MRO Market Update & Industry Trends - Aviation .0 MRO Market Update & Industry Trends...

download MRO Market Update & Industry Trends - Aviation .0 MRO Market Update & Industry Trends Presented by:

of 27

  • date post

    21-Aug-2019
  • Category

    Documents

  • view

    214
  • download

    0

Embed Size (px)

Transcript of MRO Market Update & Industry Trends - Aviation .0 MRO Market Update & Industry Trends...

  • 0

    MRO Market Update & Industry Trends

    Presented by:

    Jonathan M. Berger Vice President  ICF

    jberger@icf.com

    January 25-26, 2017

    Cancun, Mexico

  • 11

    Today’s Agenda

    Fleet & MRO Forecast

    2016: What a long strange trip

    year it’s been…

    2017: The year aviation &

    aerospace blinked…

  • 22

    MRO Forecast

  • 33

    The current

    commercial

    air transport fleet

    consists of under

    28K aircraft; over

    half are narrowbody

    aircraft

    Source: CAPA 2016

    Narrowbody Jet

    Widebody Jet

    Turboprop

    Regional Jet

    27,957

    Aircraft

    13%

    54%14%

    19%

    By Aircraft Type By Global Region

    27,957

    Aircraft

    2016 Global Commercial Air Transport Fleet

    5%

    28%

    25% 5%

    30%

    7%

    Latin

    America Africa

    North

    America

    Asia

    Pacific

    Europe Middle East

  • 44

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    35,000

    40,000

    2016 2026

    Africa

    Middle East

    Latin America Europe

    Asia Pacific

    North America

    The combination of

    strong air travel

    demand and the

    need to replace

    ageing aircraft will

    drive fleet growth at

    a healthy 3.2%

    annually

    Source: ICF analysis: CAPA 2016

    28,000

    30% 25%

    38,100

    28%

    25%

    8%

    33%

    23%

    8%

    # Aircraft

    3.4%

    2.4%

    1.3%

    4.8%

    5.0%

    4.1%

    CAGR

    3.2% Avg.

    5%

    6%

    10 Year Global Air Transport Fleet Growth

  • 55

    Current commercial

    air transport MRO

    demand is $67.6B;

    Asia is now larger

    than North America

    and Europe in

    market size

    Source: ICF analysis; Forecast in 2016 $USD, exclusive of inflation

    Engines

    Components

    Line

    Airframe

    Modifications

    14%

    17%

    22%

    40%

    8%

    North America

    Asia Pacific

    Europe

    Middle East

    Latin America

    Africa

    27%

    30%

    26%

    8%

    6% 4%

    $67.6B$67.6B

    By MRO Segment By Global Region

    2016 Commercial Air Transport Global MRO Demand

  • 66

    The global MRO

    market is expected

    to grow by 4.1% per

    annum to over

    $100B by 2026

    Source: ICF analysis; Forecast in 2016 $USD, exclusive of inflation

     Engine and component MRO markets remain the largest segments

     Modifications market will see the strongest growth (e.g. interiors, connectivity)

     Airframe market slows due to reduced man-hour intensity and increased check intervals as new fleets are introduced

    $0

    $10

    $20

    $30

    $40

    $50

    $60

    $70

    $80

    $90

    $100

    2016 2026

    Modifications

    Airframe

    Line

    Component

    Engine

    40%

    22%

    14%

    17%

    $67.6B

    $100.6B

    2.8%

    3.2%

    4.2%

    4.5%

    CAGR

    4.1% Avg.

    5.2%

    41%

    22%

    16%

    12%

    10 Year Global Commercial Air Transport MRO Demand Growth

    $USD

    Billions

  • 77

    The current Latin

    American fleet

    consists of over

    2,100 aircraft; with

    narrowbody aircraft

    making up more than

    50% of the installed

    base

    Source: CAPA 2016

    Narrowbody Jet

    Widebody Jet

    Turboprop

    Regional Jet

    2,099

    Aircraft

    15%

    52% 23%

    9%

    By Aircraft Type By Country

    Brazil

    Mexico

    Colombia Chile

    Venezuela

    Panama

    Other

    2,099

    Aircraft

    25%

    19% 8%

    20%

    11%

    6%

    6%

    5%

    2016 Latin American Commercial Air Transport Fleet

  • 88

    The Latin American

    MRO market is

    expected to grow

    to approx. $6.4B

    by 2026, at 5.5% per

    annum

    Source: ICF analysis; Forecast in 2016 $USD, exclusive of inflation

     Modifications is the fastest

    growing MRO segment in

    Latin America

     MRO spend on widebodies

    in Latin America will nearly

    double by 2026 as the fleet

    increases by 56%

    $0

    $1

    $2

    $3

    $4

    $5

    $6

    $7

    2016 2026

    Modifications

    Airframe

    Line

    Component

    Engine

    37%

    25%

    13%

    19%

    $3.8B

    $6.4B

    4.0%

    3.7%

    4.7%

    7.0%

    CAGR

    5.5% Avg.

    7.2%

    42%

    23%

    16%

    11%

    8%

    10-Year Global Latin American MRO Demand Growth

    $USD

    Billions

    7%

  • 99

    2016: What a long strong trip

    year it’s been…

  • 1010

    Driven by low fuel

    costs and

    consolidation, the

    global airline

    industry achieved

    record profitability

    of over $35B USD in

    2016

    Source: IATA, ICF analysis

    2016 was a historic year for airline

    profitability…

    Global Airline Profitability, 1997 - 2017F

    -$30

    -$20

    -$10

    $0

    $10

    $20

    $30

    $40

    $USD

    Billions

    Asia Pacific, $6.3B

    North America, $18.1B

    Europe, $5.6B

    Middle East, $0.3B

    Latin America, $0.2B

    Africa, ($0.8B)$35.6B

  • 1111

    However, record

    profitability has

    been largely limited

    to carriers in North

    America

    Source: IATA, ICF Analysis

    -1.8%

    -4.7%

    0.1%

    2.3%

    1.0%

    -0.9%

    3.4%

    4.7%

    0.7% 1.5%

    3.0%

    -0.4%

    12.9%

    5.2% 4.5%

    2.9%

    0.7%

    -3.6%

    -6.0%

    -4.0%

    -2.0%

    0.0%

    2.0%

    4.0%

    6.0%

    8.0%

    10.0%

    12.0%

    14.0%

    2008

    2012

    2017F

    Global Airline EBIT Margin by Region

    …but many airlines continue to struggle

  • 1212

    Follow the Money:

    Airlines are

    spending their hard

    earned profits in

    three primary areas

    Source: Company Reports, ICF Analysis

    Airline Profit Spend Analysis

    Labor, 20%

    Capex, 38%

    Investors, 42%

    Profit Sharing 15%

    Wage Increases

    5%Fleet 23%

    Equity Investments

    5%

    Other capex 10%

    Debt Repayments

    16%

    Stock Buy- Back &

    Dividends 26%

    1. Labor ~ 20%:

     Profit sharing

     Wage increases

    2. Capex ~ 38%:

     Fleet renewal & cabin

    upgrades

     Facilities, offices, lounges

     Equity partner investments

    3. Investors ~ 42%:

     Stock buy-backs

     Dividends

     Debt repayment

  • 1313

    Aviation is

    experiencing a

    new golden age

    of aircraft cabin

    interiors

    Modifications demand includes labor and material spend

    *Passenger-To-Freighter Conversions

    **Airworthiness Directives / Service Bulletins

    Source: ICF analysis, constant 2016 US$

    MRO modification market

    growth drivers include:

     Latest lie-flat seats are now

    the minimum standard

     Premium economy

     Wi-fi, on-board connectivity

     Capacity (ASM/K) increase

    (“Cabin Densification”)

     Coming soon: ADS-B Mod

    program

    Commercial Air Transport Modifications Forecast

    $2.8

    $4.8

    $0.8

    $1.4

    $0.6

    $0.9

    $0.3

    $0.5

    $0.3

    $0.4

    $0.2

    $0.4

    $0

    $1

    $2

    $3

    $4

    $5

    $6

    $7

    $8

    $9

    $10

    2016 2026

    Cabin Connectivity

    AD/SB**

    PTF Conversions*

    Painting

    Avionics Upgrades

    Interiors

    $5.1B

    $8.5B

    3.6%

    4.2%

    5.9%

    5.6%

    CAGR

    5.2% Avg.

    2.9%

    $USD

    Billions

    5.1%

  • 1414

    $0

    $5

    $10

    $15

    $20

    $25

    $30

    $35

    $40

    Amazon Quarterly Revenue

    Amazon is very well

    positioned to lead a

    major disruption of

    the air cargo industry

    Source: Amazon SEC Filings

    Amazon’s Growing Revenue & Shipping Costs

    0%

    2%

    4%

    6%

    8%

    10%

    12%

    14%

    Shipping Costs as a Percentage of Revenue

    $B

    USD

  • 1515

    Latin American

    Aviation Outlook

  • 1616

    The good news…

    After a half decade

    of economic decli