New Growth Opportunities Await Aerospace Industry; Business Jets Emerging as the High-Margin Segment : Frost & Sullivan

Mumbai, Maharashtra, India, Friday, August 12, 2005 -- (Business Wire India)

Although aircraft orders and demands are still to match the peak levels of 2000-2001, expanding economies both in the United States and world over and improved corporate profits and stock market perception have placed the commercial aerospace industry back on the growth track.

“In fact, many aerospace companies have registered higher sales and profits during the first nine months of 2004 compared to the same period in 2003,” observes Frost & Sullivan Senior Aerospace Analyst Kirti Timmanagoudar.

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Certain segments such as business jets, commercial maintenance, repair and overhaul (MRO), fractional ownership, and commercial avionics have grown by more than 10 percent in the last financial year with an estimated 15 percent growth rate for 2004-2005.

Stricter security standards have created new opportunities in certain aerospace segments like explosive detectives, training, and simulation. Orders for new aircraft such as Airbus A380 and Boeing 7E7 expects to catalyze growth in the future.

Industry fundamentals including available seat miles (ASMs), revenue passenger miles (RPMs), and passenger load factor (PLF) are improving with strong year-over-year growth.

“Despite the drastic reductions in air travel and employment levels, the delivery and production side has held up relatively well,” asserts Timmanagoudar.

Investors should watch out for the business jets segment, which is poised to deliver the highest margins in the aerospace industry. This segment expects to grow by 11 percent in the next three to six months (4Q04-1Q05) with pent-up demand likely to materialize into orders in the coming quarters.

The continued growth of fractional ownership, accelerated bonus depreciation and a new class of very light aircraft to be launched by the end of 2005 are likely to further the popularity of business aviation.

Fractional ownership (FO) companies have played a pivotal role in extending the reach of business aviation with packages of 25 hours of flight time for under $90,000 a year. It estimates that more than 50 percent of orders and backlogs with aircraft manufacturers are accounted by FO companies.

“Business aircraft manufacturers are expected to continue their dependence on fractional ownership companies for majority of the growth, although the over-dependence is coming down steadily,” says Timmanagoudar.

The changing dynamics of the airline industry are also affecting maintenance, repair, and overhaul (MRO) segment where third-party MRO shops are thriving due to low-cost carriers that prefer outsourcing their non-core activities. MRO is a $36 billion industry worldwide, with U.S. contributing 42 percent of these revenues. Engines and components are proving to be the fastest growing segments.

Aerospace Equipment and Services: Growth and Investment Opportunities, part of the Financial Benchmarking Analysis (FBA) Aerospace - subscription (9950), presents a broad outline of the aerospace industry, highlighting major market and financial trends with an emphasis on four growth segments, namely, business jets, fractional ownership programs, maintenance, repair and overhaul (MRO) services, and avionics. The FBA service provides comprehensive industry information and financial analysis to support all investment and financial analysis needs. Executive summaries and interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com

Aerospace Equipment and Services: Growth and Investment Opportunities A872-F1