BUSINESS AVIATION MARKET OUTLOOK

Size: px

Start display at page:

Download "BUSINESS AVIATION MARKET OUTLOOK"

Jody Rich
5 years ago
Views:

1 BUSINESS AVIATION MARKET OUTLOOK Presented by: Michael Holland Manager Aerospace Raw Materials Conference April 24, 2012 Pittsburgh, PA 0

2 Agenda Trends Driving Business Aviation Production Forecast Raw Material Forecast 1

TRENDS DRIVING BUSINESS AVIATION Business

Units 2001 2010 6,400 Units Where will the

3 TRENDS DRIVING BUSINESS AVIATION Business Aviation Has Proven to be a Cyclical Industry Over the Past Two Decades Business Jet Industry 20-Year Deliveries ,600 Units ,400 Units Where will the business aviation market go from here? Source: Bombardier 2

4 TRENDS DRIVING BUSINESS AVIATION There Are Four General Trends That Are Impacting Demand for Business and General Aviation Aircraft 1 Economic Recovery 4 Public Policy & Regulation Growth 2 in Emerging Markets 3 Introduction of New Models Source: ICF Analysis 3

5 TRENDS DRIVING BUSINESS AVIATION Economic 1 Recovery in North America Production of Business Jets is Generally Tied to GDP Growth U.S. GDP Growth U.S. Manufactured Business Jets Delivery % Change 8% # Deliveries 1,200 6% 1,000 4% 2% % -2% 400-4% 200-6% e 2016e Source: U.S. Dept. of Commerce / GAMA / IMF 4

TRENDS DRIVING BUSINESS AVIATION Economic 1 Recovery in North America In Addition Business Aviation is Highly Correlated to Corporate Profits U.S. Corporate Profits vs. Business Jet Cycles U.S. FAA Cycles 1990 2011 (in 000 s) Further economic recovery will stimulate demand U.

6 TRENDS DRIVING BUSINESS AVIATION Economic 1 Recovery in North America In Addition Business Aviation is Highly Correlated to Corporate Profits U.S. Corporate Profits vs. Business Jet Cycles U.S. FAA Cycles (in 000 s) Further economic recovery will stimulate demand U.S. Corporate Profits ($M) from * * 2011 based on 12-month total for Q Source: Roland Vincent Associates 5

Fleets That Will Grow BGA Fleet Per Capita CHINA: ~150 business jets

7 TRENDS DRIVING BUSINESS AVIATION Growth 2 in Emerging Markets Developing Markets Currently Have Very Small Business Aircraft Fleets That Will Grow BGA Fleet Per Capita CHINA: ~150 business jets ~1,000 total private aircraft (vs. 220K in the US!) China Source: Booz & Company 6

8 TRENDS DRIVING BUSINESS AVIATION Growth 2 in Emerging Markets But the Vast Majority of BGA Aircraft Will Still Go to North America and Europe Over the Next Decade Regional 10 and 20 year Delivery Outlook Units, Calendar years, and Source: Bombardier 7

9 TRENDS DRIVING BUSINESS AVIATION 3 Introduction of New Models In the Next Few Years, New Models Are Entering Service Such as G650 Legacy 500 Learjet 85 G650 Other models are entering service by 2014 such as Legacy 450/500 / Learjet 85 / New VLJ / Light Jets such as Hondajet Global 7000 entering service in 2016 and 8000 in 2017 Source: ICF Analysis, Gulfstream, Honda, Bombardier 8

TRENDS DRIVING BUSINESS AVIATION 4 Public Policy & Regulation Finally, Public Policy & Regulation Can Have a Huge Impact on

rates, changes in capital gains, even the Buffet Rule all have the potential to adversely impact business aviation Western Europe

Growth is highly dependent on liberalization of skies by the People s Liberation Army who currently control 80% of Chinese airspace

10 TRENDS DRIVING BUSINESS AVIATION 4 Public Policy & Regulation Finally, Public Policy & Regulation Can Have a Huge Impact on Business Aviation Growth Region/Country North America Policy & Regulatory Issues Government policy on dividend taxes, depreciation rates, changes in capital gains, even the Buffet Rule all have the potential to adversely impact business aviation Western Europe Proposed higher wealth taxes would curtail business aircraft demand More stringent emissions taxes would also impact BGA China Growth is highly dependent on liberalization of skies by the People s Liberation Army who currently control 80% of Chinese airspace Addition of 50 to 100 new airports will help stimulate BGA demand but support services (MRO, FBO, training) must be upgraded Source: ICF Analysis 9

11 Agenda Trends Driving Business Aviation Production Forecast Raw Material Forecast 10

BUSINESS AVIATION PRODUCTION FORECAST The BGA Fleet Comprises 57% Jets and 43%

Fleet By Size Category Heavy / Long Range 3,886 12% Midsize / Medium 6,175 20%

2,230 9% 2011 BGA Fleet By Aircraft OEM Bombardier 1383 Gulfstream 6% 1739

12 BUSINESS AVIATION PRODUCTION FORECAST The BGA Fleet Comprises 57% Jets and 43% Turboprops Cessna & Hawker Beechcraft Account for 51% of the Fleet 2011 BGA Fleet By Size Category Heavy / Long Range 3,886 12% Midsize / Medium 6,175 20% VLJ 885 3% Light Jets 6,750 22% 31,120 Aircraft Turboprops 13,424 43% Learjet 2,230 9% 2011 BGA Fleet By Aircraft OEM Bombardier 1383 Gulfstream 6% 1739 Dassault 7% 1,826 8% Pilatus % Cessna 7,821 33% Hawker Beechcraft 8,014 33% Source: ACAS 11

BUSINESS AVIATION PRODUCTION FORECAST North America Generates About Half of the Production Demand for Business Aircraft 2,000 2012 2021 Annual Business Aviation Production By Operator Region 1,800

13 BUSINESS AVIATION PRODUCTION FORECAST North America Generates About Half of the Production Demand for Business Aircraft 2, Annual Business Aviation Production By Operator Region 1,800 1,600 1,400 1,200 1, Middle East Africa Asia Pacific S. America Europe North America Over 50% of deliveries occur within North America Peak deliveries occur in 2018 Cyclical economic downturn built into forecast Source: ICF SH&E 12

14 BUSINESS AVIATION PRODUCTION FORECAST The Business Aviation MRO Market in 2012 is Worth $9.8B 2011 BGA MRO Spend ($B) By MRO Category Airframe $2.2 22% Component $2.8 28% Mods $2.5 25% Engine $2.4 25% Source: ICF SH&E 13

15 Agenda Trends Driving Business Aviation Production Forecast Raw Material Forecast 14

RAW MATERIAL DEMAND OUTLOOK Business Aviation is Approximately 10% of All Aerospace Raw Material Demand Source: ICF SH&E 2012 Aerospace Raw Material Buy Weight* Air Transport 78% 1.

16 RAW MATERIAL DEMAND OUTLOOK Business Aviation is Approximately 10% of All Aerospace Raw Material Demand Source: ICF SH&E 2012 Aerospace Raw Material Buy Weight* Air Transport 78% 1.15 B Lbs Business & General Aviation 10% Military Rotary Wing 8% 4% * Fundamental Mill Demand; Maintenance, repair and overhaul (MRO) excluded from total, estimated to add 7% to total; 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 BGA Raw Material Buy Weight* Composition 115 M Lbs Other Composites Titanium Alloys Super Alloys Steel Alloys Aluminum Alloys 15

17 RAW MATERIAL DEMAND OUTLOOK Overall, Business Aviation Raw Material Demand Will Grow at 2.8% Over the Next Decade Millions Pounds Business Aviation Raw Material Total Buy Weight* By Material Type % Change Other +2.1% Composites +4.9% Titanium Alloys +5.3% Super Alloys +4.8% Steel Alloys +3.0% Aluminum Alloys +2.0% Raw material demand will peak in 2017 Total & CAGR 2018 with = production rates 2.8% Growth in composite usage not as dramatic as air transport market Source: ICF SH&E 16

SUMMARY Key Messages The shape of the business market

regions, new models & policy/regulations Business &

8% CAGR over the next decade Raw material demand from

18 SUMMARY Key Messages The shape of the business market rebound will be driven by economic recovery, emerging regions, new models & policy/regulations Business & general aviation production will grow at 3.8% CAGR over the next decade Raw material demand from business aviation is approximately 115 million pounds in 2012 Source: ICF SH&E 17

Thank You ICF SH&E S ADVISORY SERVICES INCLUDE:

Commercial Due Diligence Strategic Sourcing Support

19 Thank You ICF SH&E S ADVISORY SERVICES INCLUDE: Aerospace Manufacturing Strategy Customer Satisfaction & Retention MRO Market Research & Analysis Cost & Performance Benchmarking M&A Commercial Due Diligence Strategic Sourcing Support Supply Chain Management LEAN Continuous Process Improvement Safety & Compliance Audits 18

Gorham PMA Conference San Diego, CA March, 2016

Gorham PMA Conference San Diego, CA 21-23 March, 2016 Presented by: Michael J. Howard Principal ICF International mhoward@icfi.com PMA Forecast and Market Trends 0 Today s Agenda MRO Forecast Meet the