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October 18-19, 2017: Miami, USA Global MRO Commercial Fleet Dynamics & Trends
October 18-19, 2017: Miami, USA
Global MRO Commercial Fleet
Dynamics & Trends
1
TODAY’S AGENDA
Global Fleet Demographics
Commercial Air Transport Fleet Forecast
Fleet Growth Risks & Implications
2Source: CAPA, Alton analysis
Today’s commercial air transport fleet consists of approx. 27,000
aircraft, with Asia recently surpassing North America
GLOBAL FLEET DEMOGRAPHICS
Narrowbody Jet
Regional Jet
Turboprop
Widebody Jet
51%
24%
9%
16%
8,040
61%
11%
10%
18%
6,952
63%
5%
10%
22%
8,147
59%
17%
14%
10%
1,87841%
17%
28%
14%
1,174
39%
7%
3%
51% 1,505
Fleet growth is driven by GDP and the so-called “Disneyland factor”
(the rate in which a country’s population enters the middle class)
GLOBAL FLEET DEMOGRAPHICS
3Source: CAPA, USDA ERS, Alton analysis
Fleet and GDP Growth by Region (1997 – 2017)
10%
7% 7%
6%
5%
3%
3.8%
4.4%4.2%
2.5%
1.8%
2.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0%
2%
4%
6%
8%
10%
12%
14%
Middle East Asia Pacific Africa Latin America Europe North America
% Fleet growthGDP
Avg. GDP
Growth/yr
Avg. Fleet
Growth/yr
4Source: CAPA, Alton analysis
Over the past 25 years, the global fleet has grown at a rate of 5.1%,
with narrowbody aircraft accounting for over 55% of today’s fleet
GLOBAL FLEET DEMOGRAPHICS
0
5,000
10,000
15,000
20,000
25,000
30,000
1992 1997 2002 2007 2012 2017
Widebody Jet
Turboprop
Regional Jet
Narrowbody Jet
20%
10%
13%
57%
Global Fleet Count (1992 – 2017) Global Fleet Count (1992 – 2017)
0
5,000
10,000
15,000
20,000
25,000
30,000
1992 1997 2002 2007 2012 2017
Other
Embraer
Bombardier
Boeing
Airbus
33%
43%
8%
7%
9%
5Source: CAPA, Alton analysis
Record high OEM backlog continues to drive investor interest and
M&A activity in MRO providers and OEM supply chain
GLOBAL FLEET DEMOGRAPHICS
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
10 Year Backlog by OEM
Others
Embraer
Bombardier
Boeing
Airbus40%
45%
46%
49%
52%48%
41%
46%41%
41%
35%
39%
39%
42%
51%
27%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
10 Year Backlog by Region
Widebody Jet
Turboprop
Regional Jet
Narrowbody Jet
6Source: CAPA, Alton analysis
Fleet retirements are down from peak levels
GLOBAL FLEET DEMOGRAPHICS
$66B
Alton Insight
▪ Typical aircraft life is approx. 25
years; there was a large spike in
aircraft deliveries in the late 1980’s
▪ Increased retirements was also driven
by high fuel prices and uneconomic
50-seat regional jets
▪ Low fuel prices and a strong traffic
growth environment contributed to
the slowdown in retirements rates
▪ The surge in aircraft retirements
spawned the aircraft tear-down/part-
out industry (very disruptive to OEM
new parts sales)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
0
500
1000
1500
2000
2500
3000
3500
Aircraft Retired
% Fleet
Avg. 464
Avg. 144
Avg. 601
Avg. 294
% FleetTotal Aircraft
7Source: Boeing Forecast (excludes turboprop), Alton analysis
Over the next 20 years, the global fleet is projected to grow by 3.7%
to over 45,000 aircraft
23,480
5,920
17,560
23,470
0
10,000
20,000
30,000
40,000
50,000
2016 2036
Growth (50%)
46,950
Replacement (37%)
Retained (13%)
GLOBAL FLEET DEMOGRAPHICS
20 Year Fleet Projection by Aircraft Type
64%
69%17%
19%
11%
6%
8%
6%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2016 2036
Freighter(2.7%)
Regional Jets(0.1%)
Widebody(4.3%)
Narrowbody(4.1%)
Type CAGR
Total CAGR
(3.7%)
20 Year Fleet Projection by Aircraft Type
8
FLEET GROWTH RISKS & IMPLICATIONS
9Source: IATA, Alton analysis
Is the airline industry really post-cyclical?
FLEET GROWTH RISKS & IMPLICATIONS
$66B-6%
-4%
-2%
0%
2%
4%
6%
8%
Financial CrisisSept. 111st Gulf WarOil Crisis
Global Airline Net Profit Margin
8 years 6 years 2 years 7+ years
10Source: Boeing, Airbus, CAPA, Alton analysis
Concentration of widebody orders
FLEET GROWTH RISKS & IMPLICATIONS
$66B
Alton Insight
▪ The big 3 Middle East airlines account
for 522, or almost 25%, of total
widebody orders
▪ Demand has been unexpectedly weak
for the very large aircraft (VLA)
market segment
▪ Emirates accounts for 142 A380
orders and operates almost half of the
global fleet of 216 aircraft delivered to
date
▪ The 747-8 appears to be destined for
freighterhood
9%
7%
6%
78%
Emirates (209) Qatar (169)
Etihad (142) Others (1,815)
2,335
11Source: Federal Reserve, Alton analysis
Are interest rates the new fuel price?
FLEET GROWTH RISKS & IMPLICATIONS
Alton Insight
▪ OEMs – Negative: Customer financing costs
increase; more difficult to sell new aircraft
▪ MROs - Positive: Used aircraft stay in
service longer so volumes increase
▪ Airlines - Neutral: Inclined to retain more
used aircraft; aircraft overall cost more to
own and lease, so incremental less capacity
▪ Lessors – Neutral: Cost of financing
increases; value of new aircraft incrementally
less, value of used aircraft incrementally
more
▪ Parts Traders – Negative: More difficult to
source used aircraft
▪ Financial Investors - Negative: Value of
outstanding bonds decline
US Interest Rates: 2007 thru 2020
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Historic Forecast
12
SUMMARY &
CONCLUSION
▪ Overall, the state of the aviation industry is strong
▪ Airbus’ C-Series investment is an industry game changer
▪ Over-concentration of widebody orders in the Middle East
▪ Limited market demand for the very large aircraft (VLA) segment
▪ Interest rates are the new fuel cost
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Jonathan M. Berger
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14
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