wingx analysis - insight...wingx 4/26/2018 | 4 growth in the worldwide fleet the longest hangover in...

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WINGXActionable Business Intelligence

The Last 10 YearsChange? Cyclical? Structural? Lost decade?

24th April 2018

WINGX

© 2018 by WINGX ADVANCE GMBH | ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION 4/26/2018 | 2

What´s changed, What didn´t?

Just another cycle? Structural Change? Lost decade?

WINGX


What are the benchmarks for evaluation?

Fleet Growth

Geographic Demand

Aircraft Performance

Aircraft Types

Industry Brand

Demand drivers

Operating modelsAircraft Values

Supply Chain

OEM competition

Industry regulationChannels to market

Financing optionsAircraft Activity

Changes in…

WINGX

4/26/2018 | 4

Growth in the worldwide fleetThe longest hangover in the industry´s history. Did the cycle end?

718

660650

711710678672

696

763

868884

750

591

518

676

784752

667

515

438

321302

20182011 2014 20172013 20152012 20162008

1.154

2005 2009 2010

1.037

2004 20072006

-2%

1998 20031995 2000 20021997 200119991996

New business jet deliveries

This was the DOT-COM business cycle. 7 years of strong growth, then 2 year ´crash´

Globalisation driving another strong up-cycle. Then the great recession following the financial crash 2008

Dead-calm. Was there a significant change to industry fundamentals?

Bumpy ride. CAGR = 8% Cliff dive, then stagnationSource: JetCraft, Nov-17

-42%

+123%

+160%

-34%

Ever more miserable forecasts!

WINGX


But it wasn´t all flat/downhillPreowned records last year. Global fleet.

0

500

1,000

1,500

2,000

2,500

20082007 2009

+10.7%+1.8%

20162010 201420122011 201720152013

20.000

5.000

10.000

15.000

0

+54%

2012201020092008 2015201420132011 20162006 2007

Wholly owned global business jetsPreowned Business Aircraft Transactions

Source: JetnetSource: Jetnet

Source: Citi Research

$23BN record billings, 2014

WINGX


Big changes in OEM competition? Not so muchPretty much the same faces...still a crowded market place

WINGX


But big changes in market shareUnderlying success story for Gulfstream in Large Jets. Others playing catch up.

11% 20%

6%6%

40% 37%

20% 19%

1%18%

16%

2007 2017

100%

4%2%

Bombardier

Dassault

Gulfstream

Cessna

Airbus

Boeing

Hawker Beechcraft

Embraer

22%40%

10%7%

21% 13%

27% 32%

1% 8%

12%

2007 2017

100%

3%4%

By unit deliveries By value

New business jet deliveries

38%

72%

34%

12%

15% 12%

11%

2008 2016

2%

1% 2%

Cessna

Dassault

Gulfstream

Embraer

Bombardier

$2.9BN $2.4BN

Leading OEM EBIT

-19%

WINGX


Fleet Size and Aircraft CategoryEvened out in units, BIG change in share of value

200

400

900

500

300

600

0

700

100

1.100

800

1.000

Medium

201820162014 20172015

Heavy

Light

201320122006 201020092007 20112008

In terms of new units, 1/3 each…but last year Heavy Metal had 70% of value

Average business jet unit price has increased by 56% over the last 10 years

27%

22%

8%18%

70%

55%

100%

20172007

Mid

Light

Heavy

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Geographic demand – still US-dominantEdging up. North America and Europe home to 86% in 2008, 80% in 2016

5% 5% 6% 7% 7% 7% 8% 8% 7%5% 5% 6% 7%

7% 8% 8% 8% 9% 9% 9%13% 14%

16% 16%16% 16% 15% 14% 14% 13% 13%

75% 73% 71% 69% 68% 67% 66% 66% 67% 67% 67%

1%1%1%1%1%1%0%0%0%0%0%2% 5%4%

2009 20162011 201520142007

2% 2%2% 2%2%3%

100%

2%2%2% 2%

2012 20132006 20102008

Source: J.P. Morgan, Teal Group, JetNet, GAMA

2.7%0.3%

70.0%

Mexico

United States

China

2.7%

UK

Rest of World

24.3%

1.4%

Mexico

United States

61.1%

30.2%

ChinaBrazil

3.4%3.9% Rest of World

Share of active fleet by region By country

2007

2017

South America

Europe

Africa

Unknown

Asia/Pacific

North America

WINGX


New business jet deliveries, by geographyWas 2012-2013 a blip or sign of what´s to come?

9%8% 9% 9%

14%11% 12% 11% 11%

7% 7% 7% 7%

5% 9%

12%

11% 15% 14% 14%

9% 9% 9% 9%

25%26%

26%

23%

20% 18%15% 16%

18% 18% 18% 18%

58%54% 49%

42%50% 50% 54% 53%

61% 61% 61% 61%

5%5%5%5%6%6%5%7%6%6%5%

2013 201720142011 20162008 2012 2015 20182009 20102007

100%

4%

LatAM

ME & Africa

North America

Asia Pac

Europe

In 1998-2007, 70% to North America whereas 2008-2017: 54%


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Overall impression is of ageing fleetBack in 2008, 48% <10Y. By 2016, down to 38%. Fleet is clearly ageing

12% 13% 13% 14% 16% 17% 19% 19% 19% 20% 19%

11% 8% 7% 7% 6% 6% 6% 6% 6% 6% 6%

8% 8% 8% 7% 7% 7% 8% 9% 11% 12% 14%

10% 10% 11% 13% 15% 17% 18% 17% 17% 16% 16%

22% 23% 21% 20% 19% 19% 20% 23% 24% 24% 22%

24% 24% 27% 27% 25% 22% 19% 16% 16%28%

17%

12%

2011 2012 20132010

10% 8%14% 13%13%

20162014

5%

100%

6%6% 5%6%

2008 20092007 20152006

>30Y

16-20Y

21-25Y

6-10Y

11-15Y

0-5Y

26-30Y

Older aircraft may be holding up the recovery in pricing…

Environmental and Navigation Mandates (ADSB) to the rescue?


WINGX


What´s happened with Flight activity?35% decline in the US, then gradual recovery. 25% fall in Europe, then long stagnation

Sectors flown, 3 month rolling average, and YOY change: United States

Sectors flown, 3 month rolling average, and YOY change: Europe

WINGX

4/26/2018 | 13© 2018 by WINGX ADVANCE GMBH

-22

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

35.000

0

5.000

55.000

10.000

15.000

20.000

25.000

30.000

40.000

45.000

50.000

60.000

Departures per monthRolling 12 months

Trend [in%]

MAX

0 %

Departures (Business Jets)

Rolling 12m trend: Jets (all)

Rolling 12m trend: Large Jets

Rolling 12m trend: Medium Jets

Rolling 12m trend: Small Jets

Jan 2007 March 2018

Small Jets

Large Jets

30,4%

17,4%

Medium Jets

52,2%

There has been some recovery…Zoom-in on Europe: relatively strong recovery in Small Jets

WINGX


But utilisation per aircraft has gone backwardsUtilisation hasn‘t yet recovered – averaging under 200 hours per year

2007: 515,609 sectors

2017: 514,540 sectors

-2%Flight Activity

2007: 1,934

2017: 2,600

+34%Installed Jets as of

2008: 267

2017: 198

-25%Utilisation/year

WINGX


167,610

119,59696,146

70,865 70,55150,571 42,190 39,274

25,347

150,000

0

50,000

100,000

700,000

Turboprop Light Jet Heavy Jet

682,150

Super Light Jet Ultra Long Range Jet

Super Midsize Jet Very Light Jet Entry Level JetMidsize Jet Departures 2017

Total:2017

55.6%26.2% 38.7%

16.2%

56.5%26.2% 30.2%

14.9%34.1% 37.2%

44.4%73.8% 61.3%

83.8%

43.5%73.8% 69.8%

85.1%65.9% 62.8%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

% of total (based on 2017)

100%

Charter

Private

-5

0

-10

5

10

35

-0.4%

14.7%

-3.9%

Charter: 2008-2017 CAGR

-0.4% -1.1% -0.4%

7.4%

33.5%

-5.4%

0.6%

20

0

-20

-10

-13.7%

-1.6%-3.1%

Private: 2008-2017 CAGR

0.0%-4.3% -4.6%

9.0%

-3.7%

19.0%

-8.1%

Some aircraft are flying less, some much moreULR – new owners; SMJ – fractional fleet renovation; VLJ – enter the Air Taxi

WINGXSome travel pattern change, much is the same


643.313

Latin America

8.348Africa

Middle East 10.920

Europe Domestic

9.975North America

1.392

2.250Asia/Pacific

Flights from Europe in 2017

-0,8%

1,9%

10,2%

2,3%

-0,3%

1,3%

CAGR 2008-2017ARRIVAL REGION:

European domestic traffic flat. EM connections well up. Some shift at top airports

80.933

EGKB-London Biggin Hill Airport 7.677

LIRA-Ciampino–G. B. Pastine International Airport

17.756

25.795

KVNY-Van Nuys Airport

28.959

KLAS-McCarran International Airport

EGLF-Farnborough Airport

17.193

LFPB-Paris-Le Bourget Airport

KPBI-Palm Beach International Airport

LIML-Linate Airport

LSZH-Zürich Airport

9.561

29.059

9.687

UUWW-Vnukovo International Airport

12.246

12.486

14.661

LSGG-Geneva Cointrin International Airport

8.362

EGGW-London Luton Airport

LFMN-Nice-Côte d’Azur Airport

KPDK-DeKalb Peachtree Airport

KHOU-William P Hobby Airport

37.187

KHPN-Westchester County Airport

KTEB-Teterboro Airport

KDAL-Dallas Love Field

41.688

30.608

31.942

KIAD-Washington Dulles International Airport 34.065

KBOS-General Edward Lawrence Logan International Airport

29.884

30.328

Departures 2017

-0,4%

0,3%

-0,5%

-1,0%

0,9%

-1,7%

1,6%

1,5%

0,2%

-4,0%

1,4%

-4,5%

-3,2%

1,2%

0,0%

0,2%

-1,7%

2,2%

-0,3%

-0,7%

CAGR:2008-2017

TOP

10

USA

TOP

10

EU

RO

PE

Traffic flows from Europe Top airports, US & Europe

Eurocontrol and FAA

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What about the demand driversOverestimated impact of profits and markets. Underestimated uncertainty and drop in oil.

Source: Credit Suisse, Jetnet, 2017

Oil Price

JPM Aerospace & Defense, July 2017

US Corporate Profits Stock Markets

Source: Credit Suisse, May, 2017

Uncertainty of investment climate

WINGX


But economy is still broadly the main driverThe industry´s biggest problem has been to work off excess production in 2000s

Jetcraft 10 Year Market Forecast, Oct-17

Business jet unit deliveries• As indexed against Global Growth (red)

versus• Actual deliveries (blue)

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Image problem – won´t go awayRegulatory treatment has softened but public opinion hasn´t

Corporate Jet Investor Survey March 2018

• Only 9% of professionals believe the industry is good at selling its benefits

• 44% believe toxic industry brand hampers the promotion of individual companies

Oxfam, Statistica

WINGX


Aircraft values – recession has reset expectationsPre-recession depreciation 3%-5% /Y. Last 10Y has re-set expectations towards 10%

A long downhill story

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Every cycle has a turning point…prices now recovering QE, Tax Cuts, Fiscal expansion, Global Trade = Business confidence, corporate CAPEX…

Barclay Business Jet Survey April 2018

Back to 2005 Stabilising at last Stronger than in 2007

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Consolidation – there has been some

Emergence of mega-groups: Fractional, Management, FBO…

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21% of the European fleet generate 43% of activity…but 80% still 1-2 tails

But still a highly fragmented industry

53.131

1 aircraft only 139.400

2 to 5 25.006

6 to 20 60.912

more than 20

Total 278.450

Flight hours Q3-2017

5,9%

0,4%

-13,2%

18,8%

20,5%

Quarterly Trend (# flights)

6.695

5.024

320

766

585

Active Aircraft in Operator category

21,9%

19,1%

50,1%

9,0%

100,0%

% of total Europe

= 80%

WINGX


Products: (mis)matching supply and demand after 2008…Recession squeezed the pyramid, from ownership downwards. Charter market fell out

Back in the commercial airline queue…

Credit Suisse, Jun-17

WINGX


100.000

80.000

10.000

90.000

0

30.000

70.000

60.000

20.000

40.000

50.000

Jul-17May-17

Jan-17

Feb-17

Mar-17

Jun-17

Apr-17

Dec-17

Nov-17

Sep-17

Mar-18

Aug-17

Jan-18

Private

Feb-18

Oct-17

Charter/AOC

0

2

4

6

8

10 9,5%

7,1%

3,2%

6,4%7,6%

9,0%

5,6%4,8%

7,4%

4,8%

2,6%

4,9% 4,9%

1,6%

6,8%

YOY: Charter

-20

-10

0

101,3%

-10,4%

2,5%

-4,6% -4,5%

6,7%0,5%2,1%

-0,2% -3,1%-8,5%

1,6%5,9%5,5%4,6%

YOY: Private

More recently?Whole ownership hasn´t recovered. Nor has Frax. But Charter is back in vogue

European business jet departures Global Fractional Fleet

0

200

700

900

1.000

500

300

800

400

600

100

2007 20122009 201120082006 201520142013

-2%

20162010

WINGX

4/26/2018 | 26

Traditional users are more risk-averse. Next-Gen are more charter-minded.

Change in user attitudes – risk-aversion or next-Gen?

© 2018 by WINGX ADVANCE GMBH | ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION

YouGov Affluent Perspective Q3-2016

High barrier to sharingLow barrier to sharing

Empty Legs… Shuttles…

Seats-sharing…

Amenable to sharing luxury assets Digital platform

WINGX


Digital disruption may be on the horizonIn other industries, digitisation has seen major disruption in the competitive landscape

Before digital disruption…

Med

iaM

usi

cTr

avel

Biz

Av

…and after

Mo

bili

ty

Which industrial landscape will emerge?

WINGX


New era of personal aviation?Quiet revolution in last 10Y may be the biggest structural change of all

Roland Berger, WINGX, 2016

WINGX


Change since 2008? Just another

cycle Pro-growth structural change

Slower growth structural change

Fleet Growth

Geographic Demand

Aircraft Performance

Aircraft Types

Industry Brand

Demand drivers

Operating Models

Aircraft Values

Consolidation

OEM Competition

Supply Chain digitalisation

Flight Activity

WINGX

MARKET REPORTS

The key trends in each month´s flight activity, highlighting the most productive aircrafttypes, airports, city pairs and operators.

ONLINE DASHBOARDS

Online interactive dashboards providing instant, interactive analysis of market and customer activity and trends, hosted on WINGX software platform.

DATA STREAMS AND ANALYSIS

Raw data inputs, packaged as analytics to suit the customer´s preferred platform forfurther evaluation.

SURVEYS

Design, content development and implementation of surveys, including onlinequestionnaires, focus groups, workshops and interviews.

FORECASTS

Researching and modelling forecasts of market activity and value, from one daily andmonthly snapshots to multi-year projections.

CUSTOMISED MARKET RESEARCH

Tailored data feeds, trends and insights to provide the most relevant perspective foreach customer within the business aviation supply chain.

STRATEGIC ADVISORY

Leveraging our extensive track-records in aircraft operations, maintenance and businessdevelopment to provide sound strategic advice.


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wingx analysis - insight...wingx 4/26/2018 | 4 growth in the worldwide fleet the longest hangover in...

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