Actionable Business Intelligence The Last 10 Years Change? Cyclical? Structural? Lost decade? 24th April 2018 WWW.-ADVANCE.COM
What s changed, What didn t? Just another cycle? Structural Change? Lost decade? 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 2
What are the benchmarks for evaluation? Changes in OEM competition Industry Brand Fleet Growth Aircraft Performance Supply Chain Geographic Demand Demand drivers Aircraft Types Aircraft Activity Financing options Operating models Aircraft Values Channels to market Industry regulation 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 3
Growth in the worldwide fleet The longest hangover in the industry s history. Did the cycle end? Globalisation driving another strong up-cycle. Then the great recession following the financial crash 2008 1.154 New business jet deliveries This was the DOT-COM business cycle. 7 years of strong growth, then 2 year crash +160% 667 752 784-34% 676 591 +123% 750 884 1.037 868-42% 763 Dead-calm. Was there a significant change to industry fundamentals? 696 672 678 710-2% 711 650 660 718 515 518 438 302 321 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: JetCraft, Nov-17 Bumpy ride. CAGR = 8% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cliff dive, then stagnation 2018 Ever more miserable forecasts! 4/26/2018 4
But it wasn t all flat/downhill Preowned records last year. Global fleet. Preowned Business Aircraft Transactions Wholly owned global business jets 2,500 +1.8% +10.7% 20.000 +54% 2,000 15.000 1,500 10.000 1,000 500 5.000 0 2007 2008 2009 Source: Jetnet 2010 2011 2012 2013 2014 2015 2016 2017 0 2006 2007 Source: Jetnet 2008 2009 2010 2011 2012 2013 2014 2015 2016 $23BN record billings, 2014 Source: Citi Research 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 5
Big changes in OEM competition? Not so much Pretty much the same faces...still a crowded market place 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 6
But big changes in market share Underlying success story for Gulfstream in Large Jets. Others playing catch up. New business jet deliveries Leading OEM EBIT By unit deliveries By value $2.9BN -19% $2.4BN 15% 12% 12% 1% 2% 34% 11% 2% 72% 38% 2008 2016 20% 19% 40% 37% 6% 6% 11% 20% 16% 2% 4% 1% 18% 2007 2017 100% 27% 32% 21% 13% 10% 7% 22% 40% 12% 3% 4% 1% 8% 2007 2017 100% Bombardier Cessna Bombardier Hawker Beechcraft Dassault Cessna Embraer Embraer Dassault Airbus Gulfstream Gulfstream Boeing 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 7
Fleet Size and Aircraft Category Evened out in units, BIG change in share of value 1.100 1.000 900 800 700 600 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 In terms of new units, 1/3 each but last year Heavy Metal had 70% of value 2012 2013 2014 2015 2016 2017 2018 Heavy Medium Light Average business jet unit price has increased by 56% over the last 10 years 100% 55% 27% 18% 2007 70% 22% 8% 2017 Heavy Mid Light 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 8
Geographic demand still US-dominant Edging up. North America and Europe home to 86% in 2008, 80% in 2016 Share of active fleet by region By country North America Europe Asia/Pacific South America Africa Unknown 75% 73% 71% 69% 68% 67% 66% 66% 67% 67% 67% 100% Mexico United States 2.7% 2.7% 0.3% 70.0% UK China 24.3% Rest of World 2007 16% 16% 13% 14% 16% 16% 15% 14% 14% 13% 13% 7% 8% 8% 8% 9% 9% 9% 5% 5% 6% 7% 5% 5% 6% 7% 7% 7% 8% 8% 7% 4% 2% 5% 0% 2% 0% 2% 0% 2% 0% 2% 0% 2% 1% 2% 1% 3% 1% 2% 1% 2% 1% 2% 1% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: J.P. Morgan, Teal Group, JetNet, GAMA United States Brazil China Mexico 3.9% 3.4% 1.4% 61.1% 30.2% Rest of World 2017 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 9
New business jet deliveries, by geography Was 2012-2013 a blip or sign of what s to come? In 1998-2007, 70% to North America whereas 2008-2017: 54% 100% North America 58% 54% 49% 42% 50% 50% 54% 53% 61% 61% 61% 61% Europe Asia Pac LatAM ME & Africa 25% 4% 8% 5% 2007 23% 26% 20% 18% 15% 16% 26% 12% 18% 18% 18% 18% 11% 15% 14% 14% 5% 9% 14% 9% 9% 9% 9% 9% 9% 11% 12% 11% 11% 7% 7% 7% 7% 9% 6% 6% 7% 5% 6% 6% 5% 5% 5% 5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: J.P. Morgan, Teal Group, JetNet, GAMA 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 10
Overall impression is of ageing fleet Back in 2008, 48% <10Y. By 2016, down to 38%. Fleet is clearly ageing 0-5Y 6-10Y 11-15Y 16-20Y 21-25Y 26-30Y >30Y 24% 24% 27% 27% 25% 22% 19% 17% 16% 16% 28% 22% 23% 21% 20% 19% 19% 10% 10% 11% 13% 15% 17% 18% 17% 17% 16% 16% 8% 8% 8% 7% 7% 7% 8% 9% 11% 12% 14% 11% 8% 7% 7% 6% 6% 6% 6% 6% 6% 6% 13% 14% 13% 12% 10% 8% 6% 6% 6% 5% 5% 12% 13% 13% 14% 16% 17% 19% 19% 19% 20% 19% 20% 23% 24% 24% 22% 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: J.P. Morgan, Teal Group, JetNet, GAMA 2016 Older aircraft may be holding up the recovery in pricing Environmental and Navigation Mandates (ADSB) to the rescue? 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 11
What s happened with Flight activity? 35% decline in the US, then gradual recovery. 25% fall in Europe, then long stagnation Sectors flown, 3 month rolling average, and YOY change: United States Sectors flown, 3 month rolling average, and YOY change: Europe 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 12
There has been some recovery Zoom-in on Europe: relatively strong recovery in Small Jets Departures per month Rolling 12 months Trend [in%] 60.000 55.000 50.000 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 18 16 14 12 10 8 6 4 2 0-2 -4-6 -8-10 -12-14 -16-18 -20-22 MAX 0 % Jan 2007 March 2018 Departures (Business Jets) Rolling 12m trend: Jets (all) Rolling 12m trend: Large Jets Rolling 12m trend: Medium Jets Rolling 12m trend: Small Jets Small Jets 52,2% Large Jets 30,4% 17,4% Medium Jets 2018 by ADVANCE GMBH 4/26/2018 13
But utilisation per aircraft has gone backwards Utilisation hasn t yet recovered averaging under 200 hours per year Flight Activity -2% Installed Jets as of +34% 2007: 515,609 sectors 2007: 1,934 2017: 514,540 sectors 2017: 2,600 Utilisation/year -25% 2008: 267 2017: 198 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 14
Some aircraft are flying less, some much more ULR new owners; SMJ fractional fleet renovation; VLJ enter the Air Taxi 700,000 682,150 150,000 100,000 50,000 167,610 119,596 96,146 70,865 70,551 50,571 42,190 39,274 25,347 Total:2017 0 % of total (based on 2017) Turboprop Light Jet Heavy Jet Super Light Jet Ultra Long Range Jet Super Midsize Jet Very Light Jet Midsize Jet Entry Level Jet Departures 2017 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 44.4% 55.6% 73.8% 26.2% 61.3% 38.7% 83.8% 16.2% 43.5% 56.5% 73.8% 69.8% 26.2% 30.2% 85.1% 14.9% 65.9% 62.8% 34.1% 37.2% 100% Charter Private Charter: 2008-2017 CAGR 35 14.7% 33.5% 10 5 0-5 -10-0.4% -1.1% -0.4% -0.4% 7.4% -5.4% -3.9% 0.6% Private: 2008-2017 CAGR 20 9.0% 19.0% 0-10 -20 0.0% -4.3% -4.6% -3.1% -3.7% -13.7% -8.1% -1.6% 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 15
TOP 10 EUROPE TOP 10 USA Some travel pattern change, much is the same European domestic traffic flat. EM connections well up. Some shift at top airports Traffic flows from Europe Top airports, US & Europe Departures 2017 CAGR:2008-2017 ARRIVAL REGION: Flights from Europe in 2017 CAGR 2008-2017 KTEB-Teterboro Airport KHPN-Westchester County Airport KDAL-Dallas Love Field 80.933 41.688 37.187 0,9% 0,2% 0,3% Europe Domestic 643.313-0,3% KIAD-Washington Dulles International Airport 34.065 KHOU-William P Hobby Airport 31.942-1,7% -0,5% Middle East 10.920 2,3% KPDK-DeKalb Peachtree Airport KBOS-General Edward Lawrence Logan International Airport 30.608 30.328-1,0% 1,6% North America 9.975 1,3% KLAS-McCarran International Airport KVNY-Van Nuys Airport 29.884 29.059-0,4% 1,5% Africa 8.348-0,8% KPBI-Palm Beach International Airport 28.959-0,7% LFPB-Paris-Le Bourget Airport 25.795-0,3% Asia/Pacific 2.250 10,2% LFMN-Nice-Côte d Azur Airport 17.756 2,2% Latin America 1.392 1,9% LSGG-Geneva Cointrin International Airport EGGW-London Luton Airport 17.193 14.661-1,7% 0,2% LSZH-Zürich Airport 12.486 0,0% EGLF-Farnborough Airport 12.246 1,2% LIML-Linate Airport 9.687-4,5% UUWW-Vnukovo International Airport 9.561-3,2% LIRA-Ciampino G. B. Pastine International Airport 8.362-4,0% EGKB-London Biggin Hill Airport 7.677 1,4% Eurocontrol and FAA 2018 by ADVANCE GMBH 4/26/2018 16
What about the demand drivers Overestimated impact of profits and markets. Underestimated uncertainty and drop in oil. US Corporate Profits Stock Markets Source: Credit Suisse, Jetnet, 2017 Oil Price Source: Credit Suisse, May, 2017 Uncertainty of investment climate 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION JPM Aerospace & Defense, July 2017 4/26/2018 17
But economy is still broadly the main driver The industry s biggest problem has been to work off excess production in 2000s Business jet unit deliveries As indexed against Global Growth (red) versus Actual deliveries (blue) Jetcraft 10 Year Market Forecast, Oct-17 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 18
Image problem won t go away Regulatory treatment has softened but public opinion hasn t Oxfam, Statistica Corporate Jet Investor Survey March 2018 Only 9% of professionals believe the industry is good at selling its benefits 44% believe toxic industry brand hampers the promotion of individual companies 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 19
Aircraft values recession has reset expectations Pre-recession depreciation 3%-5% /Y. Last 10Y has re-set expectations towards 10% A long downhill story 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 20
Every cycle has a turning point prices now recovering QE, Tax Cuts, Fiscal expansion, Global Trade = Business confidence, corporate CAPEX Back to 2005 Stabilising at last Stronger than in 2007 Barclay Business Jet Survey April 2018 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 21
Consolidation there has been some Emergence of mega-groups: Fractional, Management, FBO 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 22
But still a highly fragmented industry 21% of the European fleet generate 43% of activity but 80% still 1-2 tails Flight hours Q3-2017 % of total Europe Quarterly Trend (# flights) Active Aircraft in Operator category more than 20 53.131 19,1% 20,5% 585 6 to 20 60.912 21,9% 18,8% 766 2 to 5 25.006 9,0% -13,2% 320 = 80% 1 aircraft only 139.400 50,1% 0,4% 5.024 Total 278.450 100,0% 5,9% 6.695 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 23
Products: (mis)matching supply and demand after 2008 Recession squeezed the pyramid, from ownership downwards. Charter market fell out Back in the commercial airline queue Credit Suisse, Jun-17 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 24
More recently? Whole ownership hasn t recovered. Nor has Frax. But Charter is back in vogue European business jet departures Global Fractional Fleet 100.000 90.000 80.000 70.000 60.000 50.000 40.000 1.000 900 800 Charter/AOC 700-2% 30.000 20.000 10.000 Private 600 500 0 10 8 6 4 2 0 Jan- 17 5,6% Feb- 17 YOY: Charter 4,8% Mar- 17 9,5% Apr- 17 2,6% May- 17 Jun- 17 4,9% 4,9% Jul-17 4,8% Aug- 17 6,4% Sep- 17 7,4% Oct- 17 9,0% Nov- 17 7,6% Dec- 17 3,2% Jan- 18 7,1% Feb- 18 6,8% Mar- 18 1,6% 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YOY: Private 10 0-10 -20 2,1% 6,7% -4,6% -4,5% 2,5% 0,5% -0,2% 4,6% -3,1% 5,5% 1,6% -8,5% 5,9% 1,3% -10,4% 2018 by ADVANCE GMBH 4/26/2018 25
Change in user attitudes risk-aversion or next-gen? Traditional users are more risk-averse. Next-Gen are more charter-minded. Amenable to sharing luxury assets Digital platform Empty Legs Shuttles Seats-sharing Low barrier to sharing High barrier to sharing YouGov Affluent Perspective Q3-2016 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 26
BizAv Mobility Travel Media Music Digital disruption may be on the horizon In other industries, digitisation has seen major disruption in the competitive landscape Before digital disruption and after Which industrial landscape will emerge? 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 27
New era of personal aviation? Quiet revolution in last 10Y may be the biggest structural change of all Roland Berger,, 2016 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 28
Change since 2008? Slower growth structural change Just another cycle Pro-growth structural change Fleet Growth OEM Competition Aircraft Types Aircraft Performance Geographic Demand Flight Activity Demand drivers Aircraft Values Industry Brand Consolidation Operating Models Supply Chain digitalisation 2018 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 29
PRODUCT PORTFOLIO MARKET REPORTS The key trends in each month s flight activity, highlighting the most productive aircraft types, airports, city pairs and operators. CUSTOMISED MARKET RESEARCH Tailored data feeds, trends and insights to provide the most relevant perspective for each customer within the business aviation supply chain. ONLINE DASHBOARDS Online interactive dashboards providing instant, interactive analysis of market and customer activity and trends, hosted on software platform. FORECASTS Researching and modelling forecasts of market activity and value, from one daily and monthly snapshots to multi-year projections. DATA STREAMS AND ANALYSIS Raw data inputs, packaged as analytics to suit the customer s preferred platform for further evaluation. SURVEYS Design, content development and implementation of surveys, including online questionnaires, focus groups, workshops and interviews. STRATEGIC ADVISORY Leveraging our extensive track-records in aircraft operations, maintenance and business development to provide sound strategic advice. 2016 by ADVANCE GMBH ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 30
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