Transcript No Slide Title

Aircraft Markets In An
Age Of Extremes
Aviation Industry Overview And Forecast
Presentation To AGMA/ABMA 2013 Annual Meeting
Carlsbad, CA
By Richard Aboulafia
Vice President, Analysis
Teal Group Corporation
www.tealgroup.com
April 2013
Jetliners Are A Serious Anomaly
Aircraft Markets, Through Good And Bad Years
Worldwide Deliveries By ‘13 $
Value (in 2012)
CAGR CAGR Change Change
’03-‘08 ’08-‘12 ‘08-‘12 ’11-‘12
7.4%
Large Jetliners ($88.1 b)
Business Aircraft ($19.9 b) 17.1%
12.0%
-6.3%
57.4%
-22.9%
29.4%
5.7%
Regionals ($6.2 b)
Civil Rotorcraft ($4.9 b)
4.4%
-9.6%
-33.2%
-12.6%
17.2%
-5.4%
-15.2%
7.6%
Military Rotorcraft($14.7 b)
8.9%
13.0%
62.9%
6.6%
Military Transports ($6.2b)
3.1%
-2.0%
-7.7%
-12.5%
Fighters ($14.3 b)
1.9%
0.5%
2.1%
-13.8%
All Civil ($118.9 b)
All Military ($36.7 b)
9.7%
5.2%
22.6%
20.4%
3.7%
3.8%
16.2%
-7.6%
Total ($155.6 b)
8.0%
4.9%
21.1%
12.4%
Civil And Military Aircraft Deliveries
(Market Value in 2013 $ Bns)
120
‘08-‘12: 22.6%
(5.2% CAGR)
100
‘03-‘08: 59%
(9.7% CAGR)
80
60
‘08-‘12: 16.2%
(3.8% CAGR)
40
‘03-‘08: 19.7%
(3.7% CAGR)
20
0
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Civil
M ilitary
Military And Rotorcraft
DoD Investment, O&M Funding
Upsides: Asia Pivot, Iran. Downside: Sequestration
300
($ bns )
293
271
250
285 284
239 237
214
200
190
173
150
179
115
97
50
54 61
42 46
135 138 134
134
78
57
Pre-OCO;
pre-sequestration
165
140
100
210 209
83
65
69
121
105
73
78
77
235 230
220
80
80
81
72
110
100 99 100 106
69
68
71
69 72
0
FY01
FY03
FY05
FY07
Procurement
Budget Authority
FY09
RDT&E
FY11
O&M
FY13
FY15
FY17
A Weak DoD Weapons Investment Cycle
Source: Capital Alpha Partners
DoD Tactical Aircraft Procurement,
FY1986-FY2013
Worst Recapitalization Ever
400
(Units Procured)
(Funding in '12 $Bns)
12
10
300
8
200
6
4
100
2
0
0
6
8
Y
F
8
Y
F
8
0
9
Y
F
2
9
Y
F
94 Y96 Y98 Y00 Y02 Y04 Y06 Y08 Y10 Y12 Y13
Y
F
F
F
F
F
F
F
F
F
F F
Units
Funding
Source: DoD Selected Acquisition Reports/American Enterprise Institute
Fighter Market: Solid Demand
Export, Domestic Orders Staying Strong
800
(Market Value in '13 $Bns)
(Units Delivered)
35
30
600
25
20
400
15
10
200
5
0
0
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Units
Value
World Fighter Markets: Domestic V. Export
(Value of deliveries in '13 $Bns)
$40
1990: Exports are
25.4% of the
market
$30
$20
1998: Exports keep
the market afloat
with 71.8% of the
market
2012: Exports
are 34.9% of
the market
$10
$0
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Domestic Markets
Export Markets
Highest Value Fighter Programs: History and
Forecast
Cumulative US '13 $Bns Value
F-35
Undetermined
Su-27/30/T-50
Eurofighter
Rafale
F/A/EA-18
F-16
F-15
MiG-29
2013-2022
2003-2012
A/T-50
LCA
Gripen
$0
$15
$30
$45
$60
$75
$90
World Fighter Production Shares
(Share By '13 $bns Value)
24
20
16
12
8
4
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
F-35
Undetermined
Europe
Russia
RoW
Non-F-35 US
Highest Value Undetermined Fighter
Competitions
Cumulative US '13 $ Bns Value Through 2022;
Red Bars Are F-35-Addressable; All Others Exclude F-35
India (Rafale selected)
South Korea
UAE
Canada
Brazil
Kuwait
Australia
Malaysia
Greece
Qatar
$0
$3
$6
$9
F-16 Deliveries: USAF And Export
250
70 71
66
200
150
58
100 190189
180
50
52 69 98
87
50
0
94
68
102103
48
24 12
38
6
6
57 72
24
23
3 1 7 4
50
70 66
28 39 23 26 38
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
USAF
Export
Military Transport Deliveries By Value
(Value In '13 $Bns)
8
6
4
2
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
C-17
C-130J
A400M
KC-390
Other
World Trainer/Light Attack Market Shares
Excludes T-50; High End In Balance With T-X
2.5
(Share By '13 $bns Value)
2
1.5
1
0.5
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Props
Jets
T-X
Key Rotorcraft Markets
Military Lift Is Majority Of Demand
$2.5B
12.0%
$1.0B
$0.7B
5.7%3.8%
$1.1B
5.5%
$2.6B
14.9%
$2.8B
13.3%
$9.5B
45.8%
$8.0B
45.0%
$5.4B
30.6%
$4.8B
23.4%
2013
(2013 $)
Scout/Attack
Other Military Transport
Naval/ASW
Civil (non-tiltrotor)
2022
Tiltrotor
World UAV Market 2002-2022
4
(Units deliv ered, '000s)
(Market v alue In '13 $bns)
4.5
4
3.5
3
3
2.5
2
2
1.5
1
1
0.5
0
0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Units
Includes UCAVs; excludes R&D.
Value
Missile/Munition/UAV Forecast
20
(Market v alue in '13 $Bns)
16
12
8
4
0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
AAM
Anti-Ship
ASM
SSM
ADM
Sm art m unitions
AT M
UAVs
The Commercial Market
Our Forgotten Nemesis...Cyclicality
Large Jetliner Deliveries By Value
(Value in '13 $Bns)
$80
‘03-‘12
9.5% CAGR
‘95-‘99
20.8% CAGR
$60
‘84-‘91
16.1% CAGR
$40
$20
‘80-‘84 -13.9%
CAGR; -45%
peak-trough
‘68-‘77 -11%
CAGR; -65%
peak-trough
‘91-‘95 -12.5%
CAGR; -41%
peak-trough
‘01-‘03 -10.7%
CAGR; -28.8%
peak-trough
OR
‘99-‘03 -11%
CAGR; -37.3%
peak-trough
$0
'59
'63
'67
'71
'75
'79
'83
'87
'91
'95
'99
'03
'07
'11 '12
GDP Year/Year Growth Rates
10%
8%
6%
4%
2%
0%
-2%
-4%
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 13f'14f
World
EU
US
Asia Ex-Japan
Source: Morgan Stanley, IMF W orld Economic Outlook January 2013
Y/Y Traffic: Recovery Stalls; Cargo A Concern
2012 Totals; RPKs 5.3%, ASKs 3.9%, FTKs -1.5%;
2011: RPKs 6.9%, ASKs 8.2%, FTKs -0.6%
30%
20%
10%
0%
-10%
-20%
l
l
l
l
r
r
r
r
08 Sep ov '09 Ma ay Ju Sep ov '10 Ma ay Ju Sep ov '11 Ma ay Ju Sep ov '12 Ma ay Ju Sep ov '1F3eb
'
N n
N n
N n
N n
N n
l
M
M
M
M
a
a
a
a
Ju
J
J
J
J
Ja
RPKs
Source: IATA
ASKs
FTKs
Historical Jetliner Orders And Deliveries
3000
(Number of aircraft)
2500
2000
1500
1000
500
0
'69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13f
Deliveries
All Airbus and Boeing aircraft
Net orders
Oil Prices And Large Jetliner Deliveries
120
(Oil Prices/bbl in '12$)
(Value of Deliveries in '13$ Bns)
80
100
80
60
60
40
40
20
20
0
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Oil Prices
Value
US Energy Information Agency (Annual Average Imported
Crude Oil Price in 2012 $); Teal Group research
Interest Rates And Large Jetliner Deliveries
(Interest Rates)
(Value of Deliveries in '13$ Bns)
80
15%
60
10%
40
5%
20
0%
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Interest Rates
Value
Federal Reserve (Federal Funds Effective Rate); Teal Group research
Oil Prices And Interest Rates
120
100
(Oil Prices/bbl in '12$)
(Interest Rates)
20%

15%
80 
60
40




  


10%
 
5%





20



0%
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12f
Oil Prices Interest Rates
Jetliner Segment Deliveries
Single Aisles--Two Families--Were 46% Of 2012 Deliveries, 54% Of
2002-2011 Deliveries
(Deliveries By Value In '13 $bns)
80
60
40
20
0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11'12
Single Aisle
Mainline only
200/300
300/400
400+
Do You Believe In Super Cycles?
History And OEM Plans For Large Jet Transport Deliveries By Value
(Value in '12 $ Bns)
‘03-‘14 9.6% CAGR,
175.1% Grow th;
‘11-‘14 16.4% CAGR
$100
$80
‘95-‘99
20.8% CAGR
112.7% Growth
$60
‘84-‘91
16.1% CAGR
184.3% Growth
$40
$20
$0
'59
'63
'67
'71
'75
'79
'83
'87
'91
'95
'99
'03
'07
'11 '14f
Commercial Jetliners History And Forecast
Dangerous Words: It Really Is Different This Time
(Units Delivered)
(Market Value in '13$ Bns)
To Drop SA Rates Or
Drop Prices?
1,400
120
100
1,200
1,000
80
800
60
600
40
400
20
200
0
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Units
Value
Airbus, Boeing, CSeries, C919 only; includes KC-46
Comparative Backlog Values
350.0
(Value in '13 $Bns)
318.8
316.8
306.6
300.1
300.4
300.0
281.2
279.0
271.1
265.4
274.5
270.0
246.4
250.0
199.1
200.0
171.2
150.0
153.6
148.1
130.0
114.1
112.6
107.8
100.0
79.5
48.6
50.0
5.8
5.2
3.5
2.0
0.0
M
id
7
'9
id
M
1
'0
4
d
n
E
'0
5
d
n
E
'0
d
n
E
Boeing
6
'0
7
d
n
E
'0
Airbus
8
d
n
E
'0
d
n
E
'0
9
0
d
n
E
Bombardier
'1
1
d
n
E
'1
2
d
n
E
'1
Jetliner Programs: The Importance Of Volume
Cumulative Deliveries Value in ‘13 $ Bns
A318-21/neo
737/737Max
787
777/777-X
A350 XWB
A330/KC-30
A380
747/747-8
767/KC-767
2013-2022
CSeries
$0
$50
$100
2003-2012
$150
$200
Market Share Outlook By Deliveries Value
The Duopoly Endures
(Value in '13 $Bns)
100
80
60
40
20
0
'78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Boeing
Airbus
Douglas/Lockheed
Bombardier/COMAC
Regional Market: A History of Crashing Waves
$10
(Value of deliveries in '13$ Bns)
$8
$6
$4
$2
$0
1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 12
'6 '6 '6 '6 '6 '7 '7 '7 '7 '7 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '1 '1
19/37-seat Props
30/50-seat Jets
38/72-seat Props
60/108-seat Jets
Regional Market Entrances Possible; Exits
More Common
$10
(Value of deliveries in '13$ Bns)
$8
$6
$4
$2
$0
'92
'94
'96
'98
'00
Bombardier
BAE
'02
'04
Embraer
Fokker
'06
'08
Other
MRJ
'10
'12
ATR
SuperJet
'14
'16
Saab
'18
'20
'22
Business Aircraft
Business Aircraft Deliveries And Corporate
Profits
(Corp. Profits in $ Bns)
(Deliveries -'13 $Bns)
30
2,000
25
1,500
20
15
1,000
10
500
5
0
0
'64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Corporate Prof its
Source: US BEA, Teal Group Research
Value of Deliv eries
Bottom Half Bizjet Segment V. Top Half
14
(Market Value in 2013 $ Bns)
12
‘03-‘08 CAGR:
19.7% Bottom,
15.3% Top
10
8
6
‘08-‘12:
-55.9%
Bottom,
12.3%
Top
‘08-‘11: -55.7%
Bottom, 2.8% Top
4
2
0
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Bottom Half (<$26M)
Top Half (>$26M)
Used Jet Availability
Still Digging Out
2400
(Num be r of aircraft)
2000
1600
1200
800
400
0
/
12
95
/
12
97
/
12
99
/
12
01
/
12
02
/
12
03
/
12
04
/
12
Light
Source: AMSTAT/Bank of America
05
/
12
06
/
12
07
Medium
/
12
08
/
12
09
Heavy
6/
10
0 1 1 1 2 2 2 2
/1 3/1 6/1 0/1 3/1 6/1 9/1 2/1
2
1
1
1
Business Aircraft Market By Class
Balance Shifting Towards Larger Aircraft
$40
('13$ Billions)
$30
$20
$10
$0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Very Light
Very Large
Entry Lev el
Ultra
Mid-Sized
Jetliners+RJs
Super Mid-Sized
Turboprops
Large
Top 20 Aviation Programs: Volume Matters
Cumulative Deliveries Value in ‘13 $ Bns
Airbus A320/Neo
Boeing 737NG/MAX
Boeing 787
Boeing 777
Lockheed F-35
Airbus A350XWB
Airbus A330
Bombardier Global
Embraer E-Jets
Boeing 777-X
Boeing 747
Airbus A380
Sikorsky H-60
Gulfstream 650
Airbus A400M
Boeing 767/KC-46
Gulfstream 550
Lockheed C-130J
Gulfstream 450/P42
Eurofighter
$0
2013-2022
$60
$120
2003-2012
$180
$240
What Happens Next
Market
Large Jetliners
Change CAGR
Comment
’12-‘13 ’13-‘18
-0.1% 2.4% Tough to keep growing at
Business Aircraft
12.5%
current rate
9.8% Big structural change
Regionals
18.2%
-2.4% Recovery, but still not a
Civil Rotorcraft
-4.2%
great market
5.8% Strong recovery
Military Rotorcraft
11.6%
-1.9% Watch the curve
20.7%
Fighters
Military Transports -10.1%
3.3%
All Civil
9.2%
All Military
4.6%
Total
4.2% Gradual F-35 ramp-up
7.1% C-130J, A400M grow
3.8% See jetliners, above
3.0% Strong except rotors
3.6% No bust, less boom
Aircraft Production 2003-2022
Largely Sheltered From The Storm; Long-Term Growth, Too
200
(Market Value in '13 $ Bns)
160
120
80
40
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Fighters
M ilitaryT ransports/T rainers/Other
Business Aircraft
Rotorcraft
Jetliners/Regional AC