Air Transport Aircraft Production Outlook

Transcription

1 Air Transport Aircraft Presented by Kevin Michaels, Partner October 6, 2010 Orlando, FL TITANIUM 2010 Conference - Economics Panel Ann Arbor, Michigan Amersham, United Kingdom Singapore

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6 How Can Air Transport OEMs Increase Rates On The Heels Of A Global Recession? 6

7 Fuel Costs Have Increased 500% Since 2000 Fuel Costs 1978 to present (cents per gallon) : 30% of airline expenses : 11% of airline expenses 500% Source: Airline Monitor; Air Transport Association 7

8 And Over The Same Timeframe Airline Yields Were Flat, Creating A Major Imperative For Fuel Savings Fuel Cost (cents/gallon) 350 Fuel Costs vs. US Major Yields 1999 to present Yield (in cents/rpm), Yield Fuel Yields fell during the 2002 and 2009 downturns and are unchanged from the beginning of the decade Fuel is now 30% of an airline s cost structure compared to 10-12% earlier in the decade Source: Airline Monitor; Air Transport Association 8

9 As Evidenced By A Comparison Of MD-80 And B737NG Operating Economics Fuel Cost Per Passenger (USD) DFW New York LGA (1,447 miles) MD-80 B $18/passenger cost difference with fuel at $2.60/gallon Source: Dallas Morning News 9

10 While Fuel Costs Skyrocketed, Deliveries Of Newer Fuel-Efficient Aircraft Were Below The 2000 Peak Deliveries 1400 Air Transport Deliveries vs. Fuel Costs 1978 to present Fuel Cost (cents per gallon) Aircraft Deliveries Fuel Source: Airline Monitor 10

11 Which Contributed To Record Backlogs For Air Transport Aircraft Backlog (as a % of Fleet) Air Transport Backlog 1970 to present % of Fleet Months Backlog (in months) Airbus and Boeing achieved record backlogs in 2007/08 by maintaining relatively steady production during record orders The backlog peaked at 90 months far in excess of the previous record of 55 months in the late 1980s Source: Airline Monitor Feb

12 High Fuel Costs Have Also Contributed To Early Aircraft Obsolescence And Growing Retirements Air Transport Retirements and Deliveries Retired/scrapped aircraft Deliveries High fuel costs combined with the recession have contributed to higher retirement rates In 2007/08, 400 aircraft were scrapped each year equivalent to 40% of deliveries Qantas recently changed its depreciation policy to recognize shorter aircraft economic lifespans; will other airlines follow suit? Source: Airline Monitor Feb

13 And A Small Portion Of The 1,500+ Parked Fleet Is Economically Viable At Current Fuel Prices Air Transport Fleet: Temporarily Inactive/ In Storage (Sept 2010) Aircraft Family Sep /7/8/ A320 Series 64 A A CRJ-700/900/ EMB-170/190 7 Total 191 High potential to return to service at current fuel prices 12% 1,553 88% Despite the large size (1,553) of the parked fleet, only a small portion 200 is likely to return to service at current fuel prices This equates to 1% of global capacity.or approximately two months of production rates 2010 AeroStrategy Aviation Week MRO Europe 2010 Lowmoderate potential / obsolete Aircraft Family Sep /4/ MD DC / EMB-135/140/ /2/ CRJ-100/ F A DC8-6/70 32 DC10 38 F JET 29 A A MD L F70 4 BAC MD10 5 MD90 6 Total 1,362 Source: OAG Aviation 13

14 And The Parked Fleet Continues To Shrink Primarily Due To Scrapping And Parting Out Aircraft Air Transport Fleet: Temporarily Inactive/ In Storage (Sept 2010 vs. April 2010) High Potential Return To Service Low Potential Return To Service The high potential parked fleet has declined 48 (~20%) since April 2010; most were likely returned to service The low potential fleet is also 110 smaller; most of this difference is due to scrapping and parting out aircraft Source: OAG Aviation 14

15 Numerous Platforms Including Two Chinese Programs -- Will Soon Enter The Narrowbody Market A320 Sharklet CSeries 737 Update Next generation single aisles from Boeing and Airbus ARJ21 Re-Engined B737 or A320? Comac C919 Irkut MS-21 15

16 One Other Factor EADS s Need For Cash Will Underpin Air Transport Rates Factors Sustaining Air Transport Rates Emerging Single Aisle Competition EADS need for cash - Mounting losses on A400M and A380 - Need to fund A350 XWB development - A320 is a positive cash generator Economic fallout of skyrocketing fuel prices Record production backlogs Source: AeroStrategy analysis 16

17 Combined, These Factor Will Underpin Steady Rates Despite The Global Recession AeroStrategy Air Transport Delivery Forecast (March 2010) A EMB-170/175 CRJ-700/900/1000 Other 787 Family EMB-190/195 A330/A340 Family 777 Family rates will be even higher after the recently announced B737 / A320 production rate increases materialize A320 Family Family Source: AeroStrategy analysis 17

18 There Will Be Interesting Dynamics For Individual Aircraft Models As Rates Increase Air Transport Delivery Forecast (March 2010) Aircraft Family Grand Total A320 Family , Family , Family A Family EMB-190/ A CRJ-700/900/ EMB-170/ A Family ARJ SUPERJET C110/C MRJ EMB-135/140/ NEW 50SEAT RJ A340 Family Grand Total 1,063 1,131 1,079 1,072 1,155 1,160 1,178 1,207 1,276 1,317 1,353 12,991 In September 2010, Airbus announced a further increase to 440/year; Boeing responded with B737 rate of 38/mo (not integrated into forecast) Projected C919 introduction A320 or B737 reengining in could reduce single aisle deliveries considerably in mid- 2010s A significant B777 refresh could increase deliveries in late 2010s beyond the current baseline Higher fuel prices could push C-Series production rates well beyond the current forecast of 30/year USAF tanker decision could change increase and extend B767 production considerably Source: AeroStrategy analysis 18

19 1 EMEA London, England Americas Ann Arbor, Michigan Asia Pacific Singapore 43 Hill Avenue, Amersham Buckinghamshire HP6 5BX United Kingdom Phone: Fax: North Main Street, Suite 400 Ann Arbor, Michigan United States of America Phone: Fax: Tanglin Road, #01-05 Phoenix Park Office Campus Singapore Phone: Fax: