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The only way is up ... but it's a long road

IBA's latest views on aircraft valuations and future market trends.
IBA commercial director Owen Geach
IBA commercial director Owen Geach

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Consulting bureau, IBA joined industry colleagues from across the globe to discuss the current state of the aviation market at the Geneva Conference this week. But the real question on everyone’s minds – aside from the Icelandic volcano – was what the future might hold and how long it will be before the market stabilises?

IBA commercial director Owen Geach and senior analyst Alice Gondry hold the view that the industry downturn has now hit rock bottom and that there are signs of recovery to be seen although it will be some time yet before values return to base rates, let alone the heady heights of 2007. Key highlights from IBA’s sessions include:

• Aircraft values have declined across the board – for some aircraft, value reductions have been minor as little trading has actually occurred, but for others values have dropped significantly.

• Current production aircraft have exhibited the smallest value decline, with some out-of-production aircraft values dropping by large margins.

• Most aircraft market values have dropped between 10-20% from base values, and some have fallen even further when considering the market peak in 2007.

• Some poor performing aircraft like the MD80 have seen market values dropped 40% from base alone.

• Banks are reluctant to provide finance other than for new delivery aircraft – and this, together with low passenger numbers, has led to a reduction in deals being completed.

• There have been a large number of lease defaults – and decreasing rental streams.

For a copy of IBA’s full market presentation, or to discuss IBA’s views and predictions, please contact Owen Geach on owen.geach@ibagroup.com or +44 (0) 1372 224488.

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