2014–2024 GLOBAL MRO FORECAST MRO AMERICA CONFERENCE APRIL 2014 UNCERTAINTY AND RISK . . . NAVIGATING THROUGH THE UNPREDICTABLE ©TeamSAI 04/08/2014 A LOOK BACK NAVIGATING THROUGH THE UNPREDICTABLE ©TeamSAI 04/08/2014 2 IN 2004, TEAMSAI PREDICTED MRO IN 2014 WOULD EXCEED $56B Total Jet Aircraft MRO Forecast (2014 $USB) $83.3 $56.5 $54.7 $42.7 2004 2014 2004 Forecast Note: 2014 2024 2014 Forecast All values in 2014 $US . BUT WOULD ANYONE SAY IT HAS BEEN AN EASY DECADE? ©TeamSAI 04/08/2014 3 RPM HISTORY COMPARED TO AIRLINE PROFITABILITY (1989-2013) Gulf War 9/11 SARS Global Financial Crisis ©TeamSAI 04/08/2014 4 WHAT DOES IT MEAN FOR MRO PLANNING? risks and uncertainty abound… Forecast Uncertainties Natural Disaster Risks MRO PLANNING MRO Uncertainties ©TeamSAI 04/08/2014 GeoPolitical Risks GEO-POLITICAL DON’T GET COMPLACENT…GEO-POLITICAL RISKS CONTINUE currency fluctuations • Threatens airlines in emerging markets such as India and Indonesia short term • Ticket prices • Ability to purchase oil and parts slowdown in China short to medium term emerging market currency fluctuations • Chinese economic growth accounts for 24% of net global growth slowdown in China ? Ticket prices US$-denominated oil Non-local spare parts ©TeamSAI 04/08/2014 ▲ China as a share of net economic growth ¼ 6 MRO DON’T GET COMPLACENT…MRO RISKS ABOUND ©TeamSAI 7 FLEET AND MRO OUTLOOK NAVIGATING THROUGH THE UNPREDICTABLE ©TeamSAI 04/08/2014 8 MODEL ENHANCEMENTS FOR 2014 year-by-year fleet forecast year-by-year MRO forecast improved airframe modifications model improved component MRO model improved line maintenance model implemented engine shop visit model and improved interval driver methodology improved labor/material differentiation across all models ©TeamSAI 04/08/2014 9 GLOBAL FLEET OUTLOOK - COMMERCIAL AIRLINE SECTOR ©TeamSAI 04/08/2014 2014-2024 Growth Rate 2024 Market Share 0.8% 24% 2.1% 18% 4.4% 17% 7.3% 12% 5.1% 8% 5.6% 6% 5.8% 6% 5.1% 5% 11.4% 3% 10 GLOBALLY, THE MRO GROWTH OUTLOOK IS HEALTHY $58B+4.2% $87B Global Market Size ©TeamSAI 04/08/2014 CAGR 2014-2024 CAGR % SHARE Airframe 4.1% 20% Engine 4.1% 38% Component 4.4% 22% Line 4.1% 20% 11 MRO REGIONAL MARKET SHARES CHANGE DRAMATICALLY BY 2024 ME/Africa • ME will double by 2024, driving majority of growth Asia • Asia will be the largest MRO market by 2024 Europe • EU to have moderate MRO growth, at 2.9% Americas • Large-scale fleet ME/Africa Asia Europe Americas replacement in NA translates to flat MRO • LA&C market drives growth ©TeamSAI 04/08/2014 12 NORTH AMERICAN FLEET GROWTH WILL BE LIMITED pax traffic 2014F (IATA) current fleet 2014 (Ascend Online) fleet CAGR 2014-24 (TeamSAI) ▲ 2.5% RPK 7,305 +0.8% 2014-2024 CAGR 0.8% deliveries 2014-24 (TeamSAI) 3,700+ 0.3% RJ ▼ retirements 2014-24 (TeamSAI) ©TeamSAI 04/08/2014 -2.2% 1.3% 2,900+ 2.1% 13 NORTH AMERICAN MRO OUTLOOK $18B+0.7% $19B NA Market Size ©TeamSAI 04/08/2014 CAGR 2014-2024 CAGR % SHARE Airframe 1.9% 20% Engine 0.0% 36% Component 0.4% 25% Line 1.3% 20% 14 NORTH AMERICAN MRO BY VINTAGE & MODEL TYPE Consider Impact to MRO less-mx-intensive HMV ▼ engine MRO honeymoon ▼ component MRO honeymoon ▼ 1970s + 1980s share ▼ 1990s, 2000s, 2010s share ▲ North America's Top 10 Aircraft Families in terms of MRO Spend 2014 1 737 NG & MAX 2 757 3 A320 CEO & NEO 4 767 5 CRJ-700/900/1000 6 CRJ-100/200 7 777 8 MD-80/90 9 ERJ-135/140/145 10 747-400 ©TeamSAI 04/08/2014 2024 15% 13% 12% 8% 7% 5% 5% 4% 4% 4% 737 NG & MAX A320 CEO & NEO 777 757 Embraer 170/175/190/195 & E2 A350 787 767 A330 MD-11/11F 28% 18% 7% 5% 5% 4% 4% 4% 3% 3% 15 DEALING WITH UNCERTAINTY AND RISK NAVIGATING THROUGH THE UNPREDICTABLE ©TeamSAI 04/08/2014 16 RISKS AND UNCERTAINTIES IN FLEET AND MRO FORECAST HIGH: higher deliveries/lower retirements moderate interest rates stable economic growth in emerging regions moderate oil prices LOW: ©TeamSAI 04/08/2014 lower deliveries/higher retirements higher interest rates low economic growth 17 POSITIONING THE BUSINESS EFFECTIVELY Methods to Achieve customer focus excellent execution financial discipline broad vision Leading Qualities distinctive reputation EXCELLENCE good bottom line BENEFITS PROFITABILITY strong balance sheet ▼SURVIVABILITY ▲VERSATILITY effective scenario/ contingency planning PREPAREDNESS ©TeamSAI 04/08/2014 18 AIRLINES’ WIDEBODY HMV WORK IN THE AMERICAS 2% N. AMERICA 38% WB HMV 8% 30% IN HOUSE ON SHORE 10% 2% 9% 25% 49% L. AMERICA 65% WB HMV ALL IN HOUSE The opportunity to repatriate WB HMV is feasible, but not without risk ©TeamSAI 04/08/2014 19 MROS MUST ANALYZE, DEFINE, AND DELIVER VALUE TO CUSTOMERS know your customer know your proposition execution Deliver…….. compelling presentation know your market clear business case pricing Define …….. clear strategy, positioning market attractiveness competitor analysis Analyze…….. market potential ©TeamSAI 04/08/2014 20 THANK YOU WWW.TEAMSAI.COM Chris Doan Chairman & CEO TeamSAI, Inc. (404) 762-7257 [email protected] NAVIGATING THROUGH THE UNPREDICTABLE ©TeamSAI 04/08/2014 21
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