Aviation consultancy business IBA forecasts there will be strong orders for new aircraft at this year’s Farnborough Airshow taking place from 16-22 July.
In a report ahead of the aviation show, the company put this down down to a strengthening economic outlook – GDP and traffic growth, improving load factors, flattening of yield decline and rising oil prices.
As for whether airline profitability had peaked, IBA said there are mixed signals at play – positive metrics including traffic growth, vibrant new markets, and a buoyant SLB market “seem to indicate that strong net profitability will continue”.
IBA added: “However, with the gathering clouds of creeping fuel prices, rising interest rates, wage inflation and increasingly price sensitive passengers, a different picture begins to emerge. Mid-2018 fuel prices are $15 higher per barrel than IATA predicted, a 40% increase year on year.”
IBA also suggested that airline costs are expected to rise which would result in an upward trend in yields and has identified a number of airlines that are operating with negative margins and may find the times ahead “particularly difficult” predicted that if costs continue to rise, more airlines may begin to feel the squeeze later in the year.
IBA’s mid-market analysis indicates there is a gap in the market in terms of pricing range and payload, however it said it is not clear if the gap is as large as some have estimated.
With regard to the narrow-body market, IBA expects values to remain strong for new types as demand continues to strengthen.
“Rising costs will favour the fuel-efficient new generation of neo and MAX aircraft, and with deliveries of new generation narrow-bodies expected to rise, an increase in retirements is also expected along with a surge in conversion demand,” IBA also said.
IBA.iQ, IBA’s data platform, forecasts over 60 Airbus A330ceo lease ends each year over the next three years while A330-200 lease ends are expected to peak in 2020, potentially pushing pricing to levels attractive for P2F conversion. IBA.iQ also forecasts a peak in Boeing 777-300ER deliveries in 2019.