middle east mro forecast 2010-2020
TRANSCRIPT
Middle East MRO Forecast 2010 - 2020
Presented by:
Chris DoanChairman & CEO
2011 © TeamSAI, Inc.MRO Middle East 2011 Conference
Middle East and Surrounding Regions Lead Market
TEAMSAI©20112/1/2011
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Signs of Recovery Surface—Middle East Remains at the Center of Growth
The storm seems to be clearing … slowly!
Analysts predict airline stock growth in 2011
Source: Aviation Week and Space Technology (1/19/2011)
Middle Eastern maintenance
providers are gearing up for expansion
Source: Flight Global (1/24/2011)
IATA: 2011 to be profitable for airlines,
but minimal
Source: IATA (12/14/2010)
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Are We at the Bottom of the Downturn?
While the world fleet has continued to grow, newer, less maintenance intensive aircraft are showing their influence
– The contribution of the older vintages has been in decline as retirements have accelerated
– And the younger vintage aircraft havesignificantly lower unit costs
– In just 2 years’ time there has been a significant shift in the share of the younger vintage fleets
– As a result, the average MRO cost per aircraft per year has fallen
– 2008 -- $2.4M
– 2010 -- $2.1M
2010 should be the tipping point as fleet size and utilization increase to meet demand
So the simple answer is that we think so!
MRO Spend ($M) per AircraftVintage Jan-08 Jan-09 Dec-10
1970's $2.9 $2.5 $2.2
1980's $3.0 $3.0 $2.8
1990's $2.0 $2.1 $1.9
2000's $0.8 $0.8 $1.1
Grand Total $2.4 $2.4 $2.1
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Total global MRO is just starting a new growth cycle
Preliminary estimates for the 2011 global MRO forecast indicate a return to positive, albeit small, growth (2.1%)
Growth is expected to ramp slowly at 3.4% CAGR through 2015 and 4.4% CAGR through 2020
$45.7
$42.3 $43.2 $43.8 $44.4
$50.1
$65.3
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
MRO Forecast
-7.5%
+4.4%
+2.1%
Source: TeamSAI analysis
Understanding the year is important; understanding the decade is imperative
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AP CH IN ME LA&C EE
Market ($B)(2010)
$6.6 $2.4 $0.6 $2.4 $1.9 $1.8
Mkt Share (2010)
16% 6% 1% 6% 5% 4%
CAGR(2010-20)
5.3% 9.6% 9.4% 5.3% 6.6% 9.8%
NA WE AF
$13.9 $11.0 $1.5
33% 26% 4%
1.6% 3.6% 3.5%
Middle East is a Solid Growth Region and is Surrounded by Some of the Strongest Growth Regions
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
AP CH IN ME LA&C EE NA WE AF
2010
2020
GlobalCAGR
4.4%
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Population growth and the burgeoning middle class, particularly in the target regions, is what is driving our long term forecast
Fleet growth forecast at 5.9% CAGRto 12,219 in 10 years (45% of global fleet)
ME fleet is comparable in size to AF andEE but is expected to have more traffic
ASM growth will increase at 6.7% CAGR over same period
Long Term Fleet Growth Looks Solid Especially for Target Regions
20106,913
20158,995
202012,219
5.4%
CAGR6.3%
CAGR
ASM Growth
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Looking at Middle East and Surrounding Regions
As the central location, Middle East is ideally situated to capitalize on the area growth
37% of the global MRO market surrounds the ME
– $15.4B in 2010
– Regional CAGR is a very healthy 6.7% (2010-2020)
– Market is equivalent to that of Americas, but in 10 years time will exceed the share of the Americas by 14%
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ME MRO News from 2010
© 2010 TeamSAI, Inc.
Trends and Strategies
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Airline Financial Results Intensifies the COST Focus
Profits have been elusive in many regions, and the Middle East has had its troubles too
– Surrounding regions like Asia have been most profitable though
The quest for profitability drives business behavior
– Revenue focused innovation is evident
– Cost improvements are needed at every turn
For MRO value stream, this means– Motivation toward best value
– Outsourcing will continue to grow
– Supply chain innovation will be imperative
– Preparing for a new generation of technology
– Consolidation will be important to value creation
– Value-oriented innovation will be rewarded
Source: IATA and Energy Information Administration
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Outsourcing Continues to Grow and Expand
0%
20%
40%
60%
80%
100%
HMV (Check) Engines Components Line Tech Support
Global Outsourcing
Note: Outsourced MRO includes work outsourced to independent MROs or to OEMs but not work done by operator-affiliated MROs
Benefits
• Provides total cost advantage• Offers more flexibility to operators• Shift risks and costs away from airline• Gives independent MROs opportunity to form
credible network with extensive capabilities• Regulation could temper outsourcing growth
somewhat, but large players will adapt
Airline interest in outsourcing aligns with their desire to seek out best value
Technical Support Services
• Includes all “back office” functions such as engineering, planning and supply chain
• Early stages of the emergence of Tech Services outsourcing
• Lately, larger carriers are recognizing the leverage of outsourcing these services
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The Transformation of the Value Stream Represents a Dramatic Shift Toward Best Value Innovations
Airline / Operator MRO
Labor
key decision guidelines for choosing maintenance services/outsourcing
Material Turn time Performance Quality
Engineering
Technical Services
Supply Chain
Planning
Direct Maintenance
Airline will… manage core operations (flying)
outsource maintenance as it chooses, basing outsourcing decision on key guidelines
M&E
Customer service
Scheduled service
Core Operations
Planning
Marketing
Etc.
focus: cost
MRO must… identify new market needs and
value added services that support airline requirements
reinvent the business model to position itself to meet needs
develop business processes to optimize service
focus: value
The airlines’ unrelenting focus on cost continues to drive change
New Value Stream
Engineering
Technical Services
Supply Chain
Planning
Direct Maintenance
M&E
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Market Ups and Downs Aside, Airlines are Focused on STAYING in the BlackMROs must do everything possible to help customer meet this goal
Value-oriented innovation will be rewarded
Top-to-bottom value chain assessment will identify optimum cost structure
Outsourcing Non-Core Activity
Supply Chain Innovation
New Technology Introduction
Consolidation
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Taking the Lead
What are
necessaryto maintain the market
growth?
Createthe
Value
Doing to You
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Thank You To Our Partners
TEAMSAI©20112/1/2011
THANK YOU!