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‘2013 start of golden age of world aviation industry’

Despite past turbulence in the aviation industry—which was marked by stringent airport checks, the threat of terrorism in the sky, high fuel prices, death of old-name brands and the emergence of consolidations—2013 is seen as the beginning of its decade of golden age.

“We are actually entering a golden age of aviation, for which the past 20 years have been a mere warm up,” says Dick Forsbergh, head of strategy at Avolon, a major aircraft-leasing company headquartered in Dublin, with offices in Shanghai, Singapore, Hong Kong, the US and Dubai.

Forsbergh based his prognosis on the long-term industry trends, from traffic growth in emerging markets and the shift of regional influences to the development and delivery of future generations of commercial aircraft.

This is backed up by deep pools of capital looking for secure risk-adjusted returns.

Placing the current market condition into perspective, the author is also looking at the record-breaking developments in the past.

Globally, over 56 million people are employed in aviation and related tourism industry.

“If aviation were a country, it would rank 19th in terms of GDP [gross domestic product]; by 2026, the industry will contribute $1 trillion to the world economy,” he said.

Despite the past threat of economic downturn, he said aviation has proven to be highly resilient to economic stress, with only three of the past 40 years where passenger traffic has declined.

As more planes are bought to either replace old inefficient ones or upgraded, demand is widely forecast to maintain an average 5 percent per annum growth rate over the next 20 years.

The Avolon executive said commercial airlines provide essential infrastructure links in many of the world’s fastest-growing economies and are a key component of that growth.

He said the good news is that “over 30,000 commercial jets will be delivered over the next 20 years to meet the demands of growth and fleet replacement, requiring $4.5 trillion of financing.”

“Despite dire predictions the past decade taught the industry leaders not to be overly concerned about the sustainability of the airline industry,” he said.

In 2012 the world’s airlines expect collective operating profit of almost $14 billion and net profit of nearly $7 billion, which is not too far off from 2011 results and ahead of the consensus numbers published at the start of the year.

Forsbergh credited the positive view to US and Asian carriers, where the bulk of the gains have been recorded, while European airline profitability flat-lined again.

“Airlines can deal with expensive fuel, but not volatility,” he said, adding that some failures are still likely.

At the local front Philippine Airlines (PAL) plans to order a large number of Airbus A321s and A330s.

According Aviation Week, PAL, which is already an Airbus-A319/A320 and A330-300 operator, has decided to stay with Airbus.

The A321 order includes some A321Neos, but the bulk of the A321s on order are likely to be for the existing model, because two of the executives say PAL—as part of the deal—has secured first deliveries of the A321s in 2013.

Last year PAL announced  it had ordered 54 wide and narrow-bodied Airbus aircraft with a list price of $7 billion. The 54 aircraft orders are part of the first phase of a multi-year refleeting and modernization plan, which involves the purchase of up to 100 new planes.

“Our intention is to buy up to 100 aircraft, 26 of that will be long range, wide body,” PAL President Ramon Ang said.

PAL’s decision to go with the higher capacity A321 is significant, because it currently has no A321s. However, PAL’s largest local competitor, Cebu Pacific Air, has ordered A321s, the carrier’s CEO-advisor, Garry Kingshott said.

Cebu Pacific, the Philippines’s largest national flag carrier, has two brand-new Airbus A320 aircraft deliveries last year and seven more aircraft in 2013. The carrier currently operates 10 Airbus A319, 21 Airbus A320.

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