Brazil -Civil Aerospace: High volume to fuel growth (Strategy, Performance and Risk Analysis)
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Brazil is one of the top five commercial jet manufacturing countries in the world and stands among the top 10 exporters of aircraft and parts to the US and the UK. Although nominal GDP declined at a CAGR of 7.6%, from US$2.5 trillion in 2012 to US$1.8 trillion in 2016 due to economic and political crises, aircraft part procurements continued from the US. Brazilian civil aviation industry is led by Embraer, the world’s third-largest aircraft manufacturer, which delivered 108 commercial jets in 2016. The other major player is Helibras, a subsidiary of Airbus Helicopters. Civil aviation Brazil is regulated by the National Civil Aviation agency (ANAC). In 2017 the agency signed a new agreement with the Civil Aviation Administration of China (CAAC) as an expansion of the agreement signed between both the countries in 1994. The new agreement will support growth in passenger and cargo traffic by expanding air services between two countries. Through this agreement, existing companies or new companies operating between the two countries can use any country as an intermediate stopover point.
Increase in disposable income to drive passenger volume
In Brazil, passenger volume declined at a rate of -7.7%, from 102.0 million in 2015 to 94.1 million in 2016. However, as levels of disposable income rise, opportunities for business and leisure travel is forecast to evolve. The number of airline passengers is forecast to reach 108.2 million in 2021, at a CAGR of 1.6%.
Aircraft capital expenditure to decline
CAPEX in Brazil recorded a growth rate of 40.8%, from US$1.3 billion in 2015 to US$1.9 billion in 2016, owing to procurements by airlines and aircraft leasing companies. It is forecast to decline over the forecast period at a CAGR of -2.0%, to reach US$1.6 billion in 2021. CAPEX on single-aisle aircraft stood at US$830.0 million in 2016 and is forecast to decrease at a CAGR of -3.9%, to reach US$745.0 million in 2021. CAPEX on twin-aisle aircraft stood at US$671.0 million in 2016 and is forecast to increase at a CAGR of 0.9% to reach US$685.0 million in 2021.
Aircraft deliveries to decline over the forecast period
In Brazil, the volume of aircraft deliveries decreased at rate of -57.1%, falling from 42 units in 2015 to 18 in 2016. The number is forecast to decrease at a CAGR of -14.3%, to reach 14 aircraft in 2021, caused by the market saturation of narrow-body carriers.
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