Calm before the storm?

Eleanor Steed
By Eleanor Steed December 8, 2016 11:29

Calm before the storm?

IATA and Fitch Ratings have commented on the strong year for airlines and are predicting another good year for 2017, but are the clouds gathering on the horizon? The mood in the industry today is turning more cautious. Expectations are increasing for a market correction. Tim Clark stated this week that he sees the market flatlining, which will remain for the next few years. As we have mentioned here many times before this year, airlines are subtly reducing capacity, deferring and parking aircraft, rationalising networks – all signs of a slowing market.

Although the market expected the Federal Reserve to increase interest rates at the beginning of the year, there are stronger signs this will happen. The banks are facing serious pressure from Basel IV – no matter what is said on stage, Basel IV as currently proposed will increase their costs of funds, with some banks likely to exit this market altogether – one has already left in the past six months. Banks that are most affected need to be re-evaluating their business models today to determine how they can continue to provider aviation financing products and services in the new environment. And, even though Eximbank and UK Export Finance are currently on pause, the market is going to need additional support – deliveries will continue and will need to be financed.

All of these issues and more have been debated on stage at our Aircraft Investors Days held in London this week and will continue in Dublin in January.

Eleanor Steed
By Eleanor Steed December 8, 2016 11:29