Aircraft Markets In An
Age Of Extremes
Presentation To AIAA AVIATION 2013
Los Angeles, CA
Richard Aboulafia
Vice President, Analysis
Teal Group Corporation
www.tealgroup.com
August 2013
Jetliners Are A Serious Anomaly
Aircraft Markets, Through Good And Bad Years
Worldwide Deliveries By ‘13 $
Value (in 2012)
CAGR CAGR Change Change
’03-‘08 ’08-‘12 ‘08-‘12 ’11-‘12
7.4%
Large Jetliners ($88.1 b)
Business Aircraft ($19.9 b) 17.1%
12.0%
57.4%
29.4%
-6.3%
-29.2%
5.7%
Regionals ($6.2 b)
Civil Rotorcraft ($4.9 b)
4.4%
-9.6%
-33.2%
-12.6%
17.2%
-5.4%
-15.2%
7.6%
Military Rotorcraft($14.7 b)
8.9%
13.0%
62.9%
6.6%
Military Transports ($6.2b)
3.1%
-2.0%
-7.7%
-12.5%
Fighters ($14.3 b)
1.9%
0.5%
2.1%
-13.8%
All Civil ($118.9 b)
All Military ($36.7 b)
9.7%
5.2%
22.6%
20.4%
3.7%
3.8%
16.2%
-7.6%
Total ($155.6 b)
8.0%
4.9%
21.1%
12.4%
Our Forgotten Nemesis...Cyclicality
Large Jetliner Deliveries By Value
(Value in '13 $Bns)
$80
‘03-‘12
9.5% CAGR
‘95-‘99
20.8% CAGR
$60
‘84-‘91
16.1% CAGR
$40
$20
‘80-‘84 -13.9%
CAGR; -45%
peak-trough
‘68-‘77 -11%
CAGR; -65%
peak-trough
‘91-‘95 -12.5%
CAGR; -41%
peak-trough
‘01-‘03 -10.7%
CAGR; -28.8%
peak-trough
OR
‘99-‘03 -11%
CAGR; -37.3%
peak-trough
$0
'59
'63
'67
'71
'75
'79
'83
'87
'91
'95
'99
'03
'07
'11 '12
GDP Year/Year Growth Rates
10%
8%
6%
4%
2%
0%
-2%
-4%
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 13f'14f
World
EU
US
Asia Ex-Japan
Source: Morgan Stanley, IMF W orld Economic Outlook January 2013
Y/Y Traffic: Recovery Slows; Cargo A Concern
2012 Totals; RPKs 5.3%, ASKs 3.9%, FTKs -1.5%;
2011: RPKs 6.9%, ASKs 8.2%, FTKs -0.6%
30%
20%
10%
0%
-10%
-20%
l
l
l
l
r
r
r
r
r
08Sep ov '09Ma ay Ju Sep ov '10Ma ay Ju Sep ov '11Ma ay Ju Sep ov '12Ma ay Ju Sep ov '13Ma aJyun
'
N n
N n
N n
N n
N n
l
M
M
M
M
M
u
a
a
a
a
J
J
J
J
J
Ja
RPKs
Source: IATA
ASKs
FTKs
Historical Jetliner Orders And Deliveries
3000
(Number of aircraft)
2500
2000
1500
1000
500
0
'69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13f
Deliveries
All Airbus and Boeing aircraft
Net orders
Oil Prices And Large Jetliner Deliveries
120
(Oil Prices/bbl in '12$)
(Value of Deliveries in '13$ Bns)
80
100
80
60
60
40
40
20
20
0
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Oil Prices
Value
US Energy Information Agency (Annual Average Imported
Crude Oil Price in 2012 $); Teal Group research
Interest Rates And Large Jetliner Deliveries
(Interest Rates)
(Value of Deliveries in '13$ Bns)
80
15%
60
10%
40
5%
20
0%
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Interest Rates
Value
Federal Reserve (Federal Funds Effective Rate); Teal Group research
Oil Prices And Interest Rates
120
100
(Oil Prices/bbl in '12$)
(Interest Rates)
20%

15%
80 
60
40




  


10%
 
5%





20



0%
0
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12f
Oil Prices Interest Rates
Do You Believe In Super Cycles?
History And OEM Plans For Large Jet Transport Deliveries By Value
(Value in '12 $ Bns)
‘03-‘14 9.6% CAGR,
175.1% Grow th;
‘11-‘14 16.4% CAGR
$100
$80
‘95-‘99
20.8% CAGR
112.7% Growth
$60
‘84-‘91
16.1% CAGR
184.3% Growth
$40
$20
$0
'59
'63
'67
'71
'75
'79
'83
'87
'91
'95
'99
'03
'07
'11 '14f
Commercial Jetliners History And Forecast
Dangerous Words: It Really Is Different This Time
(Units Delivered)
(Market Value in '13$ Bns)
To Drop SA Rates Or
Drop Prices?
1,400
120
100
1,200
1,000
80
800
60
600
40
400
20
200
0
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Units
Value
Airbus, Boeing, CSeries, C919 only; includes KC-46
Comparative Backlog Values
(Value in '13 $Bns)
342.8
333.8
350.0
306.6
300.1
300.4
300.0
281.2
279.0
271.1
265.4
318.8
316.8
274.5
270.0
246.4
250.0
199.1
200.0
171.2
150.0
153.6
148.1
130.0
114.1
112.6
107.8
100.0
50.0
79.5
48.6
5.8
5.2
3.5
2.0
5.8
0.0
id
M
'9
7
id
M
1
'0
d
n
E
'0
4
d
n
E
'0
5
d
n
E
'0
Boeing
6
d
n
E
'0
7
d
n
E
Airbus
8
'0
d
n
E
9
'0
d
n
E
'1
0
Bombardier
d
n
E
'1
1
d
n
E
'1
2
id
M
'1
3
Regional Market Entrances Possible; Exits
More Common
$10
(Value of deliveries in '13$ Bns)
$8
$6
$4
$2
$0
'92
'94
'96
'98
'00
Bombardier
BAE
'02
'04
Embraer
Fokker
'06
'08
Other
MRJ
'10
'12
ATR
SuperJet
'14
'16
Saab
'18
'20
'22
Bottom Half Bizjet Segment V. Top Half
14
(Market Value in 2013 $ Bns)
12
‘03-‘08 CAGR:
19.7% Bottom,
15.3% Top
10
8
6
‘08-‘12:
-55.9%
Bottom,
0.3% Top
‘08-‘11: -55.7%
Bottom, 2.8% Top
4
2
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
Bottom Half (<$26M)
Top Half (>$26M)
Business Aircraft Deliveries And
Corporate Profits
(Corp. Profits in $ Bns)
(Deliveries -'13 $Bns)
30
2,000
25
1,500
20
15
1,000
10
500
5
0
0
'64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Corporate Prof its
Source: US BEA, Teal Group Research
Value of Deliv eries
Business Jet Manufacturer Market Shares
By Deliveries Value, 2013-2022 Vs 2003-2012
34%
30.9%
30.9%
30%
26.2%
20%
16.6%
16.6%
14.6%
13.1%
10%
0%
8.1%
6.7%
1.3%
0%
Bombardier Hawker
Dassault
Cessna Gulfstream Embraer
'03-12
Excludes jetliners, RJs, turboprops
'13-22
0.4% 0.6%
Other
DoD Investment, O&M Funding
Upsides: Asia Pivot, Iran. Downside: Sequestration
300
($ bns )
293
271
250
285 284
239 237
214
200
190
173
150
179
115
97
50
54 61
42 46
135 138 134
134
78
57
Pre-OCO;
pre-sequestration
165
140
100
210 209
83
65
69
121
105
73
78
77
235 230
220
80
80
81
72
110
100 99 100 106
69
68
71
69 72
0
FY01
FY03
FY05
FY07
Procurement
Budget Authority
FY09
RDT&E
FY11
O&M
FY13
FY15
FY17
A Weak DoD Weapons Investment Cycle
Source: Capital Alpha Partners
Source: DoD Selected Acquisition Reports/American Enterprise Institute
World Fighter Production Shares
(Share By '13 $bns Value)
24
20
16
12
8
4
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
F-35
Undetermined
Europe
Russia
RoW
Non-F-35 US
World Fighter Markets: Domestic V. Export
(Value of deliveries in '13 $Bns)
$40
1990: Exports are
25.4% of the
market
$30
$20
1998: Exports keep
the market afloat
with 71.8% of the
market
2012: Exports
are 34.9% of
the market
$10
$0
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Domestic Markets
Export Markets
Military Transport Deliveries By Value
(Value In '13 $Bns)
8
6
4
2
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
C-17
C-130J
A400M
KC-390
Other
US Military Rotorcraft Program Funding
(Funding In Then-Year $ Bns)
10
8
6
4
2
0
FY10
FY11
FY12
Bell
FY13
Sikorsky
FY14
Boeing
FY15
T otal
FY16
FY17
FY18
Military Rotorcraft Market Still Growing, For Now;
Civil Market Recovers To Higher Level
12
(Market Value in '13 $ Bns)
10
8
6
4
2
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Civil
Military (US)
Military (International)
World UAV Market 2002-2022
4
(Units deliv ered, '000s)
(Market v alue In '13 $bns)
4.5
4
3.5
3
3
2.5
2
2
1.5
1
1
0.5
0
0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Units
Includes UCAVs; excludes R&D.
Value
Missile/Munition/UAV Forecast
20
(Market v alue in '13 $Bns)
16
12
8
4
0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
AAM
Anti-Ship
ASM
SSM
ADM
Sm art m unitions
AT M
UAVs
Top 20 Aviation Programs: Volume Matters
Cumulative Deliveries Value in ‘13 $ Bns
Airbus A320/Neo
Boeing 737NG/MAX
Boeing 787
Boeing 777
Lockheed F-35
Airbus A350XWB
Airbus A330
Bombardier Global
Embraer E-Jets
Boeing 777-X
Boeing 747
Airbus A380
Sikorsky H-60
Gulfstream 650
Airbus A400M
Boeing 767/KC-46
Gulfstream 550
Lockheed C-130J
Gulfstream 450/P42
Eurofighter
$0
2013-2022
$60
$120
2003-2012
$180
$240
Aircraft Production 2003-2022
Largely Sheltered From The Storm; Long-Term Growth, Too
200
(Market Value in '13 $ Bns)
160
120
80
40
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Fighters
M ilitaryT ransports/T rainers/Other
Business Aircraft
Rotorcraft
Jetliners/Regional AC