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Double Counting - A source of the forthcoming problems for aircraft values
01 April 2008
Adam Pilarksi, senior vice-president at Avitas, continues his regular column by looking at the effects of over ordering
It is my firm belief that the huge orders of new aircraft are a sign of significant problems on the horizon for those with investments in aircraft.There are strong indications that a recession is forthcoming or we are already in the midst of one.
On the demand side, an economic downturn causes decreases in traffic, which leads to an eventual deterioration in aircraft values. But there is another reason for value changes related to the supply side. Aircraft take a long time to build.
Airlines order aircraft when they see sufficient demand for traffic and when they are profitable. However, often deliveries are made many years in the future. Economic conditions and the financial status of the airline may be very different from the time an aircraft was ordered to the time it is delivered.
Manufacturers look at the orders as an indicator of future demand. High orders have...
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