MRO Market Forecast & Industry Dynamics

  • View
    769

  • Download
    0

Embed Size (px)

Text of MRO Market Forecast & Industry Dynamics

  • ICF International | icfi.com ICF SH&E 2013

    MRO Market Forecast & Industry Dynamics

    October 15, 2013

    Jonathan M. BergerVice President ICF SH&Ejberger@icfi.com

    Presented by:

  • ICF International | icfi.com ICF SH&E 2013 1

    Todays Agenda:

    1. MRO Market Forecast

    2. MRO Industry Trends to Watch

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

    2013 Airline E&M

    North America

    Montreal, Canada

    http://www.ghkint.com/Home.aspxhttp://www.ghkint.com/Home.aspx

  • ICF International | icfi.com ICF SH&E 2013 2

    MRO Market Forecast

  • ICF International | icfi.com ICF SH&E 2013 3

    North America

    Europe

    Asia Pacific

    Latin America

    AfricaMiddle East

    NarrowbodyJet

    Widebody Jet

    Regional Jet

    Turboprop

    The current civil air transport fleet is in excess of 26K aircraft

    MRO MARKET FORECAST

    Source: Flightglobal ACAS, ICF Analysis

    2012 Global Air Transport Fleet

    26,156Aircraft

    17%

    50%15%

    18%

    ~8,30032%

    26%

    24%

    8%

    5% 5%

    26,156Aircraft

  • ICF International | icfi.com ICF SH&E 2013 4

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    35,000

    40,000

    2012 2022

    AfricaMiddle EastLatin AmericaAsia / PacificEuropeNorth America

    The air transport fleet will grow at a 3.1% rate to 2022

    MRO MARKET FORECAST

    Commercial Fleet Growth 20122022 (by Global Region)

    Source: Flightglobal ACAS, ICF Analysis

    4.3%

    4.9%

    2.0%

    1.3%

    5.8%

    4.9%

    26,200

    35,600

    CAGR

    3.1% Average

    Air travel growth of 3.9%

    Fuel costs in $80100/bbl range

    15,960 aircraft deliveries

    6,560 aircraft retirements

    Key Assumptions

    ~8,300 (32%) ~9,500 (27%)

    North America

    Europe

    Asia

  • ICF International | icfi.com ICF SH&E 2013 5

    The North American MRO market size in 2012 was $17.9 billion

    MRO MARKET FORECAST

    2012 North American MRO Spend

    $17.9B $17.9B

    Source: ICF SH&E forecastForecast in 2012 USD, exclusive of inflation. Includes turboprops

    Engines

    Components

    Airframe

    Line

    Modifications

    16%

    17%

    21%

    41%

    5% Narrowbody Jet

    Widebody Jet

    Regional Jet

    Turboprop

    50%31%

    15%

    5%

  • ICF International | icfi.com ICF SH&E 2013 6

    $6.6

    $4.6 $4.6

    $2.9 $2.8$2.2 $2.1 $2.0

    $0.0

    $1.0

    $2.0

    $3.0

    $4.0

    $5.0

    $6.0

    $7.0

    Asia/Pacific(excl China)

    China Middle East EasternEurope (incl

    CIS)

    Latin America NorthAmerica

    WesternEurope

    Africa

    Over the next decade, North American MRO absolute growth will be the lowest of all major global regions

    MRO MARKET FORECAST

    Difference in $ MRO Spend, 2022 vs. 2012By Region$ Billions

    Source: ICF SH&E analysisForecast in 2012 $USD, exclusive of inflation, Includes Turboprops

    Latin America

  • ICF International | icfi.com ICF SH&E 2013 7

    $0

    $5

    $10

    $15

    $20

    $25

    2012 2022

    TurbopropRegional JetWidebody JetNarrowbody Jet

    The North American MRO market is expected to grow to approx. $20B by 2022, at 1.2% per annum

    MRO MARKET FORECAST

    North AmericanMRO Spend 20122022 ($B)

    -2.9%

    -3.4%

    3.4%

    1.1%

    Source: ICF SH&E forecastForecast in 2012 USD, exclusive of inflation. Includes turboprops

    4%

    15%

    31%

    50%

    3%

    9%

    38%

    50%

    CAGR

    1.2% Average

    The limited North American MRO growth will be driven by widebody aircraft

    Turboprops and regional jets will see a decrease MRO spend

    Narrowbody MRO spend will hold steady

    ICF SH&E Insight

    $17.9B

    $20.1B

  • ICF International | icfi.com ICF SH&E 2013 8

    MRO Industry Trends to Watch

  • ICF International | icfi.com ICF SH&E 2013 9

    Five key MRO industry trends to watch

    Source: ICF SH&E

    MRO INDUSTRY TRENDS

    Industry Trends

    M&A in MRO

    Surplus Parts

    3-DPrinting

    AirframeMRO

    Energy & Aviation

    Convergence

    http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=4riG2atUQaWPkM&tbnid=7eLFtbP33atHCM:&ved=0CAgQjRwwAA&url=http://en.wikipedia.org/wiki/Fab@Home&ei=9TVPUuObAofa8wSjloDYDg&psig=AFQjCNEyMU46g2-BRQBH_bedxV5qKuTNNw&ust=1381009269123059http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=4riG2atUQaWPkM&tbnid=7eLFtbP33atHCM:&ved=0CAgQjRwwAA&url=http://en.wikipedia.org/wiki/Fab@Home&ei=9TVPUuObAofa8wSjloDYDg&psig=AFQjCNEyMU46g2-BRQBH_bedxV5qKuTNNw&ust=1381009269123059

  • ICF International | icfi.com ICF SH&E 2013 10

    ICF SH&E estimates that commercial MRO industry spending on surplus parts is approximately $3.0 billion

    SURPLUS PARTS MARKET

    Engine Parts

    Component

    Airframe

    5%65%

    30%

    Air Transport Surplus Parts Market*

    Source: ICF SH&E analysis*Sales to end customers; excludes intra-dealer sales

    $3.0B

    More innovative surplus parts supplier base

    Vertical integration of Lessors, Parts Traders & Repair Vendors

    Increased aircraft part-outs

    Increased engine teardowns

    ICF SH&E Insight

  • ICF International | icfi.com ICF SH&E 2013 11

    Aircraft retirements will average between 600 700 per year over the forecast period

    SURPLUS PARTS MARKET

    0.0%

    0.5%

    1.0%

    1.5%

    2.0%

    2.5%

    3.0%

    0

    100

    200

    300

    400

    500

    600

    700

    800

    Air Transport Annual Aircraft Retirements# Retirements

    Retirement as % of installed fleet

    % Installed Fleet

    ICF SH&Eforecast

    Source: ICF SH&E Analysis, Airline Monitor Feb 2013, ACAS Jan 2013,

    1990-99 Average 171

    2000-09 Average 410

    2010-22 Average 629

  • ICF International | icfi.com ICF SH&E 2013 12

    Surplus dealers now obtain over 80% of their inventory from parting-out aircraft

    SURPLUS PARTS MARKET

    54%

    82%

    26%

    8%20%10%

    0%10%20%30%40%50%60%70%80%90%

    100%

    2007 2012

    Aircraft Part-Out

    Direct Purchase From Airline

    Purchase From Surplus Dealer

    2007 & 2012 Supplier Channels for Obtaining Surplus Materials

    Source: ICFI SH&E Analysis

    Leaner airline inventories

    Improved material planning (and MRO IT capabilities)

    Increased component pooling agreements

    OEM after-market material control strategies

    ICF SH&E Insight

  • ICF International | icfi.com ICF SH&E 2013 13

    Industry Trends

    M&A in MRO

    Energy & Aviation

    Convergence

    AirframeMRO

    3-DPrinting

    SurplusParts

    Five key MRO industry trends to watch

    Source: ICF SH&E

    MRO INDUSTRY TRENDS

    http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=4riG2atUQaWPkM&tbnid=7eLFtbP33atHCM:&ved=0CAgQjRwwAA&url=http://en.wikipedia.org/wiki/Fab@Home&ei=9TVPUuObAofa8wSjloDYDg&psig=AFQjCNEyMU46g2-BRQBH_bedxV5qKuTNNw&ust=1381009269123059http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=4riG2atUQaWPkM&tbnid=7eLFtbP33atHCM:&ved=0CAgQjRwwAA&url=http://en.wikipedia.org/wiki/Fab@Home&ei=9TVPUuObAofa8wSjloDYDg&psig=AFQjCNEyMU46g2-BRQBH_bedxV5qKuTNNw&ust=1381009269123059

  • ICF International | icfi.com ICF SH&E 2013 14

    Growing interdependencies between Aviation, Energy, and the Oil & Gas industries will continue to impact the MRO industry

    Source: ICF SH&E analysis

    ENERGY & AVIATION CONVERGENCE

    AVIATION OIL & GAS

    ENERGY

    Existing linkage aviation engines (aero-derivatives) and industrial gas turbines (IGTs)

    Cutting edge aviation enginetechnologies transferable to energy

    Energy sector growth creates new opportunities for MRO suppliers

    Aviation MRO safety, quality, and reliability best practices are transferable to O&G

    Cutting edge aerospace technologies are applicable (e.g. blow out preventers - BOPs)

    Major O&G growth creates new market opportunities for aerospace & MRO suppliers

    Delta Air Lines acquires oil refinery in Pennsylvania

    Rigs powered by industrial

    gas turbines (IGTs)

    Demand for skilled

    technicians

    Exotic alloys and materials

    required in demanding

    environments

  • ICF International | icfi.com ICF SH&E 2013

    Hydraulic fracturing (i.e. fracking) is leading to a significant shift away from coal to natural gas power generation

    012345678

    $/M

    MB

    tu

    Commodity Fuel Prices

    Illinois 4lb Pennsylvania 4lb

    NYMEX Spec Henry Hub Gas

    43% 35%

    22% 30%

    34% 34%

    0

    500

    1,000

    1,500

    2,000

    2,500

    2011 Jan-Jun 2012 Jan-Jun

    TWh

    US Coal versus Gas Generation

    Coal Generation Gas Generation Other Generation

    -20% Coal

    +34% Gas

    -2% Other

    -2% Total

    Sources: ICF analysis, Bloomberg, EIA

    ENERGY & AVIATION CONVERGENCE

    Tumbling natural gas prices due to fracking have erased coals cost advantage

    As a result, U.S. gas-powered power generation increased its market share from 22% to 30% in one ye