Things Are Great!
So Start Worrying.
Aviation/Defense Industry Overview
And Forecast
Presentation To The National Aeronautic Association
Arlington, VA
Richard Aboulafia
Vice President, Analysis
Teal Group Corporation
www.tealgroup.com
January 2015
Aircraft Market Performance 1990-2014
25%
(% Change YoY)
(Value of Deliv eries in '15 $ Bns)
20%
$180
$150
15%
$120
10%
5%
$90
0%
$60
-5%
$30
-10%
-15%
$0
'90
'92
'94
'96
'98
'00
'02
Market Change YoY
'04
'06
'08
'10
Value of Deliveries
'12
'14
Civil And Military Aircraft Deliveries
Aggregate 2005-2014: 74.5% Growth (6.4% CAGR)
140
(Market Value in 2015 $ Bns)
‘05-‘14: 88.7% Growth
(7.3% CAGR)
120
100
80
‘05-‘14: 42.0% Growth
(4.0% CAGR)
60
40
20
0
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Civil
Military
Aircraft Markets, Through Good And Bad
Years
The Numbers Are Better Than We Feel….
Worldwide New Deliveries In
2014 (2015 $)
CAGR CAGR Change Change
’03-‘08 ’08-‘13 ‘08-‘13 ’13-‘14
7.5%
Large Jetliners ($98.8 b)
Business Aircraft ($23.2 b) 17.1%
10.3%
63.4%
7.8%
-3.7%
-17.0%
-0.6%
4.3%
-6.4%
-28.2%
7.7%
18.4%
-1.5%
-7.1%
-4.2%
Military Rotorcraft($16.8 b) 10.3%
9.0%
53.6%
17.1%
Military Transports ($5.3b)
3.2%
-1.2%
-6.0%
-8.1%
Fighters ($18.3 b)
1.9%
0.8%
4.0%
10.2%
All Civil ($135.3 b)
All Military ($44.5 b)
10.0%
5.0%
27.8%
5.7%
3.9%
3.7%
20.0%
10.2%
Total ($179.8 b)
8.2%
4.7%
25.8%
6.8%
Regionals ($7.2 b)
Civil Rotorcraft ($5.9 b)
US Aircraft Industry Output
70%
(% of World)
(Value of Deliv eries in '15 $ Bns)
2014: $96.9 bn/
54.3% of World
$100
60%
$80
50%
$60
40%
30%
$40
20%
$20
10%
0%
$0
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
US Output As % of World Total Value of Deliveries
'12
'14
DoD Investment, O&M Funding
300
($ bns )
293
250
265
250
260265
237
214
200
190
173
150
179
165
140
121
115
78
61
54
42 46
135 138 134
134
97
50
284
256
239
100
285
271
57
83
65
69
105
73
78
77
80
80
81
72
104 101
97
64
64
63
113
108
67 70
0
FY01
FY03
FY05
FY07
Procurement
Budget Authority
FY09
RDT&E
FY11
O&M
FY13
FY15
FY17
DoD Tactical Aircraft Procurement, FY1986-2016
Worst. Recapitalization. Ever.
400
(Funding in '15 $Bns)
(Units Procured)
12
10
300
8
200
6
4
100
2
0
0
6
8
Y
F
88 Y90 Y92 Y94 Y96 Y98 Y00 Y02 Y04 Y06 Y08 Y10 Y12 Y14 Y16
Y
F
F
F
F
F
F
F
F
F
F
F
F
F
F
F
Units
Funding
World Fighter Production Shares
28
(Share By '15 $bns Value)
24
20
16
12
8
4
0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
F-35 US
Russia
F-35 International
RoW
Undetermined
Non-F-35 US
Europe
LRS-B Looking Good
But What About The Other Funding?
4,000
3,500
3451.2
3,000
2707.3
$M
2,500
3090.8
2836
2372.2
FY14
FY15
2,000
1818
1590.6
1,500
1045.3
1,000
500
913.7
289.6
291.7
258.7
379.4
359.4
0
12
13
14
15
16
FY
17
18
19
The US Military Fixed Wing Waterfall
There’s A Lot Riding On The F-35...
25
(Value in '15$ Bns)
20
15
10
5
0
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
C-17
T-6
AV-8B
C-130
Excludes jetliner derivatives
F/A-18
F-35
F-15
T-X
F-16
B-X
F-22
T-45
Boeing Military Fixed Wing Deliveries
(Value in '15$ Bns)
10
8
6
4
2
0
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
C-17
AV-8B
F/A-18
F-15
P-8
KC-46
Military Rotorcraft Market Falls In US; Civil Market
Recovers To Higher Level
12
(Market Value in '15 $ Bns)
10
8
6
4
2
0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Civil
Military (US)
Military (International)
Our Forgotten Nemesis...Cyclicality
Large Jetliner Deliveries By Value
$100
(Value in '15 $Bns)
‘04-‘14
9.6% CAGR;
An 11-Year
Supercycle
$80
‘95-‘99
20.8% CAGR
$60
‘84-‘91
16.1% CAGR
$40
$20
$0
‘68-‘77 -11%
CAGR; -65%
peak-trough
‘80-‘84 -13.9%
CAGR; -45%
peak-trough
‘01-‘03 -10.7%
CAGR; -28.8%
‘91-‘95 -12.5% peak-trough
CAGR; -41%
OR
peak-trough
‘99-‘03 -11%
CAGR; -37.3%
peak-trough
8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4
'5 '6 '6 '6 '6 '6 '7 '7 '7 '7 '7 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '1 '1 '1
Y/Y Traffic: Strong Numbers Again, Even For Cargo
2013 Totals : RPKs 5.2%, ASKs 4.8%, FTKs 1.4%; 2012 Totals : RPKs 5.3%,
ASKs 3.9%, FTKs -1.5%; 2011: RPKs 6.9%, ASKs 8.2%, FTKs -0.6%
30%
20%
10%
0%
-10%
-20%
l
l
l
l
l
l
r
r
r
r
r
r
08 ep ov '09Ma ay Ju ep ov '10Ma ay Ju ep ov '11Ma ay Ju ep ov '12Ma ay Ju ep ov '13Ma ay Ju ep ov '14Ma ay Ju ep ov
'
S Nn
S Nn
S Nn
S Nn
S Nn
S N
l S Nn
M
M
M
M
M
M
a
a
a
a
a
a
Ju
J
J
J
J
J
J
RPKs
Source: IATA
ASKs
FTKs
Comparative Backlog Values
(Value in '15 $Bns)
450
436.27
421.92
397.42
400
365.33
350
300.42
281.81
300
309.53
300.11
271.06
268.21
321.6
316.81
277.58
269.97
250
199.11
200
150
173.03
130.03
115.48
112.93
107.75
100
79.53
48.55
50
0
7
id
M
'9
1
id
M
'0
d
n
E
'0
4
d
n
E
'0
6
d
n
E
Boeing
'0
8
d
n
E
'0
Airbus
9
d
n
E
'1
0
d
n
E
1
'1
Bombardier
d
n
E
2
'1
d
n
E
9.5
7.1
5.8
5.19
3.51
1.95
'1
3
d
n
E
4
'1
Market Share Outlook By Deliveries Value
The Duopoly Endures
(Value in '15 $Bns)
100
80
60
40
20
0
'76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
Boeing
Airbus
Douglas/Lockheed
Bombardier/COMAC/Irkut
Orders Composition: The Great
Re-Engining Shift
(Value in '15 $ bns)
$200
$40
$68
$150
$65
$24
$100
$45
$50
$0
$36
$23
$3
$7
$2
$16
$32
2002
2006
$25
$1
$21
$50
2008
Legacy
Major Derivative Re-engine
$1
$22
$57
$19
$5
$65
$95
$2
$30
$33
$33
$27
2010
2012
2013
2014
Next-Gen
Minor Derivative Re-engine
Bottom Half Bizjet Segment V. Top Half
(Market Value in '15 $ Bns)
16
‘03-‘08 CAGR:
19.7% Bottom,
15.3% Top
12
‘08-‘14:
-54.7%
Bottom,
24.8% Top
8
‘08-‘10: -56.8%
Bottom ,3.5% Top
4
0
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Bottom Half (<$26M)
Top Half (>$26M)
Aircraft Forecast By Composition
Top 5 Programs
M ilitary
$901.2B
45.6%
$526.8B
26.6%
$1,450.7B
73.4%
$552.1B
27.9%
Ne xt 15
Civ il
$524.1B
26.5%
Re mainde r
(2015-2024; 2015 $)
Top 20 Aviation Programs: Volume Matters
Cumulative Deliveries Value in ‘15 $ Bns
Airbus A320/Neo
Boeing 737NG/MAX
Boeing 787
Boeing 777/X
Airbus A350XWB
Lockheed Martin F-35
Airbus A330/Neo
Bombardier Global
Embraer E-Jets
Sikorsky H-60
Gulfstream 650
Su-30/T-50
Airbus A400M
Airbus A380
Boeing 767/KC-46
Boeing AH-64
Gulfstream 500/600
Gulfstream 550
Lockheed Martin C-130J
Dassault Falcon 7/8X
$0
2015-2024
$50
$100
$150
2005-2014
$200
$250
Big Picture Risks And Opportunities
•
•
The US: only healthy big economy.
All jetliner market change is bad.
•
•
•
•
•
•
•
•
•
787 deferred costs.
Does Boeing need a new single-aisle?
Everything about the A380.
CSeries and BBD.
Republican shift: back to non-deficit hawks.
LRS-B: M&A precipitator?
USN and the tactical combat market.
Oil prices and civil helos.
Business jet market recovery sustainability.
– Fuel is changing.
– A post-2020 bust?
Aircraft Production 2005-2024
Largely Sheltered From The Storm; Long-Term Growth, Too
210
(Market Value in '15 $ Bns)
180
150
120
90
60
30
0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Fighters
MilitaryTransports/Trainers/Other
Business Aircraft
Jetliners/Regional AC
Rotorcraft