Aircraft Finance 2010 in Geneva – Day 1

I just came home from the first day of the 24th Aircraft Finance & Commercial & Business Aviation in International Geneva.

Even within the closely knit air transport community few people outside the narrow field of aircraft finance are aware of the event. Once a year it brings together economists, market forecasters from the various manufacturers, equity researchers from banks, fleet managers from airlines and obviously dealmakers from leasing companies.

In an economic perspective it seams that the worst is over. The world is slowly crawling out of the slump. There is however one fundamental change. The part of the Western World (Europe, Japan, North America…) in global Gross Domestic Product (GDP) has fallen below 50 percent. Emerging countries such as India or China are definitely pulling up.

What does this mean for air transport and thus airframe demand? Numbers of passengers in both premium and economy cabins are rising again. Some airlines are making money again. As a whole the carriers from South East Asia are getting profitable again. Those over the Atlantic continue to stagnate. As far as air cargo is concerned, the indicators are clearly positive as well. For instance, semiconductors are hauled again in large quantities.
At a global scale the recovery in air transport is only at the beginning and the coming years will be difficult. More mergers & acquisitions in all parts of the world are likely.

There remains an oversupply in airframes. Owing to the lower number of specialized financial institutions from some 45 to less than 30 worldwide much skills and know how in the particular field of aircraft financing and maximizing asset valuation has been lost.

Now some newcomers in the Middle East and China are trying their luck. The number of leasing transactions remains very slow. Owing to other instruments, notably traditional export financing, making deals with new aircraft remains easier und more profitable for the monetary institutions.
As far as technology is concerned, there are two trends. The first is definitely towards lower fuel consumption as a way towards less carbon dioxide. From 2012 onward it will be submitted to the European Union Emission Trade Scheme (ETS). As a result, optimization through more efficient flight procedures and research in alternative fuels have become priorities. There is even a new international organization dealing with this question in Geneva.
The other is to prevent fundamental disruptions owing to the lack of funding. Airbus and Boeing are both totally absorbed by their A350XWB respectively B787 Dreamliner composite aircraft. The B787 has been nicknamed the “Delayedliner“.

As in the previous years, the event was a wonderful opportunity to refresh memories. As it is usually the case in this sort of gathering, the formal speeches are less relevant than the informal discussions. Several big shots of the international air transport world turned out to be humans such as you and me. One example is the legendary Teal Group analyst Richard Aboulafia, another James R. Billing, Boeing’s Chief Airline Market Analyst. Brian D. Pearce, Chief Economist of the International Air Transport Association (IATA) was a third.

Want to know more?

Stay tuned.

Danstanmart