michael howard, icf international, presentation
TRANSCRIPT
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Gorham PMA Conference
23 – 25 March, 2015
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PMA Market Forecast and Key TrendsMarch 23-25, 2015 – San Diego, CA
Presented by:Michael J. HowardPrincipal � ICF [email protected]
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Today’s Agenda:
These are the “Good Old Days”
MRO Market Forecast
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founded 2001, joined ICF in 2011
founded 1963, joined ICF in 2007May 2010–May 2014
PMA Market Outlook
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These Are the “Good Old Days”
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AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Aviation fuel costs have dropped over 50% during the past 6 months
$2.3
$2.5
$2.8
$3.0
U.S. Gulf Coast Jet Fuel Price per GallonIn US Dollars(USD)
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$1.5
$1.8
$2.0
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Source: EIA data of 1/7/2015; ycharts 1/7/2015 info for Dec 2014 data
Should these low fuel costs continue, there will be a dramatic repercussions throughout the aviation & MRO supply chain (and geopolitics…)
~52%
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AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Most airlines’ growth plans assume oil pricing of around $110/bbl, having proved stable over the past decade…
17%
22%
26% 27%
33%
26% 26%29% 31% 30%
29%26%
20%
30%
40%
Evolution of Fuel Cost as a Share of Operating ExpensesFuel Cost as a Share of Operating Expenses Forecast
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14%
17%
0%
10%
20%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F
Source: IATA Airline Industry Economic Report, December 2014
…resulting in plans for accelerated fleet replacement, and therefore record OEM backlogs…
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Commercial aircraft OEM production backlog remains at historical record levels
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
40%
50%
60%
70%
8,000
10,000
12,000
14,000
Order Backlog
Backlog/Active Fleet
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0%
10%
20%
30%
40%
0
2,000
4,000
6,000
8,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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, September 2014
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AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
4.3% 4.5%
6.0%
4.9%
6.8%
6%
8% Traffic (FTK) Capacity (AFTK)
Forecast
Air cargo, a key leading indicator of industry growth, has (at long last) shown positive signs of recovery
Freight Traffic / Capacity GrowthYear-Over-Year Percent Change
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Source: IATA Air Transport Market Analysis – Dec reports from 2010-2012; IATA Air Passenger Monthly Analysis 2013, 2014
0.4%
-0.9%
0.6%
4.3% 4.5%
3.0%3.6%
-2%
0%
2%
4%
2011 2012 2013 2014 2015F
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Airlines appear to have embraced the art of “capacity discipline” in recent years to the delight of the investment community…
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
8.0%
6.3%
5.3% 5.4%5.8%
7.0%6.6%
5.0%5.6%
7.3%
6%
8% Traffic (RPK) Capacity (ASK)
Forecast
Passenger Traffic / Capacity GrowthYear-Over-Year Percent Change
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Source: IATA Air Transport Market Analysis – Dec reports from 2010-2012; IATA Air Passenger Monthly Analysis 2013, 2014
5.3%
4.5%4.0%
5.0%
0%
2%
4%
2010 2011 2012 2013 2014 2015F
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$20
$30
Accordingly, driven by a combination of capacity discipline, airline consolidation, and lower fuel costs, the industry has successfully returned to profitability
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Global Airline Profitability$ Billions
$25B
8© ICF International 2015
$0
$10
2011 2012 2013 2014F 2015F
Source: IATA Central Forecast Dec 2014
$20B
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Driven by a combination of capacity discipline, airline consolidation and lower fuel costs, the industry has successfully returned to profitability
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
North AmericaGlobal$ Billions
$0
$10
$20
$30
2011 2012 2013 2014F 2015F
$ Billions
$9.0
$12.0
$15.0
$13B$12B
9© ICF International 2015
Source: IATA Central Forecast Dec 2014
$0.0
$3.0
$6.0
$9.0
2011 2012 2013 2014F 2015F
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Driven by a combination of capacity discipline, airline consolidation and lower fuel costs, the industry has successfully returned to profitability
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Latin AmericaGlobal$ Billions
$0
$10
$20
$30
2011 2012 2013 2014F 2015F
$ Billions
$1.0
$1.5
$1BNorth America$ Billions
$15.0
10© ICF International 2015
Source: IATA Central Forecast Dec 2014
-$0.5
$0.0
$0.5
2011 2012 2013 2014F 2015F
$1B
$.7B$0.0$3.0$6.0$9.0
$12.0
2011 2012 2013 2014F 2015F
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Driven by a combination of capacity discipline, airline consolidation and lower fuel costs, the industry has successfully returned to profitability
AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Rest of WorldGlobal$ Billions
$0
$10
$20
$30
2011 2012 2013 2014F 2015F
$ Billions
$9.0
$12.0
$15.0
North America$ Billions
$15.0$11B
11© ICF International 2015
Source: IATA Central Forecast Dec 2014
$0.0
$3.0
$6.0
$9.0
2011 2012 2013 2014F 2015F
Latin America$ Billions
-$0.5
$0.0
$0.5
$1.0
$1.5
2011 2012 2013 2014F 2015F
$0.0$3.0$6.0$9.0
$12.0
2011 2012 2013 2014F 2015F
$11B
$7B
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AVIATION INDUSTRY HEALTH & GROWTH INDICATORS
Current industry forecasts are based on $85/bbl – given today’s price, tremendous short-term upside exists…
$20
$40
$60
$80
$100
$120
Pro
fit (
$Bill
ion
s)
2015 IATA Forecast:$25B industry profit
based on $85/bbl
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$(40)
$(20)
$-
$50 $55 $60 $65 $70 $75 $80 $85 $90 $95 $100 $105 $110
Pro
fit (
$Bill
ion
s)
Crude Oil Cost per Barrel
However, in the long-term, low fuel costs will lead to increased capacity and new market entrants ….ultimately eroding hard fought margins gains…
Source: IATA Airline Industry Economic Report, December 2014; ICF Analysis
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MRO Market Forecast
13© ICF International 2015
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NarrowbodyJet
Turboprop
Regional Jet
The current civil air transport fleet consists of over 27K aircraft
MRO MARKET FORECAST
North AmericaLatin
America
Middle East
2014 Global Air Transport Fleet
27,531
17%
50%15%
31%8%5% 5%
27,531
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WidebodyJet
Source: FlightGlobal ACAS September 2014Source: FlightGlobal ACAS September 2014
Asia Pacific
Europe
27,531Aircraft
15%
18%26%
25%
By Aircraft Type By Global Region
27,531Aircraft
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The air transport fleet will grow at a 3.2% rate over the coming decade
MRO MARKET FORECAST
25000
30000
35000
40000
AfricaMiddle EastLatin AmericaEuropeAsia PacificNorth America
Commercial Fleet Growth 2014–2024
27,500
37,900ICF Insight
§ Air travel growth of 4.0%
§ Fuel costs in
9%
CAGR
3.8%
5.3%
4.8%
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0
5000
10000
15000
20000
25000
2014 2024
Source: ICF analysis, ACAS September 2014Source: ICF analysis, ACAS September 2014
31% 26%
§ Fuel costs in $80-100/bbl range
§ 20,500 aircraft deliveries
§ 8,624 aircraft retirements
26%
25%
8%
30%
24%
3.2% Average
2.7%
4.7%
1.4%