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DOING BUSINESS IN INTERNATIONAL...
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©TeamSAI NAVIGATING THROUGH THE UNPREDICTABLE UNCERTAINTY AND RISK . . . DOING BUSINESS IN INTERNATIONAL MARKETS 2014 ARSA STRATEGIC LEADERSHIP CONFERENCE OCTOBER 2014 10/15/2014
Transcript of DOING BUSINESS IN INTERNATIONAL...
©TeamSAI
NAVIGATING THROUGH THE UNPREDICTABLE
UNCERTAINTY AND RISK . . .
DOING BUSINESS IN INTERNATIONAL MARKETS
2014 ARSA STRATEGIC LEADERSHIP CONFERENCE OCTOBER 2014
10/15/2014
©TeamSAI
NAVIGATING THROUGH THE UNPREDICTABLE
UNCERTAINTY AND RISK . . .
TODAY’S DISCUSION
10/15/2014
• The current environment of uncertainty and risk
• Global outlook for the MRO market
• Strategic concerns when implementing international expansion
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NAVIGATING THROUGH THE UNPREDICTABLE
THE ENVIRONMENT: RISKS
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WHAT DOES IT MEAN FOR MRO PLANNING?
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MROPLANNING
risks and uncertainty abound…
Forecast Uncertainties
MRO Uncertainties
Geo- Political Risks
Natural Disaster Risks
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DON’T GET COMPLACENT…GEO-POLITICAL & MRO RISKS CONTINUE
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GEO
-PO
LITI
CA
L M
RO
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NAVIGATING THROUGH THE UNPREDICTABLE
FLEET AND MRO OUTLOOK FAVORS
INTERNATIONAL GROWTH
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GLOBAL FLEET OUTLOOK - COMMERCIAL AIRLINE SECTOR SHOWS CURRENT NA/WE DOMINANCE…
04/08/2014
2014-2024 Growth
Rate
2024 Market Share
0.8% 24%
2.1% 18%
4.4% 17%
7.3% 12%
5.1% 8%
5.6% 6%
5.8% 6%
5.1% 5%
11.4% 3%
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…BUT MRO REGIONAL MARKET SHARES CHANGE DRAMATICALLY BY 2024
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ME/Africa • ME will double by 2024, driving majority of growth
Asia • Asia will be the largest MRO market by 2024
Europe • EU to have moderate MRO growth, at 2.9%
Americas • Large-scale fleet replacement in NA translates to flat MRO
• LA&C market drives growth
Americas
Europe
Asia
ME/Africa
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BALANCE OF TRADE ANALYSIS INDICATES EMERGING REGIONS HAVE OPPORTUNITIES FOR EXPANSION
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net exporter net exporter net importer
net importer net importer net importer
net importer net importer
net importer
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NAVIGATING THROUGH THE UNPREDICTABLE
DEALING WITH UNCERTAINTY AND RISK
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LABOR RATE PARITY COULD CHANGE CONTRACTING TRENDS
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• MRO labor costs ≠ general labor costs • Labor arbitrage benefits ▼ • Contracting considerations:
• Contracting NA HMV to Asia ▼ • Contracting to Latin America will continue to have value –LA&C: $14 or 25% HMV labor cost
advantage over NA –Contracting to parts of LA&C remains
competitive at even a $5 labor rate gap
Maintenance cost MRO capabilities
Ferry costs Turn-around time
Work quality Customer service
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GROWING WB PRESENCE IN FAR EAST AND LABOR RATE PARITY COMBINE TO POTENTIALLY RESHAPE AIRLINES’ WB HMV LANDSCAPE
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L. AMERICA 65% WB HMV
ALL IN HOUSE
N. AMERICA 38% WB HMV 8%
IN HOUSE
30% ON SHORE
2%
2% 9%
49%
25%
10%
THE OPPORTUNITY TO REPATRIATE WB HMV IS FEASIBLE, BUT NOT WITHOUT RISK
GROWING LOCAL
WB DEMAND
GROWING LOCAL
WB SUPPLY
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WB REPATRIATION MOVEMENT DOES APPEAR TO BE DEVELOPING
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DEC 2013
ATS announces plans to invest $7M in Kansas City MRO base to service WB and NB aircraft
SEP 2014
AUG 2014
FEB 2014
HAECO completes acquisition of TIMCO Aviation Services, Inc., under speculation U.S.-based WB MRO could return to free-up capacity to handle increased demand for Asian WB work
AAR and Rockford, Illinois agree to expand MRO facility, focusing on servicing next-gen WB work
AAR Lake Charles wins multiple contracts with mix of major U.S. carriers, leasing institutions, and VIP operators covering a broad range of WB aircraft
BUT REMEMBER, THIS IS A RE-BALANCING, NOT A WHOLESALE SHIFT, TO ACCOMMODATE INCREASING INTERNATIONAL WB WORK AND TAKE ADVANTAGE OF LABOR RATE PARITY
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CAVEAT: MRO LABOR SHORTAGE IS SIGNIFICANT CHALLENGE TO EXPANSION
10/16/2014
• MRO industry requires specialized labor –Medium- and high-skilled workers with
technical training • Boeing: 500K new technicians needed worldwide in the next 20 years
• Retirements coming: –6-8 years to achieve adequate performance
• Shortage of skilled MRO workers has the potential to drive up labor rates –Driving “land grab” for skilled workers
Source: Boeing Pilot and Technician Outlook
New Technician Outlook 2013-2032
Shortage of Skilled Workers in 2020
Medium- skill
High- skill
HAECO case study: even #2 MRO struggling • 2013: highlighted losses due to labor shortage • 2014: has worked to reverse this, but it is a long-term
process – Improved pay – Improved career development – Improved training – Sought government support to attract ex-pats Note: market conditions (e.g., shifting market landscape for RB211 & Trent 500 work) exacerbate performance
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Ph1 export
Ph2 regionalize
Ph3 originate
Market reach transition MRO presence…
home country domination/foreign sales office
active presence in multiple regions w/ local partners
each region has long-term structural commitment
Market offerings develop MRO offerings…
international offerings same as home country
offerings adjusted to local needs
local demand drives local products
Operations transition capabilities…
home country supply chain with international capabilities
production increasingly localized
local production under global footprint
Procurement shift supply chain… international use focuses on low-cost/commodity
suppliers increasingly localized
global tiered network
IP development change IP mindset… protect HQ improve local capabilities
all regions developing shared MRO expertise
Capital target new financial resources…
capital financing from home country
financial sources globalized
localized source of capital across network
Talent develop human capital…
home country provides & deploys management
Local training and recruitment begins
local regions produce management
Operating model change structure… hub & spoke structure collaboration increases
operating model adapted as needed
Governance & risk
evolve governance… command & control oversight
regulatory and compliance more localized
Integrated global/ local governance & regional P&Ls
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POSITIONING FOR INTERNATIONAL GROWTH
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NAVIGATING THROUGH THE UNPREDICTABLE
THANK YOU
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Dave Marcontell President & COO TeamSAI, Inc. (404) 334-8040 [email protected]
WWW.TEAMSAI.COM
