Aircraft values at 'rock bottom'?

One expert view on aircraft values is that the industry downturn has now hit rock bottom and that there are signs of recovery to be seen - but it will be some time yet before values return to base rates, let alone the heady heights of 2007.

In a presentation to the the recent Annual Finance & Commercial Aviation Conference in Geneva, the International Bureau of Aviation (IBA) said that:

• 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 per cent 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 per cent 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.

Despite encouraging signs of general recovery in the airline industry (well, volcanic eruptions aside), it appears the finance sector will need more reassurance before it returns to the market with confidence.