I’m delighted to introduce Ishka Vista: 2023 Aviation Finance Market Forecast.
Commercial Aviation is a resilient industry. Well, it has had to be, considering the global events that regularly cross its path.
2022 turned out to be a better year – and it could have been even more so, if not for more global events which have cascaded a series of other issues that are making 2023 a more complex proposition.
Russia’s war against Ukraine is a deeply concerning tragedy of its own, and inevitably its repercussions since Q1 2022 have had an impact on the wider aviation ecosystem, while China, with its large domestic market and one of the drivers of global GDP, struggled to manage its exposure to COVID, as a result of which its airlines have underperformed both domestically in 2022 and also abroad.
These and other global economic events have helped create a mixed bag of other impacts on the commercial aviation world – a rise in inflation, volatile jet fuel prices, energy and commodity price hikes, a rise in interest rates, and supply chain performance. There has also been an element of escalation in new aircraft/engine pricing.
Some of these factors are contributing to a ‘cost of living’ crisis that is beginning to impact on discretionary spend in many developed world markets. Nevertheless, airlines are currently saying that forward bookings are holding up.
With a fair wind, 2023 can build on 2022 results, with some airlines continuing to repair balance sheets and registering healthy revenues and operating profits, especially in the US. Analysis also suggests that lessors have been recovering some of their deferred rentals, but they have been flexible where necessary with the more sensitive and fragile credits. Lessor and Asset Manager consolidation did continue into 2022, and 2023 won’t be an exception either.
Aviation financiers also became increasingly selective in whom and in what they were prepared to finance. In 2023, they will also have to account for fast moving inflation, escalation, and interest rate environments. The good news is that the much talked about ‘pent-up demand’ has been a consistent theme and where markets have opened and returned, so have the passengers.
Segments of the industry may experience more short-term pain in 2023 in the quest for the promise of long-term gain, but there are many positives already visible in the meantime from the speed and scale of the recovery.
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