eats 2007 maintenance conference aviation maintenance market outlook berlin october 17, 2007 071017...

EATS 2007 Maintenance Conference

Aviation Maintenance Market Outlook

Berlin

October 17, 2007

071017© 2007. All rights reserved.VZM Management Services bv

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“De weg er n aa r toe” www.vzm.net

071017-2© 2007. All rights reserved.VZM Management Services

Z


Commercial Maintenance Market Outlook

Industry-wide optimism is back ...

• The industry will show overall profit in 2007

• More profits expected in 2008

-10

-5

0

5

2004 2006 2008

source: IATA

Net profits development

North AmericaEuropeAsiaN

et p

rofi

ts (

$ bi

llio

n)

World Airline financial results

Res

ult

s ($

bil

lion

)

-20

-10

0

10

20

1991 1995 1999 2003 2007

source: ICAO/IATA/VZMOperating ResultNet Result


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… although new challenges and pressures …

An

nu

al g

row

th

0%

2%

4%

1998 2000 2002 2004 2006 2008

World annual growth

Airlines fuel burden

0%

10%

20%

30%

2000 2002 2004 2006 2008

source: IATA

% o

per

atin

g co

sts ?

Overall yield trend

75

100

2000 2002 2004 2006 2008

source: IATA/VZM

Yie

ld i

nd

ex

actualadjusted

• Slowdown after 2007/2008?

• Yields tapering off

• Increasing fuel burdens

• Cost pressures & further consolidation


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Jet orders

nu

mb

er o

f ai

rcra

ft

0

1,000

2,000

2000 2002 2004 2006

source: Speednews

RJ large

RJ small

WB

NB

Fleet deliveries vs profitability

Ind

ex f

leet

del

iver

ies

Net

res

ult

s (U

S$

b)

60

100

140

1989 1993 1997 2001 2005-15

-10

-5

0

5

10

20

Jet deliveriesNet results

… while order levels are high

• High aircraft orders

• Gradual shift larger aircraft

• Overcapacity threat

• Entry of new aircraft types


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Global warming an inconvenient truth … and opportunity

Worldwide CO2 emission

(year 2000)

0%

50%

100%

Air

Road

Int'l shippingNon-road land

source: EDGAR

Transportation emissions

0%

25%

50%

75%

100%

Transport

(19.2%)

Energy Generation

Industry

Residential, commercial

Land use

Fossil Fuel Retrieval

• Aviation small contribution

• Still affects airline industry

• Less fuel – less emission

• Opportunities & threat for MRO


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In a prosperous growing and profitable MRO market ...M

ark

et v

olu

me

ind

ex

100

120

2000 2002 2004 2006 2008 2010

MRO market size

Euro exchange rates

80

100

120

140

160

2000 2002 2004 2006 2008

Ind

ex e

xch

ange

rat

e USD

CNY

SGD

source: Speednews

Deliveries Mainliner Jets

Nu

mb

er a

/c

0

500

1,000

1995 2000 2005

WBNB

• Millennium fleet driver growth

• Engine maintenance fastest

• US Dollar mixed effect

• Most MROs profitable


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… each airline and MRO has its own strategy …

Typical airline outsource strategies

Very-small & start-ups

Large – MRO history

Small multiple types

Large – small fleet type

Small single type

Medium multiple types

Medium single type

Large - no MRO

Engineering LM BM Engines/Comp

outsourced

mix strategy

Bas

e M

aint

enan

ce

Engine Maint.

Component Maint.

Component

Management

Engine Management

Lin

e M

aint

.

-10%

0%

10%

20%

Mar

gin

Potential margin per segment

Engineering Services

Tot

al S

ervi

ce

Pac

kage

s

• Airline size & history drives outsource strategy

• MROs: focus & scale, driving M&As


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… taking into account arising shortages …

labor costs up

insufficient capacity

move to lower labor rate countries

Strategies for labor shortages

improve efficiencies

improved productivity

reduced capacity needs

optimal solution per maintenance task

optimum task scheduling based on utilization and maintenance history

dynamic packaging per maintenance

occasion

process improvement

Labor Shortages

Strategies

• Spares & capacity shortages

• Labor shortages visible

• How far east is solution for Europe?


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... and continues to work on improvements …

Price• Quoted price• No invoice surprises

Turn time• Quoted turn time• Reliability• Comprehensiveness• “Slot” availability

Quality• Trouble free operation• “Best in Class” MTBRs• Responsiveness

• Salary costs

• Productivity• Project/process control• Workscope• Material cost control

• Project/process control

• Productivity• Commitment personnel

• Craftsmanship• Engineering capabilities• Shop repair capabilities• Material logistics control• Facilities/equipment

• Project/process control• Commitment personnel

• Craftsmanship• Customer focus

Low

cos

t Good

Fast

Safe


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… creating opportunities for training services

• Growth markets

• New technologies

• Contribute MRO improvements

• Basic training

• Outsourcing training?


Z




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Who is VZM Management Services?

• Started in December 1996– US office since 2003

• VZM Management Team’s experience– Airline and MRO executive management– Organization redesign to meet business goals– Management of change and structure for profitable growth– Business development, JV/mergers/acquisitions and integration

• Worldwide customer base– Airlines– Maintenance Organizations– OEMs

VZM Management Services

Z

“De weg er n aa r toe”

P.O. Box 4102300 AK LeidenThe NetherlandsHomepage: www.vzm.net

Phone

+31-252-222 123Fax

+31-252-216 851E-mail

[email protected] Management Services

Z

“De weg er n aa r toe”

5840 Bent Pine DriveVero Beach, FL 32967USAHomepage: www.vzm.net

Phone

(772) 562 0592Fax

(772) 562 0592E-mail

[email protected]

Provides change leadership support to enhance business results

eats 2007 maintenance conference aviation maintenance market outlook berlin october 17, 2007 071017...

Documents

mro slide

profitable mro market

vzm management services

market volume index

airline industry

result net result slide

consolidation slide

jet deliveries net results