Air Transport World

Coming up for air: the aircraft leasing and finance business remains under water but is showing new buoyancy.(Asset Management)

Although demand for new and used aircraft remains severely depressed, with appraised values and lease rates well below pre-9/11 levels, signs point to the dawning of a recovery, according to aircraft financiers, appraisers and analysts with whom ATW spoke. This is particularly true when compared to the situation as it existed in the SARS- and war-battered first half of 2003. "A year ago it was worse than it is today, but it certainly got worse in the meantime," says Avitas VP-Asset Valuation Douglas Kelly.

Adam Pilarski, senior VP of the Chantilly, Va.-based consulting and appraisal firm, agrees: "I would say that compared to a year ago we are in better shape and compared to four or five months ago we are in much better shape."

Boullioun Aviation Services CEO Robert Genise also believes the market has rebounded somewhat: "We like to feel we hit bottom earlier this year and we've seen some trends that indicate improvement."

Henry Hubschman, president of GE Capital Aviation Services, states that, "In general it's looking more positive ... and there seems to be a light at the end of the tunnel."

Despite their optimism, however, all share the view that the market has a long way to go before it can be regarded as healthy and are careful not to exaggerate the scope of the nascent recovery. As Pilarski observes, "Now we are only 10 feet under water, versus a mile underwater. It's still difficult to breathe."

Contributing to that feeling of asphyxia was the presence in early October of nearly 2,200 parked aircraft, further evidence--were it needed--of the stubborn imbalance between seat supply and traffic demand. Airclaims Director-Consultancy and Information Services Edward Pieniazek says this represents a decline from the 2,201 recorded at the end of June as the SARS crisis receded but an increase of more than 100 compared to the 2,062 that were idle in November 2002. "We haven't gotten rid of the problem," he tells ATW, adding that the failure of German leisure carrier Aero Lloyd in October probably will push another dozen or so aircraft out of the active fleet.

However, he and others also make the point that the majority of parked aircraft are Stage 2 and early generation Stage 3 jets that are unlikely to return to the skies under any circumstances. Their presence significantly overstates the actual extent of the desert air force, these experts say. "As far as what comes out of storage, there are a lot less real live fliers than some people might think," states Fred Klein, president of Herndon, Va. …

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