Annual Report 2007
CTT Systems AB is a Swedish technology group operating in the aviation industry. CTT develops and markets humid- ity control systems for commercial aircraft. Customers include both aircraft manufacturers and airlines.
The parent company has its headquarters in Nyköping, Sweden, and is listed since 1999 on the OMX Nordic Exhange Stockholm, Small Cap.
FINANCIAL CALENDAR
The printed annual report for July - December 2007 is distributed to all registered shareholders. Information is published regularly on www.ctt.se.
Annual General Meeting: May 8, 2008 Interim report, Jan–March: May 8, 2008 Interim report, Jan–June: August 29, 2008 Interim report, Jan–Sept: November 21, 2008
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 5 pm on Thursday, May 8, 2008 at the company’s premises, Brukslagarevägen 5, Nyköping, Sweden.
Shareholders wishing to attend the Annual General Meeting must be registered in the VPC share register no later than May 2, 2008, and notify the company of their intended participation no later than Monday, May 5, 2008.
In order to vote, shareholders whose shares are admin- istered through a bank’s trustee department or private fund administrator must temporarily re-register their shares in their own name. Registration must be completed no later than May 2, 2008.
CTT IN BRIEF
CTT in brief 2
The year in brief 4
Review by the President 6
Superjumbo A380 8
Humidity in balance 10
Market review 16
Market potential 18
Customer overview 20
Competition 21
Dehumidification system 22
Humidification system 23
Production and deliveries 24 New companies joins the Group 28
The CTT share 30
Background, organisation and quality 32
Administrative report 34
Risk and exposure analysis 38 Five-year summary – The Group 40 Income statement – The Group 41
Balance sheet – The Group 42
Shareholders’ equity – The Group 43 Cash flow statement – The Group 43 Income statement – The Parent Company 44 Balance sheet – The Parent Company 45 Shareholders’ equity – The Parent Company 46 Cash flow statement – The Parent Company 46
Accounting principles 47
Implementation of IFRS 50
Notes of the financial statements 51
Auditor’s report 60
Senior executives 61
Board of directors and auditors 62
CONTENTS
The year in brief
Boeing order grows, better than expected outcome for ordered humidifiers
Boeing’s B787 airplane delayed by at least nine months
CTT acquires sub-supplier Bröderna Ingemar och Bo Mekaniska AB
CTT executed new stock issue of approx. SEK 40 million
60 50 40 30 20 10 MSEK –10 –20 –30
Order intake Net sales Loss
07
03–04 04–05 05–06 06-07
55
Our missiOn is tO create a better climate bOth inside and Outside the aircraft and thereby prOvide ecOnOmic and envirOnmental benefits tO the airline. the key is tO balance humidity levels On bOard. Our cOncept increases passenger wellbeing, cOntributes tO a better envirOnment and imprOves airline ecOnOmy, simultaneOusly.
we call it ”humidity in balance”.
BUSINESS CONCEPT
The company’s business concept is to solve the two moisture problems currently encountered in commercial aircraft, i.e. preventing condensation between the cabin and the outer skin, and raising the cabin humidity level to enhance comfort and wellbeing for both crew and passengers.
STRATEGY
CTT’s strategy is to consolidate its position as the leading player on the market through on-going development of products in the Dehumidification and Humidification product sector.
Marketing communications will aim to empha- size the humidity-related problems that currently prevail in aircraft. CTT will take an active part in discussions surrounding health and comfort in the cabin.
By entering into alliances with other subcontrac- tors in the aviation industry, interesting and com-
petitive system solutions shall be created for both manufacturers and airlines.
The long-term goals in terms of volume will be achieved by supplying aircraft manufacturers directly.
MISSION
Our mission is to create a better climate both inside and outside the aircraft and thereby pro- vide economic and environmental benefits to the airline. The key is to balance humidity levels on board. Our concept increases passenger wellbeing, contributes to a better environment and improves airline economy, simultaneously. We call it ”Hu- midity in Balance”.
VISION
CTT’s vision is that all airlines shall be able to offer the same level of comfort in the cabin as in a normal indoor climate, in terms of air humidity.
Review by the President
FOR CTT,THIS SHORTER FINANCIAL YEAR HAS
been characterized by Airbus’ and Boeing’s new aircraft projects.
After a trouble- some delay, Airbus has finally delivered the three first A380 aircraft to Singapore Airlines that are very satisfied with the in- troduction of the new model.
Unfortunately, Boeing has not been able to keep to the time plan for the development of the B787 aircraft. At the time of writing, it looks as if the project will be delayed by more than a year, compared with the original schedule.
INTEREST FOR ZONAL DRYING™ SYSTEM ON THE INCREASE
In March 2008, we delivered our 300th Zonal Dry- ing™ System. First Choice in the UK was the cus- tomer and the aircraft a Boeing 767-300. We have now delivered the system to a total of 27 different airlines, two of which are outside Europe. The system is becoming better known for every year that passes and not least since it became standard on the B787. Thanks to this, the rising price of oil and an increase in environmental awareness, inter- est continues to gather momentum. It is especially gratifying that many major airlines in and outside Europe are now considering installing the system in long-haul aircraft. It would be surprising if these positive signals combined with CTT’s and Satair’s marketing strategies wouldn’t result in a higher order intake over the next few years.
CAIR™ – IDEALLY POSITIONED FOR FUTURE LONG-HAUL AIRCRAFT
The development of sales of Cair™ for VIP air- craft has been particularly pleasing. Since March 2007, we have received orders for seven aircraft from seven different Completion Centers. When we began selling Cair™ on the VIP market, we were dependent on Completion Centers recommending customers to install our system. Now it is often the case that the end user is already aware of the exist- ence of Cair™’ and requests its inclusion in the tender. This presents us with major opportunities to take advantage of the prevailing VIP aircraft boom and sell the system to a number of other Completion Centers thereby further expanding the market to which we have access. We have moreover received the first indications that there is an interest to in- stall Cair™ in existing VIP aircraft in service when they are upgraded. Hence, we have the chance to open up a retrofit market for VIP aircraft.
Within the market for long-haul passenger aircraft, we have high hopes that we will be just as success- ful in the next few years. During 2009, the major airline that has ordered Cair™ for the first class cabin will take delivery of its first A380 airplane.
We believe the airline’s imminent marketing of its first class will be the starting shot for cabin humidi- fication in passenger aircraft. CTT will command a strong position when the market gets hot. We have operational experience of Cair™, are the leading supplier of humidifiers to Airbus and Boeing and offer a complete moisture management system.
CTT BECOMES A PROFITABLE OEM SUPPLIER Development work on the B787 project is nearing its end. We have passed the validation tests for the Zonal Drying™ System and only the life tests for the humidifiers need to be conducted. Regarding
humidification of the first class cabin of the A380, the dehumidifier is approved and humidifier trials will commence after the summer. We have com- menced series deliveries for the B787 project and delivered the first spare parts for the Singapore Airlines’ A380 aircraft. I’m also pleased to state that CTT will now be able to benefit economically from being suppliers to the two largest aircraft manufacturers. We have moved into the produc- tion phase for both the A380 and B787 and have even entered the aftermarket phase for the A380.
This means that CTT’s cash flow from these two large aircraft projects - that has been strongly negative for a long period - will become positive and continue to improve as the accelerating deliv- ery rates gather momentum. At the present time, it is a little difficult to see exactly when the cash flow from OEM activities will be positive as it is uncertain how long Boeing’s delay of the B787 will be. It does however feel good to know that when we start our next major OEM project, that I hope will be the A350, that we’ll have two large profitable OEM projects in production and constantly rising spare parts sales.
BRIBO
With the acquisition of Bribo, CTT is now a Group. We have recruited a Managing Direc- tor who will start after the summer vacation. We expect that he, together with the support of the previous owners, will develop the company further.
CTT will increase its orders substantially during the next few years, but the objective is to develop relationships with other customers, both existing
and new, to attain a stable growth. I extend all the employees in Bribo a warm welcome to the CTT Group.
OUTLOOK FOR 2008
As mentioned earlier, it appears most likely that Boeing will further delay the B787 project. This will mean that CTT’s production increases during 2008 will be lower than we had previously calcu- lated. Another result of delayed deliveries of the B787 aircraft to airline customers will be that CTT will commence deliveries of initial spare parts later than planned. This combined with the low Dollar rate, represents another financial burden. At the time of writing, it appears that the increased sales of Cair™ will partially compensate for the delay of the B787 project. We also expect to sell more Zonal Drying™ System on the retrofit market with relatively short delivery times. Taking everything into account, it looks as if CTT’s financial break- through will be witnessed in 2009. I hope that our shareholders have the patience to wait a little longer for positive numbers. In any case, after ten tough years of headwind, all of us at CTT are look- ing forward to soon be able to fly with Airbus and Boeing long-haul aircraft into decades of growth and good profitability.
Nyköping April 2008
Torbjörn Johansson President
CTT’s senior management team (Torleif Nilsson missing on picture)
sizevs. flexibility. Price tag vs. comfort. Which weighs the most in the future of aviation? The European aircraft manufacturer Airbus has made a clear choice with its gigantic A380 ‘Superjumbo’
that is certified for over 800 passengers and thus qualifies as the world’s largest – and possibly most comfortable passenger aircraft.
AIRBUS POINTS TO SIGNIFICANT ENVIRON- MENTAL ADVANTAGES WITH THE SUPERJUMBO According to the manufacturer, the A380 consumes about as much fuel per passenger mile as an eco- nomical family car. In numbers, around 17% less fuel than its closest rival, the Boeing 747. Moreo- ver, carbon emissions per passenger mile are well under the EU legislative limits for newly manufac- tured passenger vehicles.
CREW AND PASSENGER COMFORT
But the wellbeing of the individual is also of impor- tance and Airbus talks of ”new levels of comfort and luxury … at a more affordable price” by focusing on both passenger comfort and the crew’s working conditions. The cockpit is the quietest of its kind.
At the same time, they draw attention to the spaciousness onboard, and claim a wider cabin with broader seats and aisles improves the levels of comfort for all involved, especially those working onboard. In the crew rest compartments, which can
accommodate up to half of the crew simultaneously, the ceilings are sufficiently high to stand upright.
Furthermore, humidification is available as a standard option.
IMPROVED WORKING ENVIRONMENTS – All those who fly think it’s fantastic to work on the big machines. They are easy to work with, spacious and roomy, says Flight Instructor, Peter Sandström at Novair.
The dry air on long-haul flights – drier than in the Sahara, say some – is a well-known dilemma for all those who fly regularly. Pilots and cabin personnel who fly long-haul several times a month are especially exposed.
– It takes its toll on the body. We are advised to drink a great deal and many oil, cream and grease themselves really well. Yet we still end up feel- ing dehydrated, wrinkled and have to quench our thirsts when we reach our destination, says Peter Sandström, who welcomes the thought of air hu- midification onboard.
Because it will be some while before the Super- jumbo begins to serve the relatively small Scandi- navian airports, the A380 interior can be viewed with a degree of envy from a distance.
Steward, Mikael Morling, who has 18 years of cabin experience including destinations served by SAS in China, Thailand and North America, is also impressed by air humidification.
”Like stepping from a busy office into a quiet restaurant.”
How it is to fly with Airbus’ new Super- jumbo according to the manufacturer.
9
– A lift for the aviation industry
Morling recalls when SAS conducted trials with humidifiers in business class onboard the Atlantic crossings.
– We stewards worked the whole time in business class, but when one had been down in tourist class and returned, one immediately noticed how much better it was to inhale the better air in business class, where the humidifiers were located.
– So air humidification is high on the list of wishes.
The question is if there’s any specific measure that would mean more for our wellbeing!, he says, thus echoing the wishes of a sizable majority of his work colleagues.
THE PRICE OF A TICKET
Whereas Airbus emphasizes the possibilities in terms of comfort, there are others who believe the A380’s ”real attraction lies in its capacity to trans- port many passengers over long distances for a small amount of money.” The difference lies in how those that place the orders i.e. the airlines, decide how to dispose of the space onboard.
HUB-TO-HUB
With 50% more cabin space and 30% more floor space, the Superjumbo can in an extreme case take up to 40% more passengers per trip than its clos- est rival, the Boeing 747-400 (Jumbo Jet). With a maximum certified capacity of 853 passengers, the A380 becomes competitive on the busiest, heavily travelled routes between world metropoles such as London, Mumbai and Shanghai.
Singapore Airlines was first to take to the air with the A380. The maiden flight between Sydney and Singapore was made in October 2007, with a ma- chine in a 471-seat configuration on two levels, 60 thereof Business Class and 12 First Class. During spring, 2008, Singapore Airlines took two more A380s on strength, meaning both London and Tokyo will be visited by the ‘Giant of the Skies’ in the foreseeable future.
A NEW MARKET TAKES SHAPE
With traffic volumes in Asia and Pacific regions expected to surpass those of their European- American counterparts this year, it is logical that Asian airlines order the A380. Economies in the region are expanding. Japanese, Chinese and other Southeast Asian peoples have more money in their wallets, whereupon the inclination to travel grows.
This is reflected in the numbers of people who are flocking to fly to destinations such as Thailand, Las Vegas and Mecca.
In a world where Atlantic crossings were once the norm for long-haul flights, flights to and from Asia are now increasingly setting the tone. In the future, it is expected that seven of the world’s ten mega cities will be situated in Asia, and that China will emerge as the next largest commercial aviation market after the USA.
In the light of these facts, Airbus’ strategy is rational. By virtue of its size and comfort onboard, the A380 has excellent chances of meeting the needs and requirements of the market now taking shape.
Superjumbo A380
Since the early nineties, the aviation industry has witnessed an extremely expansive development. The first open, single-seat, propeller-driven airplanes were followed by larger aircraft enabling larger numbers of people to fly.
The advent of the pressurized cabins in the thirties rep- resented a huge leap forward in development, enabling flights at higher altitudes where weather conditions are more favourable but also placing greater demands on the reliability of the systems in the aircraft. With a warm cabin and very cold exterior, condensation began to form on the inside of the aircraft fuselage. A need for dehu- midification product was created for the first time. With the introduction of the jet engine into passenger service in the 1950s, aircraft could fly further and carry more passengers.
Hence, a need for Cair™ was created. Cair™ humidifies the cabin, counteracting the dry cabin environment of long-distance flights. In recent years, progress has mainly been made in the field of computers, communication, engines and design. Today, many aircraft systems are computer-controlled and incorporate advanced electronic equipment, which are more sensitive to condensation.
Mankind’s understanding of the environment, health and wellbeing also continues to grow.
ENVIRONMENTAL AWARENESS IS HERE TO STAY Quite suddenly, you could hear them everywhere.
Words such as climate change, greenhouse effect and global warming. It may have begun as media propaganda, but it is clear to see that public envi- ronmental awareness is here to stay. This is vindi- cated by the fact that political pressure to respond to climate issues has become more prevalent of late.
A development that suits CTT perfectly well as our fuel saving systems result in significant savings for both the environment and economy.
Many airlines now market themselves as environ- mentally aware. SAS perform green approaches whereas Virgin tests biofuel and tows its aircraft to take-off areas before firing up engines. Many airlines sell carbon emission certificates giving passengers an opportunity to pay for their share of pollution. Common for all airlines is the joint en- deavour to minimize weight in the air and thereby save fuel.
Our humidity control system Zonal Drying™ Sys- tem not only resolves the problem with unnecessary condensation for good. It also reduced the aircraft’s weight by up to half a ton, constituting significant fuel savings and reductions in harmful emissions.
So instead of being forced to manage the headaches resulting from condensation - our system gets to the bottom of the problem and remedies the root causes. With the Zonal Drying™ System onboard, you will never again need to worry about where the superfluous condensation has gone!
A STRONG FINANCIAL BOOST
Fuel savings can be easily calculated into currency and it soon becomes clear what financial benefits the system can render. The amortization period for a Zonal Drying™ System is between two and four years, depending on the type of air traffic. The higher the number of passengers and the greater the utilization of an airplane, results in faster pay- back on the investment. Furthermore, the system has a concrete effect on the environment that can quickly be quantified. Carbon dioxide emissions can in some cases be reduced by up to 150 tonnes per aircraft and year. A balanced air humidity in an aircraft results in numerous advantages in terms of, amongst others, economy, environment, the aircraft, and safety.
Humidity in balance
11
svart = 85%
PMS 7545 turkos
C 93
M 0
Y 24
K 0
PMS 313 ljus-blå, 40% av:
C 100
M 28
Y 24
K 0
PMS 277
* Based on 3,000 flight hours per year. 200 kg less weight gives a fuel saving of 7 kg per flight hour with a 90% load factor, fuel
Condensation in aircraft has been a problem in the aviation industry for a long time. It occurs when passengers’ moist exhaled air makes contact with the interior of aircraft
fuselage. Condensation water is gathered in the fuselage resulting in a whole range of problems including, for example:
INCREASED AIRCRAFT WEIGHT
Condensation can increase the weight of the aircraft by over half a ton. This un- wanted increase means higher fuel con- sumption with negative effects for both transport economy and the environment.
ELECTRICAL DISTURBANCES
Large parts of the electrical cable network in an aircraft are located in areas where condensation accumulates. This can lead to short circuits in sensitive equipment, that can result in delays and expensive repairs.
CORROSION
The problem with corrosion is that it entails extra expense for the airlines that often have to replace structural parts at major maintenance checks and overhauls.
DAMAGED/IMPAIRED INSULATION
Water gets trapped in insulation making the material heavier and more reducing its functional capacity. Passengers can often feel a cool draught from windows and doors. Mould can also flourish in wet
insulation. Insulation must therefore be regularly replaced in aircraft.
RAIN IN THE PLANE
Air passengers can be exposed to drip- ping water during take-off and landing.
Condensation gathering on ceiling panels causes this phenomenon known as “Rain in the plane”.
65
tonsCO2/year*
21
tons*less fuel
consumption/per year
zonal drying™
can save
Example: Boeing 737 NG
Reduced emissions/per aircraft and year:
CO2 65 tons, NOx 10 kg, HC 35 kg, CO 460 kg
CO2 – Carbon dioxides
Contributes to the greenhouse effect that results in an increase of the earth’s average surface temperature.
NOx – Nitrogen oxides
Contribute to acidification and over fertilization of land and water.
HC – Hydrocarbons
Daylight ground-level ozone that is created by reaction can harm vegetation and affect human health.
CO – Carbon Monoxide Detrimental to human health.
Genomsnittlig luftfuktighet utan Cair™
Relativ luftfuktighet
% 30,0 25,0 20,0 15,0 10,0 5,0 0,0
Genomsnittlig luftfuktighet utan Cair™
Humidity in balance
Crown Area Crown Area
With Cair™– Dry Crown Area
Increased humidity in
business area ~25% Increased humidity in economy area ~15%
Crown Area Crown Area
Average Cabin Humidity without Cair™
Relative Humidity
% 30,0 25,0 20,0 15,0 10,0 5,0 0,0
Average Cabin Humidity with Cair™
Ökad uftfuktighet i ekonomiklassutrymmen
~15%
THE DRY AIR
In addition to the many benefits bal- anced air humidity constitutes in terms of economy, environment, aircraft and safety, it also has a significance for the wellbeing of the passengers and health of the personnel.
Cair™ has been created to enhance the passengers’
wellbeing by humidifying the dry cabin air. Nor- mally the relative indoor humidity in homes and offices is between 50-60%. In an aircraft this drops to 5-15%. This is because half of the air is drawn in by the engines at a height of around 10,000 m where the air is extremely dry. So the longer the flight continues, the drier the cabin air becomes and the more evident the symptoms become for the passengers. When people are subjected to air humidity lower than 20% they experience a series of different problems. For example sleep disorders, dry eyes, dehydration of the skin and mucous mem- branes, as well as the fact that food doesn’t taste so good in an airplane. Other discomforts include the need to remove contact lenses, increased likelihood of colds, a greater risk of viral infections, as well as problems with dry skin and allergies. This is particularly exasperating for cabin personnel, who are constantly subjected to the dry air. Increasingly
longer flights, now with durations up to 18 hours, only aggravate the symptoms further.
FEEL BETTER
Cair™ humidifies the dry cabin air and alleviates all of the aforementioned problems substantially.
The passengers gain more strength and energy and do not feel as tired when they reach their destina- tion. It is scientifically proven that passengers feel better with an air humidifier on board. In addition to the enhanced wellbeing of all in the aircraft and improved working environment for the cabin crew, the system has other advantages. The capacity to be able to offer good air during flights is a strong competitive advantage for airlines. Especially when one considers the growing demands for good levels of cabin comfort. And to be able to offer a flight with minmized environmental effect is yet another competitive advantage.
Our two systems enhance the well-being of the passengers, accessibility of the aircraft, and offer the airlines opportunities to simultaneously reduce costs and contribute to a better environment.
We call it ”Humidity in balance”.
Cold symptoms Soar throat, dryness in mouth, nose and eyes Jet lag
General discomfort on arrival
Many passengers on long- distance flights experience:
First / Business Economy
Passengers and crew with Cair™
installed in the aircraft:
Feel better Sleep better
Food and wine taste better
Reduced risk for airborne infections Feel more relaxed on arrival
15
svart = 85%
PMS 7545 turkos
C 93
M 0
Y 24
K 0
PMS 313 ljus-blå, 40% av:
C 100
M 28
Y 24
K 0
PMS 277
CREW HUMIDIFIERS
Enables increased humidity in crew rest compartments and flight deck for the comfort and wellbeing of the crew.
ZONAL DRYING™ SYSTEM
Prevents condensation in aircraft by combating the root cause. Less condensation means less weight resulting in lower fuel consumption and emissions.
And, in the long term, increased lifetime of aircraft components and insulation.
CAIR™ SYSTEM
Provides humidified fresh air to the cabin, a measure that improves the passengers’ all sensory experiences.
They feel better, sleep better and arrive in better shape.
CTT Systems is the only company in the world that can create a pleasant humidity level for both aircraft and people. We provide the following systems:
Market review
GROWTH
Air traffic has witnessed stable growth in recent years enabling the airlines to generate profits and the manufacturers expect it to rise by an average of around 5% annually over the next twenty years.
This stable market situation combined with a good increase in revenues per passenger has resulted in several years of record orders for Airbus and Boeing.
No one believes this trend can continue, but the manufacturers have secured sufficient orders in their books to ensure stable production for the next 5-7 years. This gives them the strength needed to develop new aircraft types. Boeing’s analysis of the future shows a requirement for some 28,600 new aircraft (with more than 50 seats) over the next twenty years.
Airbus forecasts a requirement for 16,000 so-called
”single aisle”, i.e. smaller aircraft with one middle
aisle, over the next twenty years. More than 30%
of these deliveries will be made to North America, 26% to Asia and 25% to Europe. The requirement for larger aircraft types - so-called ”twin aisle”
– will be around 3,700. The total order value of all these aircraft is estimated to be in the region of a staggering USD 1,700 billion.
Airbus recorded orders for 1,341 aircraft during 2007 and fairly close to Boeing’s order tally of 1,413 aircraft. Airbus delivered 453 aircraft last year as compared to 434 aircraft for the previous year. Boe- ing delivered 441 aircraft.
NO PROSPECT OF DOWNTURN IN AVIATION The aviation industry continues to develop strongly and the number of air kilometres increased by 7.4%
during 2007. Taken by different geographical areas, Asia recorded an increase of 7.3%, Europe 6.0% and USA 5.5%.
Zonal Drying™ System
Aircraft type Total ordered Delivered Customers
B737NG 72 72 Sterling, Hapag-Lloyd, Air Berlin, Transavia, Luxair, Sun Express, Excel Airways
B757 70 61 Icelandair, JetAviation, First Choice, Thomas Cook, Monarch, Continental, Jet2.com, TUIfly Nordic B767 27 27 Martinair, KLM, Jet Aviation, Monarch, First Choice
B747 1 1 Lufthansa
BBJ 1 1 Jet Aviation
A320/A321 26 26 First Choice, Monarch, Martinair, My Travel A330 9 9 Emirates, LTU, Monarch, My Travel, TAP
A300 4 4 Monarch
MD80 2 2 Austrian
MD11 33 33 KLM, Swiss, Martinair
CRJ-100/200 66 65 Lufthansa City Line, Adria Airways, Tyrolean/Lauda/Austrian
311 301 per March 31, 2008
Cair™
Aircraft type Total ordered Delivered Customers
B767 2 2 AAC, Jet Aviation
B747 1 1 Jet Aviation
BBJ 14 13 Lufthansa Technik, Jet Aviation, AAC A340 10 3 Jet Aviation, Qatar, Air Mauritius
A330 2 1 Qatar, Lufthansa Technik
A320 2 2 Jet Aviation, Airbus Corporate JetCentre A319 3 1 Stork, Airbus Corporate JetCentre, AAC
34 23 per March 31, 2008
Product and Customer overview March 31, 2008.
17
3000
2500
2000
1500
1000
500
No.
2004 2005 2006 2007 2008
Orders of aircraft booked by Airbus and Boeing.
Not only are the majority of airlines increasing their capacities in terms of aircraft numbers, but also those aircraft already in service are being filled to an increasingly greater extent. Western Europe is benefiting greatly from the strong development of the aviation sector in Asia. The price of oil has risen in terms of USD by around 65% during the past year and there’s no prospect of a downturn. As late as September, the IATA lowered its forecast for the airline industry’s consolidated result for 2008 to a profit of USD 5.6 billion. This is lower than its earlier forecast that was initially predicted to be in the region of USD 9.6 billion. The airlines prospects for 2008 have taken a turn for the worse primarily due to the instability of the Dollar, credit crunch in the USA and, not least, soaring fuel costs.
Some are talking of a peak in the cycle and point to the turmoil on the financial markets spreading to other markets.
Oil prices are hitting new all-time highs and are accelerating the modernisation of airline fleets with more effective use of fuel as a result. Older ver-
sions of the B737 and B747 aircraft types are being replaced by lighter aircraft with more efficient, cost-effective engines and advanced designs.
The restructuring of the airline industry continues to proceed. In Europe, SAS has announced divest- ment of Spanair with Iberia a probable buyer and Alitalia may be taken over by AirFrance-KLM. A large number of low-cost carriers are now operat- ing in Asia and mergers are to be expected. No cross-border fusions have occurred in Asia to date, even if foreign ownership continues to increase.
ZONAL DRYING™ SYSTEM
In the short term, the greatest sales potential for our Zonal Drying™ System can be found amongst the 8,700-odd single-aisle aircraft currently in service and primarily B737NG, A32x and B757 aircraft types. Even in the future, lead times in the retrofit market will remain lengthy, so long as air- lines find it difficult to decide on investment issues.
However, high fuel costs and the raging debate about the environment where our system can con- tribute to a reduction in emissions will make our system an increasingly attractive investment.
It is also important that we continue to work with this market to ensure that airlines continue to demand installation of the system in new aircraft types or, alternatively, be made available as an option during production. Boeing is studying a replacement for the B737 and even Airbus is talk- ing of a replacement for the A320-series, although the timeframes for these are uncertain. Indications from Boeing & Airbus point to the middle of the next decade.
CAIR™
The retrofit market is also of interest for Cair™.
This applies especially to wide-body aircraft around 2,800 airplanes (A330/340, B777, B767 and B747-400) of which are in service. In the near future, however, the new wide-body A380, B787 and A350 aircraft will be the focus of our attention.
Marketing of Cair™ and its inherent benefits are of the essence when creating awareness amongst passengers and airlines prior to the next step.
Namely, when airlines place greater demands on the aircraft manufacturers. Already an option for the Boeing 787 (flight deck and crew rest com-
partments) and A380 (crew rest compartments) aircraft, our humidifier has also been ordered by an Airbus customer for the first-class cabin of all its A380 aircraft. We believe the humidifiers also have a very good chance of being selected as an option for the A350 and also sections of the passenger cabin. The VIP aircraft market has witnessed a strong upturn that we expect to continue for some time to come. We are market leaders in humidifica- tion for large VIP aircraft and our Cair™ sys- tems is now well established within this segment.
Customers are aware of the system’s existence and all the major completion centers around the world have experience of installing Cair™. Over the past 12 months we have added Fokker and Airbus Corporate Jet Center to our list of customers and both have high expectations of being able to equip a number of aircraft
CREW HUMIDIFIERS
For the A380, we estimate around 50 systems per year can be sold for installation in crew rest com- partments. For the B787, we believe between 100- 150 systems can be sold annually for installation in crew rest compartments.
When it comes to Flight Decks for the B787 we believe around 100 systems annually is a conceivable figure.
IMPORTANT OEM PROGRAMMES FOR CTT
AIRBUS A380
The second series production Airbus A380 was delivered to Singapore Airlines on 11th January in accordance with the latest delivery schedule. In
Market Potential
standard configuration, the aircraft carries 555 passengers and with its longer range creates new conditions for both airlines and passengers. The low operating costs per passenger mile will inevitably change areas of the aviation market. CTT’s humidi- fiers can be ordered as an option for A380 crew rest compartments. Moreover, an airline has via Airbus ordered humidification of the first-class cabin for all of its aircraft. Included in the system for humidifica- tion of the first-class cabin is a Zonal Dryer.
Airbus has orders for 190 of this aircraft type and options for a further 51.
BOEING B787 – DREAMLINER
The launch of the B787 has been the most successful in Boeing’s history with firm orders for 866 aircraft already received. The first aircraft is expected to come off the production line in 2009. Production will increase successively to reach ten aircraft per month by around 2012. In total, Boeing anticipates a market for this type of around 3,500 aircraft over a 20-year period. The Boeing B787 is based on groundbreaking technologies whereby the fuselage, to a large extent, is made of composite materials that result in lower maintenance costs and reduced weight (decreasing fuel consumption by 20%). The Zonal Drying™ System is a standard on the Boeing B787, i.e. installed in all aircraft of this type. CTT’s humidification system can be ordered as an op- tion for the flight deck. CTT’s humidifiers are also offered as an option for the two crew rest compart- ments.
B737NG
The market for short-haul aircraft (for 100 or more passengers) is dominated by two players: Airbus
with its A320 family and Boeing with the B737NG.
Both aircraft types are delivered at a rate of 300-350 units annually. The Zonal Drying™ System has been available as a BFE option for the B737NG for a number of years. Boeing has delivered 2,941 aircraft of the B737NG family to date and has outstand- ing orders for 2,156 of this type plus options for a further 947.
A320 FAMILY
To date, Airbus has delivered 3,333 aircraft of the A320 family. 51 of these are corporate/governmental aircraft, 10 are used for training purposes, and the remaining 3,272 serve as passenger aircraft. Airbus has outstanding orders for 1,743 aircraft of this type plus options for a further 916.
A350
Airbus has launched the A350-XWB with the first deliveries expected to commence 2013. Although development of the aircraft is behind schedule in comparison to the B787, orders for some 250 aircraft have been received. We expect Airbus will also se- lect our humidification technology for this aircraft.
B747-8
To be able to compete with Airbus on the market for very large aircraft, Boeing has commenced with further development of the B747 aircraft. As the new version will incorporate a good deal of technology from the B787 it has been decided to designate the new aircraft B747-8. The new version will carry 400-500 passengers. Boeing has already sold 60 of the freighter version and 19 of its passenger coun- terpart.
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NORTH AMERICA
GREAT BRITAIN
CENTRAL EUROPE SCANDINAVIA
AFRICA
MIDDLE EAST
Customer overview
21 21 DEHUMIDIFIER SYSTEMS
CTT is currently the only supplier of active dehumidifier systems for the aviation industry.
Hitherto, aircraft manufacturers have tackled the problem of condensation in aircraft with the fol- lowing measures:
• Cover the cabin with fibreglass blankets
• Install gutters to lead away the water
• Fasten pieces of rubber foam to rods, etc, to catch running water
• Adhere felt to roof panels, etc, to catch water which should then evaporate
• Install ”bilge trays” to raise insulation in the hold of the aircraft enabling condensation to run underneath
• The ”SPUD-System” that blows relatively dry ECS air into the crown area during flight only.
These methods do not prevent condensation. In the short-term, they stop water from entering the cabin, but water will still be present in the fuselage with the problems this entails: increased weight, corrosion, mould and fungus in the insulation, and the risk of disturbance to the electrical system and components.
HUMIDIFIER SYSTEMS
There are currently three other suppliers of humidifier systems for aircraft:
HAMILTON SUNDSTRAND
Hamilton Sundstrand (USA) has developed a hu- midifier in which water diffuses through a mem- brane system. This humidifier is available as an option for Boeing 777 and 747 aircraft.
LIEBHERR-AEROSPACE
Liebherr-Aerospace (Germany/France) develops a humidifier that uses a heatexchanger to generate steam with the help of hot air emitted from the air- craft’s engines. The system is available as an option for the Bombardier Global Express business jet.
LE BOZEC FILTRATIONS & SYSTEMS
Le Bozec Filtrations & Systems (France) has de- veloped a humidifier that utilises electrical power to generate steam. Le Bozec offers the system to airlines for the humidification of the cockpit and for business jets.
These products have the following in common:
• relatively complicated technology
• unable to meet performance expectations
• low reliability
• they cause condensation problems
Competition
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ZONAL DRYING™ SYSTEM
The outer skin of the aircraft is extremely cold and when the cabin air meets this surface, condensation occurs in the form of frost that turns to ice. When the outer skin heats up during landing, the ice melts. Most of the water runs out through drainage vents when the aircraft is on the ground, but some accumulates in the insulation blankets and as pools in the fuselage.
The Zonal Drying™ System takes air from the cabin, removes the moisture, and blows the air be- tween the cabin and the aircraft’s outer skin. There, a barrier of dry air, which dries the insulation blankets, creates a weak over-pressure. At the same time, the relative humidity of the air coming into contact with cold surfaces are reduced, eliminating condensation.
The technology is based on Munters’ well-known moisture removal technology, which is already used in the military aviation industry with land-based equipment. CTT has refined this technology by building small, lightweight drying units, which can be installed for permanent operation in an aircraft. A Zonal Dryer consists of a fan, a heater and a rotor. The rotor is made from glass fibre and is impregnated with silica gel, a substance with excellent properties for absorbing and dissipating moisture.
Two separate airstreams are led through the slowly moving rotor. One, comprising about 80 percent of the air, passes through the rotor for drying. The dry air is then led to the area to be dried.
The other 20 percent of the airstream is warmed before passing through and drying the rotor. This moist air is re-circulated in the cabin, either di- rectly or via the aircraft’s air conditioning system.
Depending on the aircraft type, the Zonal Dry- ing™ System is either fitted in the crown area or beneath the cabin floor. The system remains in op- eration as long as the aircraft has electric power, in other words during flight and most of the time on the ground. The Zonal Drying™ System has been adapted and installed in various aircraft types.
Humidity control – the technology
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THE HUMIDIFIER uses the technique of evaporative humidification and has been developed in co-op- eration with Munters. The main component in the humidifier is a pad of glass fibre with specially designed air channels moistened via a spreader system. When dry air passes the moist surface of the pad, the water evaporates and the air is humidi- fied while it is cooled. By dimensioning the pad ac- cording to the airflow to be humidified, as well as controlling the supply of water and air temperature before the pad, the humidifier can operate without further regulation. Minerals and other contamina- tion in the water are precipitated in the pad which is replaced at regular intervals depending on the mineral content of the water.
The risk of bacteria spreading via the humidifier is minimal since the water evaporates during transfer to the air and thus cannot carry any bacteria.
The humidifier is installed in supply ducts to the zones to be humidified. Water is taken from the aircraft’s regular water system.
Cair™ consists of CTT’s Zonal Drying™ System and a system for humidifying sections of the aircraft’s pas- senger and crew areas. The humidifying part of Cair™
consists of one or more humidifiers with water supply systems.
Moisture management – the technology
Three years have passed since we received our largest
ever order at CTT, when we were appointed as a supplier to Boeing’s new aircraft type B787. Our dehumidification system, the Zonal Drying™ System, is standard on the new aircraft type and our humidi- fier is available as an option for the cockpit and crew rest compartments. The potential value (inclusive of aftermarket) exceeds SEK 1.9 billion, calculated over the full lifetime of the aircraft type.
The agreement has already resulted in many changes here at CTT. We have recruited new personnel, rebuilt and extended our premises and acquired one of our sub- suppliers. The greatest challenge lies in the transition from smaller scale, specified manufacturing to large- scale series production. Production Manager, Stefan Hammar, is responsible for this part of the operation and tells us more about how the work is proceeding and developing.
HOW FAR HAVE YOU COME IN THE CO-OPERATION WITH BOEING?
- We have already made the first deliveries of dehumidifiers and humidifiers for Boeing’s test
Production and deliveries
– At last, we have air under our wings
Stefan Hammar, Production Manager
25 aircraft that are
used for the opti- misation and evaluation of the various systems onboard. Now we have commenced work with the first series deliveries for aircraft that will be delivered directly to a customer and that feels very positive. Everything is going according to plan and collaboration with our sub-suppliers is work- ing well.
WHAT IS IT EXACTLY CTT IS DELIVERING TO BOEING?
- Our humidity control system, the Zonal Dry- ing™ System, is installed in all B787 series aircraft. We are also delivering three types of humidifiers for crew rest compartments as options.
HOW HAVE YOU ADAPTED TO THE BOEING 787 DELIVERIES?
- I was recruited a short time after we had final- ized the Boeing order and have since been able to recruit eight new colleagues for production. The number of personnel in my department will con- tinue to increase as we need to expand by some- where in the region of one to three new employees
per year to keep pace with the ever increasing production volumes. In the future, Boeing expects to assemble a new aircraft in three days. We also have many large contracts for various airlines that want our system for their existing aircrafts such as Continental Airlines to whom we recently sold 41 systems.
YOU HAVE ALSO REBUILT AND EXTENDED …?
- To create a larger production area and meet our customers’ future requirements we have rebuilt and extended our premises by around 600 square metres. Amongst the novelties are a ‘smack room’, where the metal details of the humidifier are riv- eted together and sealed. The room is also sound insulated and has its own ventilation system, meaning personnel avoid using breathing masks.
We have also invested in two computer-controlled test rigs as a complement to the existing test facil- ity we operate.
WHAT PREREQUISITES HAVE TO BE FULFILLED TO BE A SUB-SUPPLIER FOR CTT?
- To be able to deliver to the aviation industry, a manufacturer must hold a production approval
issued by the relevant civil aviation authority. If one of our suppliers doesn’t hold its own approval it is regarded as a part of the CTT operation. This means we make it our responsibility to ensure the deliveries are in accordance with the drawings sup- plied by the contractor.
WHAT IS SPECIAL ABOUT WORKING WITH THE AVIATION INDUSTRY?
- Production management within the aviation industry is built on traceability, meaning all parts and components should be identifiable. Each and every detail has its own unique series or batch number that places high demands on documenta- tion. Acceptance testing, the final phase of pro- duction, are also important. All systems must be individually tested and validated prior to delivery and can also involve fulfilment of special customer requirements.
HOW DO YOU WORK WITH LOGISTICS IN GENERAL AND THE BOEING 787 IN PARTICULAR?
- Boeing works with an open data system where orders and delivery schedules are planned. Re- gardless of customer or order type, information is transferred to our internal production management system and co-ordinated within the manufacturing process. It is also organized so that our sub-sup- pliers can use the same system, which will be an important issue for the future.
HOW LONG ARE DELIVERY TIMES IN GENERAL?
- Generally speaking, different customer orders need to be planned up to six months in advance so that we can place orders for materials and plan production. In some cases, we can meet orders in a shorter time, assuming we already have the major- ity of articles in stock.
HOW DOES QUALITY MANAGEMENT WORK WHEN YOU ARE MANUFACTURING FOR THE AVIATION INDUSTRY?
- Fundamentally important is that one always works with the original documents approved by the holder of the type certificate for the manufac- tured aircraft and equipment. Every manufactured unit is tested separately to ensure it complies with
the regulations and safety functions. The small- est deviation must be authorized, administered and updated in all documentation. That generally complicates the production process compared to many other activities. It can sometimes be very difficult to calculate a product improvement due to the vast amount of paperwork a change or modifi- cation generates. When we produce directly for an aircraft manufacturer the customer controls both product quality and process control issues closely and we continuously develop our work procedures to satisfy the needs. This means that everything that leaves here is quality assured.
WHAT OPPORTUNITIES DO YOU SEE FOR RATIONALISATION WITHIN PRODUCTION?
- As with so many other things, there is always room for improvement. We are currently in the start up phase of series production and will learn and discover many things in the process. We will not however invest in any fully-fledged assembly line. Today, every fitter and assembler completes the humidifier and dehumidifier units from start to finish, resulting in a greater feeling of responsibil- ity that ensures a reliable, high quality product.
THE FUTURE LOOKS BRIGHT…?
- The Boeing order will provide us with work for many years to come and there is also a very large aftermarket. For example, all humidifiers contain a consumable unit - a so-called pad - that the customer needs to replace regularly. There’s also a filter that must be replaced with a certain frequency. Apart from Boeing, we have many other exciting customer contracts that we are working on simultaneously, meaning we have a lot to do for a long time to come, concludes a positive Stefan Hammar.
prOductiOn
CTT’s production strategy is to perform the final assem- bly and maintenance of its own products. A large portion of the products comprise standard components from aviation industry and purchased from reputable suppliers.
In the case of key components, long-term agreements have been signed to ensure competitive prices even for short production runs. Manufacturing and assembly are contracted to carefully selected suppliers, including our subsidiary Bribo, enabling CTT to increase turnover rap- idly without investing heavily in machinery or personnel.
