Paris Air Show 2019 - Impressions And Opinions Or Aerospace and - - PowerPoint PPT Presentation

Aerospace & Defense Forum San Fernando Valley Chapter July 16.2019 1

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Paris Air Show 2019 - Impressions And Opinions Or Aerospace and Defense In An Age Of Uncertainty

16 July 2019

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PARIS 2019 – UNCERTAINTY IN THE MARKET

The 2019 Paris Air Show was really all about uncertainty - we saw

eight key topics driving the discussion

• The continued grounding of 737 MAX - when it will return to service
• What will happen with new aircraft orders – what is health of commercial

aircraft cycle, is slowdown this year a sign of the future, what are impact of trade issues

• The changes in regional aircraft market – Bombardier and Embraer exit, so

what happens now with MRJ and COMAC

• New aircraft model introductions – will we see NMA or will Boeing opt for

NSA, will we see the new A321 XLR, or maybe others

• Consolidation continues – Raytheon/UTC merger, Boeing acquires EnCore,

Rolls Royce acquires Siemens eAircraft business, Mitsubishi acquires CRJ

• There is a growing demand for fighter aircraft – aging fleets, higher levels
• f defense spending
• Electric, hybrid and eVTOL aircraft – how close to reality are these
• Urban mobility – when will we see this, who are the key players

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PARIS 2019 – BY THE NUMBERS*

Exhibitors

• Over 2,453 exhibitors from 49 countries (2017 – 2,381/48)
• Includes 150 Start-ups from 21 countries

Visitors

• 139,840 trade visitors from 185 countries (2017 – 142,000)

Delegations

• 276 Official Delegations from 98 countries and 7

International Organizations (2017 – 290/98)

• 171 Official Defence Delegations from 88 countries and 7
• rganizations - including 16 foreign ministers, 48 chiefs of staff and 18

vice ministers or secretaries of State

• 124 civilian delegations - including 9 ministers

Total Orders

• $140B worth of contracts signed (2017 - $150B)

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* Data from SIAE.FR 3

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BOEING – 737MAX AND MORE

• Boeing came to the show with a more humble approach
• Focus on 737 MAX safely returning to service, need to rebuild trust
• 737 MAX
• 390 MAX aircraft at 92 airports - 120+ more aircraft built but not delivered
• 300 flights with new MCAS software and new training material for crews
• Maintenance/engineering support, spares and EIS/training teams
• Reimbursements to airlines could reach $1.4B (Oct) (plus costs for fix)
• Other issues from grounding - airlines refusing to pay lessors (41% of fleet is

leased), the longer the grounding - more maintenance comes due

• IAG LOI for 200 MAX aircraft (BA, Vueling) - Airbus challenging the LOI
• Pressure on Boeing for all-new narrowbody (6,504+ A320neo’s/ 5,008 MAX’s)?
• NMA - no announcement at the show regarding the NMA
• Boeing NMA design focus - 20% more seats or 20% more range that 757 family
• Launch variant may be the 275 seat NMA 7-X configuration
• 777X - first 777-9 flight delayed until Oct/Nov (GE9X), 344 B777X ordered
• Boeing continuing acquisitions (vertical integration) - focus on avionics next

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PARIS 2019 – MARKET FORECASTS

Boeing 2019 Commercial Market Outlook

• 44,040 new aircraft valued at over $6.8T over the next twenty years
• 32,420 will be single-aisle (73.6%) – up from a forecast of 31,360 last year
• Asia Pacific accounts for 17,390 of the 44,040 new aircraft
• Deliveries of 2,240 regional jets during this time
• Global fleet of 50,660 aircraft by 2038 (25,830 today)

Forecast International predictions for large jet transports

• 30,171 aircraft (worth $4.91T) will be produced over the next 15 years
• Annual production rates increase from 1,691 in 2019 to 2,127 in 2029 (but

with a dip starting in 2030).

• Airbus market share at 47.7% and Boeing’s share at 48.1%

IBA freighter conversion market

• Strong 2018 with 87 P2F conversions (up from 75 in 2017 and 70 in 2016).
• Most were older Boeing aircraft (25 B737-400, 23 B757-200, 27 B767-300)
• Rest were A330-200/300 conversions.
• Global P2F fleet will grow from 611 aircraft today to 879 by 2024

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PARIS 2019 – MARKET HEALTH

• Aviation sustainability was a major topic
• Joint statement by CTO’s of Airbus, Boeing, Dassault, GE, R-R, Safran and UTC
• Laid out each company’s goals towards sustainability in aviation
• Reduced engine noise, alternative fuels, lower weight / more efficient engines,

electrification of aviation, lighter weight materials and improved aerodynamics

• Speculation about when current order bubble will burst - what will cause it to burst
• Geopolitical uncertainty, trade war lead to worldwide recession?
• The MAX grounding led to capacity reduction – when MAX flies again capacity will

grow rapidly – will this create overcapacity?

• Potential aircraft imports tariffs in US and retaliatory measures in Europe?
• Recent European rules for defense development restrict involvement by non-EU

countries – what consequences if U.S. companies aren’t allowed to participate

• The continuing saga of Brexit is a critical issue for the aerospace market
• Airbus - “No Deal Brexit” will lead to the collapse of the UK aerospace industry,
• Lack of customs procedures, logistics, standards - major business and cost impact.
• Even EASA approvals will be impacted and UK companies will have to transfer

their DOA, POA and MOA into the EU to continue

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PARIS 2019 – THE ORDERS

Orders, Options, Purchase Rights and Conversions

• Airbus – launch of the A321XLR (Middle of Market)
• A220 (50) A320 (65+35, 253C), A321XLR (132, 74C), A330

(30), A350 (0)

• Boeing
• 737-800BCF (35+25), MAX (200), 787 (25), 777 (1), 777F

(11)

• ATR – 42/72 (58 +35 +35), 42 STOL (17)
• Embraer – 175E1 (22+19), 195E2 (17+20)
• Mitsubishi – SpaceJet100 (15)
• De Havilland Canada – Q400 (6)

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PARIS 2019 – THE ORDERS

• Engines Big Winners – Airlines opting for more LTA’s to maintain engines.

For Safran (part of CFMI) - shift from 12% on LTA’s today to 30%+ by 2025

• P&W
• GTF Sales – over 297 engines (with backlog of 10,000+ engines)

– JetSMART – 85 A320neo’s – Chinese airlines/lessor – 74 A320neo’s – VivaAerobus – 41 A320neo’s – SMBC Aviation – 20 A320neo’s – Middle East Airlines – 4 A321XLR – Undisclosed airline – 28 A320neo’s – Undisclosed lessor – 35 A320neo’s (plus 5 options) – Delta Airlines – 5 new A220-100

• CFMI
• Indigo – LEAP 1A for 280 aircraft ($20B incl. maintenance plans)
• AirAsia – LEAP 1A for 100 aircraft + expand RPFH agreement to engine fleet ($23B)
• Avolon – LEAP 1A for 70 aircraft ($2.06B)
• Peach Aviation – LEAP 1A for 10 aircraft ($294M)
• Colorful Guizhou Air – 12 year LEAP 1A maintenance ($500M)
• Zhejiang Loong Air – 12 year LEAP 1A Maint./40 engines ($800M)
• CDB Aviation – LEAP 1A for 45 aircraft ($1.3B)
• ALAFCO – LEAP 1A for 30 aircraft (and for 20 option aircraft)

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CONSOLIDATION CONTINUES

Four major deals announced around show

• Raytheon / UTC merger - $74B aerospace and defense provider
• Boeing acquisition of EnCore - extend into aircraft interiors
• Rolls Royce / Siemens eAircraft - extend capabilities for hybrid/electric
• Mitsubishi Aircraft acquisition of CRJ – network, facilities, customers

Michael Richter, managing director for Lazard

• $120B deals in 2018 - YTD2019 almost 130 deals – very robust environment
• OEM’s – don’t like pricing issues from suppliers gaining strength and

breadth, but want stronger supply chain to deliver at increasing rates

• Suppliers – expand reach, competitiveness against larger suppliers/OEM’s,

resources in face of workforce shortages and gain capital for investments

• Pools of capital competing to get an asset, driving volume and pushing

prices beyond expectation.

• Literally still hundreds, if not thousands of companies extremely

interesting from an M&A perspective.

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PARIS 2019 – THE TALK

Boeing CEO Dennis Muilenburg

• We are looking at our design and certification processes end to end.
• We are looking at a future where development programs are digitally connected
• Returning MAX to service safely is our number one priority but we continue to work
• n NMA in parallel - doing risk-reduction work to protect the 2025 EIS
• The majority of demand we see over next 20 years is in narrowbody space – MAX

will be an important part of that for decades

Airbus CEO Guillaume Faury

• Happy with platforms we have - developing building blocks for the next big platform
• Airbus is targeting to achieve up to 30% reduction in development cost and lead

time through improved efficiencies from digital design and manufacturing services

• What we are doing in urban air mobility is flying electric systems – these are

technologies that one day will be on planes.

• Airbus believes strongly in sustainable fuels – they are the way to go to start

reducing emissions before the next generations of propulsion systems are ready

• Very concerned about US tariffs on European aircraft as result of WTO dispute and

potential European retaliation – the systemic impact will be lose, lose, lose

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PARIS 2019 – THE FIGHTER MARKET

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• Forecast International - Production of 3,401 fighters (worth $264.2B) from 2019 - 2028
• Annual production rates peak at 371 (2021/22) - fall to313 aircraft/year by 2027
• The most produced fighter will be the F-35 (1,548 aircraft or 46% of market).
• AvWeek - Delivery of 3,164 new-build fighter aircraft over the next decade
• Includes 1,771 new F-35’s - 1,835 aircraft retired (584 F-16’s and 574 F/A-18’s)
• Drivers – aging fleets, increased defense budgets, changing threats
• New 6th generation aircraft beyond 2029 – European FCAS, UK Tempest, USAF

NGAD/PCA, Japanese Future Fighter

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PARIS 2019 – SUPERSONIC

• FAA exploring regulations for supersonic aircraft / operations (ICAO also)
• Two rulemaking activities – noise certification (including takeoff/ landing),

streamline process for approval for flight testing and certification

• Boom supersonic demonstrator (XB-1), supersonic airliner (Overture)
• XB-1 slipped to early 2020, Overture (55 pax airliner, Mach 2.2) still on

track for EIS in 2025 to 2027

• JAL committed to purchase 20 aircraft ($200M) - $10M investment
• Aerion supersonic business jet program - 12 pax, Mach 1.6, range of 4,750 nm.
• Apply to begin type certification this year, prototype flight by June 2023
• Boeing invested in the Aerion program early in 2019.
• Lockheed Martin Quiet Supersonic Transport (Quiet SST)
• Unveiled 40 pax design traveling at Mach 1.8 – transpacific routes
• Technology from NASA X-59 Low Boom demonstrator

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PARIS 2019 – ELECTRIC, eVTOL, UAM

• eVTOL market forecast to grow from a $1B in 2025 to a $13.8B by 2040
• Aviation industry names (Airbus, Boeing, Bell and Embraer) being joined by

Amazon, Honda, Toyota and Uber, as well as a number of startups

• Key technologies - electric motors, generators, batteries, power management

systems

• Israeli start-up Eviation Alice - 9 pax aircraft, 540 nm range at 240 knots cruise
• Certification is planned for the end of 2022, Cape Air is launch customer
• magniX - magni250 (375 hp), magni500 (750 hp) and magniDrive inverter
• Eviation’s Alice uses the magni250
• Harbor Air - retrofit magni500 propulsion system on their DHC Beaver’s
• Boeing NEXT two passenger eVTOL developed by Aurora Flight Sciences - flew

the first time in January 2019 from WDC airport

• French startup VoltAero – Cassio hybrid-electric aircraft, 200 knot cruise

speed and aircraft design is adaptable to four, six or nine passengers.

• Certify Cassio under EASA CS23, deliver first aircraft by end of 2022

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PARIS 2019 – ELECTRIC, eVTOL

• Airbus – one electric aircraft, three Urban Air Mobility (UAM) concepts
• Vahana single passenger VTOL, four passenger CityAirbus eVTOL concept
• Airbus collaborate with Audi and Italdesign on the Pop.Up NEXT
• EmbraerX developing five seat electric vertical take-off and landing (eVTOL)

aircraft

• In partnership with Uber, EmbraerX will market its concept for aerial ride-sharing

flights via an Uber app

• Uber rolled out Uber Elevate air mobility plan with the launch of Uber Copter

service in New York and Uber Eats drone deliveries in San Diego

• Uber is developing urban mobility Air System featuring SkyNodes on top of

buildings connected by SkyLanes to provide

• 5 partners - Bell, Aurora Flight Systems, Karem Aircraft, Pipistrel, Jaunt Air
• Uber with Safran Cabin designed common reference air-taxi cabin
• Demo flights of Uber Air in 2020, commercial service by 2023
• Three pilot cities – Dallas/Fort Worth, Los Angeles, Melbourne Australia

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PARIS 2019 – TECHNOLOGY

• AAR / BASF Deoxo aircraft cabin ozone and VOC converter cabin air purifying

system - very strong demand for products to improve cabin air quality

• Eaton Blended Power™ concept - a combination of hydraulic and electric

power in a distributed architecture using of hydraulic power packs (HPPs) to convert electric power into hydraulic power where it is needed

• Marshall’s Aerospace - manufacturing fourteen part numbers for the C-130

using fusion deposition modeling and Ultem 9085

• Biggest benefit is time – 24 hours or few days vs. weeks or months
• Airbus composite wings demo program for next generation single aisle -

carbon fiber with advanced metallics or thermoplastic components

• Produce wing at same cost as current A321metal wing, at rate of at least

60/month

• Airbus researching the use of algae and synthetic spider silk to produce

extremely strong, lightweight and flexible fibers to use as structural materials possibly replacing carbon fibers.

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PARIS 2019 – OBSERVATIONS

QUESTIONS??? DISCUSSION???

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