercial Air Transport Fleet

  • 88

    The Latin American

    MRO market is

    expected to grow

    to approx. $6.3B

    by 2025, at 5.7% per

    annum

    Source: ICF International; Forecast in 2015 $USD, exclusive of inflation

    Latin American MRO growth is driven by continued narrowbody aircraft deliveries

    MRO spend on widebodies in Latin America will also nearly double by 2025 as the fleet increases by 56%

    With the anticipated fleet growth, the strongest MRO spend areas will be for engines and components $0

    $1

    $2

    $3

    $4

    $5

    $6

    $7

    2015 2025

    Modifications

    Airframe

    Line

    Component

    Engine

    36%

    25%

    13%

    20%

    $3.6B

    $6.3B

    5.1%

    4.0%

    5.2%

    6.6%

    CAGR

    5.7% Avg.

    8.2%

    40%

    24%

    17%

    12%

    7%

    10-Year Global Latin American MRO Demand Growth

  • 99

    Meet the Frackers!

  • 1010

    Breakthrough

    technologies in

    horizontal drilling

    and hydraulic

    fracturing (aka

    fracking) resulted

    in a US-led energy

    revolution

    Source: ICF International analysis

    North American crude oil and natural gas

    production have soared in recent years

    3,500

    4,500

    5,500

    6,500

    7,500

    8,500

    9,500

    10 year growth = 105%(7.45% CAGR)

    Thousands

    1,250

    1,450

    1,650

    1,850

    2,050

    2,250

    2,45010 year growth = 66%

    (5.22% CAGR)

    Billion cu. ft.

    U.S. Crude Oil Production(Barrels / day)

    U.S. Natural Gas Production(Monthly marketed production)

  • 1111

    The US energy

    revolution has

    completely upset

    the global economic

    and geopolitical

    balance of power

    Source: BP Statistical Review of World Energy June 2015, ICF International Analysis

    making the U.S. a global powerhouse in

    energy production

    728

    579

    177 173 162135

    109 10883 73

    0

    100

    200

    300

    400

    500

    600

    700

    800

    11.6 11.5

    10.8

    4.3 4.23.7 3.6

    3.3 3.12.8

    0

    2

    4

    6

    8

    10

    12

    14

    Global Oil Production(Million barrels / day as of June 2015)

    Global Natural Gas Production(Billions of cubic meters as of June 2015)

  • 1212

    The potential for

    sustained

    reduction in oil

    revenues could

    further destabilize

    many already

    fragile economies

    Source: BP Statistical Review of World Energy June 2015, ICF International Analysis

    Low oil prices are exerting tremendous stress

    on economies dependent on energy exports

    Brent Crude Oil Price, $ per barrel

    $40

    $60

    $80

    $100

    $120

    $140

    $160 Venezuela

    Iran

    Nigeria

    Ecuador

    Iraq

    Libya

    Saudi Arabia

    Angola

    UAE

    Qatar

    Russia

    Deficit

    Surplus

    Brent Crude Oil Price,

    USD$ per barrel

    National Government Fiscal Budgets Break-Even Oil Price (2014)

  • 1313

    Continued low fuel

    costs will have

    significant

    repercussions

    throughout the

    aviation & MRO

    supply chain

    Source: EIA; ICF International analysis

    Aviation fuel costs have dropped over 55%

    during the past 24 months

    U.S. Gulf Coast Jet Fuel Price per Gallon

    $1.2

    $1.4

    $1.6

    $1.8

    $2.0

    $2.2

    $2.4

    $2.6

    $2.8

    $3.0

    $ USD

    ~55%Decline

  • 1414

    Continued low fuel

    costs will have

    significant

    repercussions

    throughout the

    aviation & MRO

    supply chain

    Source: EIA; ICF International analysis

    Aviation fuel costs have dropped over 55%

    during the past 24 months

    Global Airline Profitability

    -$30

    -$20

    -$10

    $0

    $10

    $20

    $30

    $40

    $USD

    Billions$36B

    North America

    $19B

    Rest of World

    $17B

  • 1515

    The Not-So-Mighty-

    Mighty BRIC House

  • 1616

    Chinas seemingly

    insatiable demand

    for global

    commodities was a

    key driver of the

    BRICS economic

    growth

    Source: IMF, World Economic Outlook Database October 2015, ICF International Analysis

    After years of staggering GDP growth,

    Chinas economy has been steadily slowing

    5%

    7%

    9%

    11%

    13%

    15%

    2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F2015F 2016F

    China GDP Year-on-Year Growth (%)

  • 1717

    Latin American

    economies must

    continue to diversify

    away from

    commodities in order

    to minimize the

    adverse economic

    impact of plunging

    commodity prices

    Source: ICF analysis

    Over the past 5 years, commodity prices

    have plummeted more than 55%

    Dow Jones Commodity Indices (DJCI)(January 2011 Indexed to 100)

    40

    50

    60

    70

    80

    90

    100

    110

    - 56.0%

    Indexed

    Values

  • 1818

    Russian Ruble-55.1%

    Brazilian Real-41.1%

    S. African Rand-34.1%

    Mexican Peso-25.9%

    Can Dollars-23.1%

    Aus Dollars-20.8%

    Euro-20.0%

    British Pound-12.8%

    Japanese Yen-11.9%

    Indian Rupee-7.8%

    Chinese Yuan-7.2%

    -60%

    -50%

    -40%

    -30%

    -20%

    -10%

    0%

    10%

    The dramatic increase

    in oil & gas market

    supply and reduceddemand for

    commodities has led

    to a stronger US Dollar

    Source: Oanda historical exchange rates, ICF International Analysis

    Partially offsets the positive impact of low fuel costs for operators

    Increa