aircraft market developments: focus on regional aircraft, mainline jet and cargo market

7/31/2019 Aircraft market developments: focus on regional aircraft, mainline jet and cargo market

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Aircraft market developments11th July 2012

Chris Seymour, Head of Market Analysis

1



Agenda

What is the traffic & capacity situation today Overview of turboprop market

Regional Jet developments

Narrowbody & Widebody market

Cargo overcapacity



Six months ago there were industry concerns…what haschanged since?

END 2011

• Freight growth stalled

• Eurozone problems, US debt,stock markets down

• China slowed

• 2012 capacity being reviewed

• Financing costs concerns

• Used a/c market slow

• AMR Filing

• Record backlog

JULY 2012

• Freight growth still stalled

• Eurozone problems worse, knock-on effect globally

• China taking some action

• 2012 capacity up 4%

• Financing costs going up

• Used a/c market still slow

• Airline failures esp in Europe

• Still there but more deferrals



International and domestic passenger traffic & capacitytrends

0%1%2%3%4%

5%6%7%8%9%

10%

Y e a r - 0 n

- y e a r g r o w t h

Traffic - RPKs Capacity - ASKs

Traffic Year to Date +6.5%Capacity is +4.7%

Source - IATA



IATA forecast of airline profits/losses for 2011 & 20122012 a tougher year but still +$3bn

(1) 0 1 2 3 4 5

Asia/Pacific

North America

Europe

Middle East

Latin America

US $ Billions

2012 Forecast 2011 Estimate Source – IATA



Turboprop market factors

19-seater market is localised; limited new production of Viking Twin Otter400s and RUAG Dornier 228s

30-seat sector under cost pressure and no new replacement; still an activeused market

40-50-seater new production limited to ATR42 & MA60

Most focus on 70-seat ATR72 & Q400 – ‘Horses for courses’ – difference in

capacity and speed suitable for differing markets

Next evolution is the 90-seater turboprop with even better seat-mile costs

ATR looking to decide soon – new engines are the key (GE or PWAC?)

Will Bombardier stretch the Q400 too? Other players? China MA700?

Higher fuel price and good short sector economics driving demand



Firm orders placed for commercial turboprops

0

50

100

150

200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

TD

N o

o f

a i r c r a f t

ATR BOMBARDIER OTHERSSource – Ascend Online Fleets



Regional Jet market factors

50-seater regional jet market has been undermined by higher fuel costs andchanging US major strategy – major fleet reductions underway – expectmany part-outs

70-seaters are also under pressure and backlog is small

US Scope clauses limit demand to 70/85-seaters – but expected uplift innear-term orders from American restructuring and Delta 50-seater

replacement Main focus is on 90- to 100-seater RJs – global orders to replace older RJs

(e.g. 146, F100) and NBs (e.g. 737-500) and complement larger NBs on off-peak services.

Embraer EJet is market leader and re-engining planned for late 2010s

Bombardier CRJ1000 gaining more traction with Garuda orders/leases



Firm orders placed for Bombardier & Embraer RJs

-50

0

50

100

150

200

250

300

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012TD

N o

o f

a i r c r a f t

Bombardier Embraer

Source – Ascend Online Fleets



A regional jet market getting more crowded

• 78- to 90-seater; CF34 powered• Orderbook predominantly Chinese carriers• Delivery now delayed into 2013

Mitsubishi MRJ

Comac ARJ21

•70- to 90-seater aircraft, with PurePower PW1200Gengine, currently the only “next gen” regional jet•Recent delivery delay into 2015•Facing challenge of capturing near-term target marketsand customers

Sukhoi Superjet•92 seater aircraft, with PowerJet SaM 146 engines• Slow build-up in production rate•Significant orders to date are from Russia, Indonesiaand Mexico – can it be more than Russian-focused?



The single-aisle market getting more crowded too !

A320neo737 MAXCSeriesC919

MS-21



Widebody firm orders backlog

787, 845

A350, 548

777, 347

A330, 315

A380, 180

747-8, 85 767-300, 63

Source – Ascend Online Fleets



International and domestic cargo traffic & capacitytrends

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%8%

M

a y -1 1

J

un-1 1

J

ul -1 1

A

u g-1 1

S

e p-1 1

O

c t -1 1

N

ov -1 1

D

e c -1 1

J

an-1 2

F

e b -1 2

M

ar -1 2

A

pr -1 2

M

a y -1 2

Y e a r - 0 n - y e a r g r o w t h

Traffic - FTKs Capacity - AFTKs

Traffic Year to Date -1.6%Capacity is +1.3%

Source - IATA



Freighter capacity – new & convertedFirm backlog of 200+ widebodies

0

10

20

30

40

50

60

70

80

90100

N o o

f a i r c r a f t

New Deliveries / On Order Conversions & Committed

Source – Ascend Online Fleets & Research



Parked widebody freighter capacity

0 10 20 30 40 50 60 70

747 Classic F

A310F

DC-10F

A300F

747-400F

MD-11F

747-8F

No of aircraft Source – Ascend Online Fleets



16



Commercial aircraft supply & demandscorecard11th July 2012

Rob Morris, Senior Aviation Analyst

17



Delivery volumes barely declined in the last cycle

18

Source: Ascend Online Fleets + Ascend Forecast



The question on everybody’s lips - are the OEMsbuilding more aircraft than justified by demand?

19



At the bottom of the cycle all deliveries are for replacement

20

Source: Ascend Online Fleets, deliveries into passenger airline service only

Early indications in 2012that share of deliveries for

replacement is growing



Few delivery slots available before 2016

21

Source: Ascend Online Fleets



Order volumes starting to decline

22

Source: Ascend Online Fleets, Western Build Passenger Jets Only



Load factor changes indicate supply / demand balance

23

Source: IATA

2011 declineindicates surplus of

supply over demand,but promising early

signs in 2012



Airline yields increased in 2011…..

24

Source: IATA

…..but reducingyield growth may be

a sign of airlineslosing pricing power



Idle jet inventory blighted by white noise

25


Inventory of “younger”idle jet aircraftrelatively static



W idebody 156

Single-Aisle 301

Regional Jet 139

Total 596

July 2012 Availability

Commercial jet availability starting to increase

26

Source: Airfax, 12-month rolling average of aircraft available for lease or sale (excludes wet-lease / ACMI)



Retirements of younger aircraft are increasing

27




Single-Aisle aircraft utilisation 2.5% below peak levels

28




Lease rates remain weaker than expected

29

Source: Ascend V1 Values



Delivery deferrals “on watch”

30




Are the OEMs building more aircraft than justifiedby demand?

31

• The definitive answer is neither yes nor no!

• All aircraft manufactured recently have been financed and delivered

• There appears to be some impact on the secondary market though…..

• …..more aircraft retirements and earlier

• …..reduced utilisation of in-service assets

• For now this issue is “on watch” with potential negative implications for aircraft valuesand rentals if the balance of positive and negative indicators shifts towards the latter

Negative Indicators (YES)• Share of deliveries for replacement appear to be

increasing• Retirements of younger aircraft are increasing• Used aircraft availability for sale / lease starting to

increase• Lease rates remain weaker than expected• Single-aisle aircraft utilisation remains 2.5%

below 2007 levels• Airline yield growth reducing

Positive Indicators (NO)• All aircraft manufactured in 2010 / 2011 were

financed and delivered into service• Passenger load factors ticked up in 2012 to date• Passenger and cargo yields increased in 2011• Single-aisle aircraft backlogs remain strong with

limited / no near-term delivery availability• Idle jet inventory marginally reduced• Airline requests for delivery deferrals were

declining



32

The information contained in our databases and used in this publication has been assembled from many sources, and whilst reasonable care has been taken to ensureaccuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend – A Flightglobal Advisory Service, part of Reed BusinessInformation Limited, its offices, or employees in respect of any error or omission that may have occurred

aircraft market developments: focus on regional aircraft, mainline jet and cargo market

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