Annual Report 2006 | 2007
CTT Systems AB is a Swedish technology company operating in the aviation industry. The company develops and markets humidity control systems for commercial aircraft. Customers include both aircraft manufacturers and airlines.
The 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 2006/2007 is distributed to all registered shareholders. Information is published regularly on www.ctt.se.
Annual General Meeting: November 15, 2007 Interim report, July–Sept: November 15, 2007 Interim report, July–Dec: Februari 2008 Interim report, July–March: May 2008
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 5 pm on Thursday, November 15, 2007 at the company’s premises, Brukslagare- vägen 5, Nyköping, Sweden.
Shareholders wishing to attend the Annual General Meeting must be registered in the VPC share register no later than November 9, 2007, and notify the company of their intended participation no later than Monday, November 12, 2007.
In order to vote, shareholders whose shares are ad-
ministered 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 November 9, 2007.
CTT IN bRIEF
Ctt in brief 2
the year in brief 4
review by the President 6
oEm-market 8
the company with a green approach 10
Humidity in balance 12
Humidity control 16
moisture management 17
market overview 18
Ctt´s market potential 20
sales and marketing strategy 22 Customer and product overview 23
Competition 25
Background, organisation and quality 26 risk and exposure analysis 28
the Ctt share 30
administrative report 32
five-year summary 39
income statement 40
Balance sheet 41
shareholders´ equity 42
Cash flow statement 42
accounting principles and notes 43
auditors´ report 52
senior executives 53
Board of directors and auditors 54
table of Contents
The year in brief
Agreement signed to develop Cair™ for humidification of the first-class cabin of the Airbus A380 aircraft.
One of the world’s largest airlines has ordered humidifi- cation of the first-class cabin for all its A380 aircraft.
First order from a USA-based airline.
Continental Airlines orders the Zonal Drying™ System for the company’s whole fleet of forty-one Boeing B757-200 aircraft.
First deliveries of the Zonal Drying™ System for the Boeing B787 aircraft.
Cair™ orders for three different VIP customers.
Net sales totalled SEK 49.2 million (SEK 23.7 million).
Operating loss SEK -7.8 million (SEK -13.4 million) and cash flow SEK -30.2 million (SEK -5.9 million).
Order intake unchanged SEK 51 million (SEK 51 million).
BUSINESS CONCEPT
The company’s business concept is to solve the two moisture problems currently encountered in commer- cial aircraft, i.e. preventing condensation between the cabin and the outer skin, and raising the cabin humid- ity 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 emphasize 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 subcontractors in the aviation industry, interesting and competitive system solutions shall be created for both manufactur- ers 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 in-flight climate 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”.
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.
60 50 40 30 20 10 MSEK –10 –20 –30
Order intake Net sales Loss
06–07
02–03 03–04 04–05 05-06
55
+108%
Net salesOUR MISSION IS TO CREATE A BETTER IN-FLIGHT CLIMATE AND THEREBY PROVIDE ECONOMIC AND ENVIRONMENTAL BENEFITS TO THE AIRLINE. THE KEY IS TO BALANCE HUMIDITY LEVELS ON BOARD.
OUR CONCEPT INCREASES PASSENGER WELL-BEING, CONTRIBUTES TO A BETTER ENVIRONMENT AND IMPROVES AIRLINE ECONOMY, SIMULTANEOUSLY.
WE CALL IT ”HUMIDITY IN BALANCE”.
Review by the President
DURING THE PAST FINANCIAL YEAR the aviation industry has continued to develop pos- itively and we now find our- selves in a period of strong global economic growth.
Historically speaking, most of the airlines have high load factors and are succeeding in raising ticket prices resulting in good profitability. Even American airlines that have been hard pressed for many years began earning money once again. Airbus and Boe- ing have recorded numerous orders, especially for their short-haul aircraft. Of considerable importance for CTT is the fact that Boeing has been extremely successful with sales of the Boeing B787 and that Airbus has commenced with the development of the A350 aircraft.
CTT IS ESTABLISHING ITSELF AS OEM SUPPLIER
For CTT, the past year has been characterized by development work for the Boeing B787 aircraft.
Humidifiers and the Zonal Drying™ System un- derwent the major part of validation tests and the first systems for the prototype aircraft have been delivered. We expect all the tests to be completed before the end of the year. Parallel to the validation tests, we have commenced series production and also invested substantial sums in manufacturing capacity during the course of the financial year.
Thanks to the sales success of the Boeing B787, we expect Boeing to raise production output sooner than planned and we are working hard to ensure that both CTT and our sub suppliers will be able to meet Boeing’s demands and requirements.
During the year, we have also been working with the development of the first-class cabin humidi- fication of the Airbus A380. Validation tests have commenced and we will deliver the first system in 2008. Moreover, our work with Airbus has been fo- cused on the marketing of our dehumidification and humidification system for the new Airbus A350.
We have high hopes that Airbus will not only offer its customers humidification of the flight deck and crew rest compartments, but also take the next step and give passengers the opportunity to experi- ence a better in-flight climate on long-haul flights.
From an industrially active viewpoint, I believe that we have succeeded in positioning ourselves ideally to qualify as a supplier for these aircraft.
Should we succeed we will be able take pride in the fact that CTT has established itself as a significant OEM supplier with products for all new types of long-haul aircraft.
POSITIVE DEVELOPMENT OF RETROFIT MARKET FOR ZONAL DRYING™ SYSTEM CONTINUES The financial year 2006-2007 was, where it con- cerns the Zonal Drying™ System on the retrofit market, very positive. We delivered 73 systems to seven different airlines with a total value exceed- ing SEK 30 million. This means that this activity, as a whole, has become profitable. Furthermore, Continental became our first airline customer in North America. The whole Continental business transaction was conducted in an impressive manner.
Two months after the order was placed, we sup- plied the first system and six months later we had delivered all 41 systems. We were highly praised by Continental for our fast and professional way of working. The deal serves as proof that CTT now has the manufacturing capacity to cope with sudden increases in turnover.
I expect the positive trend for the Zonal Drying™
System on the retrofit market to maintain momen-
tum and that we will continue to maintain stable growth in order intake. The goal for the coming year is to gain more orders in North America and win the first airline deal in Asia. The high utili- zation rate of the world’s aircraft fleet and rising aviation fuel prices make it increasingly profitable to invest in our Zonal Drying™ System.
Cair™ DominatEs tHE WorlD markEt for ViP airCraft
Six years have now passed since we delivered our first system to Lufthansa Technik for installation in a Boeing BBJ VIP aircraft. Since then, we have delivered a further 19 Cair™ for large VIP aircraft.
We totally dominate the world market for these systems and, as far as is known, no other system has been installed in a large VIP aircraft since we delivered our first system. We are now experienc- ing an upswing in this highly exclusive sector and demand for Cair™ is on the increase. This means we had and have opportunities to raise our gross margins. In combination with a system that we have now adapted for most aircraft types we see that our VIP operations begin to be profitable.
Otherwise, profitability for this business area had not been prioritized. We have seen the VIP market as a ticket to the commercially more interesting market for long-haul passenger aircraft.
tHE BrEaktHroUgH of Cair™ WitH PassEngEr airlinEs imminEnt
During the past year, we have also moved forward our positions in terms of humidification of passen- ger aircraft.
Now we have one year’s operational experience of Cair™ on two Air Mauritius Airbus A340 air- craft. On the whole, the system functions well. We experienced a couple of minor technical problems that have been resolved and expect Air Mauritius to fulfil the agreement and equip all of its long- haul fleet with the system. By way of this project, CTT has been able to gather experience of how Cair™ functions in an airline environment. This experience and those of our VIP aircraft operations are invaluable for our development work with new long-haul aircraft. All the signs are that hu- midification of the passenger cabin will within the foreseeable future witness a breakthrough and that CTT is well equipped to play a decisive role within this new business area.
Ctt nEars ProfitaBilitY
CTT has now succeeded with almost everything it has undertaken with the exception of the most essential: to be profitable. We were, however, very close to recording a positive result during the past six months. Both of our mature activities, Zonal Drying™ System for the retrofit market and Cair™ for VIP-aircraft, are now profitable.
What burdens the result is our long-term global marketing, development work with Boeing’s and Airbus’ new aircraft as well as our commitments regarding Cair™. We are however increasingly convinced that the investments we have made in all of these areas will result in good profitability over the coming decades. If we take the Boeing B787 as an example, we will have a high and stable produc- tion activity from 2008 and beyond as well as a very profitable after market. The A380 project will
The Senior Executives of CTT.
pave the way for humidification of passenger cabins on all long-haul aircraft. I therefore hope that all shareholders will agree with me that it will be worthwhile to participate in the impending stock issue and thereby give CTT the opportunity to realize the main objective and become profitable.
A BIG THANK YOU TO THE PERSONNEL AT CTT Finally, I would like to thank CTT’s personnel for yet another year of great commitment and good work. We have almost doubled the size of the workforce over the past two years resulting in the recruitment of around 20 new people. It isn’t easy to learn how to work in a complex industry such as the aviation industry and with the likes of
demanding customers such as Airbus and Boeing.
I’m impressed by how fast the new employees have grown into their new demanding roles and now work effectively with the world’s leading aircraft manufacturers.
Nyköping September 2007
Torbjörn Johansson President
PASSENGER TRAFFIC GROWTH RATES have increased steadily in recent years enabling airlines to return to profitability. Manufacturers estimate that traffic growth will average 5% annually over the coming years.
This stable growth in traffic combined with good increases in revenue per passenger has resulted in Boeing and Airbus booking record numbers of orders for several years in succession. 2007 has been no exception and Boeing’s sales for the first six months were the best in the company’s history.
Although no one believes this trend can continue, there are sufficient orders in the manufacturers’
order books to safeguard stable production dur- ing the coming years. In all likelihood, this will give the manufacturers the necessary strength to develop new aircraft types. Boeing’s future analy- sis foresees an expected requirement for around 28,600 new aircraft (for 50 or more passengers) over the next twenty years.
CTT DELIVERS SYSTEMS DIRECTLY TO OEM FOR THE FOLLOWING AIRCRAFT TYPES
AIRBUS A380 – SUPERJUMBO
The world’s largest ever passenger aircraft, Airbus’
new aircraft type A380 performed its maiden flight in 2005. The first series production aircraft was delivered to Singapore Airlines in October, 2007.
In standard configuration the aircraft carries 555 passengers and with a longer range than that of other large aircraft creates new conditions for both airlines and passengers. The low operating costs per passenger mile will change areas of the aviation market. Another noteworthy feature is the exceptionally quiet operational noise levels of the aircraft.
Airbus has 177 aircraft in an order book dominated by Asian carriers (Qantas, Singapore, Malaysian, Korean and Thai) and airlines from the Middle
OEM-Market
Boeing’s 20-year forecast for traffic growth.
7,0%
6,0%
5,0%
4,0%
3,0%
2,0%
1,0%
0
World- Numbers of Airline Traffic Cargo Traffic
Economy Passengers (RPKs) (RTKs)
3,1 % 4,5% 5,0% 6,1%
9 East (Emirates and Qatar). In Europe, Lufthansa,
Air France, Virgin and British Airways have so far ordered the A380. CTT’s humidifiers can be ordered as an option for crew rest compart- ments. Moreover, an airline has via Airbus ordered humidification of the first-class cabin for all of its aircraft. Included in the system for humidification of the first-class cabin is a Zonal Dryer.
boeingb787 – dreamliner
The launch of the B787 has been the most success- ful in Boeing’s history with firm orders for over 700 aircraft. The first 50 aircraft are expected to come off the production line in 2008. Thereafter, production output will increase successively to reach approximately ten aircraft per month by around 2011. The successful launch has however resulted in the company considering an earlier acceleration of production output than originally planned. In total, Boeing foresees a market for this type of around 3,500 aircraft over a 20-year period.
The Boeing B787 is based upon ground break- ing technologies whereby the fuselage, to a large extent, is made of composite materials that result in lower maintenance costs and lower weight (reduc- ing fuel consumption by 20 %).
The Zonal Drying™ System is a standard on the Boeing B787, i.e. it is installed in all aircraft of this type. CTT’s humidification system can be ordered as an option for the flight deck. CTT’s humdifiers are moreover offered as an option for the two crew rest compartments.
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.
fUtUrE airCraft tYPEs
b747-8
To be able to compete with Airbus in the market for very large aircraft, Boeing has commenced with the 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 airplane and 19 of the pas- senger version.
a350
Airbus has launched the A350XWB, with the first deliveries of aircraft to customers expected to commence 2013. Although development of the aircraft is behind schedule in comparison to the Boeing B787, orders for around 250 aircraft have been received. We expect Airbus will also select our humidification technology for this aircraft.
nyab737
A great deal speaks in favour of Boeing starting a project within the next couple of years the aim of which would be to find a replacement for the com- pany’s faithful servant, the B737NG. It is expected that the new aircraft will enter commercial service around 2015. With the Zonal Drying™ System as base equipment on the B787, the likelihood of Boe- ing selecting the system for this aircraft type has increased.
Ctt | humidity in balance 20 000
15 000
10 000
5 000
0
Regional Jets Single Aisle Twin Aisle 747 and Larger
3 700 17 650 6 290 960
Boeing’s forecast for estimated aircraft deliveries 2007–2026.
Est. aircraft deliveries
The company with a green approach
The airline SAS has succeeded in attracting widespread interest. As a result of its strategic environmental work the carrier has earned itself a reputation as a green airline.
The ’green landings’ at Arlanda are one of the reasons.
- This is tomorrow, says Niels Eirik Nertun, Director Environment and Sustainability at SAS.
THERE IS NO DOUBTwhatsoever that aviation has a negative impact on the environment. Therefore, it’s the respon- sibility of the airlines to do what they can to reduce emissions, believes Niels Eirik Nertun, Director Environment and Sus- tainability at the SAS Group since 1995.
– Scandinavia is a part of the world where environmental awareness has come a long way. We are a Scandina- vian company that is a product of our times with a keen sense of responsibility, exercised by a totally committed mana- gement, he says.
The same year Niels Eirik Nertun was appointed Director Environment and Sustainability, SAS’ atti- tude to environmental matters took a new direction.
The company took a decision to maintain a position at the forefront in environmental matters and issues and thus began to work more strategically.
– We aren’t pulling a populistic gimmick because climate change has become a hot talking point around the world, but we have been working with this consciously for a long time. We are looking at all conceivable possibilities to become more effec- tive, stresses Niels Eirik Nertun.
CTT SETS A GOOD EXAMPLE
He identifies all forms of weight reduction as posi- tive measures toward becoming more effective and
fuel-efficient. A description that rings harmonious- ly well with CTT Systems’ product Zonal Dry- ing™ System, that can reduce an airplane’s weight by over a ton. SAS has tested CTT’s products over a long period of time and, according to Niels Eirik Nertun, the dehumidification system is of interest to SAS from an environmental viewpoint.
– This is a good example of an element in the fuel saving process that is becoming increasingly important. We are continuously searching for new ways in which to reduce weight. Even if we can reduce the weight of the aircraft by a few kilos, we do it, he says.
GREEN LANDING
The most widely discussed SAS environmental measure is the so-called Green Approach initiative that continues to attract attention from around the world. Many of the new airports under construction in China are planning to introduce this techno- logy. Last summer, an agreement between the EU and USA was signed that proposes all Boeing and Airbus aircraft crossing the Atlantic will gradually perform green landings. But for now, it’s impossible to say when all approaches to Stockholm-Arlanda will be green, says Niels Eirik Nertun.
– It depends on how fast this all happens, but we are very satisfied. We regard this as a ”triple win situation”. The winners are the airports, airlines and local environment.
– When this becomes standard the airports will be able to increase their capacities, and that’s what they live on.
BIOFUELS NEXT STEP
The next step in the SAS environmental campaign is to commence flying with renewable biofuels.
Niels Eirik Nertun.
11 If we can reduce the weight of aircraft by a few kilos, we do it, says Niels Erik Nertun.
Together with authorities and the Volvo Aero- supported company Ecopar, SAS has developed a synthetic jet fuel from biowaste. When a jet fuel blend comprises 10% biofuel, the environmental impact is also alleviated by 10%. Although the product exists already it must be manufactured on a larger scale before it is ready for commercial use.
A prospect that Niels Eirik Nertun believes could be possible by 2010.
faCts grEEn aPProaCHEs:
In January, 2006, SAS Sverige, together with Luftfartsverket (Swedish Civil Aviation Authority), entered a project that develops so-called green ap- proaches. On a green approach, the aircraft glides during the final phase of landing with engines running at a lower speed. The result is a 50% re- duction in fuel consumption and considerably less noise pollution.
Initially, 19 SAS Boeing 737 aircraft were equip- ped with the new technologically advanced onboard computers. The system is based on increased communication between the pilot and air traffic controller. This enables the exact calcula- tion of the airplane’s direction of approach and precise time of arrival, with a margin of error of only a few seconds. Today, holding times of 10-15 minutes prior to landing are not unusual and at flight levels that are not fuel-economic. With a green approach, landing queues in holding pat- terns can be eliminated completely because the pilot knows the landing time from the outset.
More than 1,500 green approaches have been conducted since the project first commenced.
Every green landing represents savings of 200 kg of fuel and 600 kg of carbon dioxide. When all 300 SAS aircraft perform green approaches savings of 90,000 tonnes of carbon dioxide can be achieved annually. That’s the equivalent of the annual emis- sions of 20,000 cars.
sas envirOnmental wOrk
1995 – Company begins strategical work with envi- ronmental issues.
1996 – Documentation of emissions and fuel con- sumption adopted as standard. through index the company can measure improvements. the same year, sas becomes the world’s first airline to employ a newly-developed DaC engine on a B737 that reduces nitrogen oxides emissions with 40%.
2000 – sas wins awards for ‘Best Environmental reporting 2000’ from European reporting awards (EEra). since the start in 1995, sas has received awards annually for its sustainability reporting.
2001 – sas is involved in the development of a more environmentally benign de-icing fluid.
2006 – Project with green approaches at arlanda commences.
2007 – the project test phase ends, but the green approaches continue and increase in number. sas also continuously works with a fuel-saving programme.
Ctt | humidity in balance
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.
65 tons
CO
2/year*
zonal drying
™can save
Humidity in balance
13
CTT | humidity in balance
Example:
Boeing 737 NG
21 tons*
less fuel consumption/per year
Reduced emissions/per aircraft and year
CO2 65 tons NOx 190 kg HC 35 kg CO 460 kg
*
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 efficiency factor of 3.5%.Source: www.luftfartsverket.se Figures are approximate.
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 oxide
Detrimental to human health
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”.
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
Cold symptoms
soar throat, dryness in mouth, nose and eyes Jet-lag
general discomfort on arrival
feel better sleep better
food and wine taste better
risk for airborne infections are lowered feel more relaxed on arrival
many passengers on long-
distance flights experience: Passengers and crew with Cair™
installed in the aircraft:
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 wearing 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.
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 destination. It is scientifically proven that passen-
gers 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. Es- pecially 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”.
First / Business Economy
Average Cabin Humidity without Cair™
With Cair™– Dry Crown Area
Increased humidity in business area ~25%
Relative Humidity % 30,0 25,0 20,0 15,0 10,0 5,0 0,0
Average Cabin Humidity with Cair™
Increased humidity in economy area ~15%
15 15
our products, Zonal Drying™ system and Cair™, enhance the wellbeing of the passengers, accessibility of the aircraft, and offer airlines opportunities to simul- taneously reduce costs and contribute to a better environment. We call it
”Humidity in balance”.
Ctt | humidity in balance
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
17
CTT | humidity in balance
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.
THE HUMIDIFIER uses the technique of evaporative humidification and has been developed in coopera- tion 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. The pad 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.
In addition to the actual humidifier, the systems for the new Airbus and Boeing aircraft, A380 and B787, incorporate a software-based control unit, moisture sensors and advanced water valves.
Moisture management – the technology
Market overview
POSITIVE FUTURE
Things are going well for the aviation sector despite being forewarned that the trend would turn due to low yields, high fuel costs, terrorist threats, etc. So good that a growing number are returning profits and that even the American airlines are on the road to showing black figures. The economic situation, increased liberalisation and development of new markets (e.g. China, India) are driving opti- mism. Storm clouds are still present but the current economic situation in the world is so strong that there isn’t any risk for a quick change. However, many are nervous and the first sign of a negative change could set a ball rolling and bring about a swift decline. The key subject of discussion in the branch during the past years has been the impact of aviation on the environment and how emissions can be reduced. The environmental aspects for avia- tion and other duties could prove themselves to be the reasons why the pendulum will swing back in a negative direction, whilst another could be an in- dication of over capacity within specific segments.
Branch experts believe we will witness a peak dur- ing mid-2008 followed by a subsequent decline.
A relatively stable market has begun to generate profits for the airlines despite a fuel price that is higher than ever before. During 2002, the air- lines barely succeeded in presenting profits when the price of oil was USD 20 per barrel. They are now recording profits with oil prices hitting over USD 70 a barrel. Above all, the airlines have been successful with their cost saving programmes that have had a real effect. Noteworthy is the fact that since Delta Airlines and Northwest Airlines emerged from bankruptcy protection in the spring (that is granted under Chapter 11 of the U.S. bank- ruptcy code), it is the first time since December, 2002, that none of the world’s ten largest airlines
are any longer under bankruptcy protection. This is an important indicator for an industry that has lost more than USD 42 billion during the period 2001-2005. During 2006, the airlines made a combined loss of USD 500 million compared with a loss of USD 4 billion for 2005. There still remain companies that are fighting for their existence and an example is Alitalia that has been up for sale for a longer period of time but has failed to attract investors.
CONTINUED GROWTH
Growth measured in RPK (Revenue Passenger Kilometres) showed a stable development during 2006 with a passenger increase of 5.2 %. Airbus and Boeing foresee continued market growth averaging 5% annually in the coming years whereas the ICAO (International Civil Aviation Organization) predicts an annual growth of 5.3 % for 2007. The first half of 2007 witnessed an increase of 6.3 % and it was the Middle East where the growth was strongest.
As late as September, the IATA raised its forecast for the airlines combined result for 2007 from a USD 3.8 billion profit to a USD 5.6 billion profit.
Estimates for 2008 forecast a profit in the region of USD 9.6 billion.
RECORD-BREAKING ORDERS LEVELS Aircraft manufacturers continued to sell well in 2006 with Boeing and Airbus recording a total
2500 2000 1500 1000 500
No.
2003 2004 2005 2006 2007
Orders of aircraft booked by Airbus and Boeing.
19
AIRCRAF T DEL IVERED* ON ORDER* * BACKLOG 2006 BACKLOG
T YPE H1, 2007
A32X 3,095 2,174 632 391
A330/A340 811 352 115 107
A380 0 165 7 0
A350XWB 0 228 15 126
B737NG 2,177 1,630 725 239
B757 999 0 0 0
B767 880 58 10 36
B777 640 331 76 70
B747-400 639 31 12 -4
B787 0 637 157 189
B747-8 0 87 60 9
CRJ 1,327 161 46 131
EMBRAER 1,106 452 173 85
*) AUGUS T 20 07 * *) JUNE,30, 20 07. According to Flight International (August 20 07 ) the status for the various aircraft can be seen in the table.
The combined order totals for Airbus and Boeing have increased with over 100% compared with the corresponding period for last year.
of 1,816 orders, making it the second best year in history. The first half year 2007 has also begun in record fashion. The combined orders for Airbus and Boeing have increased 100 % when compared with the corresponding period for 2006. In Boe- ing’s case, the first six months’ sales have been the best in history, with sales of the Boeing B737 and Boeing B787 being exceptionally strong. Airbus owes its success primarily to the Airbus A320 family, but even the Airbus A350 has recorded a number of orders. The biggest event during this period was undoubtedly the record number of or- ders that, above all for Airbus, were placed during the Paris Aerosalon in June (accounting for 425 of 550 orders). A firm indication of strong optimism amongst the airlines.
Even Bombardier and Embraer have increased their sales (with 20 %) during 2006 compared with 2005.
MARKET FORECASTS FOR THE AVIATION INDUSTRY
FOR A PERIOD OF TIME, longer than previously ex- perienced, we have witnessed an upswing with high economic growth that many refer to as a ”super
cycle”. A good example of this is the record number of orders aircraft manufactures have booked in recent years. The question is whether the long run will continue. Many branch experts believe we will reach the peak during 2008 followed by a subse- quent decline. If this proves to be the case, many of the large aircraft orders will be ready for delivery at the same time the market is in decline and the airlines will not want the aircraft. This is a sombre scenario. The positive scenario is one where the growing markets in e.g. China and India, have such a high demand for new capacity that a requirement exists for the aircraft even if Europe and the USA experience a poor market. An additional positive factor is that the airlines have been successful with their cost reduction programmes. According to IATA, these improvements have been around 2.5 % p.a. and saved the companies USD 2 billion between 2004 and 2006. The airlines will continue with their cost savings and certainly be faster when making decisions and more flexible in terms of market presence.
In the shorter term, both Airbus and Boeing be- lieve that around 900 jet aircraft will be delivered in the next twelve months.
CTT | humidity in balance
ZONAL DRYING™
SYSTEM
In the short-term, 1-2 years, our Zonal Drying™ System has the greatest sales potential amongst the approx. 8,700 existing single-aisle aircraft in operation and primarily the B737NG, A32x and B757. Even in the fu- ture, long lead times will be commonplace in the retrofit market as decisions to invest are difficult for the airlines. What makes the investment calculation more attractive for our system is, above all, the high fuel costs and the raging debate about envi- ronmental impact, where our system contributes to a reduction in emissions. However, we ought to be able to sell the Zonal Drying™ System to a certain sector of the retrofit segment. This market is important because the airlines of the future should demand that the system is pre-installed in all new aircraft types or that an alternative is made available as an option during production. In the longer-term, we believe that the sales potential will be improved considerably via the aircraft manu- facturers thanks to the selection of our system as standard equipment for the Boeing B787. Airbus is yet to make a decision as to how the A350 will be equipped, but it is our hope that they are closely following Boeing’s moves with the B787. Boeing is moreover studying a replacement for the B737 and even Airbus has begun to show signs that a replacement for the A320 series will be looked into.
Bombardier has also come forward with the new CRJ-1000 and announced the development of a completely new aircraft known as the CSeries.
We believe our Zonal Drying™ System ought to be of interest as standard equipment for all these new types of aircraft.
CAIR™
In the short-term, the retrofit market is also of the considerable interest for Cair™. This applies espe- cially to wide-body aircraft with an existing fleet of some 2,900 airplanes (A330/340, B777, B767 and B747-400) currently in operation. But as retro- fit installations of Cair™ are relatively extensive, we only anticipate a small market share. We believe the future of Cair™ lies in systems installed in new aircraft at the time of delivery. This is where the new wide-body types Airbus A350 and Boeing B747-8 are of the greatest interest for us. The mar- keting of Cair™ and its inherent benefits are of the essence when creating awareness amongst passen- gers and airlines prior to the next step, when air- lines place demands on the aircraft manufacturers.
Our humidifiers are already options for the Boeing B787 (flight deck and crew rest compartments) and Airbus A380 (crew rest compartments). We believe the humidifiers also have a very good chance of be- ing selected as options for these compartments on both the A350 and B747-8.
The VIP aircraft market has witnessed a strong upswing that we expect to continue for some time to come. We are market leaders in humidification for large VIP aircraft and our Cair™ system is now well established within this segment. Cus- tomers are aware of the system’s existence and all the major completion centres 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. We believe we can sell 1-2 Cair™ annually for wide-bodies and 2-4 for narrow-bodies.
CTT´s market potential
Ulf Liljenberg, Sales & Marketing Manager.
Example:
A330-200
52,5 tons*
less fuel consumption/per year
Reduced emissions/per aircraft and year
CO2 165 tons NOx 630 kg HC 1 kg CO 85 kg
*
Based on 5,000 flight hours per year. 300 kg less weight gives a fuel saving of 10,5 kg per flight hour with a 90% load factor, fuel efficiency factor of 3.5%. Source:www.luftfartsverket.se Figures are approximate
21 NEW AIRCRAFT TYPES
THE A380 AND B787 can, for our part at least, no longer be regarded as new aircraft types as we have already chalked up successes with our systems and products for these aircraft. At present, the Airbus A350 is the type that has come furthest in terms of development with specification due to be completed in the autumn, 2007. Our hope is that the marketing Airbus has conducted, regarding an increased cabin humidity level, means they are looking at an active humidity control system. The Boeing B747-8 is also of interest for us even if it is based on an older design. Our hope here is that a number of novelties
will be introduced and we foresee the greatest po- tential for humidification of the crew rest compart- ments.
Other forthcoming projects in the longer term are the new Boeing B737 and the new Airbus A320.
Both of these projects have time horizons beyond 2015, but Boeing has already gone ahead with an initial study. By virtue of our successes with the Zonal Drying™ System we ought to stand a good chance of having our systems in these aircraft types.
165 tons
CO 2 /year *
zonal drying
™can save
THE PREVIOUS YEAR – A RECORD YEAR
THE PREVIOUS FINANCIAL YEAR was a record year for our retrofit sales. We sold systems for 61 aircraft, which is CTT’s best year to date. This represents a 33% increase in sales compared to the correspond- ing period for 2005/06. The fact that the majority of these systems went to new customers (50% more than 2005/06) further broadens our customer base.
The real highlight of the previous year was the agreement with Continental Airlines in the USA for an order of 41 systems for installation in their fleet of Boeing B757-200s, which constitutes a major breakthrough for us on this market. Together with the order from TAP in Portugal for systems in their A330-200, these agreements are of signifi- cant value for us in terms of sales and marketing.
With large, well-established carriers on our list of customers the interest for our system will continue to grow. Our co-operation with Satair has also enabled us to provide information to companies and markets we hadn’t previously been able to work. A development that we believe will produce results in the future. Through our new contacts we have also gathered more know-how about the airlines and their operational experiences that will facilitate our continued sales work with these markets.
ZONAL DRYING™ SYSTEM
THE MAIN TOPIC OF CONVERSATION of late has been the environment. The aviation industry is no excep- tion and many airlines have chosen to focus on environmental benefits. Until now, our customers have invested in the Zonal Drying™ System mainly as a result of high fuel costs and system’s fuel-sav- ing capability. For these reasons, we will further develop and expand the know-how of environmen- tal-related benefits associated with our system as well as the information associated therewith. The objective is to ensure that airlines take this into consideration when making their investment ap- praisals. Among other things, we will update our sales and marketing material more regularly and also attract the attention of airlines with the help of
direct marketing where the environmental advan- tages are highlighted. With the combination of fuel saving and environmental benefits, we believe we can work the so-called ”flag carriers” such as SAS, Air France, Lufthansa, British Airways etc. Even if these airlines do not have obvious condensation problems, they can still substantially reduce the weight of their wide-body aircraft and thereby re- duce emissions. And that should increase the inter- est for our system still further! Satair’s presence at most of the major aviation trade fairs facilitates the continuous marketing of CTT. Via these events and our existing customers the message of our systems’
benefits also reaches the aircraft manufacturers.
The ultimate goal is that they should incorporate our system in future aircraft types such as the new Boeing B737 and Airbus A320.
CAIR™
NOW WE HAVE ACCUMULATEDalmost one year’s op- erational experience of Cair™ with Air Mauritius, providing us with a great deal of feedback. Airbus has also conducted detailed measurements on the Air Mauritius aircraft to gather information for an evaluation. We hope to convince Airbus that cabin humidification is good, that our technology works and that they will hopefully consider the system for e.g. Airbus A350. The fact that both Airbus and Boeing are marketing improved cabin humidity as one of the key comfort advantages of the B787 and A350 has undoubtedly helped our cause on the mar- ket. Until now, neither Airbus or Boeing have said if they intend to raise the humidity level via an active system, but naturally it is our hope that they plan to do so. Our main priority is to ’spread the word’
of our systems’ advantages via Air Mauritius and the trade fairs we attend. The focus is on finding a major airline as a customer for Cair™ and with whom we can attract the worldwide attention that the systems needs.
Thanks to deliveries of the Airbus A380 and Boeing B787 during 2007/08, airlines will be able to gather
