Market Perspectives
Robert Martin Managing Director & Chief Executive Officer
Growth Frontiers Asia Pacific Conference 31st October 2017
Market Perspectives Robert Martin Managing Director & Chief - - PowerPoint PPT Presentation
Market Perspectives Robert Martin Managing Director & Chief Executive Officer Growth Frontiers Asia Pacific Conference 31 st October 2017 Disclaimer This presentation contains general background information about the activities of BOC
Robert Martin Managing Director & Chief Executive Officer
Growth Frontiers Asia Pacific Conference 31st October 2017
This presentation contains general background information about the activities of BOC Aviation Limited (“BOC Aviation”), current as at the date hereof. This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of BOC Aviation or any of its subsidiaries
The information contained in this document has not been independently verified and no representation or warranty, expressed or implied, is made as to, and no reliance should be placed on, the information or opinions contained herein. The information set out herein may be subject to revision and may change materially. BOC Aviation is not under any
affiliates, advisers or representatives (including directors, officers and employees) shall have any liability whatsoever for any loss whatsoever arising from any use of this document
No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of BOC Aviation or any of its affiliates, advisors, agents or representatives including directors, officers and employees shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the
This document may contain “forward-looking statements”, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words “will”, “would”, “aim”, “aimed”, “will likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “estimating”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “trying to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may”, “will pursue” or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond BOC Aviation’s control that could cause the actual results, performance or achievements of BOC Aviation to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Neither BOC Aviation nor any of its affiliates, agents, advisors or representatives (including directors, officers and employees) intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document. Any securities or strategies mentioned herein (if any) may not be suitable for all investors. Recipients of this document are required to make their own independent investigation and appraisal of the business and financial condition of BOC Aviation, and any tax, legal, accounting and economic considerations that may be relevant. This document contains data sourced from and the views of independent third parties. In replicating such data in this document, BOC Aviation does not make any representation, whether express or implied, as to the accuracy of such data. The replication of any views in this document should not be treated as an indication that BOC Aviation agrees with or concurs with such views. The information contained in this document is provided as at the date of this document and is subject to change without notice. 2
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Private & Confidential
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1993 1997
SALE established with 50:50 joint ownership between Singapore Airlines and Boullioun Aviation Services Temasek and GIC each became 14.5% shareholders
2006
Bank of China acquired 100%
2016
Listed on HKEx on 1 June
Ownership
2009
>US$5B
2006
>US$10B
2000
>US$1B
2013
>US$3B
1997
>US$0.5B
Total Assets
Jun-2017
US$14.4B 2018 will be our Company’s 25th anniversary!
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Sales Transitions Repossessions2 Procurement Leasing Debt financing1 280 aircraft sold More than 60 transitions 33 aircraft in 13 jurisdictions 740 aircraft purchased totaling more than US$37 billion More than 750 leases executed with more than 140 airlines in 52 countries More than US$20 billion in debt raised since 1 January 2007 US$2.7 billion1 in cumulative net profit after tax generated since inception
All data as at 30 September 2017, since inception unless otherwise indicated Notes: 1. As at 30 June 2017 2. Includes repossessions and consensual early returns 3. Average value over last 10 years since 1 January 2008
Fleet Utilization3 Cashflow Collection3 Average 99.8% Average 99.6%
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the next 20 years1
Notes: 1. Boeing CMO 2017-2036
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Notes: 1. Based on World Bank Global Economic Prospect Report, as at June 2017 2. Source: IATA (August 2017)
9/11 & Second Gulf War Global Economic Crisis First Gulf War
Source: IATA (August 2017) Source: Airbus Global Market Forecast, Boeing Capital Market Outlook
20-year fleet growth rate, % Asia: ~x2 Asia: ~x2
Source: Euromonitor Source: Ascend Flightglobal Fleet Forecast 2015, Oxford Economics, Boeing Current Market Interactive Forecast 2017-2036 Note: 1.Defined as number of households with yearly income between US$25,000 and US$150,000 Air traffic is estimated to grow by 2.5x by 2036 1990-2016 2017-2036 Air Traffic +5.3% +4.7% Global GDP +2.9% +2.8%
Above-trend passenger demand growth Growth in the middle classes1 to be driven by emerging economies Air traffic estimated to grow by 150% in the next two decades… Fleet expected to double in the next 20 years
Middle class households (million) 5.3% 5.2% 5.9% 6.5% 6.3% 7.9% 2012 2013 2014 2015 2016 Aug-2017 RPK growth (YTD) 20-year RPK trend growth 75 83 91 96 127 150 168 189 16 26 40 56 60 99 199 338 2000 2010 2020E 2030E North America Europe LATAM Asia Asia: ~x2 Asia: ~x2 Middle class households (million) 3.7% 3.5% 2017 Airbus Boeing
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7.4% 10.2% 8.7% 7.5% 7.0% 4.5%
Africa Asia Pacific Europe Latin America Middle East North America
Passenger Load Factor YoY change, %
Source: IATA (Airline Industry Economic Performance – June 2017) Source: IATA (August 2017)
Aggregate net profit US$ billion
Source: IATA (August 2017)
RPK growth, YTD Passenger Load Factor %
Elevated airline profitability sustained Emerging markets continue to record high air traffic growth High load factors suggest well-managed capacity
Aggregate net profit US$ billion RPK growth, YTD 50 60 70 80 90 (5) 5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Passenger Load Factor YoY % Change (LHS) Passenger Load Factor (RHS) Passenger Load Factor 12M Mov. Avg (RHS)
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20 40 60 80 100 120 140 7/2011 1/2012 7/2012 1/2013 7/2013 1/2014 7/2014 1/2015 7/2015 1/2016 7/2016 1/2017 7/2017 US$/BBL
US$67.27
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Country Latest GDP Growth Rate1 Domestic Airline Traffic Growth2 (RPKs based on YoY % change) Size of Domestic Market as % of Total Brazil 0.7% 5.5% 1.2% Russia 1.8% 8.3% 1.3% India 6.7% 16.0% 1.3% China 6.8% 10.0% 8.7% USA 2.2% 6.4% 15.0% Japan 1.5% 9.0% 1.1% WORLD 3.6% 7.6%
1. Source: International Monetary Fund, October 2017 2. Source: IATA Air Passenger Market Analysis (August 2017)
BRICS are now four of the five largest domestic markets
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The largest 128 airlines today operate 75% of aircraft in the market
Source: Ascend, by number of airlines and aircraft, as at 30 September 2017
Our Addressable Market
Largest 10 airlines have a combined aircraft market share of 26% Largest 43 airlines have a combined aircraft market share of 50% Largest 128 airlines have a combined aircraft market share of 75%
% of Aircraft Operated Airlines (#) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100 200 300 400 500 600 700 797
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143 airlines, 18% 43, 5% 64, 8% 56, 7% 84, 11% 407, 51%
797 airlines in service today
Source: Ascend, as at 30 September 2017
Airline Segmentation by Credit Score and Fleet Size Our Target 143 Airlines Operate 74%
Credit above minimum, fleet >20 aircraft Credit above minimum, fleet 10-20 aircraft Credit above minimum, fleet < 10 aircraft Credit below minimum, fleet >20 aircraft Credit below minimum, fleet 10-20 aircraft Credit below minimum, fleet < 10 aircraft
14,948 aircraft, 72% 15213 aircraft, 73% 15,914 aircraft, 74% 643, 3% 302, 1% 2,289, 11% 1,142, 5% 1,347, 6% c.90% of BOC Aviation’s portfolio
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Source: FlightGlobal & various public sources for 100+ seats commercial aircraft, as at 30 September 2017
Number of airlines
Number of Airlines that Left the Market, By Year 298 airlines left the market across 2000 to 2017, but less than 10% had more than 20 aircraft in their fleet
5 10 15 20 25 30 35 40 45 50 Airlines with fleet >20 aircraft Airlines with fleet <20 aircraft
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Airlines (Fleet >20 Aircraft) That Left the Market, By Year No more than 4 large airlines (fleet >20 aircraft) per year left the market
Number of airlines with fleet >20 aircraft 1 2 3 4 5 Airlines with fleet >20 aircraft
Source: FlightGlobal & various public sources for 100+ seats commercial aircraft, as at 30 September 2017
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50 100 150 200 250 300 350 400 10 20 30 40 50 60 2000 2002 2004 2006 2008 2010 2012 2014 2016
Total airline bankruptcies and the total number of aircraft repossessed per annum
repossessed
9/11 effect – impacted US carriers most; few airlines but many aircraft Weaker airlines hit by high fuel price followed by financial crisis; many airlines and many aircraft
Source: Ascend, Innovata, BOC Aviation Risk Management, based on 100+ seat operators, as at 30 September 2017
European consolidation
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Liquidity is still very strong
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1 2 3 4 5 6 7 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6-Month LIBOR US 10-Year Swap Rates (%)
6-month LIBOR (Oct 2017): 1.56% US 10-Yr Swap Rates (Oct 2017): 2.43%
Bloomberg, as at 27 October 2017
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More widebody CAPEX
US$70B in Aircraft CAPEX in 2017
Narrowbody Aircraft 45% Widebody Aircraft 55%
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B787-8 Superjet B747-8 B787-9 A350-900 ARJ21 A320NEO (PW) A320NEO (CFM) CS100 CS300 A321NEO (CFM) A321NEO (PW) B737 MAX 8 Irkut MC-21 A350-1000 B737 MAX 9 B787-10 E190-E2 A330-900 E195-E2 B737 MAX 7 A330-800 A319NEO B777-9 B737 MAX 10 MRJ E170-E2 B777-8 C919 B737 MAX 8 (200 seat) 50 100 150 200 250 300 350 400 450 2010 2011 2012 2013 2014 2016 2017 2018 2019 2020 2021 2022
As at October 2017
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
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equity
actual balance sheet growth
narrowbody SLBs relative to demand from leasing companies
Source: Ascend, 30 September 2017
Number of aircraft Number of aircraft 41,030 46,950
Source: Boeing CMO 2017-2036
Demand driven by market growth and replacement of old aircraft New aircraft demand led by Asia Pacific Predominantly single aisle aircraft Share of operating lessors now stable
Source: Boeing CMO 2017-2036 Source: Boeing CMO 2017-2036
41,030 46,950 Number of aircraft
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 126 132 138 144 150 156 162 168 174 180 186 192 198 204 210 216 222 228 234 240 246 252 258 264 270 276 282 288 294 300 2015 2017 YTD
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Whilst M&A has occurred in top 10, largest two lessors didn’t grow
Aircraft owned / managed (%)
Source: Ascend, as at 30 September 2017. Fleet data includes in-service owned and managed aircraft, based on aircraft of 100+ seats
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Lessor (#) 350
27 Source: Bloomberg, as at 5 October 2017 Note: 1. Dubai Aerospace completed its acquisition of the AWAS portfolio in August 2017
Credit ratings now prevalent amongst aircraft operating leasing companies
Lessor Fitch S&P Moody’s BOC Aviation A- A- NR SMBC Aviation Capital A- BBB+ NR Aviation Capital Group BBB A- NR Air Lease Corporation BBB BBB NR Aercap BBB- BBB- Baa3 Avolon BB BB+ Ba2 Aircastle NR BB+ Ba1 Dubai Aerospace1 NR BB Ba2 FLY Leasing NR BB- B1
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Close to US$30B worth of bonds issued by lessors in 2017 so far
Source: Bloomberg, as at 26 October 2017
1 2 3 4 5 6 7 8 9 Avolon DAE Aviation Capital Group BOC Aviation ICBC IL Finance CDB Leasing AerCap Air Lease Corp SMBC Aviation Capital Aircastle CALC Fly Leasing US$B
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Europe and US
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take effect?
delivery financing
non investment grade
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1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 10 11 12
Time GDP CREDIT
Hedge Finance Speculative Finance Ponzi Finance Minsky Moment
Stylized “Minsky Cycle”
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decade when new aircraft supply high
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competitive from 2019
crucial
portfolios as alternative growth?
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rates
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www.bocaviation.com
BOC Aviation Limited 8 Shenton Way #18-01 Singapore 068811 Phone +65 6323 5559 Facsimile +65 6323 6962
Incorporated in the Republic of Singapore with limited liability Company Registration No. 199307789K