Chamsou Deen Anjorin Boeing

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Information about Chamsou Deen Anjorin Boeing
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Published on March 28, 2008

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Africa Aviation Challenges and Opportunities 13th Aviation and Allied Business Leadership Conference:  Africa Aviation Challenges and Opportunities 13th Aviation and Allied Business Leadership Conference Chamsou D. Andjorin J. Miguel Santos Executive Director Director, Intl Sales Africa & ME Boeing International Boeing Commercial Airplanes The Boeing Company Accra, Ghana 27-29 August 2007 Agenda:  Agenda Market Outlook Global Observations African Regional Perspective Regulatory Environment Opportunities and Challenges in Africa Boeing in Africa Final Thoughts Slide3:  Aviation is moving from being highly regulated to a more liberalized and competitive marketplace Increased Liberalization Changing Airline Strategies Increased Airplane Capabilities Passengers drive airline strategies:  Passengers drive airline strategies The Underlying Dynamics of Our Industry:  The Underlying Dynamics of Our Industry Economic growth Traffic growth Fleet Capacity Requirement Fleet Capacity Growth Airline Capacity Decisions Capital intensity to adjust capacity Utilization Used Airplanes New Airplanes Parked Airplanes High Low Short term Long term Delayed Retirement Airlines adjust capacity using available options Historically Cyclical Nature of Aviation :  Asian Currency Crisis Iranian crisis Historically Cyclical Nature of Aviation Arab Oil Embargo Aviation downturns World Real GDP Growth Operating Margin Gulf War 1 9/11 Repeating History or are the Drivers Changing?:  Repeating History or are the Drivers Changing? Geographic Balance map or globe Airline Business Model Balance Replacement Requirements Impact of Globalization:  Impact of Globalization “There are three new market drivers that are helping to shape current and future aviation cycles, balanced geographical aircraft demand innovative airline business models growing requirement for replacement airplanes worldwide These factors might prolong the current strong market cycle and help financiers reduce investment risk since they also reduce the risk of an industry wide downturn, stabilize the airplane market and sustain demand for new, more efficient airplanes“ Scott Scherer, VP Financial Services for Boeing Capital Balancing the Global GDP:  Balancing the Global GDP Sources: IMF, EIU 1970 2000 2012 Europe 24% United States 36% Rest 35% China 3% India 2% Europe 17% United States 22% Rest 44% China 11% India 6% Europe 13% United States 18% Rest 43% China 18% India 8% Globalization mitigates impact of regional economic cycles Increasing Geographic Diversity of the World’s Fleet:  Increasing Geographic Diversity of the World’s Fleet Note: 2012 fleet composition based on forecast 2025 airplane fleet from Boeing 2006 CMO Source: Airclaims 1970 2000 2012 Europe 33% United States 55% Other 7% Asia 5% Europe 31% United States 40% Other 12% Asia 17% Europe 24% United States 38% Other 13% Asia 24% Geographic fleet balance should mitigate aviation cycles Orders by Business Model:  Orders by Business Model Airclaims 2006 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2000 2001 2002 2003 2004 2005 2006 % of Orders LCC Traditional Leasing Cargo Liberalization and increased competition are driving airline business strategies Backlog at YE 2006 Shows Strength of LCC and Emerging Markets:  Backlog at YE 2006 Shows Strength of LCC and Emerging Markets US and Europe Network 11% LCC & Emerging Market 41% Other 48% Boeing Source: Airclaims, excludes military Freighter and VIP airplanes US and Europe Network 7% LCC & Emerging Market 50% Other 43% Airbus US and Euro majors represent nearly half of the global aircraft requirement Reduced exposure to a cyclical decline driven by US and European network carriers US and European Network Carriers Looming Replacement Requirement:  US and European Network Carriers Looming Replacement Requirement US Carriers: AA, DL, CO, NW, UA European Carriers: BA, AF, LH Source: Airclaims Normal Level of Replacement Delayed replacement and no growth capacity Airlines will need over 27,000 new airplanes:  Airlines will need over 27,000 new airplanes 27,200 airplanes 2.6 trillion delivery dollars* *In year 2005 dollars CMO 2007 Overview – Africa Region:  CMO 2007 Overview – Africa Region CMO 2007 GDP and RPK Growth Africa to grow at above world average:  Annual growth, 2007 - 2026 Percentage CMO 2007 GDP and RPK Growth Africa to grow at above world average Source: CMO 2007 5.0% 3.1% 5.4% 4.9% Since 1995, all air travel growth has been met by frequency growth and new nonstops:  Since 1995, all air travel growth has been met by frequency growth and new nonstops Index 1995=1.00 World Frequency Growth Nonstop Markets Average Airplane Size Air Travel Growth August OAG Africa international air travel growth has been met by increased frequencies:  Africa international air travel growth has been met by increased frequencies Frequency Growth Nonstop Markets Average Airplane Size Air Travel Growth Index 1990=1.00 August OAG Economic fundamentals continue positive improvement:  Economic fundamentals continue positive improvement 5% avg GDP growth rate in Africa over past six years driven by: Oil and gas revenues Increased private sector investment Increased tourism Political stability 17% increase in US total trade with Sub-Saharan Africa. US remains largest trading partner with Africa US – Africa trade concentrated in South Africa, Nigeria, Angola, Equatorial Guinea, and Kenya Near / medium term GDP growth in Africa driven by increased trade with China. Africa – Europe Most Significant Growth Market:  RPKs, billions 2006 traffic Added traffic 2007-2026 Annual growth % 5.5 Africa – Europe Most Significant Growth Market Source: CMO 2007 6.0 5.7 6.4 5.9 6.9 Africa - Europe air travel growth has experienced mostly frequency growth:  Africa - Europe air travel growth has experienced mostly frequency growth Only 3 Airlines BA, AF, LH Contribute 490 wkly flights To 60 city pairs Source: May 2007 OAG Market demand increasing:  Market demand increasing Vast majority of US – Africa traffic currently flows via major European hubs Point-to-point solutions demanded by passengers to alleviate: Travel costs Trip time Visa issues Delays (ie., weather, congestion) Growth demand driven mostly by oil and gas industry followed by friends and family traffic 1.25M estimated African diaspora population living in US* *Source: U.S. Census Bureau, 2005 American Community Survey Africa - US international air travel growth has been met by challenges:  Africa - US international air travel growth has been met by challenges 45 weekly frequencies 9 city pairs Source: May 2007 OAG Increasing Frequencies will Influence Fleet Mix :  Increasing Frequencies will Influence Fleet Mix Africa New Airplane Deliveries Africa Fleet Mix 640 airplanes 1,010 airplanes Percentage of Fleet 2007-2026, in Airplane Units 490 airplanes $48 billion * * In year 2006 dollars Shared Responsibility for A Safe & Efficient Global Air Transportation System:  Shared Responsibility for A Safe & Efficient Global Air Transportation System Flight Operations Maintenance Training Airlines Governments Best Airplanes Latest Technology Best Services Boeing Partner 707 727 737 747 757 767 777 787 “Leadership & Partnership” Working Together: care, respect, appreciation skill & motivation Manage Growth Departures Time Accident Rate Accidents Safety Oversight Air Traffic Management Airport Infrastructure MD-11 MD-80 MD-90 DC-8 DC-9 DC-10 All Five Elements Must be in Place to Ensure Growth:  All Five Elements Must be in Place to Ensure Growth Market Environment X = A Safe, Reliable, and Profitable Air Transportation System Regulatory Capability Airline Capability Airplane Capability X Infrastructure X X All Five Elements Must be in Place to Ensure Growth:  All Five Elements Must be in Place to Ensure Growth Market Environment Regulatory Capability Airline Capability Airplane Capability Infrastructure Strong demand exists to support increased non-stop routes Governments must increase political and financial support of their regulatory agencies FAA IASA Cat 1 status is the largest challenge in growing traffic to the US Airport and Air Traffic Infrastructure must first be in place to support continued growth. African airlines need to continue focus on safe, reliable, and profitable operations 787 range, size, and operating economics now provides African carriers with ideal tool to open Africa – US direct routes Global Roadmap’s 12 Focus Areas: “The Roads”:  Global Roadmap’s 12 Focus Areas: “The Roads” Focus Areas Enable, Implement, Confirm, Integrate and Share States Consistent implementation of int’l. standards Consistent regulatory oversight No impediments to reporting errors/ incidents Effective incident and accident investigation Industry No impediments to reporting and analyzing errors/ incidents Consistent use of Safety Management Systems Consistent compliance with regulatory rqmts Consistent adoption of industry best practices Alignment of global industry safety strategies Sufficient number of qualified personnel No gaps in use of technology to enhance safety Regions Consistent coordination of regional programs Safety is the Foundation for Growth:  Safety is the Foundation for Growth The safety and integrity of Africa’s air transportation system is the foundation for growth in the African aviation industry: Safety will constrain growth if not adequately addressed Public demand for safety drives regulatory action or lack thereof Safety is the Foundation for Growth:  Safety is the Foundation for Growth Inability to meet FAA / EASA Cat 1 status is one of main drivers stopping African carriers from flying into US and Europe FAA International Aviation Safety Assessment is based on a Civil Aviation Authority’s compliance to international (ICAO) standards Requires regulatory agency commitment to adhere to ICAO International Safety Standards, to hire qualified personnel, and to commit resources and training All elements must be continually monitored, updated and enforced Strong, independent and well funded regulatory agencies are needed to create this environment Global FAA IASA Status:  Global FAA IASA Status Cat. 1: Country meets minimum ICAO Standards Cat. 2: Country does not meet minimum ICAO Standards Unrated: Country has not been assessed by the FAA Based upon 05/24/06 FAA IASA data Slide32:  Regulatory Capability is Essential to Safety Western-built transport hull loss accidents, by airline domicile, 1997 through 2006* Accidents per million departures United States and Canada 0.5 Latin America and Caribbean 2.4 Europe 0.7 China 0.3 Middle East 3.0 Africa 12.0 Oceania 0.0 C.I.S. 4.9 World 1.16 * Scheduled air transport jets > 60,000 lbs MGW; source: Boeing Asia (Excluding China) 1.9 Economic Fundamentals are Essential to Sustainable Growth:  Economic Fundamentals are Essential to Sustainable Growth Emphasis on profitability will create long term economic development Profitable airlines invest in maintenance, training, and fleet renewal, and adopt best practices for safe and reliable operations African airlines profitability challenged from numerous fronts: Weak business plans and capitalization High operational costs Low revenue environment Lack of financial and human capital Low operational efficiencies Government interference Old fleets Key to successful government support lies in: Strengthened regulatory capability Increased efficiency in regulatory oversight Reduced taxes and airport fees Smart business - Profitable airlines:  Smart business - Profitable airlines Key to success lies in: Adopting Low Cost Carrier philosophies Developing pipeline of African airline professionals Sound fleet renewal programs Benchmarking best practices from other world carriers Adopt commercial operating practices even if government owned Concerns for African Commercial Aviation:  Concerns for African Commercial Aviation Worldwide aircraft demand is out-stripping supply - Over 3800 airplanes sold in 2006; 2046 sold by Boeing African carriers need to start thinking “Strategically” relative to market demand and shrinking airplane supply Long-term fleet planning should be an integral part of the business Airlines world-wide and in the region are becoming healthy Some major large carriers have yet to renew their fleets Concerns for African Commercial Aviation:  Concerns for African Commercial Aviation Strategic Planning – 10 year minimum Six-month rolling review Tactical Planning - 2-3 years Monthly rolling review Or does Africa continue with stop-gap tactics? Buying / leasing cheap old airplanes is not a strategy for growth neither to establish a strong and stable competitive position It is also about using the correct tools:  It is also about using the correct tools Market Acceptance Revenue Creation Potential Unsurpassed Passenger Comfort and Appeal Cargo Carrying Capacity New Route Potential New Leading Edge Technology Lowest Fuel Burn Less Maintenance Highest Reliability Lower Carbon Emissions Highest Investor Appeal Boeing twin-aisle airplane strategy provide the right sizes to meet future market requirements:  Boeing twin-aisle airplane strategy provide the right sizes to meet future market requirements Passenger Airplane Deliveries Forecast 2006 – 2025 777-300ER 365 seats 767-400ER 245 seats 767-300ER 218 seats 767-200ER 181 seats 2,770 3,030 1,250 2,650 1,799 BOEING 747-8 450 seats 777-200ER/200LR/787-10 301 seats 650 Both Manufacturers strive to meet better market coverage with a more efficient fleet:  Both Manufacturers strive to meet better market coverage with a more efficient fleet A350-900 A350-1000 A350-800 200 300 400 350 250 787-8 787-9 777-300ER 365 / 380 280 242 Seats 350* 314* 270* G A P *Airbus claim 301 / 310 787-10 777-200ER/LR The goal is to provide the right sized aircraft to meet future market requirements:  777-200ER/200LR /787-10 301 seats The goal is to provide the right sized aircraft to meet future market requirements Passenger Airplane Deliveries Forecast 2006 – 2025 2006 – 2025 777-300ER 365 seats 767-400ER 245 seats 767-300ER 218 seats 767-200ER 181 seats 2,770 3,030 -200- 200 Seat Gap A380-800 555 seats A340-600 323 seats A340-500/A340-300/A330-300 280 262 262 seats A330-200 241 seats 1,263 2,579 2,125 -450- -400- -300- BOEING AIRBUS -350- -250- -500- 563 325 SEATS 325 747-8 467 seats Boeing is Committed to African Aviation:  Boeing is Committed to African Aviation Boeing International Accra Office Boeing International Johannesburg Office Boeing International Middle East Office Field Service Offices Lagos Luanda Johannesburg Nairobi Addis Ababa Cairo Casa Libya Tunis Boeing is Committed to African Aviation:  Boeing is Committed to African Aviation Lagos Luanda Johannesburg Nairobi Addis Ababa Cairo 40 Years of Involvement in Africa 640 Boeing Airplanes in the African market Johannesburg Office opened March 2001 Accra Office opened in April 2001 20 Full-Time Employees Reside in Africa The Boeing fleet in Africa: Aircraft on Order:  The Boeing fleet in Africa: Aircraft on Order Boeing’s Growing Supplier Base in Africa:  Boeing’s Growing Supplier Base in Africa MATIS Aerospace (Morocco Aero-Technical Interconnect Systems) Joint Venture between Boeing, Royal Air Maroc and Labinal located on the outskirts of Casablanca. Manufactures wiring harnesses for several airplane platforms MATIS has become a world-class supplier in our global network Aerosud (South Africa) Manufactures interior linings and vacuum formed flight deck and cabin assemblies across a range of Boeing airplane models Aerosud has become an established leader in the So. African aviation industry and helps Boeing with partnerships in other African Countries Denel Aviation - (South Africa) Manufactures machined parts across various Boeing airplane programs Work statement expanded significantly since initial contract placed Denel Aviation has become an important supplier on Boeing sustaining programs Boeing is interested in long-term reliability and quality… we very pleased with the quality of products made at our African suppliers Boeing Supports Improved Safety and Aviation Growth in Africa:  African Union Goals Training and Information: Improved maintenance practices Operations best practices Flight Operations Support Program (FOSP) Access to My Boeing Fleet for Civil Aviation Authorities Safety Seminars Nigeria South Africa Airline Planning Seminars Morocco Libya Mauritius South Africa Supporting IATA Partnership for Safety Supporting Coscap projects in Africa Working with Industry Safety Strategy Group (ISSG) and ICAO to implement Global Safety Roadmap Boeing Supports Improved Safety and Aviation Growth in Africa Things to remember :  Airlines have accommodated air travel growth by adding more frequencies and non-stops throughout the world … as we have seen this in Africa as well Long-term fleet planning needs to be part of all airline’s strategy, not just an exercise Look for synergies, partnerships, ways to grow the Regional market “collectively” Look for ways to grow the lucrative international business traffic Look for ways to capture international new markets Things to remember Things to Remember:  Things to Remember Strong demand exists to support increased non-stop routes between Africa and Europe, the US and Middle East African airlines need to continue to focus on safe, reliable, and profitable operations New technology aircraft such as Boeing’s 787 have longer range, the correct size, and better operating economics to provide African carriers with the ideal tool to open Africa to the “Rest of the World” on direct routes Things to remember:  Things to remember African governments must increase political and financial support of their respective regulatory agencies Achieving and maintaining FAA IASA Cat 1 status is the largest challenge in growing routes and frequencies between Africa – US as well as European Union … and Finally:  Africa needs to be mindful of falling behind the rest of the world in long-term fleet planning and fleet renewal Remain focused on “your” plan, but never loose sight of your competitors “Constantly evaluate your business model … and have the courage to change, adapt and create market flexibility”, J. Miguel Santos, Dir Intl Sales ME&A Protect Africa’s future within the global airline industry! … and Finally Thank You!:  Thank You!

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