0 PMA Forecast and Market Trends Presented by: Presented by: Michael J. Howard Principal ICF International [email protected]Michael J. Howard Principal ICF International [email protected]Gorham PMA Conference San Diego, CA 21-23 March, 2016 Gorham PMA Conference San Diego, CA 21-23 March, 2016
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Gorham PMA Conference San Diego, CAgorham-tech.com/.../docs/...Market___final___03222016_4.82135807.pdf · Gorham PMA Conference San Diego, CA 21-23 March, ... The air transport MRO
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The fall in commodity prices have had a dramatic impact of economies dependent on commodity exports
Source: Dow Jones Commodity Index
Over the past 5 years, commodity prices have plummeted more than 55%
Dow Jones Commodity Indices (DJCI)(January 2011 Indexed to 100)
40
50
60
70
80
90
100
110
- 56.0%
Indexed Values
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The dramatic increase in oil & gas market
supply and reduceddemand for commodities has led to a stronger US Dollar
Partially offsets the positive impact of low fuel costs for operators
Increases the cost of dollar based flight hour agreements (and parts/material in general)
Cost of labor for in-country MROs is cheaper driving up margins for US dollar based contracts
Buying/leasing aircraft becomes more expensive
FOREX Impact
Source: Oanda historical exchange rates, ICF International Analysis
Russian Ruble-55.1%
Brazilian Real-41.1%
S. African Rand-34.1%
Can Dollars-23.1%
Aus Dollars-20.8%
Euro-20.0%
British Pound-12.8%
Japanese Yen-11.9%
Indian Rupee-7.8%
Chinese Yuan-7.2%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
B
R
C
S
A
The “CRABS”: Countries with economies that are heavily dependent on commodity exports
Global Currency Exchange Rates vs USD% Value Change, Jan. 2014 – Jan. 2016
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The PMA Market…The PMA Market…
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Last year, operators spent over $28B on OEM new parts and an additional $13B on alternatives such as PMA, surplus, and parts repairs
2015 Parts Alternatives Compared To OEM New Parts
OEM new Alternatives
Repair (inclDER)
Surplus
PMA ($0.54B)
Source: ICF International
46%
$28B
$9B
$3.7B
1919
Parts pricing and availability continue to drive demand for PMA parts
Price and availability are the main reasons for PMA usage
Source: ICF International
• PMA parts are typically 20 to 40% off OEM list price
• Many OEMs may protect their aftermarket revenue streams by campaigning against PMA and by insisting that licensed MROs discard PMA parts found during overhaul
• In an AOG situation, any permitted serviceable part will be used irrespective of price, including PMA
• Use of PMA is usually driven by long lead time for OEM parts
Part Price Part Availability
0
20
40
60
80
100
120
New As Removed
OverhauledNew Surplus
PMA
Illustrative* Parts Price Bands
Exceptional circumstances
% OEM List
“TAT on repair order and warranty management are most important for my component repair business. Parts availability might drive the use of alternative parts in the future. “
- Major Chinese Airline
2020
PMA parts tend to be best suited for low price, high velocity parts
Alternative Parts Exposure vs. Part Type
Source: ICF International
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PMA growth is expected to be slower due to the retirement of mature aircraft, but still healthy at 5.1%
Air Transport PMA Market Forecast In $ Millions (2015-2020)
Source: ICF InternationalForecast in 2015 USD, exclusive of inflation
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
-
100
200
300
400
500
600
700
800
2015 2016 2017 2018 2019 2020
Component
Engine
Airframe
Total
Penetration (%)
2015 – 2020
7.3%
1.4%
6.5%
5.1%
CAGR:
$ millions% of total MRO material
‘15-’20 CAGR: 5.1%
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The air transport MRO market is expected to grow 4.1% per annum through 2025 driven by the Asia Pacific region
The two largest global airframe MRO suppliers are headquartered in the Asia Pacific region
The US energy revolution combined with the economic slowdown in China are having a significant impact commodity export dependent CRABS
The PMA market is expected to grow 5.1% per annum to $700M USD by 2020
In Summary…
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