Speaking at the 24th Annual Finance & Commercial Aviation Conference in Geneva, the International Bureau of Aviation (IBA) gave its latest views on aircraft valuations and its predictions for future market trends and the good news is that it cannot get any worse.

Owen Geach, IBA’s Commercial Director, and Alice Gondry, Senior Analyst, addressed the conference presenting their findings on the current levels of aircraft values and lease rates.

Mr Geach said: “IBA holds the view that the industry downturn has now hit rock bottom and that there are signs of recovery to be seen although it will be some time yet before values return to base rates, let alone the heady heights of 2007.

 IBA’s research found 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,” explained Mr Geach.  “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% from base values and some have fallen even further when considering the market peak in 2007,” he explained. “Some poor performing aircraft like the MD80 have seen market values dropped 40% from base alone.”

Mr Geach warned the financial crisis is still having an effect. “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.”

While the volcanic ash cloud which has settled over Western Europe  looks set to ease in the coming days, Exclusive Analysis which provided market intelligence of the Lloyd’s and London market insurance community said the expectation was that there would be  large numbers of business interruption claims from various industries.

“While the overall economic impact of the volcanic ash cloud affecting European travel is likely to only modestly affect the global economy, industries like perishable exports and regional airlines would face significant adverse economic conditions if the current situation continues beyond the week,” it said. “This would result in the need for substantial government support.

“The growing backlash against regulators will likely force future governments to take a softer line in closing national airspace due to natural or human disasters, such as terrorist attacks, global pandemics or satellite failure, though not to the extent that safety would be jeopardised.”