surplus part market overview
TRANSCRIPT
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Surplus Part Market OverviewMay 18, 2015 – Punta Cana, Dominican Republic
Presented by:
Jonathan M. BergerVice President ICF [email protected]
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ICF is one of the world’s largest and most experienced aviation and aerospace consulting firms
52 years in business (founded 1963)
100+ professional staff
− Dedicated exclusively to aviation and aerospace
− Blend of consulting professionals and experienced aviation executives
Specialized, focused expertise and proprietary knowledge
Broad functional capabilities
More than 10,000 private and public sector assignments
Backed by parent company ICF International (2014 revenue - $1.05B)
Global presence –– offices around the world
Airports • Airlines • Aerospace & MRO • Aircraft Asset Advisory
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong
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Today, spending on air transport surplus parts is ~$3.5BSURPLUS PARTS MARKET
Engines
Components
Airframe
5%
65%
30%
Air Transport Surplus Parts Market*
* Sales to end customers; excludes intra-dealer sales
Surplus material for engines predominantly consist of piece parts (e.g., LLPs)
Component surplus are primarily rotables LRUs; Demand is driven by AOGs, BER and provisioning
Typically slow moving
structural parts
Source: ICF International
~$3.5B
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Annual retirements will exceed 1,000 aircraft by 2024; 2014 saw a significant drop-off in retirements however…
SURPLUS PARTS MARKET
Air Transport Annual Aircraft Retirements
Includes TurbopropsSource: FlightGlobal ACAS March 2015, Airline Monitor, ICF International Analysis
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
200
400
600
800
1,000
1,200
# Retirements
Retirement as % of installed fleet
% Installed Fleet
ICFforecast
1990-99 Average 191
2000-09 Average 432
2010-24 Average 806
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SURPLUS PARTS MARKET
2003-2014 Total Retired Aircraft(By Aircraft Category)
2003-2014 Total Retired Aircraft(By Aircraft Type)
Source: FlightGlobal ACAS, ICF International Analysis
About 6,700 aircraft were retired between 2003-2014; of which over half were narrowbody jets
Narrowbody Jet
Turboprops
Widebody Jet
Regional Jet
~ 6,700Retirements
727
737 Classic
737-1/200
DC-9
MD-80
747 ClassicA300 / A310
A320 FamilyDC-8
DC-10
~ 6,700Retirements
13%
9%
8%
7%
7%6%4%4%3%
2%
54%
21%
19%
7%
Others37%
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ICF forecasts 8,600 retirements through 2024, which will drive 42% of deliveries, compared to the historical 20%
SURPLUS PARTS MARKET
Source: ICF InternationalNote: includes turboprops and regional jets
Air Transport Retirements 2014 – 2024
-
5,000
10,000
15,000
20,000
25,000
Composition of Demand 2014 – 2024
20,500 Deliveries…
…of which 8,600 to offset retirements
…and 11,900 for new growth
42%
58%
A320 Family
737NG
737 Classic
767
CRJ-1/2/400
MD-80ERJ757
DHC6
747-400
~ 8,600Retirements
20%
8%
8%
5%
6%
Others35%
4%5%
3% 3%3%
Retirements historically drove 20% of deliveries; ICF estimates this % will double over the next 10 years
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
00's Tech
90's Tech
80's Tech
70's Tech
60's Tech
Historical Air Transport Retirements By Technology Era
SURPLUS PARTS MARKET
Source: FlightGlobal ACAS, ICF International Analysis
The emphasis on retirements is shifting towards aircraft that were manufactured during the 1980s
Percentage of
Retirements
2000s (e.g ERJ170s, A340-500/600s)1990s (e.g.A320 Family, A330s, 737NG, 777s)1980s (e.g A300/A310s, 757s, 767s, MD80s)1970s (e.g BAe146s, 737 Classics, DC9s, DC10, L1011)1960s (e.g 707s, 727s, 1-11s, F27s)
e.g. 707s, 727s
e.g. 737 Classics, DC9s, L-1011s e.g. A310s, 757/767s, MD80s
e.g. A320, 737NG, 777
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Commercial aircraft OEM production backlog remains at historical record levels
SURPLUS PARTS MARKET
0%
10%
20%
30%
40%
50%
60%
70%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft. Only includes passenger, freighter, quick change and combi operational rolesSource: Flightglobal ACAS, April 2015
Order Backlog
Backlog/Active Fleet
Commercial Aircraft OEM Production Backlog
High oil prices Low interest rates Emerging market growth New Technology aircraft/engines
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Surplus dealers and MROs now obtain approx. 85% of their inventory from parted-out aircraft
SURPLUS PARTS MARKET
54%
85%
26%
6%20%9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2014
Aircraft Part-Out
Direct Purchase From Airline
Purchase From Surplus Dealer
Supplier Channels for Obtaining Surplus Materials
Increased component cost per flight hour agreements
Leaner airline inventories – fewer airlines own inventory assets
Improved material planning (and MRO IT capabilities)
Growth of sophisticated parts brokers & lessors
ICF Insight
Source: ICF International
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Surplus Market Overview Appendix
SURPLUS PARTS MARKET
AOGs: (Aircraft On Ground) – Aviation industry term indicating an aircraft is out of service for a technical reason.
BER: (Beyond Economical Repair) – When the cost to repair an aircraft part exceeds the replacement value cost.
OEM: (Original Equipment Manufacturer) – A company whose products are used as components in another company's product
BRICS: Brazil, Russia, India, China, South Africa
MRO: Maintenance, Repair, and Overhaul
CAGR: Compound Annual Growth Rate
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Thank you!For questions regarding this presentation, please contact:
Jonathan M. BergerVice President – Aerospace & MRO
+1 (404) [email protected]