aircraft health monitoring · 2017-09-19 · icf proprietary and confidential. do not copy,...

AIRCRAFT HEALTH MONITORINGThe True Value of Aircraft Health Monitoring and

Data Management

14 September 2017

ICF proprietary and confidential. Do not copy, distribute, or disclose. 2

Agenda

Market Trends

New Technology Aircraft

MRO Forecast

Benefits for the Airline

3

Market Trends

ICF proprietary and confidential. Do not copy, distribute, or disclose.

Airlines are achieving historically high return on invested capital (ROIC) levels – there’s an evident correlation with changes in fuel costs

4

Source: IATA, ICF Analysis

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

$0

$20

$40

$60

$80

$100

$120

$140

Fuel Price ROIC

Fuel Price and Global Airline Return On Invested CapitalJet Fuel

Price

($/barrel)

Airline

ROIC (%)


The global airline industry achieved record profitability over the past years, driven by low fuel prices and greater cost control

5


-$30

-$20

-$10

$0

$10

$20

$30

$40

$USD (Billions)

Europe, $7.4B

Africa, ($0.1B)

North America, $15.4B

Asia Pacific, $7.4BMiddle East, $0.4B

Latin America, $0.8B

$35.9B

Global Airline Profitability, 1997-2017F


Latin America has seen modest but stable profit margins over the past decade

6


-1.8%

-4.7%

0.1%

2.3%

1.0%

-0.9%

3.4%4.7%

0.7%1.5%

3.0%

-0.4%

11.6%

8.3%

5.2% 4.7%

0.8% 1.7%

-5%

0%

5%

10%

15% 2008

2012

2017F

Global Airline EBIT Margin by Region

North

America

Asia

Pacific

Europe Latin

AmericaMiddle East Africa


Commercial aircraft OEM production backlog remains at historical highs…

7

Source: CAPA, ICF Analysis

0%

10%

20%

30%

40%

50%

60%

70%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Order Backlog

Backlog /% Active Fleet

# Aircraft

Commercial Aircraft OEM Production Backlog


… and more stable fuel costs have slowed aircraft retirements

8

Source: CAPA, Airline Monitor, ICF analysis

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

200

400

600

800

1,000

1,200

# Retirements % Active

Fleet

1991-1999 Average: 203

2000-2009 Average: 473

Commercial Annual Aircraft RetirementsPotential Impact:

• Reduced part-out feed

stock for surplus

market

• Mature aircraft being

placed with new

operators

• Increase in airframe

and engine MRO

spend on older

airframes

• Improved new parts

sales

• Higher used part

values/pricing


The outlook for Latin America’s aviation industry is starting to brighten as economies recover ……..

Source: ICF Analysis

Rise of Low-Cost

Airlines in Latin

America

Partnerships With

Major Global

Carriers

Healthy OE

Backlog

Recovering

Economy

Infrastructure and

Regulatory

Challenges

Aviation Outlook:

• Economic growth

remains weak, driven by

uncertainty and

geopolitical events

• Three LCC carriers have

launched this year,

bringing total LCCs to

over 10

• Additional LCCs have

been announced

• High taxes on air travel

and airport duties hinder

market growth

• Infrastructure constraints

10


-$0.5

$0.0

$0.5

$1.0

$1.5

…and carriers are beginning to reverse losses and earn profits

Source: IATA, Company Filings & ICF analysis

GOL

FY2016 Net Profit: BRL 1.1B ($338.5M)

FY 2016 Net Margin: 11.1%

LATAM

FY2016 Net Profit: $69.2M


Copa



Avianca



AeroMexico

FY2016 Net Profit: MXP 1.1.B ($53.8M)


Latin America

Airline Profitability$B

11

MRO Market


NarrowbodyJet

WidebodyJet

Turboprop

Regional Jet

The current commercial air transport fleet consists of ~28,000 aircraft; ~2,000 are located in Latin America

Source: ICF, CAPA 2016

54%

14%

19%

13%

By Aircraft Type

28,000

Aircraft

By Global Region

30%

28%

25%

8%5%

5%Latin

America

Africa

North

America

Asia

Pacific

Middle

East

28,000

AircraftEurope

2016 Global Commercial Air Transport Fleet

13


The combination of strong air travel demand and the need to replace ageing aircraft will drive fleet growth at a healthy 3.2% p.a.


30% 25%

28%

33%

25%

23%8%

8%

5%

6%

4%

5%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2016 2026

~28,000

~38,100# Aircraft

Total: 3.2%

CAGR

10-Year Global Air Transport Fleet Growth

1.3%

4.8%

2.4%

3.4%

5.0%

4.1%

Latin America

Middle East

Africa

Europe

North America

Asia Pacific

14


Engines

Components

Line

Airframe

Modifications

2016 commercial air transport MRO demand is $67.6B; Latin America has ~5% of the market

Source: ICF, CAPA 2016, Constant 2016$

By MRO Segment By Global Region

40%

14%

17%

8%

$67.6B

30%

27%

26%

8%

5% 4%Middle

East

Africa

Asia

Pacific

North

America

Latin

America

$67.6B

Europe

22%

2016 Global MRO Demand

15


The global MRO market is expected to grow by 4.1% per annum to over $100B by 2026


Note: Constant 2016$

40%

41%

22%

22%17%

16%

14%

12%

7%

9%

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

2016 2026

$67.6B

$100.6B CAGR

Total: 4.1%

$ USD (Billions)

10-Year Global MRO Demand Growth

4.5%

4.2%

3.2%

2.8%

5.2%

Airframe

Modifications

Line

Engine

Component

16


Over the next decade, Latin America will see ~$2.7B increase in MRO spend


16

$8.0$6.6

$5.5

$3.5$2.7 $2.7 $2.3 $1.7

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

AsiaPacific(excl

China)

China MiddleEast

NorthAmerica

LatinAmerica

WesternEurope

EasternEurope

(incl CIS)

Africa

65% 83% 101% 19% 71% 18% 76% 71%Percent

Change:

$ USD (Billions)

Difference in MRO Spend, 2026 vs. 2016 –By Global Region


2016 MRO market in Latin America is ~$3.8B; Top 5 operator groups contribute over 50% of the MRO spend


117

New

Technology

Aircraft


When Lindbergh

flew from Long

Island to Paris Le

Bourget in 1927, it

was a long flight –

33.5 hrs.

With no IFE, ACARS or

… lavatory!


The “new technology” fleet is set to grow significantly

Old: First flight <1990s, e.g. A300/A310 / 747-1/2/3 / BAe146

Mature: First flight >1990s, e.g. 737CL / 737NG / A330/340 / 777 / E-Jet

New: First flight > 2005; e.g. 787 / A350 / A380 / CSeries / E-Jet E2

Source: ICF

4,811 2,141

22,097

18,252

17,753

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2016 2026

10-Year Fleet Forecast by Aircraft Generation

# Aircraft

Total: 3.2%

CAGR

Mature

New

Old32.7%

-1.9%

-7.8%~28,000

~38,100

22


Source: ICF Research

Number of AHM

Parameters

777 787

~ 28MB

< 1MB

Transmittable Data

(MB/Flt)A/C Data Generated

(TB/Year)

2012 2022

~ 137TB

~11TB

~1,100%

767: 10,000

A320: 15,000

B787: 100,000

Stakeholder Battle:

Who will control and

gain the most from

the operating data IP?

• Operators

• Lessors

• OEMs

• MRO Suppliers

Airlines need to understand how best to realize value from the terabytes of data generated by new technology aircraft

21


Today, AHM is being used by airlines and OEMs for reliability analysis & updating maintenance programs

Source: ICF

Evolution of Aircraft Maintenance Approach

• Aircraft health

monitoring

• Predictive

maintenance

• Inventory

optimization

Leading to…

• Improved

aircraft

availability

• Cost control

23


As AHM becomes a critical service, non-OEM players need to develop capabilities to retain competitiveness…

Source: ICF

• Aircraft Health

Monitoring has been

around in various forms

since 1970

• Rolls-Royce was the

first OEM to provide

extensive services as

part of its TotalCare

program

• Large MROs have also

started to integrate the

product in their

services offerings

MSG-2 introduces

“Condition Monitoring”

maintenance concept

1970s 1990s 2012 2016

Rolls-Royce starts its

TotalCare program

introducing extensive health

monitoring services

Boeing launches AHM

as part of Boeing Edge

AFI KLM and LHT launch

health management and

prognostic products

Airbus launches

AiRTHM in 2012

24


There are a number of structural trends affecting the maintenance data and health management market

24

Source; ICF

Key Trends

Increased OEM

Aftermarket Focus E-enabled Aircraft

Large Volumes of

Data Processing

Advancement in

Analytics

TITLE

25

True benefits

for the airline


Airlines can extract the highest value when operator not only predicts the issues but can allocate resources in an optimal way

26

Source: ICF

Capability Goal

PrescriptiveOptimizing the

MRO operation

Prognostics Fault

Diagnostics Troubleshooting

Storage and

Basic Processing

Fault

Identification

Increasing

Value

When can we schedule

the repair in the most

economic way?

When will a part fail?

Why did the part fail?

What do we need to fix?

What systems failed?

What is the reliability of

a system?


For airlines, improved technical dispatch reliability and fewer NFFs are the key benefits of AHM

Source: ICF Analysis

ICF sees 4 main categories of benefits for airlines:

Technical Dispatch Reliability: Increased

dispatch reliability

No Fault Founds: Reduction in unnecessary

removal of functional components

Inventory: Spare parts held by airlines/MROs

Labor Productivity: Increased labor

productivity

• Airlines can optimize

inventory by

strategically distributing

parts among

maintenance centers

and holding the right

number of parts

• Improved monitoring

can reduce time spent

on finding faults

227

THANK YOUFor questions regarding this presentation, please contact:

Joost Groenenboom

Principal

+44 20 3096 4953 [email protected]


ICF supports clients across the aviation industry

29

Serving the

Aviation

Community

Since 1963

Broad Perspective.

Compelling Results. ICF offers our team of nearly 100 aviation experts dedicated to

strategic and operations consulting for the aviation industry. Our

aviation practice was founded as SH&E in 1963 and expanded with

the acquisition of AeroStrategy in 2011. Today we are one of the

world’s largest aviation consulting organizations. We provide objective,

independent commercial, financial, technical, and regulatory guidance

to aviation clients, including airlines, airports, lessors, financial

institutions, manufacturers, governments, and VIPs. From our offices

around the globe, ICF helps aviation clients manage assets and

operations, mitigate risk, and maximize return on investment.

Visit us online at icf.com/aviation.

ICF Aviation

Comprehensive Services:

Airlines

Fleet and network planning, pricing

and revenue management, OTP and

operational efficiency

Airports

Strategic planning, policy, route

development, concessions planning

Aircraft

Valuations, cash flow forecasts,

portfolio due diligence, market analysis,

technical services

Aerospace & MRO

Operations assessment, M&A support,

marketing analysis, strategy development


BROAD PERSPECTIVE.

COMPELLING RESULTS. Serving the Aviation CommunitySince 1963

ICF offers our team of nearly 100 aviation experts dedicated to

strategic and operations consulting for the aviation industry. Our

aviation practice was founded as SH&E in 1963 and expanded with

the acquisition of AeroStrategy in 2011. Today we are one of the

world’s largest aviation consulting organizations. We provide objective,

independent commercial, financial, technical, and regulatory guidance

to aviation clients, including airlines, airports, lessors, financial

institutions, manufacturers, governments, and VIPs. From our offices

around the globe, ICF helps aviation clients manage assets and

operations, mitigate risk, and maximize return on investment.

Visit us online at icf.com/aviation.

ICF is a proud member of both ISTAT and the IATA Strategic

Partnerships Program.

31


Our four specialized practices collaborate together and with our

clients to effectively address business challenges

ICF provides aircraft operators, manufacturers, financiers, lessors, and owners, maintainers, airports, and related businesses with world-class

advisory, implementation, and improvement management consulting services.

Aerospace &

MRO

Strategy and

marketing advisory,

and transaction

support for OEMs,

MROs, and investors

Airline

Advisory

Operational , strategic

and transaction

support for airlines

and air transport

businesses

Aircraft

Industry-focused

support for aviation

equipment transaction

activities

Airports

Operational and

strategic support for

owners, operators,

regulators, and

developers


Aerospace and MRO

32

ICF guides manufacturers, airlines, independent MROs, suppliers, and

the financial community through every step of the aerospace and MRO

supply chain to realize value and deliver strategies that drive growth.

We understand and focus on the key aspects of the industry, and have

the proprietary tools necessary for successful operations. Below, we

briefly describe our core aerospace & MRO services and proprietary

supporting products.

ICF focuses on

key aspects of the

industry that drive

value in both

revenue growth

and cost control.

Strategy Development

Leveraging years of aerospace and

MRO advisory experience as well as

proprietary market intelligence, ICF

delivers data-driven, objective insight

to underpin sustainable strategies.

Transaction Support

For clients’ investment decisions,

ICF combines global thought

leadership in aerospace and MRO

supply chain with accurate market

intelligence, operations expertise,

and unparalleled industry contacts.

Operations and Supply Chain

ICF’s proven tools and methodologies

offer improved performance and cost

reduction across manufacturing,

operations, and all phases of

make-buy supply chain planning

and execution.

MRO Business Improvement

For airlines, OEMs, and independent

MROs, ICF has deep experience in

comprehensive operational and

financial diagnostics based on

extensive proprietary benchmarks,

followed by results-oriented

improvement programs.

AEROSPACE AND MRO PRODUCTS

ICF’s suite of proprietary aerospace &

MRO tools, models, and databases

helps stakeholders navigate key

business challenges to their advantage.

Fleet &

MRO ForecastsValue Database MRO Best Practices

and Benchmarks

Proprietary, independent

forecasts for commercial

and business aviation,

industrial gas turbine, and

military markets.

Production value

breakdown by component

category and raw material

content across the

aerospace supply chain.

Comprehensive,

proprietary databases on

processes,

costs, and organization.

aircraft health monitoring · 2017-09-19 · icf proprietary and confidential. do not copy,...

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