farnborough international airshow capital markets ?· 2016-08-17 · farnborough international...

voestalpine AG
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voestalpine AG
Farnborough International Airshow
Capital Markets Day 2016

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Part I
Aviation 2016
Aircraft Raw Material Demand
Global Supply Chain
Aviation Industry China
Part II
voestalpine: A member of the club
Special Steel Division
Metal Forming Division
Conclusion
07/12/2016 CMD2016 Farnborough International Airshow 2
Agenda

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Highlights and Insights
Aviation 2016

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The global aerospace market offers a steady growth
within the next years.
The global Aerospace market outlookBoeing current market outlook -
Fleet in service evolution 2014-2034:
Boeing and Airbus comprise two-thirds of
materials consumed for aerospace globally
This duopoly strongly influences behavior of
entire aerospace supply chain.
Boeing 36%
Airbus 30%
GE 5%
CFM Intl 4%
CFM 3%
Rolls-Royce 3%
Embraer; 2%
Pratt & Whitney 2%
other; 15%
2015 Aircraft material demand by OEM707kt per year
21.600
43.560
1.420
38.050
-17.510
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000E
nd o
f ye
ar
201
4
Rem
ove
dfr
om
serv
ice
Con
vert
ed to
freig
hte
r
New
deliv
erie
s201
5 to 2
03
4
End o
f ye
ar
203
4
Nu
mb
er
of
Air
cra
fts
removed build Total fleet
Source: Boeing Current Market Outlook 2015Source: ICF Analysis

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Aircraft Market Outlook 2034
asks for 38.050 new aircrafts
7%
70%
13%
9%
1%
Delivery units
Large wide-body
Medium wide-body
Small wide-body
Single aisle
Regional Jet
Source: Boeing Current Market Outlook 2015
World Market Value: 5.570 $b
New deliveries: 38.050 Airplanes
Average airplane value: 150 ($M)
Asia38%
Europe19%
North America
21%
Latin America
8%
Middle East8%
C.I.S.3%
Africa3%
60% of new aircrafts go
into emerging markets.

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Main Drivers of the Aviation Industry
New Aircraft Delivery Demand
Air travel demandAirlines ability to acquire
new aircraft
Economic
Growth
Oil Price vs.
Air Fare
Aircraft
Retirements
Availability of
aircraft financing
Sources
Airlines
Finance

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Different forecasts, different approach
Airline Monitor
Top down approach from global
passenger growth rate to world fleet.
demand oriented 5.1% RPM1
Average build rate in 2035 is 2,500 AC
Major OEMs (Boeing and Airbus)
Bottom up approach from backlog and
projected orders to build rate.
Supply oriented Airbus 4.6% RPM1
Boeing 4.9% RPM1
Average build rate in 2035 is 2,450 AC
07/12/20167
1 Revenue Passenger Miles
Source: Airline Monitor 02/2016, Boeing Current Market Outlook 2015, Airbus
Global Market Forecast 2015
CMD2016 Farnborough International Airshow
1.300
1.800
2.300
2.800
2014 2019 2024 2029 2034
Airline Monitor
Boeing CMO

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0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
Nu
mb
er
of
Air
cra
fts
Retired, scrapped, others
Increase in fleet
The average growth rate was increased
to ~3.7% per year until 2035
Retired small regional jets will be replaced by larger single-aisle aircrafts
Retirement age increases to 27-30 years
Source: Airline Monitor 06/2016
Average Growth rate 2016-2035:
~ 3.7% per year
07/12/20168 CMD2016 Farnborough International Airshow

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Aerospace a cyclical business with downturn
approximately every 8-10 years
0
200
400
600
800
1.000
1.200
1.400
1.600
Year 1970 1975 1980 1985 1990 1995 2000 2005 2010
To
tal
delivere
d a
ircra
fts total delivered aircrafts
The 70s
recessionEnergy price
recession
Gulf war
Tech bubble
and 9/11
-74%-42%
-50% -35%
Financial
market
meltdown
Source: Airline Monitor, Aircraft History, 02/2016, GE Aviation marketing analysis, Ascend
07/12/20169 CMD2016 Farnborough International Airshow

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Market Trends
Low oil price supports airline profitability
A change in aftermarket due to a slight overshoot in aircrafts
China economy development
The need for a MoM Middle of the Market Aircraft is heavily discussed
Some sign that a slow down maybe underway but no evidence so far
Airbus and Boeing stay with their aggressive production plans

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Aerospace: Further a growth market!
Airline Monitor and major OEM forecast an
average growth of ~3.7% per year from
2016-2035.
Airbus and Boeing have a
backlog of >12,000 aircrafts
representing 8-10 years of steady
production.
Highest load factor of aircrafts ~80%
and parked fleets are 10-15 years low.
Source: Airbus, Boeing, Ascend, BCC analysis
Homato

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Outlook 2020
Aircraft Raw Material Demand

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Aluminum
Steel
Superalloys
Titanium
other
composites
~707 ktons
2015 Aircraft Raw Material Demand
Aluminum
Steel
Superalloys
Titanium
Other
composites
~12bUSD
The aggregated fly to buy ratio is ~ 6
Source: ICF International

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Aluminum
Steel
Superalloys
Titanium
other
composites
~740 ktons
2020 Aircraft Raw Material Demand
07/12/201614
Aluminum
Steel
Superalloys
Titanium
Other
composites
~12,5bUSD
The aggregated fly to buy ratio is ~ 6
Source: ICF International; calculation with same commodity prices
CMD2016 Farnborough International Airshow
+0.7%
+1.9%
+4%
+5.8%
-0.7% (CAGR p. year)

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Majority of the aerospace material demand for
value added is US based, followed by Europe
Aerospace raw material demand ~707ktons
North America
Europe
Asia
other
by Region*
Air Transport
BGA**
Heli
Military
by Market
*) Region where most value-added work is performed
**) Business and General Aviation
Source: Aerolytics, 12/2015 Sheet and Plate Study

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Aviation Industry
Global Supply chain

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Business Characteristics Aircraft
Limited players
Zero defect approach
Trust (track record, safety), relationship and market power are key
decision criteria
Highly conservative business behavior
(to become member of the club)
Price pressure
Serial business (small scale)
Defined products through very tight specifications
Frozen technologies
Strict management of failures
Low level of differentiation through the product/service portfolio
Product characteristics typical for Operational Excellence
The business
with the highest
entry barrier for
mission critical
parts/materials

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A challenge to the supply chain!
OEMs monitor their supply chain with frequent
capacity audits and ramp-up control
The supply chain is ready for the next growth
peak, OEM requested supplier to make
investment
Possible over-capacity will have to be managed
solely by supplier
Suppliers constantly high performance over the
next 3-4 years will guarantee them pole position
in the following multi-year-bids
Homato

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The global Aerospace Value chain is worth ~600bUSD
and employs more than 2.3 Million people*)
North America
~1,100,000 people
~310bUSD
Europe:
~600.000 people
~175bUSDAsia*)
~600,000 people
~ 88bUSD
France 8%
200,000
Germany 4%
110,000
UK 4.5%
120.000
Source: TKA 2014, BPac, Market reports Mexico, Morocco, Brazil
*) w

farnborough international airshow capital markets ?· 2016-08-17 · farnborough international...

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