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Indonesian Aviation Industry Readiness Toward ASEAN Single Aviation Market (ASAM) 2015
Global and Indonesian MRO Industry Analysis
21st November 2012, Pullman Hotel, Jakarta, IAMSA Seminar
Indonesian Aviation Industry Readiness Toward ASEAN Single Aviation Market (ASAM) 2015
2
Global MRO Trends
3
MRO activities are migrating to Asia Pacific, Middle East and Latin America
Global MRO Key Trends (1)
Emerging Clusters
Eastern China
Singapore
Malaysia
UAE
Eastern Europe
GermanyUK
France
North Africa
Brazil
Mexico
Central America
South Florida
Southern Californi
a
Central US
Quebec
Established Clusters
Hong Kong
With increasing labour costs, MRO activities are moving towards low cost nations like Mexico, Brazil, Malaysia, and North Africa. This is particularly seen in labor intensive heavy maintenance checks.
Most low labor cost nations are improving support for MRO services and providing infrastructure in the newly build airports.Source: Frost & Sullivan Analysis
4
Source: Frost & Sullivan
Africa Asia Pacific Europe Latin
AmericaMiddle East
North America
Africa 76% 14% 8% 2%
Asia Pacific 100%
Europe 3% 9% 84% 4%
Latin America 5% 92% 3%
Middle East 1% 16% 83%
North America 35% 4% 3% 58%
Total 3% 44% 24% 4% 9% 16%
Supply
Op
erat
or
reg
ion
Migration of Airframe Heavy Maintenance Man-hours
• Increasing fuel costs and retirement of maintenance intensive aircraft will hinder migration
• New generation aircrafts will affect man-hours per maintenance visit
• North America outsources HMV the most amongst all regions
• Middle East, Latin America, Eastern Europe and Africa are amongst the regions which have least ERO capabilities
EuropeNorth
AmericaMiddle East
Latin America
Eastern Europe
Asia Pacific
Africa
Europe 74% 11% 1% 5% 0% 9% 0%
North America 16% 65% 1% 3% 0% 14% 0%
Middle East 45% 22% 4% 0% 0% 30% 0%
Latin America 29% 43% 19% 5% 0% 5% 0%
Eastern Europe 44% 15% 8% 0% 3% 30% 0%
Asia Pacific 18% 14% 2% 1% 0% 65% 0%
Africa 57% 8% 15% 0% 0% 21% 0%
Total 33% 34% 3% 3% 1% 26% 1%
Supply
Op
era
tor
reg
ion
Migration of Engine Maintenance
Global MRO Key Trends (2)
6.5% of the global MRO spend is expected to migrate to Asia Pacific
5
Engine MRO market shares of OEMs and Independent MRO Providers are on the rise
2010 20200%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
OEM42%
OEM50%
Independent33%
Independent40%
In-house25%
In-house10%
• OEM are aggressively looking for vertical
integration into MRO services.
• In-house decreasing significantly
• Airlines are reluctant to share the inventory
investment risks
• OEM presence in Asia Pacific is lower than the
world but is growing rapidly
3873
5279
1102 938655
3768
546
ERO Demand and Supply($ Millions), 2011
+44% +1% -61% -51% -98% +15% -100%
Excess supply as a percentage of demand
• Europe is the major net exporter of engine
MRO while Middle East, Africa, Latin America
are net importers
• The net importer regions are expected to
provide more incentives and infrastructure to
improve services of local companies
Global MRO Key Trends (3)
6
Global MRO Analysis
7
B737 will remain the biggest aircraft family by 2020. A320NEO has the highest CAGR in the timeframe.
Global Commercial Fleet (1) - by Aircraft Family
Aircraft Family 2011 2020 CAGR737-6/7/8/900 3775 7201 7.4%
A320 2804 4610 5.7%737-3/4/500 1614 828 -7.1%
A319 1250 1624 3.0%EMB-135/140/145 1035 901 -1.5%
CRJ-100/200 966 817 -1.8%757 951 603 -4.9%767 719 298 -9.3%
MD-80 670 60 -23.5%A321 664 1005 4.7%
Aircraft Family 2011 2020 CAGR737-6/7/8/900 3775 7201 7%
A320 2804 4610 6%A319 1250 1624 3%
A320NEO 0 1422 124%787-8/9 36 1171 47%
A321 664 1005 5%EMB-190/195 464 972 9%
EMB-135/140/145 1035 901 -2%CRJ-700/900/1000 635 869 4%
737-3/4/500 1614 828 -7%
Aircraft Family 2011 2020 CAGRA320NEO 0 1422 124%A350-900 0 402 95%
CS100 0 255 85%A350-800 0 218 82%
MRJ 0 190 79%C919 0 127 71%
A350-1000 0 82 63%MS-21 0 57 57%ARJ21 6 230 50%
787-8/9 36 1171 47%
Aircraft Family 2011 2020 CAGRFK100 204 5 -34%
DC-8-60/70 43 2 -29%DC-9 136 8 -27%
MD-80 670 60 -24%L-1011 22 2 -23%
FK70 46 5 -22%737-200 291 36 -21%
DC-10 35 5 -19%A300 61 9 -19%F-28 43 9 -16%
Top 10 aircraft families by numbers, 2011 Top 10 aircraft families by numbers, 2020
Bottom 10 aircraft families by CAGRTop 10 aircraft families by CAGR
MD, DC and FK fleets will be the major aircraft fleets to be retired in the next 10 yearsSource: Frost & Sullivan Analysis
8
Important to manage a balance between narrow body and wide body hangar space in Asia Pacific.
Global Commercial Fleet (2) - by Aircraft Category
NORTH A
MERIC
A
WESTE
RN EUROPE
ASIA P
ACIFIC
CHINA
LATI
N AM
ERICA
MID
DLE E
AST
EASTERN E
UROPE
AFRIC
A
INDIA
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
6,163 3,806 1,545 1,546 1,324 655 984 800 355
1,226
991
1,278 218 142
566 119 196 67
Worldwide Fleet, 2011
Wide Body
Narrow Body
83%90%
79%89%
80%
54%
88%
55%
84%
17%10%
21%11%
20%
46%
12%
45%
16%
Worldwide Fleet - Narrow body and Wide body, 2011
Narrow body Wide body
Source: Frost & Sullivan Analysis
9
Whilst new aircraft will grow rapidly compared to older aircraft, the older aircraft will nonetheless achieve higher earnings per annum
Global Commercial Fleet (3) - by Age of Fleet
• The families which entered service before 2004 are considered old.
• A380-800, 787-8/9, A320NEO, A350-800/900 are some of the new families.
Source: Frost & Sullivan Analysis
Old New Others
$2.54
$2.18
$1.74
Average Earning per Aircraft in a year (US$ Millions), 2011Fleet Families
Others92
41%
New18
10%
Old76
49%
2011 MRO Revenue 2020 MRO Revenue
Old $52,204
Old $63,139
New $1,115
New $11,584
Others $1,690
Others $2,975
2%CAGR
30%CAGR
Others include DC-9-50 STAGE 3, 747-200F,BAE 146-300, MD-87 (DC-9-87), 767-400ER737-200C/F, 747-400 SCD, 727-200, EMB-170/175, A310-200F, 707-320C, 737-200C/F STAGE 3
10
Although western nations command high market revenues, high growth markets lie in emerging market in the east
Global MRO Revenues - by Region
18.55
North AmericaNorth
America
2.83
Latin America
Latin America
1.92
AfricaAfrica
13.53
EuropeEurope
2.22
CIS & RussiaCIS & Russia
3.38
Middle East
Middle East
Middle East
APAC Latin America
Africa CIS & Russia
Europe North America
8.9
5.7 5.3 5.0
2.31.4 0.8
2011-2020 Growth(CAGR %)
1.92 2.22 2.83 3.38
12.5713.53
18.552011 MRO Revenue
($ Billion)
North America
34%
Europe25%
APAC23%
Middle East6%
Latin America
5%
CIS & Russia4%
Africa3%
2011 MRO Revenue share
12.57
Asia PacificAsia
Pacific
Source: Frost & Sullivan Analysis
11
South East Asia along with India and China present very promising opportunities
APAC MRO Revenues - by Country
3.10
ChinaChina
1.45
JapanJapan
0.94
Hong KongHong Kong
1.13
South KoreaSouth Korea
0.76
SingaporeSingapore
0.95
AustraliaAustralia
CHINA24%
JAPAN11%
SOUTH KOREA9%
AUSTRALIA7%
HONG KONG7%
SINGAPORE6%
TAIWAN5%
INDIA5%
Thailand4%
INDONESIA4%
Others18%
2011 MRO Revenue share
0.70
TaiwanTaiwan
INDONESIA
THAILAND
INDIA
TAIWAN
SINGAPORE
HONG KONG
AUSTRALIA
SOUTH KOREA
JAPAN
CHINA
0.54 0.57 0.67 0.70 0.760.94 0.95
1.131.45
3.10
2011 MRO Revenue (US$ Billion)
0.67
IndiaIndia
0.54
IndonesiaIndonesia
INDIA
MALA
YSIA
CHINA
SINGAPORE
VIETNAM
INDONESIA
AUSTRALIA
PHILIPPIN
ES
THAILAND
NEW Z
EALAND
SOUTH KOREA
11.7
10.0
7.46.6 6.2 5.7 5.4 5.0 4.5
3.52.3
2011-2020 Growth(CAGR %)
Source: Frost & Sullivan Analysis
0.57
ThailandThailand
12
Indonesia MRO Analysis
13
Engine and component maintenance are growing at a significant pace in Indonesia
MRO Market Analysis – Indonesia MRO Revenues (by Segment and Aircraft Type)
Source: Frost & Sullivan Analysis
Components40%
Engine24%
Line20%
Base12%
Modifications4%
MRO spending in Indonesia (US$ Millions), 2011
Modifications Components Line Maintenance
Airframe Heavy
Maintenance
Engine Maintenance
$-
$50
$100
$150
$200
$250
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
$23
$216
$111
$64
$130
11.1%
6.4%
2.2%
-0.2%
8.2%
Indonesia MRO spending, 2011
Indonesia Spending, 2011 CAGR (2011-2020)
Sp
en
din
g (
US
$ M
illio
n)
CA
GR
(2
01
1-2
02
0)
US $0.54 Billion
IndonesiaIndonesia
2011 2020
Narrow $433
Narrow $697
Wide $111
Wide $201
MRO Spending by Aircraft Type(US$ Million)
CAGR 5%
CAGR 7%
CAGR 5.7% (2011-2020)
14
737-800/900 will have the highest increase in spending while 737-200/300/400 will see significant decrease in spending by 2020
MRO Market Analysis – Indonesia MRO Revenues (by Aircraft Family and Airlines)
Source: Frost & Sullivan Analysis
Others
BAE 146-200
BAE 146-100
MD-90
MD-83 (DC-9-83)
FOKKER 100
737-200
747-400
A330-300
A330-200
737-800
737-900BBJ3/-900ER
A320-200
737-400
737-300
$86
$2
$-
$8
$-
$1
$-
$-
$31
$101
$139
$340
$138
$5
$38
$44
$9
$9
$9
$10
$10
$14
$23
$38
$38
$46
$49
$53
$59
$134
MRO Revenues by Aircraft Family (US$ Million)
2011
2020
LION AIR, 737-900 GARUDA, 737-800 GARUDA, A330-200 INDONESIA AIRASIA, A320-200
$-
$10
$20
$30
$40
$50
$60
0%
5%
10%
15%
20%
25%
30%
$49 $46
$29
$15
24%
13% 13%15%
MRO Revenues for selected Airlines and Aircraft Fami-lies (US$ Million), 2011
MRO revenue, 2011 CAGR (2011-2020)
15
Lion Air is forecasted to have the highest increase in MRO spending by 2020. Garuda will, however, remain the biggest spender but only narrowly so.
MRO Market Analysis – Indonesia MRO Revenues and Fleet Composition
Source: Frost & Sullivan Analysis
OTHERS
MERPATI
INDONESIA AIRASIA
SRIWIJAYA
LION AIR
GARUDA
$135
$1
$51
$1
$348
$364
$152
$20
$24
$38
$77
$234
Airline MRO Spending (US$ Million), 2011 and 2020
20112020
737-6/7/8/900 737-3/4/500 A320 737-200 A330-200/300
Others
102 100
29 2414
62
236
37 41
121
44
Indonesia Aircraft Fleet, 2011 - 2020
2011
2020
Others include Batavia, Mandala related aircrafts and other airlines
16
CFM56-3 engines will be retired rapidly by 2020
MRO Market Analysis – Indonesia Engine MRO revenues
Source: Frost & Sullivan Analysis
$-
$10
$20
$30
$40
$50
$60
$70
Engine MRO Revenues (US$ Million), 2010
CFM56-3 TRENT700 CF6-80C2
V2500-A1 V2500-A5 Others
GARUDA BATAVIA AIRASIA LION AIR MANDALA $-
$20
$40
$60
$80
$100
$120 Engine MRO Revenues (US$ Million),
2020
CFM56-3 TRENT700 V2500-A5 CFM56-5B
CFM56-7 GE90-115B Others
Overall CAGR 8%CFM56-3 CAGR (27%)CFM56-7 CAGR 68%
CF
M5
6-3
TR
EN
T7
00
CF
6-8
0C
2
V2
50
0-A
1
V2
50
0-A
5
CF
M5
6-5
B
CF
M5
6-7
GE
90
-11
5B
-27% 9%
-100% -100%
27%44%
68%48%
CAGR 2011-2020
17
Spending is highest for CFM56-7 on 737-900ER by 2020
MRO Market Analysis – Indonesia Engine MRO revenues
Source: Frost & Sullivan Analysis
CFM56
-3
TRENT7
00
CF6-8
0C2
V2500
-A1
LF50
2/50
7
CF6-8
0E
V2500
-D5
V2500
-A5
CFM56
-5A
SPEYTA
Y
JT8D
-200
$-
$10
$20
$30
$40
$50
$60
Engine MRO by Engine type ($ millions), Indonesia, 2011
747-400 A330-200 737-300 737-400
A320-200 A330-300 OTHERS
Re
ve
nu
e (
$ m
illio
n)
CFM56
-7
TRENT7
00
V2500
-A5
GE90-1
15B
CFM56
-5B
CF6-8
0E
V2500
-D5
CFM56
-3 $-
$20
$40
$60
$80
$100
$120
Engine MRO by Engine type($ millions), Indonesia, 2020
A330-200 A320-200 737-800
737-900BBJ3/-900ER 777-300ER OTHERS
18
Component MRO market will grow by 6% and each individual component is projected to grow
MRO Market Analysis – Indonesia Component MRO revenues
Source: Frost & Sullivan Analysis
LANDIN
G GEAR
AIRBORNE A
UXILIA
RY POW
ER
ENGINE -
FUEL
AND CONTR
OL
FLIG
HT CONTR
OLS
AIR C
ONDITIO
NING A
ND PRESSURIZ
ATION
NAVIGATI
ON
EQUIPMENT/
FURNIS
HINGS
EXHAUST
INDIC
ATING /
RECORDING S
YSTEM
HYDRAULIC P
OWER
ELECTR
ICAL
POWER
AUTOFL
IGHT
IN F
LIGHT
ENTERTA
INMENT
PNEUMATIC
COMMUNICATI
ONS
OXYGEN
STARTI
NGOIL
FUEL
FIRE P
ROTECTI
ON
BLEED A
IR
ENGINE IN
DICATI
NG
ENGINE C
ONTROLS
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
0%
2%
4%
6%
8%
10%
12%
$39 $38
$16 $13 $12 $11 $11 $10
$9 $8 $8 $7 $7 $6 $4 $4 $3 $3 $2
$1 $1 $1 $0
8%
2%
8%
5%
7%
8%
7%
10%
7%7%
6%
7%
9%
5%
7%
1%
7%8%
7%
5%
3%
6%
6%
Indonesia Component MRO Revenues, 2011
Rev
enu
es (
US
$ M
illio
n)
19
MRO Cluster Development
2020
Source – Frost & Sullivan
1. European Union (EU) and the Unites States (US) 2008
2. European Union (EU) and Israel (2012)
3. Japan and US (2010)4. Japan and Australia (2011)5. Japan and China 20126. China and US (planned)7. China and Japan (2010)8. South Korea and Canada
(2009)9. South Korea and
Vladivostok (2012)10. South Korea and Canada
(2009)
Regulatory – Global Open Skies Policies
Key Open Skies Policies are paving the way for global footprint of regional airline by entering into bilateral and multilateral agreements
21
Source – Frost & Sullivan
Bilateral and multilateral agreements between countries
Key reform of existing aviation rules and regulations are being undertaken in Asia Pacific mainly as efforts to open up the commercial aviation market
22
Developing MRO industry
In order to compete in different market dynamics which are likely to be more competitive from 2015 onwards, several key areas need to be addressed
Critical to continue to grow and grab opportunities will be :
Development as a key destination for airlines to come to/ connect
Development as an MRO Hub for Commercial & Business Aviation MRO,
Development of MRO Cluster Across Value Chain (Logistics, FBO, Parts, R&D, etc.)
Continuous capability development for next generation aircraft and engines,
Leveraging on high end integrated MRO service offerings,
Increase value-add modification and upgrades work,
Adopt lean MRO management to increase margin and efficiency.
23
Improving Supply Chain Government Incentives Enhancing workforce
• Having a holistic approach to supply chain
• Developing a overall support for suppliers in the country
• Provide incentives to MRO suppliers to set-up services in Indonesia. Offsets?
• The incentives include direct government support, labour regulation, tax structure and infrastructure, fuel price.
• High Manpower requirement in Indonesia due to growing fleets of each airline
• Manpower shortage in the region and is also a global challenge
MRO Supply Chain
Airl
ine
Supplier
MRO company
Concession Rates
Subsidized infrastructure
support
Land availability
Labour Regulation
2010 2015
14% CAGR
MRO growth
Developing MRO industry
Govt. incentives like concession rates, subsidies play a large role in attracting foreign investment, but workforce capabilities, and supply chain are also critical
24
Source: Frost & Sullivan Analysis,2011
Global MRO cluster benchmarking
Credibility can only be achieved if capabilities are developed across the value chain – backed and developed with the aid of industry and the Government
• The chart shows the general gap
area on aerospace MRO service-
process capability, which 23% of
total key service-processes are
either with limited capability or not
available in the Country.
• The chart also shows the gap area
in each MRO segment with
percentage value on top of each bar
to indicate the ratio of total limited
and not available service-processes
in each segment.
Assessment of Leading MRO Country Provider in s.e. Asia
Airframe MRO Avionics Systems MRO
Components MRO Engine MRO MRO Support
75
123
202
78 83
66
17
14
13
60
FULL CAPABILITY STRONG CAPABILITY
FULL CAPABILITY: MRO processes commonly available amongst suppliers. STRONG CAPABILITY: MRO process exist, however with limited processes in certain areas
25
Australia Mexico Singapore Middle East China
Cluster Spread RegionalScattered across
MexicoRegional Regional Regional
Cluster Focus MRO Manufacturing MRO MROMRO /
Manufacturing
Development Stage Mature Developing Mature Developing Mature
Cluster SizeMore than 500
businessesClose to 200 businesses
Close to 180 businesses
Close to 200 businesses
Close to 350 businesses
Source: Frost & Sullivan Analysis,2011
Global MRO cluster benchmarking
Different countries have adopted different models with regards to developing MRO Clusters – examples on a global basis of approaches taken
26
Source: Frost & Sullivan Analysis,2011
Global MRO cluster benchmarking
Strategy for Indonesian MRO cluster : will need to bring different parts of the value chain to be successful – all parties in value chain need to work together
ManufacturingCapabilities/ R&D
MRO Capabilities/ R&D
Supply Chain/ Logistics Capabilities
Physical FaciltiiesCommercial/ Business
FlightsHuman Resource
Training
Government lncentives, coupled with Industry Participation and Investment are required to build an MRO Park and make it a Success
1 2 3
4 5 6
27
Now is the time to act!
Thank you
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