Operating lessor AerCap is keeping an optimistic outlook for the Gulf and Russian aviation markets, but admits Turkey remains a concern due to geopolitical risk.
“There is obviously concern around Turkey, more than anywhere else, given the events during last summer and the decline in traffic in Turkey due to the tragic events recently,” said AerCap’s chief Aengus Kelly, speaking on a fourth-quarter earnings call, adding: “There are definite stresses in Turkey and, for sure, in parts of Mediterranean Africa.”
However, Kelly says AerCap has seen "a turn” in the Russia aviation market.
“Two years ago, Russia was in a really tough spot and we were taking lots of airplanes out…and now with the stronger ruble and tremendous demand from the Russian traveller…we're stressing the resilience in the Russian market.”
Gulf orderbook
Increasingly market observers are raising concerns about the three dominant Gulf carriers as they represent a sizeable percentage of the widebody backlog, and also certain of these carries have announced restructuring efforts.
Emirates said on 23 January that it was in the process of a modest restructuring, after it reported a substantial decline in half-year profits due to slower growth.
At the same time, Etihad Airways announced its chief James Hogan will step down after a decade at the helm. The move comes as the Abu Dhabi-based carrier continues to suffer losses from its investments in Air Berlin and Alitalia.
However, Kelly plays down any worries regarding the Gulf carrriers and the region’s orderbook.
“We have certainly seen a region having a much bigger share of the backlog, having gone through significant stress for a long period of time, and that would be the North American market. Most North American airlines have filed for bankruptcy protection multiple times, with massive backlogs, and massive amounts of airplanes in the system - far greater than what is in the Gulf,” he says
Going forward, Kelly stresses the Gulf carriers will “work their way through their issues”.
“This is nothing that we haven't seen before and the OEMs are not going to put the national carriers of these countries into bankruptcy. That will not happen. They will work with them. They will defer what needs to be done.”
As is the case for any airline in the world, deferrals are an “expensive discussion”, he admits, adding: “But that's how the OEMs make a lot of money is by deferrals….so it is part of the OEM business model, and their profit margin, to expect deferrals.”
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