turbulence ahead disengage the autopilot · 2015-2025 middle east and africa mro market forecast by...
TRANSCRIPT
© Oliver Wyman
AVIATION
Andrew Medland
Principal
WEDNESDAY, FEBRUARY 3, 2016
TURBULENCE AHEAD DISENGAGE THE AUTOPILOT 2015-2025 GLOBAL FLEET & MRO MARKET FORECAST
1 © Oliver Wyman
Oliver Wyman’s aviation practice integrated TeamSAI into CAVOK, our aviation technical consulting and services division
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reliability
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OEM Strategy
MRO Strategy
Transaction Support
Maintenance and Operations
Global Fleet &
MRO Market Outlook
3 © Oliver Wyman
13,124 16,949
21,089
4,686
5,753
7,181
3,396
3,222
2,906
2,721
3,079
3,232
23,927
29,003
34,408
5.2%
4.2%
-1.0%
2.5%
4.5%
4.5%
-2.0%
1.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2015 '15-'20CAGRS
2020 '20-'25CAGRS
2025
Narrowbody Widebody Regional Jet Turboprop
• Global fleet will grow on
average 3.7% annually
over the full forecast
period
• Passenger fleet expected
to grow at 3.8% annually
• Cargo fleet forecast to
grow by 2.3% annually
• Narrowbody aircraft will
lead the growth
• Regional jets will actually
decline in the mix
Key Fleet Forecast
Growth Rates
2015-2025 Global Fleet Forecast
by Aircraft Class
The global air transport jet and turboprop fleet will grow by more than 10,000 net new aircraft by 2025
Nu
mb
er
of
Air
cra
ft
The growth outlook, however, varies widely from region to region
3.9%
3.5%
4 © Oliver Wyman
A 5 pt spread in regional growth rates leads to a significant share shift over the decade ahead
The mature North American and Western European markets will continue to
undergo significant refleeting efforts during the next 10 years
2015
Fleet Size
722 North America
Europe
Latin America
& the Caribbean
Africa / Middle East
Asia Pacific / China / India
0.9%
2.8%
4.7%
5.5%
6.1%
6,131
1,720
1,965
997
1,562
5,235
10YR
CAGR
2015- 2025
Absolute Growth
2,204
7,420
6,452
5 © Oliver Wyman
A 5 pt spread in regional growth rates leads to a significant share shift over the decade ahead
The mature North American and Western European markets will continue to
undergo significant refleeting efforts during the next 10 years
2025
Fleet Size
North America
Europe
Latin America
& the Caribbean
Africa / Middle East
Asia Pacific / China / India 6.1%
7,420
6,131
1,720
2,204
6,452
8,096
2,717
3,766
11,687
8,142
6 © Oliver Wyman
New Cargo Deliveries
423
New Passenger Deliveries
18,068
664
Cargo Retirements
7,346
Passenger Retirements
Passenger Fleet
716
P2F Conversions
Cargo Fleet
43% of all new aircraft deliveries will replace old technology aircraft over the forecast period
The systematic elimination and replacement of older aircraft with new technology
aircraft will drive significant change is the business for airlines and maintainers
7 © Oliver Wyman
New Cargo Deliveries
423
New Passenger Deliveries
18,068
664
Cargo Retirements
7,346
Passenger Retirements
Passenger Fleet
716
P2F Conversions
Cargo Fleet
43% of all new aircraft deliveries will replace old technology aircraft over the forecast period
The systematic elimination and replacement of older aircraft with new technology
aircraft will drive significant change is the business for airlines and maintainers
10,481 Net Growth
8 © Oliver Wyman
2025 Global Air Transport Fleet
by Vintage
2015 Global Air Transport Fleet
by Vintage
The significant move towards late generation aircraft, in addition to improving airline
costs, will undoubtedly impact MRO dynamics
The result is a staggering change in fleet mix by 2025
1970's 2%
1980's 26%
1990's 63%
2000's 9%
1970's 0.1%
1980's 9%
1990's 46%
2000's 16%
2010's 29%
9 © Oliver Wyman
22% 19% 17%
42% 45% 47%
19% 18% 19%
18% 18% 18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2020 2025
Airframe Engine Component Line
$14.5 $15.9 $16.7
$27.9 $37.1
$46.8 $12.4
$15.2
$19.2
$12.3
$15.0
$17.8
$67.1
$83.2
$100.4
1.9%
5.9%
4.1%
4.0%
1.0%
4.8%
4.7%
3.5%
$0
$20
$40
$60
$80
$100
$120
2015 '15-'20CAGRS
2020 '20-'25CAGRS
2025
Bil
lio
ns
Airframe Engine Component Line
Global MRO Market Share Forecast
by MRO Segment
Global MRO Market Size Forecast
by MRO Segment
The fleet dynamics of the period result in a forecast that tops $100 billion by 2025, a 4.1% average annual growth rate
20
15
Do
lla
rs (
$U
SB
)
Ma
rket
Sh
are
Airframe Heavy Maintenance costs improve with the new technology while both
Engine and Component sectors will take a larger share
4.4%
3.8%
10 © Oliver Wyman
Shadowing the fleet trends, large differences in regional growth rates will lead to a significant shift in MRO demand
Asia/Pacific, China, & India will be challenged to build the necessary infrastructure
capable of handling the volume of MRO the combined region will demand
2015
MRO Spend ($USB)
$1.3 North America
Europe
Latin America
& the Caribbean
Africa / Middle East
Asia Pacific / China / India
0.6%
3.3%
7.3%
5.5%
6.6%
$17.9
$3.2
$7.0
$3.3
$5.3
$16.5
10YR
CAGR
2015- 2025
Absolute Growth ($USB)
$7.5
$18.3
$20.0
11 © Oliver Wyman
Shadowing the fleet trends, large differences in regional growth rates will lead to a significant shift in MRO demand
Asia/Pacific, China, & India will be challenged to build the necessary infrastructure
capable of handling the volume of MRO the combined region will demand
2025
MRO Spend ($USB)
North America
Europe
Latin America
& the Caribbean
Africa / Middle East
Asia Pacific / China / India 6.6%
$20.0
$17.9
$3.2
$7.5
$18.3
$21.3
$24.9
$6.5
$12.8
$34.8
Middle East and Africa Fleet &
MRO Market Outlook
13 © Oliver Wyman
Passenger traffic is soaring in the Middle East surpassing 11% growth in the last year. Traffic growth in Africa has remained mostly flat
2015 PASSENGER TRAFFIC (RPK)
GROWTH
11.1%
2015 CURRENT FLEET
2,204
2,100+
2015-2025 AIRCRAFT DELIVERIES
800+
2015-2025 AIRCRAFT RETIREMENTS
+5.5%
2015-2025
FLEET CAGR
14 © Oliver Wyman
In 10 years, over 42% of the Middle East and Africa fleet will be new technology aircraft requiring new technical skills and capabilities
777
737NG/MAX
A320C/NEO
737CL
A330
767
747
A340
A300
A380
777
A320C/NEO
737NG/MAX
A330
A340
747
A380
Top 10 Middle East and Africa Aircraft Families - 2025
Top 10 Middle East and Africa Aircraft Families - 2015
787
A350
ATR
15 © Oliver Wyman
$7.6 $7.6 $7.5 $8.4 $8.8
$10.3 $10.2 $10.6 $11.6 $11.5
$12.9
$0
$2
$4
$6
$8
$10
$12
$14
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Airframe Engine Component Line
2015-2025 Middle East and Africa MRO Market Forecast
by MRO Segment
A sharp increase in the rate of deliveries drives a 5.5% growth rate in MRO spend over the next ten years
MR
O S
pe
nd
in
20
15
US
Do
lla
rs (
$U
SB
)
Despite the solid growth, aftermarket participants will still need to have an
aggressive and innovative plan to maintain or grow market share.
16 © Oliver Wyman
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
Middle East Africa
2015 Middle East and Africa MRO Market Forecast
by Operator Country
Many different dynamics are at play in a region comprised of 62 countries and states; differences in individual economies and resource availability will produce uneven growth in the region
20
15
US
Do
lla
rs (
$U
SB
)
$2.7
Saudi Peninsula
• Fleet Size: 284
• MRO Market: $1.1B
With so many options around it and current
MRO options already in place, we do not
anticipate above average investment in this
region.
Sub-Saharan Africa
• Fleet Size: 723
• MRO Market: $1.4B
Declining commodities prices and lower
demand from the sub region’s largest
importer China greatly hamper the economic
outlook of the region. This paired with
constant geopolitical strife limits the
opportunities for MRO in the region.
United Arab Emirates/Qatar
• Fleet Size: 555
• MRO Market: $3.5B
The largest opportunities exist in Dubai, Abu
Dhabi and Doha. leading to future joint
ventures and increased OEM presence.
North Africa
• Fleet Size: 307
• MRO Market: $0.6B
The fleet consists of mostly aging
turboprops and regional jets adds up to a
relative small maintenance cost base,
leaving little opportunity in this sub region..
Fertile Crescent
• Fleet Size: 335
• MRO Market: $0.9B
While, economic development continues in
parts of the region, the current refugee
crises and current strife within this region will
limit any promise of growth for the
foreseeable future.
18 © Oliver Wyman
• Decisions necessary enter new markets for each of airframe,
engine and component repairs
New repair capabilities
required
• Health monitoring and predictive maintenance will reduce overall
time-on-tool requirements for individual checks with fewer repairs Less maintenance
• Increased aftermarket market share for the newest generation of
aircraft
OEM’s increased
aftermarket presence
• Critical new source of value to the aftermarket driven by those who
design the best algorithms and most rigorous data management
Increased use of data
analytics
Market participants will need aggressive and innovative plans for growth
Fleet changes and technological advances will create turbulence for the MRO business
2015 MRO Survey Results
20 © Oliver Wyman
Oliver Wyman’s 2015 MRO Survey identified a slew of new technologies that are poised to come to market Most prominent new technologies by 2020 (All respondents)
Aircraft Health Monitoring Systems
Predictive Maintenance
“Live” maintenance through
wearable and mobile technology
Composite repair capabilities
New repair technology
Additive manufacturing
Artificial intelligence
Drone-supported maintenance 4%
6%
25%
26%
35%
57%
66%
66%
21 © Oliver Wyman
The collection, storage, aggregation and analysis of data will be key factors in aircraft health monitoring and predicative maintenance Who is best positioned within the industry to benefit from predictive maintenance?
0%
7%
9%
19%
65%
PMA Manufacturers
MROs
Too early to predict
OEMs
Airlines
22 © Oliver Wyman
However, digesting innovative change is not standard fare for the MRO industry…
Survey respondents completed this sentence: “The MRO industry innovates...”
• Historically, little need to build internal
organizations devoted to R&D,
corporate strategy and product
development
• Lack of regular disruptions decrease
relative:
– Devoted resources
– Tried and tested review processes
– Time and attention of executives
– Clarity of ownership / leadership
– Assessment infrastructure
• Internal ability to recognize, assess
and prepare for change is not a core
capability for the industry
… frequently 13%
21% … primarily as a
response to OEM innovation
27% … sporadically
39% … periodically
23 © Oliver Wyman
…and though they have a vision, many organizations struggle with how to rapidly evaluate and bring innovative ideas to market Positive survey responses
We can quickly translate the identified opportunities into pilot projects and fast-to-market roll-out programs
Our innovation process allows us to quickly translate identified opportunities into plans and get sign-off from top management
We use a strategic planning method to visualize areas of opportunity and identify the most promising prospects
Top management has a clear, shared vision and strategy for growth in new business areas
Use a strategic planning method to visualize areas of opportunity and identify the most promising prospects
Our innovation process allows us to quickly translate identified opportunities into plans and get sign-off
We quickly pilot ideas and roll out fast-to-market programs
Decreasing
impact;
More
difficulty
bringing vision
to market
76%
68%
43%
33%
Top management has a clear, shared vision and strategy for growth in new business areas
24 © Oliver Wyman
So what’s really inhibiting change in MROs?
• The primary inhibitors of innovation at my organization are:
Budget / capital availability
Total cost / lack of clear payback
Inability to prove innovative process
/ product / service will offer margin
benefits over current techniques
Organization resistance
Implementation difficulties
Review and approval process
Lack of personal capability
Lack of need for change
How can you eradicate
these barriers within your
own organization?
6%
21%
21%
32%
35%
44%
44%
50%
25 © Oliver Wyman
New technologies will reshape our perception of MRO aftermarket commercial offers. Advances could cut or redistribute 15 to 20 percent of MRO spend, but also spawn new business models and revenue streams.
26 © Oliver Wyman
Time to disengage the Autopilot
• Focusing solely on business as usual is a risky strategy in
the coming years
• Relying on current commercial offers, sales practices,
resources, will challenge an MRO’s future business
• Advances could cut 15-20% of MRO spending from the
aftermarket
• But also spawn new business models and revenue
streams
• Amounts to a reduction or redistribution of $10-15B
among current industry players & new competitors
• MROs and operators must actively choose technologies
to develop and exploit
• Those that fail will end up as innovation takers, ceding
further aftermarket control to competitors
Is your corporate Auto Pilot engaged?
27 © Oliver Wyman
The future is now
28 © Oliver Wyman
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