air transport and equipment market review & outlook for...
TRANSCRIPT
Slide 2
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Slide 3
Four-cycle model – Background
The “Industry Cycle”
determines the demand for
seat (RPK) and cargo (FTK)
capacity. This “demand” can
be compared to the “supply”
side (ASK and AFTK) to
determine/project shortage
or surplus situations
The “Technology Cycle”
determines how competitive
an aircraft is. A more
competitive design (same
payload/range category) can
severely undermine value
and remarket ability (A340
vs. 777). A successor may
also impact the value curve
(“last of the line” effect)
Increasingly aircraft
transactions take place
between “financially driven”
parties (lessors, investors)
vs. the traditional “airline-to-
airline” model. The state of
the finance market conse-
quently is very important
For investors/financiers the
end-of-lease conditions are
increasingly important. Is the
aircraft under a FHA, Return
Conditions or does the lessor
have access to Maintenance
Reserves?
Avia
tio
n i
nd
us
try
Cyc
leTyp
e T
ec
hn
olo
gy C
yc
leA
/c M
ain
ten
an
ce
Cyc
leF
ina
nc
ing
Cyc
le
increasingly important for "mid live investors“ very high
peaked new generation gaining momentum
Slide 4
The global economic environment – Improving slightly
3.43.2
3.1
3.4
1.92.1
1.61.8
4.6
4.04.2
4.6
3.9
2.6
2.3
3.8
2014 2015 2016 2017
World output Output advanced economies Output emerging markets World trade volume
IMF – Macro-economic projections (Y-o-Y growth)
Source: IMF – World Economic Outlook October 2016
[%]
5
4
3
2
1
0
Slide 5
Towards an era of de-globalisation/protectionism?Global trade vs. global production
Source: CPB World Trade Monitor
20
15
10
5
0
-5
-10
-15
-20
-25
Ja
n-0
1
Ju
l-0
1
Ja
n-0
2
Ju
l-0
2
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Ja
n-1
2
Ju
l-1
2
Ja
n-1
3
Ju
l-1
3
Ja
n-1
4
Ju
l-1
4
Ja
n-1
5
Ju
l-1
5
Ja
n-1
6
Ju
l-1
6
World industrial production volume (excl. construction) World merchandise world trade
[%]
Slide 6
0.3
0.5
1.0
1.3
0%
1%
1%
2%
2014 2015 2016 2017
1.5
1.0
0.5
Airline fuel and interest cost moving up
Crude oil & jet fuel – price development [US$ and €]
Source: eia – Short-term energy outlook, December 2016
IMF US$ libor (mnth.) projection
West Texas Intermediate (WTI) crude oil price IMF oil price projection
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
[€][US$]
US Gulf Coast jet fuel spot (cUS$ per barrel)
WTI Spot (cUS$ per barrel)
US Gulf Coast jet fuel spot (c€ per barrel)
WTI Spot (c€ per barrel)
[US$ per barrel]
0
20
40
60
80
100
120
Jan-2015 Jul-2015 Jan-2016 Jul-2016 Jan-2017 Jul-2017
projections
STEO price forecast NYMEX futures priceHistorical spot price
95% NYMEX futures lower confidence interval
95% NYMEX futures upper confidence interval
Source: IMF – World economic outlook October 2016
2016
2014 2015 2016 2017
Oil (US$/BBL) Δ Oil price (US$ in %)
-8%
-47%
$50.8
-15%
$43.0
18%
$50.6
40
42
44
46
48
50
52
38 -60
-50
-40
-30
-20
-10
0
10
20
30
[US$]
[%]
Source: IMF – World economic outlook October 2016
[€]
Slide 7
14.9
8.9
6.9 7.9
2.4
-1.2
8.06.3 5.3 5.2 5.7
7.45.9
5.1
2.81.0
6.6
1.7
8.3
-13.7
9.5
7.5
-1.4
-3.9-5.5
-10.7
-8.0
0.0
73.5
75.0
76.2
78.5
79.479.7
79.980.4 80.2
79.8
70
72
74
76
78
80
82
-20
-15
-10
-5
0
5
10
15
20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F
RPK growth Pax. yield PLF
2010–2016 passenger traffic robust, but yields down
Source: IATA
IATA passenger market data
[%]
RPK growth & pax yield
[%]
PLF
RPK = Revenue passenger-km PLF = Passenger load factor
Slide 8
11.6
2.3
6.3
4.7
-0.7
-8.8
19.4
0.4
-0.9
0.6
5.0
2.33.4
3.53.9
0.5
4.4 5.67.0
-15.2
14.4
0.8
-4.2 -4.9
-2.0
-17.4
-12.5
0.0
-20
-15
-10
-5
0
5
10
15
20
25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F
FTK growth Cargo yield
2011–2016 stagnant freight traffic – 2016 turn-around?
Source: IATA
IATA cargo market data
[%]
FTK = Freight tonne km
Slide 9
2016 YtD – Passenger traffic solid, freight recovering
Source: IATA Air passenger and freight analysis
10
8
6
4
2
0
-2
-4
-6
-8
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16
Intra 2016
freight trend
YtD: 6.1%
YtD: 3.2%
RPK FTK
[%]
Traffic volumes
Slide 10
2016 – Peak in the profit cycle?
800
700
600
500
400
300
200
100
0
-1002000
Source: Airline Monitor; ICAO; for 2014/15/16 IATA
Op. income Net income Airline revenue Airline expenses
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E
701
718
35.3
35.6
[US$ mn]
World airline financial results
Slide 11
-0.8
0.3 0.9
7.3 7.50
20.3
35.5
-9.6
1.1
4.45.5
7.84
22.4
9.4
-15
-10
-5
0
5
10
15
20
25
30
35
40
Africa Latin America Middle East Asia/Pacific Europe North America Global
Net profit 2016F Net profit per passenger 2016F
2016 – Profitability mainly for North American Airlines
Source: IATA (Ec. performance December 2016)
[US$ bn]
IATA – Net airline profit – (post tax) per region
Slide 12
-5,6-4.1 -5.0
14.7
-26.1
-4.6
17.3
8.39.2 10.7
13.7
35.3 35.6
29.8
840
1,8732,033
2,421
1,420
652
1,354
2,561
2,331
3,534 3,551
2,3642,175
0
500
1000
1500
2000
2500
3000
3500
4000
-30
-20
-10
0
10
20
30
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F
Net airline profit* Western built jet orders (civil operators)**
Airline profits driven by low fuel – Orders down 2015/16
Source: * IATA "Economic performance of the airline industry (December 2016), ** Ascend fleets (January 2017)
[US$ mn]
Net airline profits vs. commercial jet orders
[Number]
Slide 13
Lessor‘s share remains stagnant at high level (39%)
Source: Flightglobal/Ascend; West.B.Jets, all civil opserators
Lessor % in global jet fleet Lessor % in jets on order
45
40
35
30
25
20
15
10
5
01970 1975 1980 1985 1990 1995 2005 2010 20152000
39.1%
18.3%
[%]
Lessor share in global commercial jet fleet/orders
Slide 14
Generation change now gaining momentum
Source: Ascend flightglobal
90
80
70
60
50
40
30
20
10
0
1975
75% – Order+Lol+Option
59% – Narrowbodies
57% – All
47% – Widebodies
9% – Stored/fleet
1980 1985 1990 1995 2000 2005 2010 2015
All stored % total fleet
WB on order % of in service fleet
All on order % of in service fleet All on order + option/LoI % of in service
NB on order % of in service fleet
[%]
Backlog as % of in service fleet
Slide 15
The 2016 Numbers – Published net orders
Source: Press releases
A320CEO 46
A320NEO 561
NB: 607
A330CEO 41
A330NEO 42
A350 41
A380 0
WB: 124
731
Deliveries 688
Book/Bill 1,06
Cancellations 2016 218
Backlog 31/12 6874
Cancellation as % backlog 3.17%
737NG 16
737MAX 534
NB: 550
767 26
787 58
777CG 17
777X 0
747 17
WB: 118
668
Deliveries 748
Book/Bill 0,89
Cancellations 2016 180
Backlog 31/12 5715
Cancellation as % backlog 3.15%
Slide 16
231
785
136
540
405
80 51 64
32 23 129 21 10 7 2 18 10
500
1000
1500
2000
2500
3000
3500
4000
4500
Order Intake 2012 - 2016 (Western Jet, All Civil Ops.)Source : Ascend (data incl. "type swaps")
2012 2013 2014 2015 2016
Recent order intake per aircraft family
Source: Ascend (data incl. "type swaps")
Gross Orders
(incl. type
swaps) 2012 2013 2014 2015 2016
Backlog
31/12/16
A320CEOFam 278 435 496 146 231 653
A320NEOFam 407 830 1050 941 785 4992
737NG 217 469 265 234 136 837
737MAX 908 699 900 412 540 3605
E-Jets E1 69 203 69 126 40 185
E-Jets E2 0 150 60 57 5 272
787 36 181 49 99 80 700
A350 40 239 57 16 51 754
A330CEO 68 54 48 103 64 145
A330NEO 0 0 120 52 32 204
777 Current 75 55 54 38 23 134
777X 0 66 220 20 0 306
CSeries 15 25 61 0 129 353
CRJ 67 36 47 27 21 61
MRJ 100 0 26 32 10 233
767 22 2 4 49 7 70
A380 8 50 20 3 2 112
747 7 17 2 6 18 28
Others 14 23 3 3 1 15
2331 3534 3551 2364 2175 13659
Order intake 2012–2016 (western jet, all civil operators)
Slide 17
2016 – Equipment highlights & concerns
A320 family selling well and gaining market share vs. 737NEO. A319 marginalised and A321 taking increasing share of
orders. Significant number of A320CEO cancellations/type swaps.
737MAX selling well but slowly falling behind A320 family. Main difference seems the lack of a 737MAX10X (so far) to
compete against the A321NEO. Dilemma: a simple stretch or a more radical redesign (commonality?). 737MAX 7+ still at
risk of being marginalised. Cancellations/type swaps for 737NG.
E-Jets E2 still outsold by the E1, in particular by the 175-E1. Concerns about 175-E2 not meeting MTOW limits under US
Scope Clauses. E175-E1 the “fall-back” that MRJ may be missing, facing similar issues.
787 and A350 selling well by Twin Aisle standards with focus on 787-9 and A350-900. A350-800 “exit” and 787-8 heading in
same direction. 787-10 and A350-1000 not yet too convincing. Will a A350-”2000” be convincing as Airbus’ largest twin
aisle (apart from the struggling A380)?
A330CEO still doing well after having been given more range. A-300 still a credible aircraft. A330-800 seems to follow the
A350-800, -900 not a very convincing order-book yet.
777X order intake stalling but still time to bounce back. 777-300ER had to face the inevitable production cut. 777F the
leading long haul plane in this niche market.
CSeries had excellent 2016 in terms of – much needed – orders. Has to maintain momentum/profitability.
Will the MRJ be inspired by the recovery of the Cseries? Advanced plane but needs some credible orders.
747-8F got some crucial orders. 747-8I nearing the end. Program profitability impacted by Airforce One discounting?
A380 further in the danger-zone.
Slide 18
Outlook 2017 – Softening but no “doom & gloom“
According to IMF global economy heading for fragile continuation of the recovery. Event risk omni-present.
CPB data suggest de-globalisation (production growth > trade growth). Production technology (robotisation) and
protectionism? Long term risk!
Fuel slowly moving up, rising interest rates, labor cost increasing – airline profitability under pressure.
Ticket prices to increase, potentially reducing passenger traffic growth. Cargo recovering, beyond the Hanjin effect.
More order deferrals/cancellations in selected regions. Order slump to continue in 2017.
Programs that have not built strong backlog in 2013/14 may struggle to gain momentum.
Money remains plentiful, even without EXIM/ECA
Investors may be disappointed by residual value of selected twin aisle. No major impact expected yet of the last-of-the-line
effect, but… Big difference remarketability aircraft on lease or naked.
Will we see in 2017 :
‒ MAX 10 (yes)
‒ A350-2000 (no)
‒ CS500 (no)
‒ 777-10X (no)
‒ C919 making first flight (yes)