Current market values of aircraft are expected to return to base values by 2015, AVITAS said Tuesday.
Speaking as a panelist at the ISTAT 2013 Americas conference in Orlando, AVITAS VP valuation Doug Kelly said, “We originally forecast values to come back in 2014, but have since revised our expectations to 2015 due to current market factors.”
Kelly went on to say that values were then expected to peak in 2017/2018 before the next recession. He stressed that this formula was not the same for every aircraft type, but works as a whole.
Fred Klein, president of Aviation Specialists Group, identified four major factors that were affecting aircraft values, one of which was structural and three of them being cyclical.
Jet fuel remains the chief structural factor, making new aircraft a premium if prices remain high, and just the opposite if prices drop. AVITAS’ Adam Palarski predicted earlier in the conference that oil prices will fall to $40 per barrel by 2018.
The three cyclical factors affecting aircraft values include moving out of the severe down cycle, higher OEM production rates, and continued low interest rates.
Klein said these increasing OEM production rates are neither good nor bad for the industry; however, they will create a lot of supply when the nature of demand changes.
Robert Agnew of Morten Beyer & Agnew added that he was definitely seeing a steeper curve in the depreciation of aircraft values, and agreed that fuel costs would be major factor in determining aircraft economic lives into the future.