icf she gorham pma 2014 finalgorham-tech.com/yahoo_site_admin/assets/docs/icf_she... · 2014. 3....

Today’s Agenda:

1. Air Transport MRO Market

2. PMA Market

ICF International | icfi.com © ICF SH&E 2014 1

joined ICF in 2011 joined ICF in 2012joined ICF in 2007

Air Transport MRO Market


Maintenance costs typically range between 15%-18% of an airline’s operating cost structure

AIR TRANSPORT MRO MARKET

Typical Airline Cost Breakdown Typical Airline’s MRO Cost Breakdown

EnginesAirframe

Modifications

Airline’s MRO Cost

15%

40%

6%

Maintenance

Labor & Benefits

Depreciation Aircraft Rent

Other

16%

14%

28%

5% 3%


Source: Form 41 & ICF SH&E Analysis

Annual airline maintenance spend as a % of total cost will fluctuate year-to-year based on timing of major visits (e.g. airframe heavy checks & engine overhauls), fleet age, size, mix

and perhaps most importantly the price of fuel

Components

Line

MRO Cost17%

22%

40%Maintenance

Fuel

16%

35%

EnginesAirframe

Modifications

15%40%

6%

The current air transport MRO market is $60.7 billionAIR TRANSPORT MRO MARKET

North America

Middle East

South America

Africa

31%7%

5% 4%

2013 Global MRO Demand(Total = $60.7B)


Components

Line 17%

22%

40%

Asia Pacific

Europe

27%

26%

Source: ICF SH&EForecast in 2013 $USD, exclusive of inflation

MRO Segment Region

$70

$80

$90

$100ModificationsHeavy AirframeLineComponentsEngine

The global MRO market is expected to grow to $89B by 2023, at 3.9% per annum

AIR TRANSPORT MRO MARKET

Global MRO Spend 2013–2023

2.8%

3.4%13%

16%

6.4%

7%

CAGR

Key Assumptions

§ Average growth is forecast to be 3.9% CAGR to $89B in 2023§ The strongest driver of growth


$0

$10

$20

$30

$40

$50

$60

2013 2023

4.3%

3.7%

15%

17%

22%

40%

16%

23%

40%

6%

3.9% Average

§ The strongest driver of growth is expected to be the engine market§ Reducing labor intensity of

airframe heavy checks as the fleet renews...offset in emerging markets by increasing labor rates§ Upgrade and modification

demand drives high modifications growth

Source: ICF SH&EForecast in 2013 $USD, exclusive of inflation

FleetDynamics

Additive Surplus

Four key MRO industry trends to watch…MRO INDUSTRY TRENDS


Industry Trends

Role of OEMin MRO

AdditiveManufacturing

SurplusParts

Source: ICF SH&E

NarrowbodyJet

Turboprop

Regional Jet

The current civil air transport fleet is in excess of 26K aircraftAIRCRAFT RETIREMENTS OUTLOOK

North America

South America

Africa

2013 Global Air Transport Fleet

17%

50%

32%8%

5% 5%


WidebodyJet

Turboprop

Source: FlightGlobal ACAS September 2013Source: FlightGlobal ACAS September 2013

Asia Pacific

Europe

26,772Aircraft

50%15%

18% 26%

25%

By Aircraft Type By Global Region

26,772Aircraft

AIRCRAFT RETIREMENTS OUTLOOK

Fleet Demographics––the 1990 Bulge Historically Low Interest Rates (%)

0

500

1,000

1,500

2,000

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Air transport deliveries0

2

4

6

8

10

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

10-Year US Treasury Bond Yield – though cost of capital is now trending up

Four market factors are reshaping aircraft economics and MRO


Source: ICF SH&E Analysis; Flightglobal ACAS 2013, ATA, US Federal ReserveSource: ICF SH&E Analysis; Flightglobal ACAS 2013, ATA, US Federal Reserve

New Technology & OEM Production Rates Exacerbate Retirements

Historically High Jet A Fuel Prices ($/BBL)

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

0

20

40

60

80

100

120

140

1991 1994 1997 2000 2003 2006 2009 2012

Average retirement ages appear to be trending down slightly for certain aircraft…


20

25

30

35

Ave

rage

Age

of

Ret

irem

ent

Narrowbody

Trends in Average Age of Aircraft Retirements


0

5

10

15

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Ave

rage

Age

of

Ret

irem

ent

Year Retired

Narrowbody

Widebody

Source: Flightglobal ACAS 2013Source: Flightglobal ACAS 2013

…and the impending arrival of aircraft with new technology engines will impact retirements for current models…


A320-200 (CFM56-5B/V2500-A5) Survivor Curve§ Oldest aircraft

approaching 20 years

§ Median retirement age appears on track for less than 25 years200

250

300

60%

70%

80%

90%

100%

In S

ervi

ce P

roba

bilit

y

Deliveries (RHS)Survivor Curve (LHS)Average Narrowbody (LHS)


Notes: (1) Survivor curves represent delivery-weighted curve fits. (2) Late A320-200 aircraft powered by CFM56-5B and V2500-A5 engines.Source: ICF SH&E Analysis; ACAS 2013

less than 25 years

§ How will the A320neo affect retirements?

0

50

100

150

0%

10%

20%

30%

40%

50%

60%

0 5 10 15 20 25 30 35 40De

liver

ies

In S

ervi

ce P

roba

bilit

y

45-50% of new aircraft deliveries in the next decade will be for aircraft replacements, versus the historical norm of ~20 %.


Air Transport Retirements 2014 – 2023

12,000 14,000 16,000 18,000 20,000

Composition of Demand 2014 – 2023

17,700 Deliveries…

…of which 8,100 to offset retirements

46%A320 Family

737 Classic

17%17%

OTHERS


Source: ICF SH&E AnalysisNote: includes turboprops and regional jets

-2,000 4,000 6,000 8,000

10,000 12,000

..and 9,600 fornew growth

Retirements historically drive 20% of deliveries

54%

737 Classic

767

CRJ-200

737NGMD-80

ERJ-135747-400

757-2/300

777-2/300

~ 8,10010%10%

6%6%

5%5%

6%6%

4% 6%6%3%

3%3%

ICF SH&E projects that the number of aircraft retirements as a percentage of fleet will be between 2-3% in the next decade


Air Transport Annual Aircraft Retirements

2.0%

2.5%

3.0%

800

1,000

1,200# Retirements

Retirement as % of active fleet

% Active Fleet

ICF SH&Eforecast


Includes TurbopropsSource: Airline Monitor Jun 2013, ACAS Sept 2013, ICF SH&E

0.0%

0.5%

1.0%

1.5%

0

200

400

600

of active fleet

1990-99 Average 170

2000-09 Average 400

2010-23 Average 750

icf she gorham pma 2014 finalgorham-tech.com/yahoo_site_admin/assets/docs/icf_she... · 2014. 3....

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