NAVIGATINGTHROUGH THE UNPREDICTABLE -...

©TeamSAI

NAVIGATING THROUGH THE UNPREDICTABLE

UNCERTAINTY AND RISK . . .

2014–2024 GLOBAL MRO FORECASTMRO EUROPE CONFERENCE

OCTOBER 2014

10/07/2014

©TeamSAI


A LOOK BACK

210/07/2014

©TeamSAI 3

IN 2004, TEAMSAI PREDICTED MRO IN 2014 WOULD EXCEED $56B

10/07/2014

$42.7

$56.5

2004 20142004 Forecast 2014 Forecast

BUT WOULD ANYONE SAY IT HAS BEEN AN EASY DECADE?Note: All values in 2014 $US

Total Jet Aircraft MRO Forecast (2014 $USB)

$54.7

2014 2024

$83.3

©TeamSAI

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%Historical and Forecast GDP Growth in the EU

4

THINGS MAY BE CALMING DOWN IN THE EU

10/07/2014

AFTER A TUMULTUOUS FEW YEARS, EUROPE SEEMS POISED FOR GROWTH

Source: IMF World Economic Outlook, 4/2014

©TeamSAI 5

BUT DIFFERENT REGIONS TELL DIFFERENT STORIES

10/07/2014

BUT PEELING BACK THE EU CURTAIN SUGGESTS GROWTH IN SOME REGIONS COMES WITH RISKS

Source: IMF World Economic Outlook, 4/2014, UN country groupings

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Region Issue RisksEastern Europe

Strong growth in recent years but now subject to serious concerns

• Tension between Russia and Ukraine

• Soft energy prices in Europe contribute to the East’s economic weakness

• Geo-Politicalrisk

SouthernEurope

Moderate growth in countries still struggling with austerity

• Debt levels remain high• Weak consumer market

• Credit / Forecast risk

NorthernEurope

Strong growth forecast

• Relatively calm countries but volatile results

• Forecast risk

Western Europe

Moderate growth in most countries

• Largest basket but history has shown these countries too can be volatile in terms of GDP growth

• Forecastrisk

Europe Implementation of sanctions on Russia

• Across all regions, sanctions could hinder fragile recovery

• Geo-Politicalrisk

6

RISKS SPEFIC TO EU REGIONS

10/07/2014

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WHAT DOES IT MEAN FOR MRO PLANNING?

10/07/2014

MROPLANNING

risks and uncertainty abound…

ForecastUncertainties

MROUncertainties

Geo-PoliticalRisks

NaturalDisasterRisks

©TeamSAI 8

DON’T GET COMPLACENT…GEO-POLITICAL RISKS CONTINUE

10/07/2014

slowdown in China

• Chinese economic growth accounts for 24% of net global growth

GEO

-PO

LITI

CA

L

currency fluctuations

• Threatens airlines in emerging markets such as India and Indonesia

• Ticket prices• Ability to purchase oil and parts

short term

short to medium

term

China as a share of net economic growth ¼Ticket prices

US$-denominated oilNon-local spare parts ▲

?

emerging market currency fluctuations

slowdown in China

©TeamSAI 9

DON’T GET COMPLACENT…MRO RISKS ABOUNDM

RO

©TeamSAI


FLEET AND MROOUTLOOK

1010/07/2014

©TeamSAI

year-by-year fleet forecast

year-by-year MRO forecast

improved airframe modifications model

improved component MRO model

improved line maintenance model

implemented engine shop visit model and improved interval driver methodology

improved labor/material differentiation across all models

11

MODEL ENHANCEMENTS FOR 2014

10/07/2014

©TeamSAI 12

GLOBAL FLEET OUTLOOK - COMMERCIAL AIRLINE SECTOR

10/07/2014

2014-2024 Growth

Rate

2024 Market Share

0.8% 24%

2.1% 18%

4.4% 17%

7.3% 12%

5.1% 8%

5.6% 6%

5.8% 6%

5.1% 5%

11.4% 3%

©TeamSAI 13

GLOBALLY, THE MRO GROWTH OUTLOOK IS HEALTHY

10/07/2014

$58B-$87B

Global Market Size

+4.2% CAGR

2014-2024

Airframe 4.1% 20%Engine 4.1% 38%Component 4.4% 22%Line 4.1% 20%

CAGR % SHARE

©TeamSAI 14

MRO REGIONAL MARKET SHARES CHANGE DRAMATICALLY BY 2024

10/07/2014

ME/Africa • ME will double by 2024, driving majority of growth

Asia • Asia will be the largest MRO market by 2024

Americas • Large-scale fleet replacement in NA translates to flat MRO

• LA&C market drives growth

Europe • EU to have moderate MRO growth, at 2.9%

Europe

Americas

Asia

ME/Africa

©TeamSAI 15

EUROPEAN FLEET GROWTH WILL BE SOLID

10/07/2014

pax traffic2014F (IATA) ▲ 4.7% RPK

current fleet2014 (Ascend Online) 5,950

fleet CAGR2014-24 (TeamSAI) +2.9%deliveries2014-24 (TeamSAI) 3,700+

retirements2014-24 (TeamSAI) 1,700+

RJ▼

2014-2024 CAGR

2.9%

1.3%

-0.5%

3.3%

3.7%

WE EE EUGrowth 1,104 872 1,976 Replacement 1,591 138 1,729

©TeamSAI 16

EUROPEAN MRO OUTLOOK

10/07/2014

$16B-$22B

EU Market Size

+2.9% CAGR

2014-2024

Airframe 2.0% 23%Engine 3.1% 33%Component 3.5% 20%Line 3.0% 24%

CAGR % SHARE

©TeamSAI 17

EUROPEAN MRO BY VINTAGE & MODEL TYPE

10/07/2014

Consider Impact to MRO

less-mx-intensive HMV ▼engine MRO honeymoon ▼component MRO honeymoon ▼1970s + 1980s share ▼1990s, 2000s, 2010s share ▲

Europe’s Top 10 Aircraft Families in terms of MRO Spend2014 2024

1 A320 CEO & NEO 29% A320 CEO & NEO 29%2 737 NG & MAX 14% 737 NG & MAX 21%3 747-400 10% 777 8%4 777 9% A350 7%5 A330 7% A330 6%6 A340 7% 787 4%7 737 Classics 6% A340 4%8 767 3% 747-8 3%9 757 3% A380 2%

10 Embraer 170/175/190/195 & E2 2% 747-400 2%

©TeamSAI 19

RISKS AND UNCERTAINTIES IN FLEET AND MRO FORECAST

10/07/2014

HIGH: higher deliveries/lower retirementsmoderate interest ratesstable economic growth in emerging regionsmoderate oil prices

lower deliveries/higher retirementshigher interest rates

LOW: low economic growth

©TeamSAI

BENEFITS

20

POSITIONING THE BUSINESS EFFECTIVELY

10/07/2014

Methods to Achieve

strong balance sheet

good bottom line

distinctive reputation

effective scenario/ contingency planning

customer focus

broad vision

excellent execution

financial discipline

Lead

ing

Qua

litie

s EXCELLENCEEXCELLENCE

PROFITABILITYPROFITABILITY

▼SURVIVABILITY▲VERSATILITY

▼SURVIVABILITY▲VERSATILITY

PREPAREDNESSPREPAREDNESS

©TeamSAI

Deliver……..Deliver……..

Define ……..Define ……..

Analyze……..Analyze……..

21

MROS MUST ANALYZE, DEFINE, AND DELIVER VALUE TO CUSTOMERS

10/07/2014

know yourmarketknow yourmarket

know your propositionknow your proposition

know yourcustomerknow yourcustomer

compelling presentation

execution

clear business case

pricing

clear strategy, positioning

market attractiveness

competitor analysis

market potential

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