Bureau Sees New Issues In Redelivery, Repossession,
Retirements
Earlier this month, International Bureau of Aviation (IBA) met
with leading Japanese banks, investors, aircraft lessors, airlines
and financiers for a series of structured meetings designed to
identify the forthcoming challenges to the aviation finance sector
and pinpoint particular exposures or strategic opportunities.
Managing Director Steve Fisk and Commercial Director Owen Geach
presented IBA’s market overview and the key trend indicators
which will affect the market going forward. New equipment and
technology, new financing opportunities, engine investment and an
aggressive leasing environment appear to be the main areas of
future interest.
IBA says that currently, the cyclical aviation market is facing
reduced financing as austerity measures impact spending in North
America and Europe. The picture is brighter in Asia, the Middle
East, South America and much of the Pacific Rim and India.
Against this backdrop, order books total over 1,400 orders between
Airbus and Boeing in 2011, including almost 1,000 A320 Neo orders,
and sale and leaseback deals are plentiful.
Operators and lessors are confident of finding finance for these
orders although senior Japanese financiers believe that ECA support
will remain increasingly important. Lessors are also
concerned about the effects of these new aircraft on residual
values of older fleets. Engine financing transactions are also a
hot topic and on the rise.
Forthcoming redelivery and possible repossession issues and
procedures will be impacting several Japanese banks in the near
future, with potential for losses. Incomplete documentation
and in some case a limited secondary market impacts aircraft
remarketing and this is another area which is set to dominate as
fleets of aircraft are retired.
Japanese airlines have been looking closely at valuations of
their fleet, engines and spare part inventories as they look at
outsourcing to streamline their operations and derive maximum value
from their assets. IBA’s professional appraisal team has also
been responsible for several bank’s valuations on end of
lease returns.
Looking ahead, IBA predicts new technology, in the form of the
Airbus A320Neo and the Boeing 737RE, will place a new emphasis on
maintaining the cost-efficiencies that they promise. There are many
new entrants into the finance market and IBA predict a sharp rise
in the requirement for airline assessments and asset
management.