Contenu connexe Similaire à Key Battlegrounds in the Aftermarket (20) Key Battlegrounds in the Aftermarket1. ICF International | icfi.com © ICF 2015 00
Key Battlegrounds in the Aftermarket
AISCT – 16 September 2015 – Toulouse, France
Presented by:
David Stewart
Global Lead, Aerospace & MRO Practice ICF International
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Agenda
Key Battlegrounds in the
Aftermarket
Context
Takeaways
The Battlegrounds
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Agenda
Key Battlegrounds in the
Aftermarket
Context
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The global air transport industry has been completely
transformed in the last thirty years
CONTEXT
Pre-1980s 1980 – 2000 Post-2000s
Airlines
Largely state-owned
(except US)
Regulated fares & routes
Point-to-point routes
Restrictive route rights
Mix of state & privately
owned
Increasing liberalization of
fares & routes
Hub-and-spoke model
First-generation LCCs
Code-sharing leading to
launch of global alliances
Private ownership
Pricing transparency (Internet)
Global spread of LCC’s
Business model convergence
between LCC’s & legacies
Alliances & immunized JV’s are
majority of global capacity
More recently, significantly
increased focus on ROIC
Airlines have evolved from a regulated industry towards greater liberalization
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The aftermarket evolved from being an afterthought to a market
of significant importance
CONTEXT
1980 – 2000 Post-2000s
Airlines
Maintenance mainly a cost
centre
LCC’s drive new approach to
managing maintenance
Increased outsourcing
US airline bankruptcies and
restructuring
Limited focus on aftermarket;
Rolls-Royce ahead of the
game
Significant growth of point-of-
aircraft sale MRO contracts by
engine OEMs
Increasing economic imperative for
Component OEMs given design
investment on new programmes
OEMs
MROs Supply mostly in-house – few
large airline MRO suppliers
and hugely fragmented
independent sector
Growth of integrated services
Globalization of demand
The aftermarket has evolved from a cost centre to a highly competitive market
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Aftermarket is significant at $135B, equivalent to 75% of the
value of current production
CONTEXT
Source: ICF International
Air Transport,
61%
Business &
General
Aviation, 14%
Civil Rotary
Wing, 3%
Military, 12%
Military Rotary Wing,
10%
Production:
$180.3B
Air Transport,
48%
Business &
General
Aviation, 9%
Civil Rotary Wing,
3%
Military, 27%
Military Rotary Wing,
13%
Aftermarket:
$135.1B
Aftermarket and Production Market Size (2015 $B)
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Across the air transport MRO supply chain, engine and
component parts drive almost 60% of total margin
CONTEXT
Engine & APU
Maintenance
26%
Engine Parts
17%
Component
Maintenance
14%
Line Maintenance
11%
Airframe Heavy
Maintenance
10%
Component Parts
8%
Others
14%
% of
Total Revenue
Engine Parts
42%
Component
Parts
16%
Component
Maintenance
11%
Engine & APU
Maintenance
11%
Line
Maintenance
4%
Airframe Parts
4%
Other
12%
% of
Total Margin
2014 Air Transport MRO Revenue by Segment
Total = $97.3B
2014 Margin By Main Activity
Total = $23.9B
Source: ICF International
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Engine OEMs have the most mature and strongest OEM position
across the main air transport aftermarket segments
CONTEXT
55%
35%
2% 0%
20%
25%
44%
82%
25%
40%
54%
18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Engine
overhaul
Component
O&R
Airframe
Heavy
Line
maintenance
Non-OEM
MRO
Airline in-
house
OEM
Source: ICF International
Highlights
OEMs strongest share in the
more material intensive
markets
Component OEM market share
lower than engine OEMs
Aircraft OEMs have an almost
non-existent position in the
airframe-related aftermarket
Air Transport Supply (2015)
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CONTEXT
The net result – aircraft OEMs are seeking to follow the engine
and component OEMs
-Source: ICF International
Relative Air Transport Market Margin and Leverage
EBIT %
Leverage
(ND/EBITDA)
0.0x
OEMs: Components
& Structures
-
OEMs: Engines
OEMs: Aircraft
MROs
MRO with mixed signals
from Integrators to
Independents
Airlines
(Size scaled down)
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The ramp up and introduction of new generation aircraft creates
the opportunity to change the aftermarket supply chain
CONTEXT
Source: ICF International
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Aircraft deliveries (units)
Highlights
New aircraft with higher
reliability, lower manhours and
complex technology change the
business case for establishing
MRO capability
…especially with greater airline
focus on ROCE
This is a catalyst to change the
MRO supply model….
Creating new opportunity for
OEMs and aftermarket
providers
Mature Aircraft
New Generation
Aircraft
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For 2015 onwards, the aftermarket will move to a new era based
on new battlegrounds
CONTEXT
2015 Onwards
Airlines
Chance to change business model –
outsource cost, assets and risk to
aftermarket suppliers
Airframe OEMs enter the fray - will
they succeed?
Component OEMs increasing control
of data, manuals and parts choice
More sole source engines on new
wide body platforms
OEMs
MROs
Evolving from a cost centre to a highly competitive market
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Agenda
Key Battlegrounds in the
Aftermarket
The
Battlegrounds
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ICF believes there are three key battlegrounds that will
determine the future of the Aftermarket
THE BATTLEGROUNDS
Who controls the
operational data?
Who controls
the workscope?
Who controls
the assets?
• Critical to success in
market participation
and in gaining
operational feedback
for design and
reliability improvement
• Critical to success in
driving parts choice and
aftermarket margins
• Critical to success in
growing integrated
service market
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The role of traditional aviation players in the data value chain is
still to be determined
THE BATTLEGROUNDS
Data ownership versus data access and use are of great concern to operators, and data
processing business models are unproven (except at engine OEMs?)
DATA
Aircraft Generate Data…
Airlines owns them
Airline Operations
Control Centers
… Which Can be Processed in
Many Locations
Aircraft / Engine
OEM Networks
Component OEM
MRO
DATA
Data Service
Companies
OEM
Direct
Access
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All stand to gain significantly from improved access to and
control of operational data, which today is owned by the airlines
THE BATTLEGROUNDS DATA
Airlines
OEMs *
Airline MRO
Eng. OEMs
Who controls the
operational data?
HOW MUCH DOES EACH PARTY GAIN?
(example benefits)
* Airframe and component OEMs
Higher reliability (e.g.,
predictive maintenance)
Lower costs (fuel,
maintenance, inventory)
Operational data to feedback
into design loop
Higher performance products
Operational data to feedback
into design loop
Higher performance products
Reduce costs and improve
competitiveness
Market access
Source: ICF International
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Aircraft OEMs are vying to use their leverage to become the
arbiters of data for the connected airline…
THE BATTLEGROUNDS
• Boeing EDGE: “Information Services” , the
Digital Airline and Gold Care brands
• Notable Aircraft Health Management (AHM)
successes
• “Services by Airbus”: training/flight
operations, material management, E&M e-
solutions, upgrades, and FHS/TSP support
packages
• “Airbus Smarter Fleet” partnership with IBM -
integration of e-solutions
Boeing View of AHM System Architecture
Aircraft OEMs believe that their scale
and position in the market make them a
natural middleman for data aggregation
and analysis
DATA
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Control of workscope is key to input decisions – hence the
historic focus on this by engine OEMs and the former PMA “War”
THE BATTLEGROUNDS WORKSCOPE
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Engine
Materials
80%
Labour
20%
Airframe
Materials
20%
Labour
80%
Components
Materials
55%
Labour
45%
Line
Materials
15%
Labour
85%
TypicalMROCostBreakdown
Typical Aftermarket Cost Breakdown Insight
For engine and component
activity “Whoever controls the
workscope controls the parts
decision” – this is a key driver
behind related OEM aftermarket
strategies
Use of PMA, repairs and surplus
are important alternatives to
OEM new parts
For airframe activity, labour unit
cost (rates & productivity) drive
the economics, hence the market
is more open
Source: ICF International
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Workscope control is most important for material intensive
activity i.e., control over the parts decision
THE BATTLEGROUNDS
Airlines
OEMs *
Airline MRO
Eng. OEMs
Who controls the
workscope ?
HOW MUCH DOES EACH PARTY GAIN?
(example benefits)
* Airframe and component OEMs
Cost control
Increased revenue and
margin
Increased revenue and
margin
Cost control, shorter turn-
times and improved
competitiveness
Source: ICF International
WORKSCOPE
Airframe Component
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The share of integrated programmes in component support is set
to increase
THE BATTLEGROUNDS: ASSETS
Component Support Buying Behaviour
Growth Drivers
Small fleet size
• Perceived technology risk
• Improved ROIC
• Maintenance no longer core
activity
• Predictable outgoings
• Attractive value propositions
• Lower investment, less
infrastructure
Source: ICF International
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2014 2024
Integrated*
Traditional
Integrated Component Programs
Penetration
777 787/A350
~20% 55%-70%
9%
30%
45%
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Control of assets enables aftermarket players to support
integrated programmes more effectively
THE BATTLEGROUNDS: ASSETS
Insight
Component aftermarket support
programmes are a driver of growth
and of margin
Central to the economics of this
offer is control and access to the
inventory
The more inventory held by a
supplier, the lower the inventory
cost per aircraft supported
The “battle” for 787 / A350
component support has already
been joined, with e.g., AFI/KLM
E&M winning multiple 787-related
contracts
Source: ICF International
Relative Inventory Requirements
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Control of the rotable assets is a core feature driving the
“winning business model” in integrated packages
THE BATTLEGROUNDS
Airlines
OEMs *
Airline MRO
Eng. OEMs
Who controls the
assets ?
HOW MUCH DOES EACH PARTY GAIN?
(example benefits)
* Airframe and component OEMs
Inventory cost reduction and
parts availability (if scale
sufficient)
Parts pool critical to
(profitable) component
aftermarket packages
Spare engine pool already
part of total support
programmes
Vital to competitiveness and
profitability of integrated
aftermarket packages
Source: ICF International
Airframe Component
ASSETS
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Agenda
Key Battlegrounds in the
Aftermarket
Takeaways
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Today, airlines have strong ownership/control of their destiny but
do they make the most of it?
TAKEAWAYS
Category
Who Owns The
Workscope?
Who Owns The
Assets?
Airlines
Airframe OEMs
Engine OEMs
Component
OEMs
Airline MROs
Independent
MROs
StrongKeyWeak ImprovingWorsening
Eng Comp Airframe
Who controls the
operational data?
Who controls the
workscope?
Who controls the
assets?
Source: ICF International
Airlines, as a buyer
of aircraft and the
owner of the
operational data,
should push the
aftermarket supply
chain....to benefit
from better, more
cost efficient
solutions
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Expect strong focus on these battlegrounds – achieving a winning
position is key to the aftermarket participants meeting their goals
TAKEAWAYS
• Safe and reliable operation of aircraft
• Operational feedback
• Increased revenue, margin and RONA
• Delivery of promised cost and
performance
Airframe & Component OEM Goals
Importance To Achieving Goals
Data
Workscope
Assets
Strong
Key
Weak
/
• Safe and reliable operation of aircraft
• Operational feedback
• Increased revenue and margin
• Delivery of low/competitive (total) cost
to customers
Airline and Independent MRO Goals
Importance To Achieving Goals
Data
Workscope
Assets
Source: ICF International
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Airlines
OEMs *
Airline MRO
Eng.OEMs
Whocontrols the
operational data?
WHO HAS THE MOSTTO GAIN?
(example benefits)
Higher reliability (e.g.,
predictive maintenance)
Lower costs (fuel,
maintenance, inventory)
Operational data to feedback
into design loop
Higher performance products
Operational data to feedback
into design loop
Higher performance products
Reduce costs and improve
competitiveness
Market access
Especially from the Airframe and Component OEMs who have the
most to gain…
TAKEAWAYS
Airlines
OEMs *
Airline MRO
Eng.OEMs
Who controls the
workscope ?
WHO HAS THE MOSTTO GAIN?
(example benefits)
Cost control
Increased revenue and
margin
Increased revenue and
margin
Cost control, shorter turn-
times and improved
competitiveness
Airframe Component
Airlines
OEMs *
Airline MRO
Eng.OEMs
Who controls the
assets ?
WHO HAS THE MOSTTO GAIN?
(example benefits)
Inventory cost reduction and
parts availability (if scale
sufficient)
Parts pool critical to
(profitable) component
aftermarket packages
Spare engine pool already
part of total support
programmes
Vital to competitiveness and
profitability of integrated
aftermarket packages
Airframe Component
…and therefore expect to
see more investments
from these OEMs in these
aspects of the aftermarket
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Large airline MROs are well positioned in contrast to
independent MROs
TAKEAWAYS
Category
Who Owns The
Data?
Who Owns The
Workscope?
Who Owns The
Assets?
Airline MROs
Independent MROs
StrongKeyWeak ImprovingWorsening
Who controls the
operational data?
Who controls the
workscope?
Who controls the
assets?
Takeaways
For Airline MROs, significant scale is a must for engine and component
markets– to leverage their fleet and inventory under management, and
build the scope of data and intelligence captured
The business case for small airline MROs will erode significantly moving
forward
Independent MROs have to become the lowest cost producer and/or
align with the large airlines or OEMs
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Control of assets facilitates data access - so supplier scale and
scope of product will drive the winning business model
TAKEAWAYS
DATA Takeaways
Those managing the component and
engine assets have the access to the
operational (reliability and cost) data
Some large airlines may elect to keep this
driver of performance in-house
Others will not because of the negative
impact of inventory on ROIC / RONA
Large airline MROs or OEMs with broad
packages to offer have a competitive
advantage via scale and scope
But do they want the inventory on their
books?
ASSETS
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In summary...
TAKEAWAYS
Engine OEM aftermarket business model a
harbinger for the future
Airframe and Component OEMs will invest
more and increase their focus on aftermarket
especially on integrated component packages
(Large) Airline MROs can and need to protect
their market position versus the OEMs
Airlines have the opportunity to drive efficient
solutions and competition into the aftermarket
Scale and scope of assets under management
is vital – growing need for financial community?
29. ICF International | icfi.com © ICF 2015 28
Appendix
LCCs – Low Cost Carriers
ROIC – Return on Invested Capital
MRO – Maintenance, Repair and Operations
OEMs – Original Equipment Manufacturers
ND/EBITDA – Net Debt to EBITDA Ratio
ROCE – Return on Capital Employed
E&M e-solutions – Engineering and Maintenance e-solutions
FHS/TSP support packages – Flight Hour Services/Tailored Support Packages
PMA – Parts Manufacturer Approval
AFI/KLM E&M – Air France Industries/KLM Engineering & Maintenance
ROIC / RONA – Return on Invested Capital/ Return on Net Assets
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David Stewart
Head of Aerospace and MRO
Watling House
33 Cannon Street
London EC4M 5SB
United Kingdom
+44 (0)20 3096 4931
david.stewart@icfi.com
Thank You!