Air Transport Traffic, Fleet & MRO Update

22 November 2021

Richard Brown
Naveo Managing Director

richard@naveo.com
+44 7718 893 833

© Naveo Limited 2021

 Contents
Capacity, Air Transport
Production & Aftermarket
Fleet Update Trends

2
Capacity Forecast

Overall air travel capacity (ASKs) for 2021 is forecasted to be down ~45% on 2019
Naveo 2021 ASK Forecast Scenarios
1,000

900
Available Seat Kilometres (billions)

800

700
59% 58% 62%
600 62%

52%
500 49%
46% 48%
45%
400
41%
300

200

100

2019 Actual Optimistic Nominal Pessimistic

Compared to 2019, ASKs have hovered at around 58-60% since July

However, with the opening up of travel (including international travel to the USA), the nominal forecast calls for a slight improvement to the end of the
year. That said, we are watching closely developments in mainland Europe where another wave of COVID is causing further lockdowns

Source: IATA, Aviation Week, Naveo Analysis

Note: Percentages indicate proportion of 2019 capacity 3
Capacity Forecast

Naveo forecasts air travel capacity to exceed 2019 levels by 2023

Global Aviation Capacity Forecast, 2015-2024
Aviation capacity will take at least two years to
return to pre-pandemic levels 14,000

While the global economy will have recovered to

2019 levels by the end of 2021, Naveo does not 12,000
expect aviation capacity to reach an equivalent
milestone until late-2022

Available Seat Kilometres (billions)

10,000
The forecast assumes that the acute effects of
the pandemic (such as travel restrictions,
mandatory quarantines) will have almost entirely 8,000
been removed by Q1 2024

The spread between the optimistic and 6,000

pessimistic scenarios primarily reflects the extent
of structural changes to the aviation industry
caused by the pandemic 4,000

Variables that influence the long-term scenario

spreads include: 2,000
Will historical macroeconomic ratios between GDP
and aviation growth remain constant?
Will mass tourism business models return to the 0
paradigm seen between 2015-2020?
Will business travel resume at pre-pandemic levels?
Actual Optimistic Nominal Pessimistic

Source: IATA, Aviation Week, Naveo Analysis

Note: Percentages indicate proportion of 2019 capacity 4
Fleet Utilization

Global aircraft utilisation in 2020 was just 53% of levels seen in 2019;
October 2021 flying hours were ~73% of October 2019
Air Transport Global Fleet Flight Hours, 2019, 2020 and Jan-October 2021
(Millions Hrs)
The COVID-19 pandemic saw aircraft 8
utilization fall by almost half in 2020 2019
6
Flight hours operated by the global fleet in 2021 Jan-Oct
4 2020
2020 fell to just 41.4 million, compared to
78.6 million in 2019 2

Aircraft utilization for January-October 2021 0

was 62% of the equivalent levels for 2019. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
However, that’s an improvement on the first
2019 2020 2021 Jan-Oct
ten months of 2020 when utilization was only
52% of 2021
Air Transport Fleet Flight Hours by Operator Region, 2019/2020/Jan-October 2021
North America has led the way, with 2021 (Millions Hrs) & 2020 as % of 2019
hours (Jan-October) being 62% of 20219. 25 22
They are followed by China which is ~59% of 19
20
2019 hours. This is primarily due to the size
14
of their home domestic flying markets 15 59% 11
10 44% 6
48% 65%
4
5 50% 2
50% 46%
0
North America Europe Asia Pacific China Middle East Latin America Africa
2019 2020 2021 Jan-Oct
Source: Aviation Week, Naveo Analysis
Note: Dataset range from 01/01/2019 to 31/10/2021 5
Fleet Utilization

The pace of recovery has accelerated in the past few months in all regions apart
from Asia Pacific and for August, China
Traffic remains below pre-pandemic levels for all
Air Transport Fleet Monthly Flying Hours By Operator Region Jan
regions. However, the pace of utilization recovery by
2020-Oct 2021. Indexed to January 2020 (=100%)
region has been different

100 Compared to January 2020 (before the impact of

COVID-19 reached most regions), the pace of
Europe
90 recovery has picked up in 2021 as vaccine rollout
North America
progressed
80 Middle East
Africa China’s recovery has been chiefly ahead of other
70 China regions, but its traffic dipped due to the desire to
Latin America control the Delta variant and local outbreaks in
60
August. But, in September, there was a sharp
rebound though it is still below September 2020
50
Asia Pacific Europe’s recovery since February has been
40
impressive leading to utilization reaching ~91% of
30 January 2020 levels in August (just ahead of North
America’s 89% of January 2020 levels)
20
Asia Pacific’s recovery has been frustrating and
10 anaemic. September’s 2021’s flying hours were only
up ~27% compared to September 2020. October
0 2021 was a bit better at 50% of pre-covid levels (the
most significant improvement seen since early 2021

Africa Asia Pacific China Europe Latin America Middle East North America

Source: Aviation Week, Naveo Analysis

Note: Dataset range from 01/01/2019 to 31/10/2021 6
Fleet Utilization

Narrowbody and 70+ seat Regional Jets have led the recovery due to them
typically flying short-haul and domestic routes less impacted by restrictions
Air Transport Monthly Flying Hours by Aircraft Size January 2019-October 2021
(Millions Hours)
4.0 0.5

July 2021
3.5 July 2021 Peak Regional Jet
Peak Narrowbodies 0.4 70+ Seats
3.0

2.5
0.3

2.0

Turboprops
0.2
1.5 Widebodies

1.0
Small Regional Jet
0.1
0.5

0.0 0.0
Aug-20

Aug-21
Feb-20

Jul-20

Feb-21

Jul-21
Dec-20
May-20

Nov-20

May-21
Jan-20

Apr-20

Sep-20
Oct-20

Jan-21

Apr-21

Sep-21
Jun-21

Oct-21
Mar-20

Jun-20

Mar-21

Feb-20

Feb-21
Jul-20

Nov-20
Dec-20

Jul-21
Jan-20

Apr-20
May-20

Oct-20

Jan-21

Apr-21
May-21

Oct-21
Jun-20

Sep-20

Jun-21

Sep-21
Mar-20

Aug-20

Mar-21

Aug-21
Source: Aviation Week, Naveo Analysis
Note: Dataset range from 01/01/2019 to 31/10/2021 7
Fleet Utilization

The 737NG, A320ceo and A320neo families are the key narrowbody
aircraft driving recovery though utilization is still below pre-COVID levels
A320ceo/neo family, 737NG & 737 MAX Monthly Flying Hours
January 2019- October 2021 (Millions Hours)

2.5 The 737NG and A320ceo family are the key narrowbody
aircraft in-service and the aircraft driving recovery

Since the seasonal low point of February 2021, the 737NG and
2.0 A320ceo flying hours peaked in July (the typical high-point in
the year)

However, comparing pre-COVID with 2021 YTD, it can be seen

1.5 that utilization is still lower, with 737NG hours in October 2021
~69% of October 2019 and, A320ceo family ~61%
737NG
A320ceo Family The A320ceo family has seen increased retirements versus
1.0 737NG due to the A320ceo family entering service before the
737NG. For instance, since 2019, 160 737NGs have retired
compared to 379 A320ceo family aircraft
0.5 Deliveries of new A320neo family and 737 MAX have
A320neo Family
continued along with return-to-service of more parked 737
MAX aircraft. Hence fleet utilization is increasing. It is hoped
737 MAX that China will give the MAX regulatory approval in the 1st Qtr.
0.0
of 2022
Feb-19

Apr-19

Feb-20

Apr-20

Feb-21

Apr-21
May-19
Jan-19

Aug-19
Sep-19

May-20

May-21
Jan-20

Aug-20
Sep-20

Jan-21

Aug-21
Sep-21
Jul-19

Jul-20

Jul-21
Dec-19

Dec-20
Mar-19

Oct-19

Mar-20

Mar-21
Oct-20

Oct-21
Jun-19

Nov-19

Jun-20

Nov-20

Jun-21

737 MAX 737NG A320ceo Family A320neo Family

Source: Aviation Week, Naveo Analysis

Note: Dataset range from 01/01/2019 to 31/10/2021 8
Fleet Utilization

By the end of October 2021, CFM and Pratt & Whitney had already exceeded
2020 engine flying hours 2020 Year End Impact vs. 2019
Air Transport Engine Annual Flying Hours: Comparing 2020 & 2021 Jan-Oct to 2019 (100%)
35 million lost 50% utilisation
100 flight hours reduction
50
51

14 million lost 37% utilisation

100 flight hours reduction
63
60

10 million lost 54% utilisation

100 flight hours reduction
46
42

10 million lost 55% utilisation

100 flight hours reduction
45
42

3 million lost 33% utilisation

100 flight hours reduction
66
73

1.8 million lost 79% utilisation

100 flight hours reduction
21
3

0 10 20 30 40 50 60 70 80 90 100

2019 2020 % of 2019 2021 Jan-Oct

Source: Aviation Week, Naveo Analysis
Note: Dataset range from 01/01/2019 to 31/10/2021 9
Fleet Utilization

CFM and GE have led the recovery in engine flying hours –boosted by strong
exposure to cargo, narrowbodies and regional jets…
Monthly Engine Flying Hours by Engine OEM Jan 2019-October 2021
(Millions Hours)
4 7

6
3
GE 5 CFM

4
2
3

Rolls-Royce 2
1
IAE
Pratt & 1
Whitney
0 0

Oct-19
Nov-19

Oct-20
Nov-20

Oct-21
Feb-19
Mar-19

Jul-19

Feb-20
Mar-20

Jul-20

Feb-21
Mar-21

Jul-21
May-19

May-20

May-21
Jan-19

Jan-20

Jan-21
Feb-19

Feb-20

Feb-21

Dec-19

Dec-20
Apr-19

Jun-19
May-19

Sep-19

Apr-20

Jun-20

Sep-20

Apr-21

Jun-21

Sep-21
Aug-19

Aug-20

Aug-21
Apr-19

Apr-20

Apr-21
Jan-19

Aug-19
Sep-19

May-20

May-21
Jan-20

Aug-20
Sep-20

Jan-21

Aug-21
Sep-21
Dec-19

Dec-20
Mar-19

Mar-20

Mar-21
Oct-20
Jun-19
Jul-19

Oct-19
Nov-19

Jun-20
Jul-20

Nov-20

Jun-21
Jul-21

Oct-21
General Electric Pratt & Whitney Rolls-Royce CFM International International Aero Engines

The recovery in engine flight hours depends, of course, on the aircraft type that the engine powers, the demographics of that aircraft, and its role (passenger and cargo)
Comparing October 2021 with October 2019, GE flying hours were down 20%, Rolls-Royce down 41%, CFM down 26%, and IAE down 41%
More positively, Pratt & Whitney’s October 2021 engine hours were just higher than pre-COVID October 2019 by ~0.7%. The GTF is included in P&W hours, and PW4000
has been boosted by solid cargo demand)

Source: Aviation Week, Naveo Analysis

Note: Dataset range from 01/01/2019 to 31/10/2021 10
Fleet Utilization

…But the change in engine flying hours has varied by engine family
Monthly Engine Flying Hours by Engine Family Jan 2019-October 2021 (Hours)
900,000 300,000

800,000
250,000
700,000 Trent XWB

GE90-110/115
600,000 200,000
CF6-80A/C2/E
500,000 GEnx
150,000 Trent 1000
400,000

300,000 100,000

Trent 700 RB211-535

200,000
PW4000-94 GE90-94B
50,000
Trent 800
100,000
Trent 900
PW4000-110/112 GP7200
0 0

Aug-20
Aug-19

Aug-21
Dec-19

Sep-20

Dec-20
Jan-19

May-19

Sep-19

Jan-20

May-20

Jan-21

May-21

Sep-21
Feb-19
Mar-19
Apr-19

Nov-19

Feb-20
Mar-20
Apr-20

Feb-21
Mar-21
Apr-21
Jun-19

Oct-19

Jun-20

Oct-20
Nov-20

Jun-21

Oct-21
Jul-21
Jul-19

Jul-20
Jan-19

May-19

Dec-19

Dec-20

May-21
Feb-19

Sep-19

Jan-20

May-20

Sep-20

Jan-21

Sep-21
Aug-19

Aug-20

Aug-21
Mar-19
Apr-19

Feb-20
Mar-20
Apr-20

Feb-21
Mar-21
Apr-21
Oct-19

Oct-20

Oct-21
Jun-19

Nov-19

Jun-20

Nov-20

Jun-21
Jul-19

Jul-20

Jul-21

CF6-80A/C2/E GE90-110B/115B GEnx GE90-94B GP7000 RB211-535 TRENT 1000

PW4000-100/112 PW4000-94 TRENT 700 TRENT 800 TRENT 900 TRENT XWB

The relative ‘winners’ where recovery has been quicker have been those engines powering the latest-generation aircraft (e.g., A350 and 787s) such as GEnx or Trent XWB
or those powering cargo or high-cargo capacity passenger aircraft (e.g., GE90 powered 777-300ERs or CF6-80 powered 767s). Note how Rolls-Royce Trent XWB hours
are now up to mid-2019 flight hours
The A380 (Trent 900/GP7200), A330 (Trent 700/PW4000-110), and 777s powered by Trent 800s and GE90-94 have been slower to recover due to continued softness in
long-haul demand and the resulting continued parking of aircraft
Source: Aviation Week, Naveo Analysis
Note: Dataset range from 01/01/2019 to 31/10/2021 11
Fleet Utilization

CFM56-7B and CF34-8 engines have been leading the engine utilization recovery
Monthly Engine Flying Hours by Engine Family Jan 2019-October 2021 (Hours)
Millions Hrs Hrs
700,000

4
600,000

CF34-8
500,000
3

CFM56-7B 400,000

2
300,000
PW100

CFM56-5B 200,000
1 V2500 CF34-10
LEAP 100,000
GTF CF34-3
AE3007
0 0
Oct-20
Oct-19

Feb-21

Oct-21
Feb-19

Aug-19
Sep-19

Nov-19

Feb-20

Aug-20
Sep-20

Nov-20

Aug-21
Sep-21
Apr-19

Apr-20

Apr-21
Jan-19

Mar-19

May-19

Jul-19

Dec-19

Jul-20
Jan-20

Mar-20

May-20

Dec-20

Jul-21
Jun-20

Jan-21

Mar-21

May-21
Jun-19

Jun-21

Jan-19

May-19

Dec-19

Dec-20

May-21
Mar-19

Sep-19

Jan-20

May-20

Sep-20

Jan-21
Feb-21

Sep-21
Feb-19

Apr-19

Aug-19

Aug-20
Feb-20
Mar-20
Apr-20

Mar-21
Apr-21

Aug-21

Oct-21
Jun-19

Oct-19
Nov-19

Jun-20

Oct-20
Nov-20

Jun-21
Jul-19

Jul-20

Jul-21
CFM56-5A/B CFM56-7B LEAP GTF V2500 AE3007 CF34-10 CF34-3 CF34-8 PW100

The 737NG (powered by the CFM56-7B) has been recovering strongly, boosted by use in countries with larger domestic markets (e.g., China and USA)
LEAP (737 MAX and A320neo) and GTF (A320neo, E2, A220) powered aircraft are popular due to fuel efficiency and not needing maintenance events. These aircraft
continue to be delivered, thereby increasing the utilization
70-90 seat regional jets continue to be popular (powered by CF34-8 and CF34-10). However, as can be seen, 50-seat RJ aircraft (powered by CF34-3 and AE3007 were in
decline before COVID (due to airlines upguaging to larger RJs) and combined with further retirements and a large stored fleet, recovery has been sluggish
Source: Aviation Week, Naveo Analysis
Note: Dataset range from 01/01/2019 to 31/10/2021 12
Air Transport Aircraft Production Delivery Forecast

2021 air transport deliveries are expected to exceed 2020 by ~170 aircraft.
Deliveries are set to surpass 2018 levels in 2025
Air Transport Deliveries - History & Forecast (Qty of Aircraft
Actuals 1989-2020 Forecast 2021 - 2030
2,500

Between 2021-2030, here are 2,000

~18,180 forecasted air transport 1,500

deliveries, valued at ~$1,100B 1,000

These are made up of ~16,395 500

narrowbody and widebody 0

aircraft, and, 1,785 regional

1989

2008

2018
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

2009
2010
2011
2012
2013
2014
2015
2016
2017

2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
aircraft (jets and turboprops)
Narrowbody & Widebody Jets Regional Jets & Tuboprops
It will take until 2025 for Air Transport Deliveries - History & Forecast Value ($B)
deliveries to exceed 2018 levels Actuals 1989-2020 Forecast 2021 - 2030
(the previous peak). 2019
deliveries were lower due to the 140
120
737 MAX grounding
100
80
60
40
20
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Narrowbody & Widebody Jets Regional Jets & Tuboprops

Source: Teal Group November 2021. Naveo Analysis 13

Air Transport Aircraft Production Delivery Forecast

Aircraft Delivery Forecast Qty 2021-2030 Aircraft Delivery Forecast Qty 2021-2030 Of the ~18,180 new air transport aircraft that
(By Aircraft Family) (By Aircraft Size) are forecasted to be delivered between 2021
Others
Turboprops and 2030, the A320neo family and 737 MAX
777-X Regional Jets 4%
ATR 42/72 2% 6% 6% represent nearly 70% by quantity
4%
E2
4% Widebody The continued passenger growth in emerging
A350
4%
A320neo 13% markets, demand from low-cost carriers, and
family
787 ~18,180 41% ~18,180 replacement of older aircraft (e.g. 737NG,
5% A320ceo, 757s etc.) is driving demand for
Aircraft Aircraft these new narrowbody aircraft
A220
6% Narrowbody
77%
Widebody aircraft are set to represent ~13%
737MAX of future demand (qty of aircraft delivered),
28%
Aircraft Delivery Forecast 2021-2030
with regional jets and turboprops making up
(Value of aircraft 2021-2030) $B the remaining 10%

Regional Jet, 33, Turboprop, 14,

However, in terms of $ value, due to the
3% 1% higher cost of widebodies, they make up a
larger share, with widebody aircraft
comprising ~32% ($355B) and narrowbodies
~64% (~$698B)
Widebody, 355,
32%
~$1,100B
Narrowbody,
698, 64%

Source: Teal Group November 2021. Naveo Analysis 14

Fleet Status – November 2021

In mid-November, ~71% of the global air transport fleet is in active service and ~29% parked/stored
Air Transport Fleet Status Mid-November 2021 Air Transport Fleet By Region
(Qty of Aircraft In-Service/Stored)
(Qty of Aircraft In-Service and Parked/Stored)
Latin America, Africa, 1,657
Stored 2,274
16% 90+ days
Middle East, North America,
2,334 10,329

Parked Parked
7+ days In-Service ~34,239
& Stored 8% ~34,239 ~24,278 China, 4,102
~9,961 Aircraft
Aircraft 71%
29%
Parked <7 days
5%
Asia Pacific,
5,820 Europe, 7,638

Air Transport Fleet By Size

(Qty of Aircraft In-Service/Stored)

~71% of the fleet is in active service (~24,278), and ~29% (~9,961) are parked/stored
This is the same as September, when 71% were in-service. At the start of November, ~72% were in-service
However, the fleet situation is fluid. There are many aircraft that are short-term parked for less than seven days
(~1,700) and a further ~5,500 that have been parked for less than 90 days ~34,239
Aircraft
Airlines are responding to waves of demand by moving lots of aircraft from parked/stored to in-service and back
to parked

Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 15

Fleet Status – November 2021

China has the highest % of its fleet in service, followed closely by North America.
Asia Pacific is lagging behind though the situation is slowly improving
Air Transport Fleet By Operator Region
(Qty of Aircraft In-Service/Parked/Stored) Mid-November 2021
100%
6%
90%
14% 19% 8% 17% 17% 15% Stored (90+ days)
22%
7% 9%
80%
3% 8% 9% 8% 12% Parked (7-90 days)
10% 4% 4% 4% Parked <7 days
70% 5%
6%
60%

50%

40% 76% 78%

68% 70% 71% 69% In-Service
30% 62%
20%

10%

0%
North America Europe Asia Pacific China Latin America Middle East Africa

China has ~78% of its fleet actively in service, down from ~83% at the start of November. North America follows with ~76% of the fleet being actively in-service
However, China has a further 9% of the fleet that has flown in the past seven days, and North America a further 3%
North America and China benefit from large domestic markets, hence boosting their potential for in-service fleets compared to those countries that rely on international travel
Asia Pacific, coping with various issues, including slower vaccine rollout, zero-Covid policies and concern over the Delta variant, lags at ~62% of its fleet in service (but this is up from
55% in September). Note how Asia Pacific leads the way with the highest % of its fleet in storage (over 90 days)- with ~22% of the fleet stored
Europe has ~68% of its fleet in-service. Down from the 70% in September but (up from ~46% in May and 58% in June).
As said previously, the fleet situation is fluid, with aircraft moving from being parked temporarily back into service back into the temporary parked status

Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 16

Fleet Status – November 2021

Narrowbody aircraft have the highest % of

Overall, ~71% of the fleet is in active service. However, as
their fleet in service with 74% active can be seen, the size of aircraft makes a difference

Air Transport Fleet By Aircraft Size Domestic travel is recovering quickly (as seen by USA and
(% Aircraft In-Service/Stored) – November 2021 China travel) – since these flights don’t cross borders
where there might be travel restrictions
~18,300 ~6,306 ~4,982 ~3,049 ~1,602 ~34,239 Consequently, narrowbody aircraft (A320ceo and neo
100%
family, 737NGs and MAX) and larger regional jets (e.g., E-
13% 14% Stored (90+ days)
90% 19% 20%
16% Jet/E2/CRJ700-1000s)s are leading the way in terms of
28%
7% 8%
in-service aircraft by size
80%
5% 7%
8% Parked 7+ days
11% 4%
70% 5% 5% Parked <7 days 73% of 70+ seat regional jets are in-service
6% 12%
60% Smaller 50 seat regional jets aren’t faring as well, driven
7%
by scope changes and upguaging in the US that has led to
50%
more 70+ seat jets and, relatively higher cost of operation
40% of the 50 seaters. Note how 28% of smaller RJs are in
74% 73%
70%
64%
71% In-Service longer-term storage
30%
53%
It’s good to see that Widebody aircraft are climbing back
20%
to 70% of the fleet in active service (up 3% since
10% September) – driven by increasing utilization of the latest
generation widebodies (e.g., 787, A350XWB) and the
0%
Narrowbody Jet Widebody Turboprop Large RJ (70+ Small RJ Overall Fleet popular 777-300ER, valued for its cargo capacity
Seats)

Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 17

 Fleet Status – November 2021

Airlines are actively flying their youngest, most efficient and right-sized aircraft
Top Air Transport Aircraft Families
% Aircraft In-Service/Parked/Stored – Ranked By Fleet Size. November 2021
100% 4% 4%
17%
8%
4% 12%
8% 12% 10% 11%
16% 15%
11%
15% 14% 12% 11% 14% 7% 16%
Stored (90+ days)
90% 7% 4% 22% 22% 6% 3%
7%
27% 29% 9% 5% 27% 30% 7% 29%
5% 5% 10% 35% 14% 5% 8% 7% Parked 7+ days
80% 7% 4% 6% 11% 11% 3% 8%
4% 5% 5% 2%
10%
70%
5% 12% 10% 21% 2% 4%
7%
53% 5% Parked <7 days
8% 10% 3%
5% 14% 2% 11% 73%
6% 5% 6% 5%
60% 7% 2%
8% 11%
50%
88% 86%
40% 80% 77% 81% 76% 78% 79% 78% 17%
70% 75% 72% 71% 75% 71% 71%
63% 65% 67%
30% 59% 60% 56% 57% 59%
2% 6% In-Service
49% 49% 3%
20%

10% 23% 24%

0%

Airlines are flying their newest aircraft, typically those under warranty or not due heavy checks or engine shop visits (e.g., A320neos, 737NGs, 787s, A350s)
The 777-300ER has remained popular for passenger and freight/passenger flights – hence 78% are actively in-service
Larger regional jets are also popular such as the E-Jet (77% in-service and CRJ700-1000 with ~75% in service)
Cargo aircraft such as A300/A310, 747-400, and 757 freighters are, unsurprisingly, active
737NG has ~80% of its fleet in service, helped by the large fleet in the USA and China and popularity with low-cost carriers
Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 18
Fleet Status – November 2021

~47% of the air transport fleet is ten years old or younger, and, unsurprisingly,
younger aircraft are more likely to be in-service
Top Air Transport Aircraft Families
Aircraft In-Service/Parked/Stored & Average Age – Ranked By Fleet Size. November 2021
9,000
~25% of fleet ~8,470 ~7,448 ~5,675 ~4,400 ~3,408 ~2,245 ~2,594
8,000
607 100%
~22% 7%
428 14% 16% Stored (90+ days)
90% 5% 18%
341 24% 25% 22%
7,000 1,029 4%
7%
80% 11% Parked 7+ days
6% 9%
6,000 537
~17% 70% 5%
8% 11%
5% Parked <7 days
418 11%
5%
1,044 5% 6%
5,000 60%
~13%
521
4,000 50%
308 1,036
7,094 ~10% 84%
40%
370 73%
3,000 855
5,464
200 ~8% 67% 63% 67% In-Service
367
~7% 425 Stored (90+ days) 30% 59% 61%
2,000 162 503 286 Parked 7+ days
3,802 142 Parked <7 days
255 20%
2,793 127
1,000 2,024 1,741 In-Service 10%
1,360

0 0%
0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26-30 years 31+ years 0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26-30 years 31+ years

The average age of the 34,239 aircraft in the air transport fleet (in-service/parked/stored) is ~14.4 years
25% of the air transport fleet is five years or less, coming out of warranty and soon to be starting to generate maintenance events
Cargo aircraft will be boosting the % in-service for older aircraft along with turboprops
Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 19
 Fleet Status – November 2021

Stored fleet analysis

There are ~5,400 aircraft that have been inactive and stored
Stored Aircraft Fleet (90+ days Inactive)
Top Stored Air Transport Aircraft Families Ranked By Fleet Size. November 2021
for 90+ days

Qty of Aircraft Av. Age The average age of all of the stored aircraft is ~17 years
1,600 30
Stored aircraft are split ~52% owned and 48% leased
# Aircraft Average Age 28 28

1,400 1,339 Many of the stored aircraft will return to service, waiting for
26 25 travel demand to return fully, or their cargo conversion to
1,209
1,200
happen, or, in the case of the 737 MAX regulatory approval
22 (e.g., in China)
20 20 20 20
19
1,000 However, Naveo estimates that at least ~2,000 aircraft that
are stored won’t return and will be retired in due-course
800 15 15 15
15
13
12
600 525 Widebody,
10 22%
9
400 344 Stored
279 261 248 229 5
Fleet by Narrowbody,
192 184 44%
200 3
175 171
125
Size
113 105
(~5,400
0 0
Turboprop, Aircraft)
18%

Regional Jet,
Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 16%
20
Fleet Status – November 2021
Fleet Profile by Aircraft Age - Years (Qty of Aircraft In-Service/Parked/Stored)
November 2021

Qty of Qty of
Aircraft Boeing 737NG Aircraft Airbus A320ceo Family
500
500

450
450

400 400

350 350

300 300

250 250

200 200

150 150

100 100

50 50

0 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
In-Service Parked/Stored Age (Years) In-Service Parked/Stored Age (Years)

Average Age ~11.5 yrs. Average Age ~11.9 yrs.

~6,459 aircraft in-service/stored/parked ~7,081 aircraft in-service/stored/parked
~50% of the fleet is 10 years old or younger ~48% of the fleet is 10 years old or younger

Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 21

Fleet Status – November 2021
Fleet Profile by Aircraft Age - Years (Qty of Aircraft In-Service/Parked/Stored)
November 2021

Qty of Qty of
Aircraft Boeing 767 Aircraft Airbus A330-200/300
50 120

45
100
40

35
80
30

25 60

20
40
15

10
20
5

0 0
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 29

In-Service Parked/Stored Age (Years) Age (Years)

In-Service Parked/Stored

Average Age ~20.6 yrs. Average Age ~11.3 yrs.

~807 aircraft in-service/stored/parked ~1,260 aircraft in-service/stored/parked
~22% of the fleet is 10 years old or younger ~49% of the fleet is 10 years old or younger
(Excludes A330neo)
Source: Aviation Week Fleet Discovery. 11 November 2021. Naveo Analysis 22
Retirements

Approximately 697 aircraft were officially retired in 2020

2020 did not yield the thousands of retirements that had been feared, and Qty of Aircraft
Air Transport Retirements 2001 –November 2021
Retirements % of
Retired Per Year Active Fleet
neither has 2021. Airlines and lessors prefer to wait and see how traffic (and
residual values) recover Retirements Per Year Retirements as % of In-Service Fleet
1,000 4.0
885
900 3.5
798 800
~694 air transport aircraft retired in 2020. Some aircraft described as 800
parked/stored will likely already have been retired. It takes time for the data to 700 646
694 691 692
644 652
697 692 697 3.0
615
catch up to the on-the-ground reality. 2020 total was above the 20 year 600
573 2.5
515 534
average of ~628 retirements per year 500
500 409 426 2.0
403
400 357
As a % of the active fleet, retirements have typically hovered between 1.7% 1.5
300
and 3.4%. The average has been 2.5%. The rate in 2020 was 2.7% 1.0
200
0.5
So far, as of November 2021, ~357 aircraft have been officially retired. 2021 100
total retired will increase as we continue to capture the aircraft listed as 0 0.0
parked/stored that have likely been retired. But so far, the numbers are still
lower than expected

Others, 145 A320ceo Family, Others, 73

157
A320ceo Family,
115
2020 2021
777-200/300, 20 777-200/300, 9 Jan- November
Retirements
757, 20 757, 10 Retirements
~697Aircraft 747-400, 59
A340-200/300, 747-400, 12 ~357 Aircraft
22
767, 12
ERJ, 24
MD-80, 43
CRJ-100/200, 26 717, 15
737NG, 56
737 Classic, 27 737NG, 42 777-300ER, 17
A340-500/600,
MD-90, 38A330, 39 A330, 19
35 737 Classic, 19
Source: Aviation Week Fleet Discovery. 20 November 2021. Naveo Analysis 23
 Retirements

Most of the aircraft retired in 2020 and 2021 were already slated for retirement.
So far in 2021, ~357 aircraft have been officially retired
Qty of Aircraft Top 21 Air Transport Aircraft Retirements 2020 vs 2021 (Jan-early November) Average Age The average age of the 697 aircraft retired in
(Years)
Retired Qty of Aircraft Retired & Average Age at Retirement 2020 was 23.5 years
180 50.0
2020 Retirements 2021 Retirements 2020 Av. Age 2021 Av. Age The E-Jets had an average age of ~12 years
(picked up by private equity for teardown), and the
44.8 45.0
160
43.6 A340-500/600 retired averaged ~14 years old.
The A340-500/600 has been a casualty of
40.0
140 preference for fuel-efficient twin-engine
36.3 widebodies
35.0
120
So far, from January to November 2021, there’s
30.8 30.6 28.6
28.6 30.2 30.0 been ~357 recorded retirements, with an average
28.9 27.3 28.0
100 28.2
27.7 27.3 27.1 26.6 26.7 age of 22.0 years
24.7 24.9 25.0
23.1 23.1
80 22.8
20.1
23.0
21.9 Though the 737NG might appear to be retiring
20.9 21.1 21.1
19.2 18.9
18.9 20.0 young (with an average retirement age of 17.2
18.8 19.8 18.6 18.6
60 17.2 years in 2021), 77% of the 56 737NGs retired so
14.3 17.6 18.3
14.7 13.2
15.0
13.0
far in 2021 were 737-600 and 737-700s – smaller
12.3 12.1 aircraft and less popular than the larger 737-800s.
40
10.0 These aircraft were typically acquired by private
equity for their engines and components (common
20 5.0 to larger 737NGs)

0 0.0 The A380 (~9 retired in 2020/2021) has seen

recent reactivation with British Airways and
Qantas. Therefore it’s not all bad news!

Source: Aviation Week Fleet Discovery. 20 November 2021. Naveo Analysis 24

 Contents
Capacity, Air Transport
Production & Aftermarket
Fleet Update Trends

25
Jet Fuel Price

Jet fuel is currently at prices not seen for three years at ~$92 per barrel
Jet Fuel Price ($ per Gallon) 1990 – November 2021*
Average Fuel
Year
4.5 Price ($/Gallon)

2015 1.525 Jul 2008

4
$3.886 Apr 2011
2016 1.249
3.5 $3.267
2017 1.561
3 2018 2.017
Oct 2014 Oct 2018 Nov 2021
2019 1.877 $2.46 $2.249 $2.208
2.5
2020 1.101
2
2021 Jan-Nov 1.834
1.5

0.5 Jan 2016

$0.93 Apr 2020
0 $0.60

The jet fuel price has edged up since the trough in April ($0.60 per gallon) caused by global lockdowns and 80% of air transport aircraft grounded

As of 18th November, jet fuel is currently ~$2.208 per gallon*, that’s nearly double November 2021 (+94%). In mid-October 2021, it hit $2.360 – the highest level for seven years
though it has since fallen back

IATA forecasts the average fuel price for 2021 to be ~$76.3/bbl. which equates to an additional +$46.9B that airlines will pay in 2021 for jet fuel

If jet fuel continues to remain high, it will put additional pressure on older, less fuel-efficient aircraft (and encourage replacement by newer aircraft)

Source: US Energy Information Administration. *Price as of 18 November 2021. Naveo Analysis

26
MRO Outlook

Air transport MRO spend should return to pre-pandemic levels by 2023

After years of impressive aftermarket growth, the 2020 Air Transport MRO Market Forecast, 2019-2031 By MRO Category
MRO market was down ~35% despite a solid first quarter (All Air Transport Aircraft) – $
as airlines grounded most of their fleets by the start of
Q2 120
$111B
Impact on the different types of MRO activity varied $106B $106B $107B 7
$97B $101B $102B $99B $101B 6 5 5
depending upon the levers that airlines can pull to reduce 100 5 6 5 7 7
7
5 8
the expense $87B 5
7 8 8
8
$84B 7
21
7 21 21
As airlines are in cash conservation. Where possible, 80 6 19 20 20
20

operators will consider using green-time engines in-lieu 7 $72B 6 19 19

of an immediate shop visit, USM, or DER repairs 6

13
5 24
60 $57B 17
20 22 23 23
21 22
MRO market is forecasted to reach $97B by 2023 (in 5 16
19 21
17
2022 dollars $), exceeding 2019 pre-COVID levels 4
17
10
40
There will be increasing retirements of aging aircraft that 15
12
would need heavy airframe checks or third/fourth engine
50 51 51 51
shop visits 42
47 49 48 45 47
20 37
26 30
This reduces MRO expenditure for operators but, in turn,
reduces revenues for OEMs and maintenance providers
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Engine Maintenance Components Line Maintenance Modifications Airframe Heavy

Source: ICF, Aviation Week, Naveo Analysis. Constant US$. Forecast from 2022 in 2022 $ 27
MRO Considerations

MRO buying behavior tends to evolve over the aircraft lifecycle

The introduction of a new aircraft type provide operators
with the chance to change their maintenance behavior, and
Aircraft OEMs this was seen as operators with 787s, A350XWBs, GTS,
LEAPs embraced outsourced maintenance offerings
Component OEMs
OEMs, MRO integrators, and independent suppliers each
Engine OEMs
have their own strengths and challenges, but choice,
flexibility, and customization are the name of the game
Integrator MROs
They help to leverage workscope management, used
serviceable material, part repairs, and, to varying degrees,
big data analytics
Independent MROs
Suppliers are battling for positions to support aircraft, from
Surplus Parts DER/PMA
entry-into-service through to retirement and tear-down.
OEMs, integrators, airline MROs, independent MROs, and
parts traders are attempting to extend their reach across
Big Data & Connectivity
the lifecycle

As aircraft age, operators become more price-sensitive and

• Aircraft under
warranty
•
•
Out of warranty
First maintenance
•
•
More cost-focused
Tailored workscopes
•
•
Retirement planning
Maximise residual
may embrace alternatives to traditional new parts or MRO.
• OEMs well events • Growing supply of value Examples include surplus parts, part repair / DER
positioned • Focus on reliability USM • Cost containment
• Inventory pooling and time-on-wing • Re-tender MRO • Tailored workscopes
• Aircraft health • Leverage Big Data contracts • Leverage USM/DER COVID, and the need to focus on costs, further encourages
monitoring • Limited supply of USM • Manage lease-returns • Leased engines
airlines to embrace USM, pooling, greentime engine
A220 A350XWB A320ceo A300 management, tailored workscopes, health monitoring, digital
A320neo 787 A330 747-400
EXAMPLE solutions etc.
AIRCRAFT E-Jet E2 E-Jet CRJ 757
737 Max ERJ 767
MC-21 737NG MD80
777

Source: Naveo Analysis 28

MRO Considerations

OE and Aftermarket Considerations for Leadership

Competitive Environment Strategic Implications Further Considerations
How will the OEM and MRO landscape evolve How competitive is your aftermarket business As the recovery gathers pace, where are there
as recovery occurs? How will these changes across the aircraft lifecycle (new, mature, prime opportunities for consolidation, divestment,
impact your business as your customers and sunset aircraft)? Which weaknesses has COVID M&A, and private equity investment?
competitors best position for the recovery and exposed- and will continue to expose during
How are you going to protect against margin
seek competitive advantage? the recovery?
leakage caused by surplus and DER/parts repair
How will your business be impacted by changes Where are your best revenue production and alternatives? Or reduced inventory IP sales through
in OE production, growth in maintenance, and aftermarket growth opportunities over the next to pooling or distribution agreements?
potentially increased use of alternative material three to five years?
How can you leverage (or defend against) the
choices (e.g., USM, repairs, PMA)?
Which customer segments are you not opportunity that USM/Repairs and customer cash-
As the recovery gathers pace, will you have currently serving well? Customer regions? conservation brings by working with your
sufficient talent? Where are the weaknesses? Opportunities? customers to develop new ways of doing business
What is your plan over the coming weeks and and win-win solutions?
Before COVID, shortages of capacity (especially
months to position for growth?
in engine MRO) was a key issue. This will return How could competitor M&A impact your business
as an area of concern in the next few years Are you leveraging digital solutions to add (and where is it most likely to happen)? Are you
value to customers and generate cost savings? thinking through scenarios?
Who will be the winners and the losers?
How are you addressing your ESG What if further consolidation occurred within
OE: Airframe / Engine / Components /
Aerostructures / Raw Materials responsibilities to make meaningful change? OEMs? MROs? Airlines? How would these impact
Aviation is in the environmental spotlight your business?
MRO: Airframe / Engine / Components / Line /
Airframe / Modifications

MRO suppliers: OEMs, Independents, Airline 3rd

Party, Multi-product Integrators, Distributors, Part
suppliers

29
MRO Considerations

Pace of COVID recovery: Big Data, health Talent & skills– recruiting,
Supply chain (e.g. part lead- monitoring & predictive retaining and training.
times) and capacity maintenance & Shortages will return as
challenges to return to pre- cybersecurity an issue
COVID levels (and exceed
them)

Aircraft retirements, USM MRO growth in How to differentiate MRO

headwind, repair rather than developing countries – service offerings, create
replace partnership / own value and stickiness
facilities

OEM / Integrator / Lessors: More leased More reliable

Independent MRO aircraft components (impact on
competition and M&A IP, repair demand)

MRO expansion, outsourcing Environment – aviation End of life aircraft, engine

- pooling / inventory mgt under the spotlight. and component MRO
solutions Need for sustainable strategies
growth
Source: Naveo Analysis 30
 Naveo’s consultancy expertise is broad.
Our capabilities include:

Strategy & Market Analysis M&A Transaction Support Services

Strategy and growth planning Customer satisfaction research, Acquisition search Independent revenue and margin
implications and action plans commentary
Additive manufacturing and 3D Due-diligence advisory
printing Customer segmentation and buying Expansion growth vectors
behavior Market assessment and trends
Aerospace cluster strategy planning Potential bolt-on acquisitions (or
and support Engine parts repair market Demand and supply outlook divestitures)
Operations and supply chain
Aftermarket value proposition improvements Competitive positioning, Exit considerations
research, design, and testing strengths, and weaknesses
Mid-life to end-of-life aircraft market
Airframe, component, engine, and
cabin interior market Original equipment production and
MRO aftermarket forecasting
Big data and connectivity, aircraft
health monitoring, prognostics and PMA parts market
diagnostics
Surplus parts / used serviceable
Competitor analysis material (USM)
E hello@naveo.com
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Air Transport – Business Aviation – Rotary Wing – Military Aviation

31
 naveo.com
hello@naveo.com

Naveo is a focused aerospace consultancy dedicated to serving the needs of global

clients, large and small. Highly responsive and backed by timely, relevant thought
leadership, and in-house intellectual property. We support revenue growth and business
optimization across the production value chain – from raw materials to operators and
financiers – and aircraft lifecycle – from entry-into-service to retirement and part-out.
Our team is led by the experienced aerospace management consultant, Richard Brown

Aerospace is fast-moving, so we understand how your in-house analytical, operational,

and strategic resource is challenged with constantly evolving issues. Naveo provides
fresh, dynamic, and relevant advice to help you understand the critical issues that
impact revenue growth, efficiency savings, and strategic options

Experience managing
Passionate focus
projects with global
on aerospace
blue-chip clients

Innovative thought From manufacturing suppliers Follow us on LinkedIn

leadership for the to operators, from production for more insights
digital age to aftermarket. Air Transport,
Business Aviation, Rotary
Wing, Military Aviation

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Thank you!
Richard Brown
Managing Director
Get in touch
richard@naveo.com M +44 (0)7718 893 833
T +44 (0)207 867 3782
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consultancy
© Naveo Limited 2021 33