the current civil air transport mro market is valued at...
TRANSCRIPT
EnginesAirframe
Modifications
15%40%
6%
The current civil air transport MRO market is valued at $62.1 billion USD
MRO MARKET FORECAST
North AmericaMiddle East
Latin America
Africa
29%7%6%
4%
2014 Global MRO Demand
$62.1B$62.1B
ICF International | icfi.com © ICF International 2015 16
Components
Line 17%
22%Asia Pacific
Europe
27%
27%$62.1B$62.1B
By MRO Segment By Global RegionSource: ICF analysisForecast in 2014 $USD, exclusive of inflation
$60.7B$70
$80
$90
$100 ModificationsHeavy AirframeLineComponentsEngine
The global MRO market is expected to grow to $90B by 2024, at 3.8% per annum
MRO MARKET FORECAST
Global MRO Spend 2014–2024
13%
17%
8%
ICF Insight
§ Average growth is forecast to be 3.8% CAGR
§ The strongest driver of growth is expected to be the engine
2.6%
3.7%
5.9%
CAGR$90B$90B
$62.1B$62.1B
ICF International | icfi.com © ICF International 2015 17
$60.7B
$0
$10
$20
$30
$40
$50
$60
2014 2024
15%
17%
22%
40%
17%
24%
38%
6%
Source: ICF analysisForecast in 2014 $USD, exclusive of inflation
is expected to be the engine market
§ Reduced labor intensity of airframe heavy checks as the fleet renews and increased intervals...offset in emerging markets by increasing labor rates
§ Aircraft upgrades (e.g. interiors, winglets) drive high modifications growth
3.7%
4.5%
3.5%
3.8% Average
$62.1B$62.1B
Over the next decade, Asia and the Middle East will account for $16.5B in absolute MRO spend growth
MRO MARKET FORECAST
Difference in $ MRO Spend, 2024 vs. 2014 – By Global RegionUS$ Billions
$5.0
$6.0
$7.0
$8.0
ICF International | icfi.com © ICF International 2015 18
Source: ICF analysisForecast in 2014 $USD, exclusive of inflation
$6.9
$5.4$4.2
$2.6 $2.5 $2.3 $2.3 $1.8
$0.0
$1.0
$2.0
$3.0
$4.0
Asia/Pacific (excl China)China Middle EastEastern Europe (incl CIS)Western EuropeLatin AmericaNorth America AfricaAsia/Pacific(ecl. China)
China Middle East
PMA Market Forecast
ICF International | icfi.com © ICF International 2015 19
Airline interest and use of alternative parts is increasing
PMA MARKET FORECAST
2013 Air Transport Material Demand and Alternatives*
20
25
30
Alternatives ~50% of OEM new parts revenue
$ billions
ICF International | icfi.com © ICF International 2015 20
*Total parts demand of $29.3B USD is made up of OEM New + Surplus parts + PMA: Repair activity is outside this parts demand. Source: ICF SH&E*Total parts demand of $29.3B USD is made up of OEM New + Surplus parts + PMA: Repair activity is outside this parts demand. Source: ICF SH&E
0
5
10
15
OEM New Alternatives
$25.2B PMA greater than $500M
Surplus parts consumption$3.5B and increasing
Parts repair, incl. DER repair $8.5B
$8.5B
$3.5B
$0.5B
Price and availability are the main reasons for PMA usage
PMA MARKET FORECAST
•PMA parts are typically 20 to 40% off OEM list price
•Many OEMs may protect their aftermarket revenue streams by campaigning against PMA and by insisting that licensed MROs discard PMA parts found during overhaul
• In an AOG situation, any permitted serviceable part will be used irrespective of price, including PMA
• Use of PMA is usually driven by long lead time for OEM parts
Part Price Part Availability
ICF International | icfi.com © ICF International 2015 21
Source: ICF SH&E Analysis / Market Interviews
0
50
100
150
New As Removed
OverhauledNew Surplus
PMA
Illustrative* Parts Price Bands
Exceptional Exceptional circumstances
% OEM List
“TAT on repair order and warranty management are most important for my component repair business. Parts availability might drive the use of alternative parts in the future. “
- Major Chinese Airline
PMA market dynamics remain unchanged …
PMA MARKET FORECAST
Entry Barriers for PMA:
• Engineering capability• Reverse engineering skills• Data requirements• Development investment• Certification investment
Risks for PMA Players:
• OEM pressure• Reducing customer
acceptance - Lessors- Tier 1 operators
Eligible Parts:
• High volume• High OEM price • Poor availability• Sufficient value• Attainable engineering
Entry Barriers for PMA: Eligible Parts: Risks For PMA Players:
ICF International | icfi.com © ICF International 2015 22
Source: ICF SH&E / Market InterviewsSource: ICF SH&E / Market Interviews
• Certification investment• Sales channels• Customer acceptance
- Tier 1 operators
Major PMA Parts Supplier July 2012 “We have three headwinds in PMA: OEM material agreements, increased interest and availability of surplus parts, and the fleet demographic
[fewer engines at the correct life-cycle stage]”
• Attainable engineering level
• Not protected by IP law
High volume, low price parts are the most fertile ground for PMA parts manufacturers …
PMA MARKET FORECAST
Alternative Parts Exposure vs. Part Type
ICF International | icfi.com © ICF International 2015 23
Source: ICF SH&E
1.5%
2.0%
2.5%
400
500
600
700
800
Current PMA market is forecast to increase to $700M by 2019, driven by Component and Airframe PMA parts
PMA MARKET FORECAST
• Current PMA penetration of total material demand is 1.7% and is projected to reach 1.8% by 2019
• Interiors is a fast growing segment
Air Transport PMA Market Forecast In $ Millions (2014-2019)
$ millions % of total MRO material
ICF International | icfi.com © ICF International 2015 24
0.0%
0.5%
1.0%
-
100
200
300
400
2014 2016 2018
AirframeEngineComponentTotalPenetration (%)
• Interiors is a fast growing segment of the component PMA market
• Engine OEMs have long established defensive measures against PMA
• Lessors are still concerned about the use of PMA parts on leased fleet, especially on engines; almost half the global fleet is on operating lease
Source: ICF InternationalSource: ICF InternationalForecast in 2014 USD, exclusive of inflationForecast in 2014 USD, exclusive of inflation
2014 – 2019
7.9%2.7%8.3%6.0%
CAGR:
‘14-’19 CAGR: 6%
Thank you!Thank you!
§ MRO Market Research & Analysis
§ Airline Maintenance Benchmarking
§ M&A Commercial Due Diligence
§ Aerospace Manufacturing Strategy
ICF’s MRO advisory services include the following:
ICF International | icfi.com 25© ICF International 2015 25
§ Aerospace Manufacturing Strategy
§ Aviation Asset Valuations & Appraisals
§ MRO Information Technology (IT) Assessment
§ MRO Strategic Sourcing Support
§ Supply Chain Management
§ LEAN Continuous Process Improvement
§ Military Aircraft Sustainment
ICF is one of the world’s largest and most experienced aviation and aerospace consulting firms
§ 51 years in business (founded 1963)
Airports • Airlines • Aerospace & MRO • Asset AdvisoryAirports • Airlines • Aerospace & MRO • Asset Advisory
ICF International | icfi.com 26© ICF International 2015 26
§ 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 sector and public sector assignments§ Backed by parent company ICF International ($937M 2013 revenue)§ Global presence –– offices around the world
joined ICF in 2012
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing • Hong Kong
ICF delivers professional services and technology solutions in three focus areas, which the aviation group draws upon, further enhancing its service offerings and technology solutions to the aviation community
ICF International | icfi.com 27© ICF International 2015 27
One of ICF's founders and its first president was a Tuskegee Airman. C.D. "Lucky" Lester flew more than 90 missions and earned the Distinguished Flying Cross. In 1969, "Lucky" and 3 DoD analysts founded the organization that is now ICF International.
$937M Revenues4,500+ EmployeesICFI NASDAQ
Energy EnvironmentTransportation
Health, Social Programs, and Consumer/Financial
Public Safety and Defense
Thank you!For questions regarding this presentation, please contact:
Michael J HowardPrincipal
28icfi.com/aviation |
PrincipalAerospace & MRO Practice
101 N. Main Street Suite 400Ann Arbor, MI 48103+1 (734)[email protected]