01. frost and sulivan iamsa presentation

1

Indonesian Aviation Industry Readiness Toward ASEAN Single Aviation Market (ASAM) 2015

Global and Indonesian MRO Industry Analysis

21st November 2012, Pullman Hotel, Jakarta, IAMSA Seminar

Indonesian Aviation Industry Readiness Toward ASEAN Single Aviation Market (ASAM) 2015

2

Global MRO Trends

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MRO activities are migrating to Asia Pacific, Middle East and Latin America

Global MRO Key Trends (1)

Emerging Clusters

Eastern China

Singapore

Malaysia

UAE

Eastern Europe

GermanyUK

France

North Africa

Brazil

Mexico

Central America

South Florida

Southern Californi

a

Central US

Quebec

Established Clusters

Hong Kong

With increasing labour costs, MRO activities are moving towards low cost nations like Mexico, Brazil, Malaysia, and North Africa. This is particularly seen in labor intensive heavy maintenance checks.

Most low labor cost nations are improving support for MRO services and providing infrastructure in the newly build airports.Source: Frost & Sullivan Analysis

4

Source: Frost & Sullivan

Africa Asia Pacific Europe Latin

AmericaMiddle East

North America

Africa 76% 14% 8% 2%

Asia Pacific 100%

Europe 3% 9% 84% 4%

Latin America 5% 92% 3%

Middle East 1% 16% 83%

North America 35% 4% 3% 58%

Total 3% 44% 24% 4% 9% 16%

Supply

Op

erat

or

reg

ion

Migration of Airframe Heavy Maintenance Man-hours

• Increasing fuel costs and retirement of maintenance intensive aircraft will hinder migration

• New generation aircrafts will affect man-hours per maintenance visit

• North America outsources HMV the most amongst all regions

• Middle East, Latin America, Eastern Europe and Africa are amongst the regions which have least ERO capabilities

EuropeNorth

AmericaMiddle East

Latin America

Eastern Europe

Asia Pacific

Africa

Europe 74% 11% 1% 5% 0% 9% 0%

North America 16% 65% 1% 3% 0% 14% 0%

Middle East 45% 22% 4% 0% 0% 30% 0%

Latin America 29% 43% 19% 5% 0% 5% 0%

Eastern Europe 44% 15% 8% 0% 3% 30% 0%

Asia Pacific 18% 14% 2% 1% 0% 65% 0%

Africa 57% 8% 15% 0% 0% 21% 0%

Total 33% 34% 3% 3% 1% 26% 1%

Supply

Op

era

tor

reg

ion

Migration of Engine Maintenance


6.5% of the global MRO spend is expected to migrate to Asia Pacific

5

Engine MRO market shares of OEMs and Independent MRO Providers are on the rise

2010 20200%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OEM42%

OEM50%

Independent33%

Independent40%

In-house25%

In-house10%

• OEM are aggressively looking for vertical

integration into MRO services.

• In-house decreasing significantly

• Airlines are reluctant to share the inventory

investment risks

• OEM presence in Asia Pacific is lower than the

world but is growing rapidly

3873

5279

1102 938655

3768

546

ERO Demand and Supply($ Millions), 2011

+44% +1% -61% -51% -98% +15% -100%

Excess supply as a percentage of demand

• Europe is the major net exporter of engine

MRO while Middle East, Africa, Latin America

are net importers

• The net importer regions are expected to

provide more incentives and infrastructure to

improve services of local companies


6

Global MRO Analysis

7

B737 will remain the biggest aircraft family by 2020. A320NEO has the highest CAGR in the timeframe.

Global Commercial Fleet (1) - by Aircraft Family

Aircraft Family 2011 2020 CAGR737-6/7/8/900 3775 7201 7.4%

A320 2804 4610 5.7%737-3/4/500 1614 828 -7.1%

A319 1250 1624 3.0%EMB-135/140/145 1035 901 -1.5%

CRJ-100/200 966 817 -1.8%757 951 603 -4.9%767 719 298 -9.3%

MD-80 670 60 -23.5%A321 664 1005 4.7%

Aircraft Family 2011 2020 CAGR737-6/7/8/900 3775 7201 7%

A320 2804 4610 6%A319 1250 1624 3%

A320NEO 0 1422 124%787-8/9 36 1171 47%

A321 664 1005 5%EMB-190/195 464 972 9%

EMB-135/140/145 1035 901 -2%CRJ-700/900/1000 635 869 4%

737-3/4/500 1614 828 -7%

Aircraft Family 2011 2020 CAGRA320NEO 0 1422 124%A350-900 0 402 95%

CS100 0 255 85%A350-800 0 218 82%

MRJ 0 190 79%C919 0 127 71%

A350-1000 0 82 63%MS-21 0 57 57%ARJ21 6 230 50%

787-8/9 36 1171 47%

Aircraft Family 2011 2020 CAGRFK100 204 5 -34%

DC-8-60/70 43 2 -29%DC-9 136 8 -27%

MD-80 670 60 -24%L-1011 22 2 -23%

FK70 46 5 -22%737-200 291 36 -21%

DC-10 35 5 -19%A300 61 9 -19%F-28 43 9 -16%

Top 10 aircraft families by numbers, 2011 Top 10 aircraft families by numbers, 2020

Bottom 10 aircraft families by CAGRTop 10 aircraft families by CAGR

MD, DC and FK fleets will be the major aircraft fleets to be retired in the next 10 yearsSource: Frost & Sullivan Analysis

8

Important to manage a balance between narrow body and wide body hangar space in Asia Pacific.

Global Commercial Fleet (2) - by Aircraft Category

NORTH A

MERIC

A

WESTE

RN EUROPE

ASIA P

ACIFIC

CHINA

LATI

N AM

ERICA

MID

DLE E

AST

EASTERN E

UROPE

AFRIC

A

INDIA

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

6,163 3,806 1,545 1,546 1,324 655 984 800 355

1,226

991

1,278 218 142

566 119 196 67

Worldwide Fleet, 2011

Wide Body

Narrow Body

83%90%

79%89%

80%

54%

88%

55%

84%

17%10%

21%11%

20%

46%

12%

45%

16%

Worldwide Fleet - Narrow body and Wide body, 2011

Narrow body Wide body

Source: Frost & Sullivan Analysis

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Whilst new aircraft will grow rapidly compared to older aircraft, the older aircraft will nonetheless achieve higher earnings per annum

Global Commercial Fleet (3) - by Age of Fleet

• The families which entered service before 2004 are considered old.

• A380-800, 787-8/9, A320NEO, A350-800/900 are some of the new families.


Old New Others

$2.54

$2.18

$1.74

Average Earning per Aircraft in a year (US$ Millions), 2011Fleet Families

Others92

41%

New18

10%

Old76

49%

2011 MRO Revenue 2020 MRO Revenue

Old $52,204

Old $63,139

New $1,115

New $11,584

Others $1,690

Others $2,975

2%CAGR

30%CAGR

Others include DC-9-50 STAGE 3, 747-200F,BAE 146-300, MD-87 (DC-9-87), 767-400ER737-200C/F, 747-400 SCD, 727-200, EMB-170/175, A310-200F, 707-320C, 737-200C/F STAGE 3

10

Although western nations command high market revenues, high growth markets lie in emerging market in the east

Global MRO Revenues - by Region

18.55

North AmericaNorth

America

2.83

Latin America

Latin America

1.92

AfricaAfrica

13.53

EuropeEurope

2.22

CIS & RussiaCIS & Russia

3.38

Middle East

Middle East

Middle East

APAC Latin America

Africa CIS & Russia

Europe North America

8.9

5.7 5.3 5.0

2.31.4 0.8

2011-2020 Growth(CAGR %)

1.92 2.22 2.83 3.38

12.5713.53

18.552011 MRO Revenue

($ Billion)

North America

34%

Europe25%

APAC23%

Middle East6%

Latin America

5%

CIS & Russia4%

Africa3%

2011 MRO Revenue share

12.57

Asia PacificAsia

Pacific


11

South East Asia along with India and China present very promising opportunities

APAC MRO Revenues - by Country

3.10

ChinaChina

1.45

JapanJapan

0.94

Hong KongHong Kong

1.13

South KoreaSouth Korea

0.76

SingaporeSingapore

0.95

AustraliaAustralia

CHINA24%

JAPAN11%

SOUTH KOREA9%

AUSTRALIA7%

HONG KONG7%

SINGAPORE6%

TAIWAN5%

INDIA5%

Thailand4%

INDONESIA4%

Others18%

2011 MRO Revenue share

0.70

TaiwanTaiwan

INDONESIA

THAILAND

INDIA

TAIWAN

SINGAPORE

HONG KONG

AUSTRALIA

SOUTH KOREA

JAPAN

CHINA

0.54 0.57 0.67 0.70 0.760.94 0.95

1.131.45

3.10

2011 MRO Revenue (US$ Billion)

0.67

IndiaIndia

0.54

IndonesiaIndonesia

INDIA

MALA

YSIA

CHINA

SINGAPORE

VIETNAM

INDONESIA

AUSTRALIA

PHILIPPIN

ES

THAILAND

NEW Z

EALAND

SOUTH KOREA

11.7

10.0

7.46.6 6.2 5.7 5.4 5.0 4.5

3.52.3

2011-2020 Growth(CAGR %)


0.57

ThailandThailand

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Indonesia MRO Analysis

13

Engine and component maintenance are growing at a significant pace in Indonesia

MRO Market Analysis – Indonesia MRO Revenues (by Segment and Aircraft Type)


Components40%

Engine24%

Line20%

Base12%

Modifications4%

MRO spending in Indonesia (US$ Millions), 2011

Modifications Components Line Maintenance

Airframe Heavy

Maintenance

Engine Maintenance

$-

$50

$100

$150

$200

$250

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

$23

$216

$111

$64

$130

11.1%

6.4%

2.2%

-0.2%

8.2%

Indonesia MRO spending, 2011

Indonesia Spending, 2011 CAGR (2011-2020)

Sp

en

din

g (

US

$ M

illio

n)

CA

GR

(2

01

1-2

02

0)

US $0.54 Billion

IndonesiaIndonesia

2011 2020

Narrow $433

Narrow $697

Wide $111

Wide $201

MRO Spending by Aircraft Type(US$ Million)

CAGR 5%

CAGR 7%

CAGR 5.7% (2011-2020)

14

737-800/900 will have the highest increase in spending while 737-200/300/400 will see significant decrease in spending by 2020

MRO Market Analysis – Indonesia MRO Revenues (by Aircraft Family and Airlines)


Others

BAE 146-200

BAE 146-100

MD-90

MD-83 (DC-9-83)

FOKKER 100

737-200

747-400

A330-300

A330-200

737-800

737-900BBJ3/-900ER

A320-200

737-400

737-300

$86

$2

$-

$8

$-

$1

$-

$-

$31

$101

$139

$340

$138

$5

$38

$44

$9

$9

$9

$10

$10

$14

$23

$38

$38

$46

$49

$53

$59

$134

MRO Revenues by Aircraft Family (US$ Million)

2011

2020

LION AIR, 737-900 GARUDA, 737-800 GARUDA, A330-200 INDONESIA AIRASIA, A320-200

$-

$10

$20

$30

$40

$50

$60

0%

5%

10%

15%

20%

25%

30%

$49 $46

$29

$15

24%

13% 13%15%

MRO Revenues for selected Airlines and Aircraft Fami-lies (US$ Million), 2011

MRO revenue, 2011 CAGR (2011-2020)

15

Lion Air is forecasted to have the highest increase in MRO spending by 2020. Garuda will, however, remain the biggest spender but only narrowly so.

MRO Market Analysis – Indonesia MRO Revenues and Fleet Composition


OTHERS

MERPATI

INDONESIA AIRASIA

SRIWIJAYA

LION AIR

GARUDA

$135

$1

$51

$1

$348

$364

$152

$20

$24

$38

$77

$234

Airline MRO Spending (US$ Million), 2011 and 2020

20112020

737-6/7/8/900 737-3/4/500 A320 737-200 A330-200/300

Others

102 100

29 2414

62

236

37 41

121

44

Indonesia Aircraft Fleet, 2011 - 2020

2011

2020

Others include Batavia, Mandala related aircrafts and other airlines

16

CFM56-3 engines will be retired rapidly by 2020

MRO Market Analysis – Indonesia Engine MRO revenues


$-

$10

$20

$30

$40

$50

$60

$70

Engine MRO Revenues (US$ Million), 2010

CFM56-3 TRENT700 CF6-80C2

V2500-A1 V2500-A5 Others

GARUDA BATAVIA AIRASIA LION AIR MANDALA $-

$20

$40

$60

$80

$100

$120 Engine MRO Revenues (US$ Million),

2020

CFM56-3 TRENT700 V2500-A5 CFM56-5B

CFM56-7 GE90-115B Others

Overall CAGR 8%CFM56-3 CAGR (27%)CFM56-7 CAGR 68%

CF

M5

6-3

TR

EN

T7

00

CF

6-8

0C

2

V2

50

0-A

1

V2

50

0-A

5

CF

M5

6-5

B

CF

M5

6-7

GE

90

-11

5B

-27% 9%

-100% -100%

27%44%

68%48%

CAGR 2011-2020

17

Spending is highest for CFM56-7 on 737-900ER by 2020

MRO Market Analysis – Indonesia Engine MRO revenues


CFM56

-3

TRENT7

00

CF6-8

0C2

V2500

-A1

LF50

2/50

7

CF6-8

0E

V2500

-D5

V2500

-A5

CFM56

-5A

SPEYTA

Y

JT8D

-200

$-

$10

$20

$30

$40

$50

$60

Engine MRO by Engine type ($ millions), Indonesia, 2011

747-400 A330-200 737-300 737-400

A320-200 A330-300 OTHERS

Re

ve

nu

e (

$ m

illio

n)

CFM56

-7

TRENT7

00

V2500

-A5

GE90-1

15B

CFM56

-5B

CF6-8

0E

V2500

-D5

CFM56

-3 $-

$20

$40

$60

$80

$100

$120

Engine MRO by Engine type($ millions), Indonesia, 2020

A330-200 A320-200 737-800

737-900BBJ3/-900ER 777-300ER OTHERS

18

Component MRO market will grow by 6% and each individual component is projected to grow

MRO Market Analysis – Indonesia Component MRO revenues


LANDIN

G GEAR

AIRBORNE A

UXILIA

RY POW

ER

ENGINE -

FUEL

AND CONTR

OL

FLIG

HT CONTR

OLS

AIR C

ONDITIO

NING A

ND PRESSURIZ

ATION

NAVIGATI

ON

EQUIPMENT/

FURNIS

HINGS

EXHAUST

INDIC

ATING /

RECORDING S

YSTEM

HYDRAULIC P

OWER

ELECTR

ICAL

POWER

AUTOFL

IGHT

IN F

LIGHT

ENTERTA

INMENT

PNEUMATIC

COMMUNICATI

ONS

OXYGEN

STARTI

NGOIL

FUEL

FIRE P

ROTECTI

ON

BLEED A

IR

ENGINE IN

DICATI

NG

ENGINE C

ONTROLS

$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

0%

2%

4%

6%

8%

10%

12%

$39 $38

$16 $13 $12 $11 $11 $10

$9 $8 $8 $7 $7 $6 $4 $4 $3 $3 $2

$1 $1 $1 $0

8%

2%

8%

5%

7%

8%

7%

10%

7%7%

6%

7%

9%

5%

7%

1%

7%8%

7%

5%

3%

6%

6%

Indonesia Component MRO Revenues, 2011

Rev

enu

es (

US

$ M

illio

n)

19

MRO Cluster Development

2020

Source – Frost & Sullivan

1. European Union (EU) and the Unites States (US) 2008

2. European Union (EU) and Israel (2012)

3. Japan and US (2010)4. Japan and Australia (2011)5. Japan and China 20126. China and US (planned)7. China and Japan (2010)8. South Korea and Canada

(2009)9. South Korea and

Vladivostok (2012)10. South Korea and Canada

(2009)

Regulatory – Global Open Skies Policies

Key Open Skies Policies are paving the way for global footprint of regional airline by entering into bilateral and multilateral agreements

21

Source – Frost & Sullivan

Bilateral and multilateral agreements between countries

Key reform of existing aviation rules and regulations are being undertaken in Asia Pacific mainly as efforts to open up the commercial aviation market

22

Developing MRO industry

In order to compete in different market dynamics which are likely to be more competitive from 2015 onwards, several key areas need to be addressed

Critical to continue to grow and grab opportunities will be :

Development as a key destination for airlines to come to/ connect

Development as an MRO Hub for Commercial & Business Aviation MRO,

Development of MRO Cluster Across Value Chain (Logistics, FBO, Parts, R&D, etc.)

Continuous capability development for next generation aircraft and engines,

Leveraging on high end integrated MRO service offerings,

Increase value-add modification and upgrades work,

Adopt lean MRO management to increase margin and efficiency.

23

Improving Supply Chain Government Incentives Enhancing workforce

• Having a holistic approach to supply chain

• Developing a overall support for suppliers in the country

• Provide incentives to MRO suppliers to set-up services in Indonesia. Offsets?

• The incentives include direct government support, labour regulation, tax structure and infrastructure, fuel price.

• High Manpower requirement in Indonesia due to growing fleets of each airline

• Manpower shortage in the region and is also a global challenge

MRO Supply Chain

Airl

ine

Supplier

MRO company

Concession Rates

Subsidized infrastructure

support

Land availability

Labour Regulation

2010 2015

14% CAGR

MRO growth

Developing MRO industry

Govt. incentives like concession rates, subsidies play a large role in attracting foreign investment, but workforce capabilities, and supply chain are also critical

24

Source: Frost & Sullivan Analysis,2011

Global MRO cluster benchmarking

Credibility can only be achieved if capabilities are developed across the value chain – backed and developed with the aid of industry and the Government

• The chart shows the general gap

area on aerospace MRO service-

process capability, which 23% of

total key service-processes are

either with limited capability or not

available in the Country.

• The chart also shows the gap area

in each MRO segment with

percentage value on top of each bar

to indicate the ratio of total limited

and not available service-processes

in each segment.

Assessment of Leading MRO Country Provider in s.e. Asia

Airframe MRO Avionics Systems MRO

Components MRO Engine MRO MRO Support

75

123

202

78 83

66

17

14

13

60

FULL CAPABILITY STRONG CAPABILITY

FULL CAPABILITY: MRO processes commonly available amongst suppliers. STRONG CAPABILITY: MRO process exist, however with limited processes in certain areas

25

Australia Mexico Singapore Middle East China

Cluster Spread RegionalScattered across

MexicoRegional Regional Regional

Cluster Focus MRO Manufacturing MRO MROMRO /

Manufacturing

Development Stage Mature Developing Mature Developing Mature

Cluster SizeMore than 500

businessesClose to 200 businesses

Close to 180 businesses





Different countries have adopted different models with regards to developing MRO Clusters – examples on a global basis of approaches taken

26



Strategy for Indonesian MRO cluster : will need to bring different parts of the value chain to be successful – all parties in value chain need to work together

ManufacturingCapabilities/ R&D

MRO Capabilities/ R&D

Supply Chain/ Logistics Capabilities

Physical FaciltiiesCommercial/ Business

FlightsHuman Resource

Training

Government lncentives, coupled with Industry Participation and Investment are required to build an MRO Park and make it a Success

1 2 3

4 5 6

27

Now is the time to act!

Thank you

01. frost and sulivan iamsa presentation

Documents

mro services

mro activities

global mro trends

global mro analysis

independent mro providers

maintenance visitnorth

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