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bombardier business aircraft market forecast - Bombardier Events ...

BOMBARDIERBUSINESSAIRCRAFTMARKETFORECAST2012-2031BARRY MACKINNONDIRECTOR OF MARKETINTELLIGENCE & ANALYSIS2012 PRODUCT UPDATE &VALUATION SEMINAROCTOBER 4, 2012


FORWARD LOOKING STATEMENTSFORWARD-LOOKING STATEMENTSThis presentation includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, guidance, targets, goals,priorities, markets and strategies, financial position, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook,prospects and trends of an industry; expected growth in demand for products and services; product development, including projected design, characteristics, capacity orperformance; expected or scheduled entry into service of products and services, orders, deliveries, testing, lead times, certifications and project execution in general; ourcompetitive position; and the expected impact of the legislative and regulatory environment and legal proceedings on our business and operations. Forward-lookingstatements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “anticipate”, “plan”, “foresee”, “believe” , “continue”or ”maintain”, the negative of these terms, variations of them or similar terminology. By their nature, forward-looking statements require us to make assumptions and aresubject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. While weconsider our assumptions to be reasonable and appropriate based on information currently available, there is a risk that they may not be accurate. For additional informationwith respect to the assumptions underlying the forward-looking statements made in this presentation, refer to the respective Guidance and forward-looking statementssections in Overview, Bombardier Aerospace and Bombardier Transportation sections in the Management’s Discussion and Analysis (“MD&A”) in the Corporation’s annualreport for the fiscal year ended December 31, 2011.Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include risks associated with general economicconditions, risks associated with our business environment (such as risks associated with the financial condition of the airline industry and major rail operators), operationalrisks (such as risks related to developing new products and services; doing business with partners; product performance warranty and casualty claim losses; regulatory andlegal proceedings; to the environment; dependence on certain customers and suppliers; human resources; fixed-price commitments and production and project execution),financing risks (such as risks related to liquidity and access to capital markets, exposure to credit risk, certain restrictive debt covenants, financing support provided for thebenefit of certain customers and reliance on government support) and market risks (such as risks related to foreign currency fluctuations, changing interest rates, decreasesin residual value and increases in commodity prices). For more details, see the Risks and uncertainties section in Other. Readers are cautioned that the foregoing list offactors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. The forwardlookingstatements set forth herein reflect our expectations as at the date of the Corporation’s MD&A and are subject to change after such date. Unless otherwise requiredby applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement.CAUTION REGARDING NON-GAAP EARNINGS MEASURESThis presentation is based on reported earnings in accordance with International Financial Reporting Standards ((IFRS) generally accepted accounting principles (GAAP)).It is also based on EBITDA and Free Cash Flow. These non-GAAP measures are directly derived from the Consolidated Financial Statements, but do not have astandardized meaning prescribed by IFRS; therefore, others using these terms may calculate them differently. Management believes that a significant number of the usersof its MD&A analyze the Corporation’s results based on these performance measures and that this presentation is consistent with industry practice.ALL AMOUNTS ARE EXPRESSED IN U.S. DOLLARS UNLESS OTHERWISE INDICATED.22


3CURRENTBUSINESS JETMARKETOVERVIEW


BUSINESS JET MARKET SEGMENTATIONVERY LIGHTLightSuperLightLIGHT MEDIUM LARGE LargeCorporateAirlinersEntry Midsize Midsize Super Midsize Large Super LargeEntry LongRangeUltra LongRangeExtra LongRangeL40XR L45XR L60XR L85 CL-300 CL-605 G5000 G6000 Global 7000BombardierL70 L75 CL-850 Global 8000CessnaDassaultMustang CJ2+ CJ4 XLS+ Latitude Sovereign Citation X LongitudeM2 CJ3 Citation TenF2000S F2000LX F900LX F7XEmbraerPhenom 100 Phenom 300 Legacy 450 Legacy 500 Legacy 600 Lineage 1000Legacy 650GulfstreamG150 G280 G450 G500 G550 G650HawkerBeechcraftOthersPremier 1A H900XP H4000Hondajet ACJ 318/319Eclipse 550 SJ30-2 BBJ 1/2/3In Prod33In Dev16SOURCE: BOMBARDIER BUSINESS AIRCRAFT4


BUSINESS AIRCRAFT JET INDUSTRY ORDERSCONTINUE TO RECOVER, GRADUALLYTOTAL INDUSTRY NET ORDERSUnits, 2002-20111,7851,4121,112803444525423741802002 2003 2004 2005 2006 2007 2008 2009 2010 2011SOURCE: ESTIMATES BASED ON COMPETITORS FINANCIAL REPORTS, QUARTERLY EARNINGS, COMPETITIVE INTELLIGENCE5-865


WEAK PERFORMANCE IN U.S. AND EUROPEANECONOMIES SO FAR IN 2012, OUTLOOK FOR 2.6%WORLD GDP GROWTH IN 2013Real GDP Growth (Q/Q-1), 2010-2012U.S.Eurozone3.8%1.0%2.5% 2.3%0.4% 0.3%0.4%0.8%1.3%1.8%0.1% 0.1%3.0%2.0%0.0%1.7%-0.3%-0.2%Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12• We (Citigroup) continue to look for global growth at about 2.5% this year and 2.6% for 2013• There were notable downgrades to the forecasts for China and Japan due to global liquidity easing potentiallycomplicating China’s efforts to contain goods and asset price inflation and continued decline in exports in Japan.• There are more modest forecast downgrades to a range of emerging markets, especially in Asia and Centraland Eastern Europe due to economic growth in major countries likely to remain substandard in 2013.• The Fed's impatience with subpar job growth has prompted a new easing campaign that appears likely to persistwell into next year.• Barring a fiscal policy calamity, recovery's micro-foundations suggest a gradual improvement in the growthoutlook.• With its OMT (Outright Monetary Transactions) Program, the European Central Bank (ECB) reduced the risk ofa near-term break-up of the euro area.• It is now up to Euro Area governments to set up support packages in order to benefit from ECB support.• We expect the ECB to cut the refinance rate further to 0.25% in early 2013 and set a negative deposit rate.SOURCE: BLUE CHIP ECONOMIC INDICATORS, JULY 2012 , CITIGROUP GLOBAL OUTLOOK AND STRATEGY – SEPTEMBER 20127


STOCK MARKET PERFORMANCEIMPROVEMENT FROM LAST YEAR AND LAST QUARTER1500S&P 500 Stock Market Index, 2011-201214501400135013001250120011501100Q3-2012 Performancevs. Q3-2011 15.9%vs. Q2-2012 4.4%10501000Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12SOURCE: STANDARDANDPOORS.COM8


U.S. CORPORATE PROFITSCORPORATE PROFITS ARE AT RECORD LEVELS WHICH SHOULDTRANSLATE INTO INCREASED BUSINESS AIRCRAFT DEMANDU.S. Corporate Profits, 2010-2012+6.7%1,7021,8271,7231,8011,9001,922*1,5111,2481,342Q2-2012 Performancevs. Q2-2011 6.7%vs. Q1-2012 1.2%20072008200920102011Q1 11Q2 11Q1 12Q2 12SOURCE: BEA FINAL ESTIMATE Q2 20129


INDUSTRY PRE-OWNED INVENTORYPRE-OWNED INVENTORY IS DRIFTING DOWNPercentage (%) of fleet, all aircraftIndustry - All A/CIndustry - In-Prod17.8%17.2%16.1% 15.7% 15.2% 15.2% 15.0%14.4%13.8% 13.7% 13.6% 13.6% 13.4%13.3%12.2%10.9% 10.9% 10.5% 10.6% 10.4% 9.8%9.0% 8.8% 9.1% 9.1% 8.7%Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12SOURCE: JETNET, EXCLUDES VERY LIGHT JETS AND LARGE CORPORATE AIRLINERS10


RESIDUAL VALUES IN THE LARGE CATEGORY HAVERECOVERED, USED INVENTORY LEVELS IN MEDIUMAND LARGE ARE HEALTHYResidual Values, 5-Yr% of original B&CA list prices, Q2-09 to Q3-12100%Pre-owned Aircraft Inventory by CategoryQ1-09 to Q2-12Light90%84%14.5%80%NormalLarge*NormalMedium12.8%70%60%Medium*60%Large8.1%Light*52%50%Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212Q312Q109Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212* Expressed as an un-weighted average of the aircraft residual values within each categorySOURCE: AIRCRAFT BLUEBOOK11


UTILIZATION RATES STABLE COMPARED TO SAMEPERIOD LAST YEARUS Business Jet UtilizationAll business jets, Thousands departures and landingsEuropean Business Jet UtilizationAll business jets, Thousands departures and landingsTypicalRange 1,0411,0341,0011,018 1,019 1,006 1,013 1,010 1,0159459609278741131241039712013310810012813710599123TypicalRangeQ209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212Q209Q309Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212SOURCE: FAA, EUROCONTROL12


13BUSINESS JETMARKETFORECAST2012-2031


MARKET DRIVERS ARE SHOWING POSITIVE TRENDSBusiness Aircraft Key Market Drivers14


20-YEAR GDP GROWTH PROJECTIONSSOURCE: IHS GLOBAL INSIGHT, FEBRUARY 201215


BUSINESS AVIATION HAS A SIGNIFICANT GROWTH RUNWAYPenetration index represents the number of business aircraft per $100 US GDPPenetration index(Fleet per $100B US)7067LeadingMarket60504720112002403230266020211005253931271320230ChinaAsia &OceaniaIndiaEuropeMiddle-EastAfricaRussia& CISLatinAmericaNorthAmerica16NOTE: PENETRATION INDEX DEFINED AS BUSINESS JET FLEET PER $100BN OF GDP. FLEET EXCLUDES VERY LIGHT JETSAND LARGE CORPORATE AIRLINERS.. SOURCES: ASCEND; IHS GLOBAL INSIGHT, CONSTANT 2005 US$16


BUSINESS JETS WILL PENETRATE NEW MARKETSWORLDWIDE1960-2031 Fleet per Capita vs. GDP per Capita10000Fleet per 100 Million Population (Log Scale)1000100101st driving1 drivingforce: GDPforce: GDPgrowthgrowthLATIN LATIN AMERICAMIDDLE-EAST &AFRICA MIDDLE-EAST& AFRICAASIAASIANORTH AMERICANORTH AMERICAEUROPE &EUROPE &RUSSIARUSSIAAverageAverage growth pathgrowth path2nd2 drivingdrivingforce:force:removal ofremoval ofbarriersbarriers171100 1,000 10,000 100,000GDP per Capita (USD, Log Scale)SOURCE: ASCEND, UNITED NATIONS, IHS GLOBAL INSIGHT


24,000 BUSINESS JET DELIVERIES WORTH $648BOVER NEXT 20 YEARSTotal 20Yrs$648BTotal 20Yrs24,000 units 20-Year Revenue Forecast by Size Category, $ Billion5,500(23%)4035Large$292B(45%)307,800(32%)2520Medium$239B(37%)1510,700(45%)10Light$117B(18%)5012 13 14 15 16 17 18 19 202122232425262728293031SOURCE: BOMBARDIER, REVENUES EXPRESSED IN CONSTANT 2011 U.S. BILLIONS $.18


NORTH AMERICA, EUROPE, CHINA WILL BE THELARGEST MARKETS FOR BUSINESS JET DELIVERIESRegional 10-Year and 20-Year Delivery Outlook, UnitsTotal WorldSOURCE: BOMBARDIER MARKET FORECAST 2012-2031.192012-2021 9,8002022-2031 14,200


WORLD FLEET FORECAST TO GROW TO 31,500 BY 20312011-2031 Business Aircraft Fleet, Deliveries, Retirements4,60014,2009,8003,10031,50015,20021,900Fleet 2011DeliveriesRetirementsFleet 2021DeliveriesRetirementsFleet 2031SOURCE: BOMBARDIER MARKET FORECAST 2012-2031. EXCLUDES VERY LIGHT JETS AND LARGE CORPORATE AIRLINERS.20


RAPID EXPANSION IN HIGH GROWTH ECONOMIESDistribution of Fleet by Region, Actual and Forecast2011 FLEET % TOTAL 2031 FLEET% TOTALNorth America 9,725 64%North America13,750CAGR: 2%44%Europe1,89012%Europe5,125CAGR: 5%16%Latin America1,65011%Latin America3,135CAGR: 3%10%Middle-East4353%China2,605CAGR: 13%8%Russia & CIS4003%Russia & CIS1,800CAGR: 8%6%Asia Pacific3752%Middle-East1,470CAGR: 6%5%Africa3402%India1,420CAGR: 13%5%China2251%Asia Pacific1,170CAGR: 6%4%India1151%Africa970CAGR: 5%3%Total Fleet Size 15,200 Total Fleet Size 31,500SOURCE: BOMBARDIER MARKET FORECAST 2012-2031. EXCLUDES VERY LIGHT JETS AND LARGE CORPORATE AIRLINERS.21


CONCLUSION• This is still a growth market• Key market drivers are improving• U.S. market is recovering, driven by replacement• Substantial opportunity to penetrate emerging markets with new business jets• We forecast 24,000 deliveries worth $648 Billion over 20-years• World fleet to more than double (to 31,500 aircraft) in 20-years22


BOMBARDIERBUSINESSAIRCRAFTMARKETFORECAST2012-2031THANK YOU!QUESTIONS?2012 PRODUCT UPDATE &VALUATION SEMINAROCTOBER 4, 2012

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