CLINGING TO THE PAST OCTOBER 2017 - Presented by: Brian Prentice - Oliver Wyman
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
CLINGING TO THE PAST OCTOBER 2017 Presented by: Brian Prentice AVIATION, AEROSPACE & DEFENSE © Oliver Wyman
Oliver Wyman’s Aviation, Aerospace & Defense practice is the largest
and most capable consulting team dedicated to the industry
OUR EXPERIENCE OUR CLIENTS OUR APPROACH
• 241 professionals across Europe We have worked with more than ¾ Data-driven: unbiased benchmarking
and North America of the industry’s Fortune 500 and forecasting tools to establish
• Deep aviation knowledge and companies, including: problems and identify solutions
capabilities allow the practice to • All major US airlines Innovative: ideas that are
deliver data-driven solutions and forward-thinking
• Leading airlines, MROs, OEMs, and
provide strategic, operational, and independent parts manufacturers in Actionable: results-oriented
organizational advice
the Americas, Europe, and Asia recommendations
• Dominant aerospace and Collaborative: an emphasis on
defense firms working with our clients, alongside
executives, management, and
support teams
© Oliver Wyman
© Oliver Wyman 11 Taking Care of Business
In recent years the airline industry has achieved record profits, with Asia Pacific, China and India (Asia Pacific) operators
returning to sustained profitability.
Global Commercial Air Transport Industry Net Profit
by Year
Billions of
US $ Asia Rest of World
$30
$20
Peak
$10
$0
-$10
-$20
-$30
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F Co
Commercial aviation remains a fiercely competitive global market
© Oliver Wyman Source: IATA 3Three years of low oil prices have driven record industry profits and allowed operators to invest heavily in the passenger
experience
Crude Oil and Jet Fuel Spot Prices per Gallon
by Year
US $ Brent Crude WTI Crude Jet Fuel Cone of Uncertainty
$4.0
$3.5
$3.0
$2.5
New gen narrowbody aircraft are
$2.0 more profitable than current gen
$1.5
New gen widebody aircraft are
more profitable than current gen
$1.0
$0.5
$0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Operators have also adopted new, more expensive labor contracts, which may be a possible source of turbulence in the near future
amid a changing economic landscape as the oil market begins to recover
© Oliver Wyman Source: U.S. Energy Information Administration, Oliver Wyman Analysis 4Nearly half of aircraft operator respondents in our MRO Survey are delaying retirements and nearly one third of
respondents are reactivating aircraft they have pulled from long term storage
Q: Are you delaying aircraft retirements?* Q: Have you pulled an aircraft out of storage and pressed it into service within the past 12
months? If so, why?*
71%
53%
30%
23%
13%
3% 3% 3%
No Yes, due to lack of Yes, due to improved Yes, due to temporary No Yes, due to lack of Yes, due to improved Yes, due to temporary
availability of new economics of older capacity opportunities availability of new economics of older capacity opportunities
aircraft aircraft vs acquiring aircraft aircraft vs acquiring
new aircraft new aircraft
© Oliver Wyman Source: Oliver Wyman 2017 MRO Survey | *Responses filtered to aircraft operators 5Over the past year, status changes to 3,792 aircraft have lead the global in-service fleet to experience a net growth of 828
aircraft, representing a 3.4% annual growth rate
Year Over Year Changes to the Global Commercial Air Transport In-Service Fleet 2017 Global Commercial Air Transport MRO Market Forecast
by Transaction Type by MRO Segment
3.4%
$17.7B
Airframe & Modifications
2,310
(1,482) Aircraft Additions
Aircraft Removals 25,368 $29.6B
2017 In-Service Fleet Engine
24,540
2016 In-Service Fleet
Storage for conversion
into a freighter
Transferred to a
commercial operator
$12.1B
Component
(5) 3
Transferred to a Completed freighter
non-commercial operator conversion $12.8B
(42) 30 Line
Involved in an accident Unknown prior exclusion
(34) 6
Formally retired Removed from storage
(198) 630
Sent to storage New aircraft delivery
(1,180) 1,641
Translating the changing fleet dynamics into MRO, the 2017 market is forecast to be $72.1B, with engine MRO continuing to be the
driver of growth
© Oliver Wyman Source: Flightglobal, Oliver Wyman Analysis 6While the fleet continues to grow, and the industry is recording near historic net profits, uncertainties surrounding
economic growth, interest rates, and oil could disrupt and hinder growth
Global Commercial Air Transport Fleet Forecast Global Commercial Air Transport MRO Market Forecast
by Year by Year
Historical Fleet Forecast Fleet Historical MRO Forecast MRO
Number of Billions of
Aircraft Likely Case Alternate Scenarios Best/Worst Case Alternate Scenarios US $ Likely Case Alternate Scenarios Best/Worst Case Alternate Scenarios
41,000 $130
130
39,000
$120
120
37,000
$110
110
35,000
$100
100
33,000
31,000 $90
90
29,000
$80
80
27,000
$70
70
25,000
$60
60
23,000
21,000 50
$50
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2011 2012
2011 2012 2013
2013 2014
2014 2015
2015 2016
2016 2017
2017 2018
2018 2019
2019 2020
2020 2021
2021 2022
2022 2023
2023 2024
2024 2025 2026 2027
The commercial air transport fleet is forecast to increase by 10,133 aircraft over the next 10 years driving the $72.1B commercial air
transport MRO market to go grow at an average annual rate of 3.7% per year, topping out at $103.8B in 2027
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet & MRO Market Forecasts 7The global fleet is forecast at an annual growth rate of 3.4%, while the MRO market is forecast to grow at an annual rate
of 3.7%
Global Commercial Air Transport Fleet Forecast Global Commercial Air Transport MRO Forecast
by Aircraft Class by MRO Segment
Number of Billions of
Aircraft Narrowbody Widebody Regional Jet Turboprop US $ Airframe & Mods Engine Component Line
40,000 $110
3.0% 5.2%
$100
35,000
3.4% 3.5% 3.7%
-3.5% $90
3.8% -2.0% 2.3% 3.5%
30,000 -2.8%
$80
-0.4% 3.5%
-1.9% 4.0%
3.5%
25,000 -1.1% $70
4.0% 3.8%
4.6% $60 3.5%
20,000 4.5% 6.9%
$50 4.9%
4.9%
3.0%
5.3%
15,000 $40
$30
10,000
$20
4.0% 1.4%
5,000 -1.0%
$10
0 $0
2017 ’17–’22 2022 ’22–’27 2027 ’17–’27 2017 ’17–’22 2022 ’22–’27 2027 ’17–’27
CAGR CAGR CAGR CAGR CAGR CAGR
Next gen narrowbody aircraft will dominate the global fleet growth, while expensive engine shop visits will drive the growth in the MRO
market.
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 8Asia Pacific is forecast to experience the fastest growth in the world at an average annual rate of 6.5%, reaching a fleet
size of nearly 14,000 aircraft by 2027
Asia Pacific Commercial Air Transport Fleet Forecast Asia Pacific Commercial Air Transport MRO Forecast
by Aircraft Class by MRO Segment
Number of Billions of
Aircraft Narrowbody Widebody Regional Jet Turboprop US $ Airframe & Mods Engine Component Line
16,000 $50
14,000
5.3%
$40
-0.9% 7.6%
12,000 6.5%
4.3% 5.6%
1.7% 6.9%
10,000 7.8% 4.0% 6.4% $30 6.2%
4.4% 6.8%
4.4% 6.1%
8,000 8.6% 6.8%
6.4% 7.9%
4.7%
9.0%
7.8% $20
6,000 8.9% 7.9%
9.2% 6.8%
4,000
$10
2,000 6.8% 4.3%
1.7%
0 $0
2017 ’17–’22 2022 ’22–’27 2027 ’17–’27 2017 ’17–’22 2022 ’22–’27 2027 ’17–’27
CAGR CAGR CAGR CAGR CAGR CAGR
Engines will be the main driver of growth in Asia Pacific with the overall MRO demand increasing from $21B in 2017 to over $41B by
2027, a 6.9% annual growth rate
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 92 Aircraft Technician Shortage
The Oliver Wyman 2017 MRO Survey found that 84% of respondents across the globe are experiencing labor challenges
Percent of organizations using stop-gap strategies
to temporarily address labor challenges:
Q: What stop-gap strategies is your organization
using to temporarily address labor challenges?*
Overtime / internal productivity
and efficiency strategies 74%
Internal training to expand
worker skill sets 71%
84% Certification programs to
expand worker skill sets 29%
External training to
expand worker skill sets 24%
Outsourcing 24%
Hiring foreign workers 16%
Job sharing 13%
Other 8%
Over the long term, reliance on large amounts of overtime is costly, can reduce overall productivity, and unsustainable
© Oliver Wyman Source: Oliver Wyman 2017 MRO Survey 11In the US, the commercial MRO workforce is comprised of approximately 86,000 maintenance technicians with a
median age of 51, nearly 9 years older than the median age of the US labor force
US Commercial MRO Maintenance Technician Workforce
by Age
Number of
People Median Age of US Labor Force Median Age of US Commercial MRO Maintenance Technician Workforce US Commercial MRO Maintenance Technician Workforce
6,000
5,000
4,000
3,000
2,000
1,000
0
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90
Where data is not as readily available, European airlines and MRO’s are reporting similar challenges while Asia Pacific is facing a
different challenge with respect to Technicians
© Oliver Wyman Source: A4A Members, Other US Airlines, US MROs, BLS, FAA, Oliver Wyman Analysis 12In Asia Pacific, assuming the numbers of technicians are correct for today’s fleet and given the explosive growth in MRO
demand and the time it takes for a mechanic to become proficient, investment in technicians is required
Asia Pacific Commercial Air Transport Fleet Forecast Asia Pacific Commercial Air Transport MRO Forecast
by Aircraft Class by MRO Segment
Number of Billions of
Aircraft US $
16,000 $50
88% Time to become proficient?
14,000
$45 94%
$40
12,000
$35
10,000
$30
8,000 $25
$20
6,000
$15
4,000
$10
2,000
$5
0 $0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
There is reason to think that Asia Pacific may need substantially more technicians soon to prepare for fleet growth
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 13One way to mitigate the impact of the tight labor market is to modernize training for new and existing technicians by using
cutting-edge technology to deliver content that is personalized, relevant, and easier to retain
• They do not offer a personalized learning experience for employees to directly
Personalized L&D resources are apply to their specific roles
ineffective at building long-term • The content is not easily digestible
knowledge • Employees are expected to know more than ever before, but have less time to
spend on L&D
• By 2025, millennials will make up 75% of the workforce
Millennials (and their learning styles) are • Millennials prefer non-traditional learning methods
taking over • Millennials absorb information more effectively when they are presented in shorter
bursts and delivered digitally
• Developing innovative, effective material for employees requires a lot of time,
money, and internal resources
• A majority of organizations indicate their biggest challenge for L&D is ensuring
Employers are struggling to develop that what is taught is actually utilized on the job
relevant L&D content • The fastest-growing segment in HR tech spending is now the adoption of new
employee learning systems
• At most companies, the learning management system (LMS) is among the oldest
and most challenging to use
Training should be personalized, proficiency-based, and custom-tailored to employee needs to allow for technicians to focus on
individual maintenance units rather than general knowledge that is irrelevant to job duties
© Oliver Wyman 143 Moore Changes Required
The maintenance technician shortage will make performing maintenance at the right time, and as efficiently as possible
more important than ever
Q: Which of the following game changing technologies for the shop / hangar floor are you planning on implementing within the next 3 years?
Drone / Robot Supported Maintenance Paperless Shops / Hangars Predictive Maintenance Smart Sensors (SansEC Sensing) Virtual Maintenance Training
18% 82% 77% 9% 32%
More than three quarters of MRO Survey respondents plan on implementing paperless shops/hangars and predictive maintenance
over the next three years – technologies aimed at increasing technician efficiency and productivity and maximizing aircraft availability
© Oliver Wyman Source: Oliver Wyman 2017 MRO Survey 16While respondents express interest in predictive maintenance, big data, and advanced analytics, there is limited evidence
so far as to the benefits, largely due to the industry being plagued with major inefficiencies and a lack of innovation when it
comes to information technology
Q: Select the top three (3) problems facing your IT systems today:
2016 MRO Survey 2017 MRO Survey
62%
54%
46%
35% 35%
31%
23%
0% 0%
Lack of Data Quality / Integrity Flexibility Cost Training / User Constrained by Old Regulatory Other There Are
Functionality Adoption Technology Compliance No Problems
Aircraft designed in 2017 are being maintained by systems designed decades ago and it’s starting to show
© Oliver Wyman Source: Oliver Wyman 2016 MRO Survey, Oliver Wyman 2017 MRO Survey 17Today, the rate of technological change is accelerating so fast that it has risen above the average rate at which our
industry can adapt to change, preventing us from fully benefiting from all of the new technology that is coming along
Adaptability to Technological Change Q: Indicate which new technologies your company is planning to deploy in the next three
Astro Teller Illustrative Graphic (3) years?
Rate of
Change
RFID 68%
Wearable and/or
68%
We are here Handheld Devices
Industry’s ability to adapt Barcoding 40%
to change
Composite Repair
36%
Technological
Change
Capabilities
Time 28% New Repair Technology | 24% Additive Manufacturing | 20% Artificial Intelligence (Machine Learning)
20% Robotics | 12% Drone-Supported Maintenance
This is evident by the fact that the new technologies planning on being deployed over the next 3 years are RFID and wearable and/or
handheld devices such as tablets – technologies other industries adapted to several years ago
© Oliver Wyman Source: Oliver Wyman 2017 MRO Survey 18Most have recognized that they are behind the technology curve and plan to make significant changes to their IT systems
over the next few years
Q: Indicate which IT systems have a migration or major upgrade planned within the next three (3) years?
2016 MRO Survey 2017 MRO Survey
68%
55%
50% 50% 50%
41%
23% 23%
18%
Engineering Planning Supply Chain Heavy Maintenance Line Maintenance Engine / Component Human Resource Technical Services Finance
Shop Maintenance Management
An ever aging IT infrastructure, competing for limited resources, needs to be given higher priority because not only is the fleet getting
larger, it is becoming more technologically advanced - fast
© Oliver Wyman Source: Oliver Wyman 2016 MRO Survey, Oliver Wyman 2017 MRO Survey 194 The Lean, Digitally Mean Airline Fleet of the
Future Takes ShapeAs the in-service fleet grows to over 35,000 by 2027, the rapid deployment of aircraft incorporating next generation
technology will be the primary agent of change
Global Commercial Air Transport Delivery Forecast Global Commercial Air Transport Fleet Forecast
by Aircraft Vintage by Aircraft Vintage
Number of Number of
Aircraft 1970’s 1980’s 1990’s 2000’s 2010’s Aircraft 1970’s 1980’s 1990’s 2000’s 2010’s
2,500 40,000
35,000
2,000
30,000
25,000
1,500
20,000
1,000
15,000
10,000
500
5,000
0 0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Dealing with the technological shift in the fleet will be an enormous challenge as the new fleets will bring new complexity to the market
and further change the skill requirements of the workforce maintaining the fleet
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 21The Asia Pacific in-service fleet will grow from over 7,300 to nearly 14,000 by 2027, as the rapid deployment of aircraft
incorporating next generation technology will be the primary agent of change in the region.
Asia Pacific Commercial Air Transport Delivery Forecast Asia Pacific Commercial Air Transport Fleet Forecast
by Aircraft Vintage by Aircraft Vintage
Number of Number of
Aircraft 1970’s 1980’s 1990’s 2000’s 2010’s Aircraft 1970’s 1980’s 1990’s 2000’s 2010’s
1,000 16,000
900
14,000
800
12,000
700
10,000
600
500 8,000
400
6,000
300
4,000
200
2,000
100
0 0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
In 2017 only 7% of Asia Pacific’s fleet is composed of next generation aircraft. By 2026, the number of next generation aircraft in the
region is forecast to outnumber the current generation fleet.
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 22And, even though many have altered fleet plans to take advantage of current market conditions, the number of aircraft
removed from the fleet is expected to reach historic levels over the next 10 years
Global Commercial Air Transport Retirement Forecast Q: What tools do you use to manage the end-of-life?
by Aircraft Vintage
Number of
Aircraft 1970’s 1980’s 1990’s 2000’s 2010’s
1,200
1,000
Microsoft Excel 68%
800
Cost Analysis 60%
600
Market Supply
33%
400 Analysis
200 Simulation-based
30%
Models
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Approximately 40% of the in-service fleet is forecast to End of life planning needs to move into the digital age
retire by 2027 to account of the complexity of aircraft with different
retirement requirements
© Oliver Wyman Source: Oliver Wyman Global Commercial Air Transport Fleet Forecast 23It’s time to break free of antiquated thinking, processes, and systems holding us back from fully benefiting from new technologies. █ The industry has passed the peak of this current financial cycle. █ The aging of the mechanic workforce and rash of anticipated retirements could not come at a worse time for the industry. █ An ever aging IT infrastructure, competing for increasingly limited resources, needs to be given higher priority. █ The sheer number of retirements over the next 10 years will strain the processes and methods currently use to manage the end an aircraft’s useful life. End of life planning needs to move into the digital age.
You can also read
