Engine MRO Forecast & Industry Trends · Regional Jet Widebody Jet Narrowbody Jet. Source: CAPA,...

Engine MRO Forecast &

Industry Trends

Jonathan M. BergerManaging DirectorNovember 6-8, 2018, Singapore

1

Agile. Global. Independent.

COMPANY INTRODUCTION

Alton Aviation Consultancy is a boutique aviation consulting firm

with deep domain expertise across the aviation value chain

Aircraft Leasing &

Financing AdvisoryAirlines

Aviation &

Aerospace Investors

Business &

General Aviation

Aerospace Manufacturers

& Supply ChainMRO & Aftermarket Airports Specialty Projects

In China, Alton Aviation Consultancy is known as 德世国际航空咨询（北京）有限公司, or De Shi.

Alton supports a global client base from offices in the U.S., Europe,

China, Hong Kong, and Tokyo with additional associates worldwide

COMPANY INTRODUCTION

411 Fifth Avenue

Suite 801

New York, New York

10016

USA

+1 212 256 [email protected]

New York

8 Guanghua Dongli

China Overseas Plaza

South Tower, Floor 11,

Suite A053

Chaoyang, Beijing 100020

China


Beijing

136 Des Voeux Road

Suite 1202

Central

Hong Kong

+852 8191 [email protected]

Hong Kong

Taiyo Seimei

Shinagawa building

28th Floor, 2-16-2 Konan,

Minato-ku, Tokyo 108-0075,

Japan


Tokyo

No. 1 Grants Row

Lower Mount Street

Dublin, Ireland

+353 1 566 8933 [email protected]

Dublin

3

TODAY’S AGENDA

Global Fleet Dynamics & MRO Forecast

“Revenge of the Engine PMA”

New Engine Technologies on the Horizon

4

GLOBAL FLEET DYNAMICS & MRO FORECAST

Historically, fleet growth has been directly correlated to GDP…


5Source: CAPA, USDA ERS, Alton analysis

Fleet and GDP Growth by Region (1997 – 2017)

10%

7% 7%

6%

5%

3%

3.8%

4.4%4.2%

2.5%

1.8%

2.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0%

2%

4%

6%

8%

10%

12%

14%

Middle East Asia-Pacific Africa Latin America Europe North America

% Fleet growthGDP

Avg. GDP

Growth/yr

Avg. Fleet

Growth/yr

…perhaps a better determinant of future fleet growth is the so-called

“Disneyland factor”; the growth rate of a country’s middle class


6Source: Airbus Global Market Forecast 2016-2036, Alton analysis

103%

6%

51%

2%

149%

41%

75%

0%

20%

40%

60%

80%

100%

120%

140%

160%

-

500

1,000

1,500

2,000

2,500

3,000

20

Ye

ar

Gro

wth

Rate

Ho

us

eh

old

s (

mil

lio

ns

)

2016203620 yr % growth

Middle Class Growth by Region (2016 – 2036)

7Source: CAPA, Alton analysis

Record high OEM backlog continues to drive investor interest, joint

venture, and M&A activity in MRO providers and OEM supply chain


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

10 Year Engine Backlog by OEM

Other

IAE

Rolls-Royce

Pratt & Whitney

GE, CFM

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

10 Year Aircraft Backlog by Region

Turboprop

Regional Jet

Widebody Jet

Narrowbody Jet


Over the past 25 years, the global fleet has grown at a rate of 4.9%, with

narrowbody aircraft accounting for over 57% of today’s fleet


0

5,000

10,000

15,000

20,000

25,000

30,000

1993 1998 2003 2008 2013 2018

Widebody Jet

Turboprop

Regional Jet

Narrowbody Jet

20%

10%

13%

57%

Global Fleet Count (1993 – 2018) Engines by Manufacturer (1993 – 2018)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1993 1998 2003 2008 2013 2018

Other

IAE

Rolls-Royce

Pratt & Whitney

GE, CFM


Today’s commercial air transport fleet consists of approximately 28,000

aircraft, with Asia Pacific now equal in size to North America


Narrowbody Jet

Regional Jet

Turboprop

Widebody Jet

51%

24%

9%

16%

8,400

61%

11%

10%

18%

6,600

63%

5%

10%

22%

8,400

59%

17%

14%

10%

2,10041%

17%

28%

14%

1,300

39%

7%

3%

51% 2,100

Growing to 44,000 aircraft by 2028

3.8% CAGR

2028

2018


0

1,000

2,000

3,000

4,000

5,000

Driven by narrowbody aircraft deliveries, the installed engine base in Asia-

Pacific primarily consists of the CFM56-5/7 and V2500


Installed Base by Engine Model(Asia-Pacific Region)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Installed Base by Country(Top 10 by Volume; Asia-Pacific Region)

OTHER GEnx

CF34 PW4000

CF6 GE90

Trent 700 PW100

V2500 CFM56-5

CFM56-7

~ 9,850 engines

~ 6x


There are already over 4,400 confirmed orders for the CFM LEAP & P&W

Geared Turbo Fan (GTF) engines in the APAC region


Alton Insight

▪ Both the CFM LEAP and P&W GTF are

meeting fuel efficiency targets

▪ Given the recent Airbus / Bombardier

venture, analysts predict a potential

doubling of previous C Series/A220 order

estimates (great news for P&W!)

▪ P&W has secured significant GTF MRO

capacity in APAC via JVs with SAIEC (Eagle

Services Asia in Singapore) and Air New

Zealand (Christchurch Engine Center), IHI in

Japan, and MTU Zuhai (China Southern JV)

▪ In APAC, GE plans to support the LEAP in

its Singapore facility; MTU will also support

the LEAP in its Zuhai, China facility

$66B

0

200

400

600

800

1000

1200

10 Year Engine Count by Country(Top 10 Asia Pacific Countries by Volume)

P&W GTF

CFM LEAP

12Source: Alton Analysis, all figures constant dollars ($2018 USD)

Today’s commercial air transport MRO market demand is approx. $69B,

growing to $103B by 2028 – an annualized growth rate of 4.1%


$0 $20 $40 $60 $80 $100 $120

World Total

Asia Pacific

North America

Europe

Middle East

Latin America

Africa

$103B

10yr CAGR

5.0%

5.0%

6.5%

2.2%

1.6%

5.7%

$0 $20 $40 $60 $80 $100 $120

World Total

Engine

Components

Line

Airframe Heavy

Modifications

10yr CAGR

$103B

6.1%

2.9%

3.9%

3.1%

4.4%

$0 $20 $40 $60 $80 $100 $120

World Total

Asia Pacific

North America

Europe

Middle East

Latin America

Africa

$69B

$3.8B

$7.4B

$16.4B

$16.9B

$22.6B

$2.4B

$0 $20 $40 $60 $80 $100 $120

World Total

Engine

Components

Line

Airframe Heavy

Modifications

$69B

$6B

$8B

$13B

$14B

$29B

13

REVENGE OF THE ENGINE PMA

14

Alton Insight

▪ From emissions, to noise, to time-

on-wing & MTBR, the CFM56-5/7 and

V2500 exceeded expectations on

virtually every performance metric

▪ Many would argue the engines were

too durable (shop visits driven by

LLP, not EGT)

▪ Much to the delight of the MRO

supply chain, the infamous shop

visit “bow wave” has finally arrived,

creating competition for shop visit

slots

Source: Alton forecast

Current generation of narrowbody engines propelled the industry to new

heights in aero-engine performance and reliability


Cumulative Engines by

Year of Delivery

0

5,000

10,000

15,000

20,000

25,000

30,000

CFM56-7B

CFM56-5B

V2500 7,522

12,922

6,138

15Source: Alton forecast

Annual deliveries of new technology engines will see dramatic increases,

challenging the scalability of the engine production supply chain


Annual Deliveries of New

Technology Engines

0

500

1,000

1,500

2,000

2,500

3,000

3,500CFM LEAP

PW1000G

Trent 1000

2,098

914

149

Alton Insight

Historically consistent, several new

technology engines are experiencing

operational “teething pains”,

resulting in significant volume of

unscheduled shop visits

▪ CFM LEAP - high pressure turbine

shroud issues

▪ Pratt & Whitney PW1000G Geared

Turbo Fan - knife-edge seals and

cooling issues

▪ Rolls Royce Trent 1000 - fan blade

issues


Fleet retirements are down from peak levels


$66B

Alton Insight

▪ Typical aircraft life is approx. 25

years; there was a large spike in

aircraft deliveries in the late 1980’s

▪ Airline retirement decisions are

primarily driven by fuel prices and

airline financial health

▪ Surge in aircraft 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 had a significant impact

on PMA growth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

0

500

1000

1500

2000

2500

3000

3500

Aircraft Retired

% Fleet

Avg. 464

Avg. 144

Avg. 601

Avg. 294

% FleetTotal Aircraft

17Source: Alton analysis

Jonathan M. Berger: https://www.linkedin.com/pulse/revenge-engine-pma-jonathan-m-berger/

Revenge of the Engine PMA: “The perfect storm”


New engine teething pains driving high

volume of unscheduled shop visits

1

Mature engine routine shop visits at

an all time high

2

Reduced retirements and part-outs

limiting surplus part availability

3

Engine piece part supply chain unable

to meet demand to support production

and MRO

4

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

https://www.linkedin.com/pulse/revenge-engine-pma-jonathan-m-berger/

18

NEW ENGINE TECHNOLOGIES ON THE HORIZON

19Source: Aviation Week, May 2017

Additive manufacturing (or 3D printing) is already transforming traditional

engine design and production


Alton Insight

▪ GE’s new Advanced Turboprop is

being touted as “the world’s most

printed engine”

▪ The Advanced Turboprop will

power Cessna’s new Denali aircraft

▪ Additive manufacturing replaces

855 normally made parts with just

12 “printed” components

▪ GE claims the engine is designed

to achieve 20% better fuel burn

with 10% more power than

comparative engines

18Source: The Economist, September 2017

An army of tiny robots are on the march; with plans to disrupt engine MRO

inspection and repair processes


Alton Insight▪ OEMs are developing very small

robots which can venture inside an

engine to perform inspections and

carry out any necessary repairs

▪ The robots are small enough to

navigate their way around all the

various fan and turbine blades,

taking video of everything they see,

and will relay the pictures

wirelessly to technicians

▪ Once the video has been analyzed

by technicians, the robots will be

able to carry out certain repairs (at

the gate between flights!)

ALTONAVIATION.COM

NEW YORK | DUBLIN | HONG KONG | BEIJING | TOKYO

Jonathan M. Berger

+1 212 301 0573

[email protected]

Engine MRO Forecast & Industry Trends · Regional Jet Widebody Jet Narrowbody Jet. Source: CAPA,...

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Transcript of Engine MRO Forecast & Industry Trends · Regional Jet Widebody Jet Narrowbody Jet. Source: CAPA,...