The current civil air transport MRO market is valued at ...gorham-tech.com/yahoo_site_admin/assets/docs/ICF... · The current civil air transport MRO market is valued at $62.1 billion

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


$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


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


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


*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


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:


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


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


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


§ 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


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]

Documents

The current civil air transport MRO market is valued at ...gorham-tech.com/yahoo_site_admin/assets/docs/ICF... · The current civil air transport MRO market is valued at $62.1 billion