By Jessica Salerno
As general aviation bids good riddance to 2009, Sparta, N.J.-based Brian Foley Associates, is citing some key evidence for a brightening outlook for 2010.
In a recent release Foley points out that the U.S. Treasury yield curve is widening to a record, signaling recovery; the U.S. Gross Domestic Product (GDP) climbed to 2.2 percent in the third quarter of 2009 (historically, 3 percent would indicate a favorable aircraft-sales environment), the fastest pace since 2007; stock markets around the world have rebounded smartly and the dollar value is still low. “With their strong local currencies and faster healing economies, it’s our thesis that non-U.S. buyers will deplete the most desirable pre-owned inventory, forcing still-recovering U.S. buyers to lead the new aircraft recovery later,” Foley says.
He also adds that while inflation doesn’t seem to be a problem (yet), he believes some may hedge by buying hard, high-value assets (such as an airplane) at today’s depressed prices and low interest rates. Finally, pent-up demand can’t be overlooked as the sales drought approaches its second anniversary in 2010. According to Foley, “just as some individual investors regret having sold their stocks at a market low, there’s likely a degree of remorse among one-time buyers who cancelled orders prematurely.”
Foley points out that the general aviation recovery will be gradual and stealthy when compared to the abrupt drop that got us here. He states that “whereas we were whip-lashed by the speed and severity of the downturn, we’ve now begun a six-year up-cycle whose pace will seem glacial in comparison. We were also a little spoiled by the robustness of business conditions near the top of the last cycle. The new “normal” will average out somewhere between then and now, and expectations should be recalibrated accordingly.”
Source: AVIATION WEEK
Date: 2010-01-04