Market Update, the impact of Brexit and Geographic Risk, November 2016

IBA’s Stuart Hatcher, Chief Intelligence Officer, shares his expertise in this Market Update, focusing upon the impact of brexit and regional risk.

In summary IBA forsees the below for the remainder of Q4 2016 and the beginning of Q1 2017:

  • Low oil continues to stimulate growth in developed economies – slow rises expected only until >2020
  • Emerging markets growing but oil is too low
  • Strong USD hurting US exports, election result could be defining moment or anti‐climax
  • Brexit effects still settling. UK economy reacted better than expected and exports have been boosted by falling pound, full effect only speculation at the moment
  • Interest rates will remain low with further drops in Europe, small rises in US market (early 2017)
  • Inflation rising due to strong USD for ROW – could trigger early interest rate rises
  • Traffic will remain strong for 2016 within US, Europe less certain. India and China still exhibiting strong growth
  • Chinese & Japanese markets still retains strong appetite to acquire aviation businesses
  • Airlines generally still doing well, but some high profile operators have seen big drop in profits. Brexit and weak pound has had an effect on UK carriers
  • South American, Russian and South East Asian operators feeling pressure, Western European and US doing well
  • Values for younger aircraft still rising, lease rates still falling – margins are very thin
  • 2015 was the top of the market for operators, we are now on the plateau. Pricing is increasing still but lease rates can’t support values at current levels indefinitely should operator demand significantly reduce! Watch your lessees!

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