middle east : regional fleet developments impact on mro demand
TRANSCRIPT
Confidential and Proprietary. Copyright © 2013, Aviation Week
Regional Fleet Developments & Impact On MRO Demand:
MRO Middle East
Brian Kough Director – Forecasts & Analysis Aviation Week Washington, DC
Copyright © 2014 Penton 2
Regional Fleet Developments & Impact On MRO Demand
Fleet Trends & Outlook
• Middle East fleet changes
• Shorter Service Lives
• “Upgauging” cabin sizes
• The Duopoly continues
• Outlook for deliveries
• Patterns in fleet retirement
Copyright © 2014 Penton 3
Regional Fleet Developments & Impact On MRO Demand
MRO Implications
• Changes in aircraft economic life
• Other factors: Scrappers
• Middle East regional MRO forecast
• Strong CAGR relative to other regions
• Ten-Year MRO market of some $53 billion
• Things to think about “right now”
Copyright © 2014 Penton 4
Regional Fleet Developments & Impact On MRO Demand
Regional Fleet Trends & Outlook
Copyright © 2014 Penton 5
Upgauging: A New ‘Fact Of Life’
…for the largest in class
Increasingly, airlines are opting…
B737-800
B777-300
A330-300
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The Duopoly: Airbus & Boeing
Forecast Top Five New Aircraft Deliveries Middle East
777-300 ER & Airbus families dominate the decade’s deliveries
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Between them, Airbus and Boeing will command 93% of new deliveries to the Middle East through 2023
The Duopoly: Airbus & Boeing
Top Ten New Aircraft Deliveries Through 2023
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A350-900 is projected to be the fastest-growing fleet, starting from a very low base; The 787-900 will maintain a steady presence
Outlook For Deliveries
Top Ten Fastest-Growing Middle East Fleets
Compound Average
Growth of In-Service
Aircraft
Copyright © 2014 Penton 9
More than 6,000 retirements 1993-2013 - 1/4 of world fleet; forecast retirements trend accelerating
Patterns In Fleet Retirement
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Patterns In Fleet Retirement
Types Seen Retiring in Middle East Fokker 100: most not out until 2021
MD80: most not out until 2020
Airbus 320: the overall fleet grows,
but older aircraft retire at rate of
about 3 per year
A300-600: out by 2017
A310: most out by 2016
747-400
10
A320
B747
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Patterns In Fleet Retirement
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Boeing aircraft are retiring faster than Airbus aircraft…
…and Airbus’ deliveries are outpacing Boeing’s.
Retirements 2011 2012 Total
Airbus 62 96 158
Boeing 254 314 568
316 410 726
Deliveries 2011 2012 Total
Airbus 536 585 1121
Boeing 477 601 1078
1013 1186 2199
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Patterns In Fleet Retirement
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Net 2012-2013 Airbus fleet growth: 1,014 aircraft Net 2012-2013 Boeing fleet growth: 610 aircraft
Continuously growing worldwide fleet should more than compensate for somewhat younger retirements
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Patterns In Fleet Retirement
Safety As A Driver e.g., ADS-B/TCAS/GPWS Equipage costs versus residual value of
the aircraft Non-compliant aircraft have limited
utility
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Fuel As A Driver Short-haul narrowbodies more sensitive
to sustained fuel-price gains Some small number of “cast-off” U.S. RJs
seen entering service in Africa, Eastern Europe; overall RJs are in steep decline
Noise As A Driver Many older types banned
Technology As A Driver Next-Gen, RNP Passenger amenities, IFE, etc. Global recession artificially cramped the
most recent replacement cycle
Fuel and technology are factors changing aircraft economic-life assumptions
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1. More than 1,400 new aircraft will be delivered through 2023
2. Middle East fleet will grow to nearly 2,500
3. Larger airframes, wide-bodies will dominate at 68%
4. Airbus and Boeing will preserve “The Duopoly” in this market
5. So long as fuel and component prices continue on their present
trajectories, retirements will make sense at younger aircraft ages
6. Safety, noise, fuel and technology all will accelerate the need for
MROs to build new capabilities
14
Fleet Summary
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Changes In Aircraft Economic Life
Increasingly, younger aircraft are going straight to part-out…
This aircraft was less than 13 years old
upon retirement
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15
2025
3035
40
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
NB+WB PASSENGER NB+WB FREIGHTER
15
20
25
30
35
40NARROWBODY JETS * WIDEBODY JETS *
2,0002,000retirementsretirements
4,0004,000retirementsretirements
Changes In Aircraft Economic Life
Jet aircraft economic service life may have peaked
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Changes In Aircraft Economic Life
Increasingly, younger aircraft are going straight to part-out…
CFM56 components are valuable and sought-after
Airbus A320s are also popular, driven by component needs
Copyright © 2014 Penton 19
Survivor Disappearing Corporation Merged FleetUnited Air Lines Continental Airlines 346Delta Air Lines Northwest Airlines 316Expressjet Airlines Atlantic Southeast Airlines 169US Airways America West Airlines 132Air India Indian Airlines 85Japan Airlines International Japan Air Systems 75China Southern Airlines Zhongyuan Airlines, China Northern, China Xinjiang 72China Eastern Airlines Shanghai Airlines 54Olympic Air Aegean Airlines 53Air China China Southwest Airlines 49SN Brussels Airlines Virgin Express 48Tuifly Hapag-Llyod Express, Hapag-Lloyd Flug 43Kingfisher Airlines Air Deccan 41Flybe Finnair 38Piedmont Airlines Allegheny Airlines 33
Next:American Airlines US Airways 337
Top 15 mergers in the past 10 years affected over 3,400 aircraft
Consolidation Creates Bargaining Power
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Average Fleet Size
185201
225
115126
146
0
50
100
150
200
250
2000 2006 2012
Top 50 OperatorsTop 100 Operators
Number of Operators
63
75
98
30
4248
0
20
40
60
80
100
120
2000 2006 2012
50 or More Aircraft in Fleet100 or More Aircraft in Fleet
Consolidation Creates Bargaining Power
Operators worldwide have grown larger, with better bargaining power over MRO costs
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On-Airplane MRO Cost
$0.00
$0.50
$1.00
$1.50
$2.00
1960 1970 1980 1990 2000 2010 2020
Technology Year
Cost
$ /
FH
/ 1
000
LB M
TOW Narrowbody
Widebody
Technology, Too, Has Chipped Away At MRO Oppty
Technology has brought down aircraft life-cycle MRO costs
Copyright © 2014 Penton 22
MRO Forecast: Middle East
Aviation Week forecasts a $3.7 billion MRO market in 2014
Engine Maintenance & Component categories are the largest share of the market
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MRO Forecast: Middle East
By 2023 the MRO market should grow to $6.9 billion, the result of a 7.3% CAGR
$53 billion MRO opportunity over 10 years
Copyright © 2014 Penton 24
MRO Forecast: Middle East
Engine Maintenance shows the strongest absolute growth and CAGR follow by Components
$ Billions
2014
2023
Copyright © 2014 Penton 25
Take-Aways: Reshaped Fleet, New Imperatives
1. Younger fleet suggests creative service offerings or packages may be inevitable to balance revenue stream
2. Higher number of larger twins. Implications for MROs? Hangar space/shop space/tooling needs?
3. Growth of leasing companies’ share of the overall aircraft portfolio
will lead to more emphasis on margins; parting-out will accelerate unless OEMs adjust
4. Newer, less diverse fleets will boost importance of competence on Airbus and Boeing
5. Engine maintenance is largest share of MRO spending & expands more by 2023