Norton Rose survey outlines optimism about recovery on global aviation markets

The Middle East is continuing to lead the aerospace world out of the downturn, according to a new survey released today by international legal practice Norton Rose Group.

The aviation sector has been concentrating on corporate survival, but now is the time to review the wider state of the business in anticipation of an upturn, according to the survey.

Key points to emerge suggest that there are signs of recovery despite significant cancellations or deferrals of aircraft orders up to the end of 2010 .

The survey: “The Way Ahead for Transport” is based on a survey of 961 individual respondents from the aviation, rail and shipping sectors from 17th June to 3rd July 2009 to coincide with the first signs of improving confidence in the transport industry following the global financial crisis of late 2008. A total of 154 respondents from the aviation sector; 153 respondents from the shipping sector and 654 respondents from the rail sector gave their views. The aim has been to find out how participants in these sectors view the short to medium term future and more specifically their business strategy for managing the impact of the crisis.

Aircraft orders

There is a strong expectation amongst the aviation respondents (90%) that a significant number of cancellations or deferrals of aircraft orders up to the end of 2010 is at least likely. For new aircraft deliveries that complete successfully, respondents perceive that most will occur in the Middle East.

Consolidation

In terms of business strategy, over half of aviation respondents (58%) believe that their organisations are most likely to pursue a cooperation agreement or alliance with a strategic partner in the next 12- 18 months. Consolidation is thought to be most likely amongst major airlines in Western Europe and North America.

Signs of recovery

Over half of aviation respondents (54%) think that there will be some recovery from the effects of the global financial crisis for the industry within 12 months time. This view is slightly less optimistic than the expectations of rail (62%) and shipping (61%) respondents.

Caution

On a cautionary note, while aviation companies have concentrated on corporate survival, they have perhaps been unable to address other aspects of their business. While 58% do not think the current economic climate will impact on the timetable for implementation of the EU Emissions Trading Scheme, 94% are not fully prepared for the implementation of the scheme in 2012. A third have taken no steps to prepare for the scheme at all.

Similarly, 70% of aviation respondents indicate that EU competition law has had no impact on their business and 38% think the IASB’s proposals to end the accounting distinction for finance leases and operating leases will have very little or no impact on their business.

Neil Poland, Global Head of Aviation, Norton Rose LLP, London, said: "With no major structural shocks to the world economy during 2009, we expected to see signs of optimism. However, I think the continuing uncertainty as to how deep the impact of the recession will be helps to explain how cautious this optimism is, with most respondents not expecting improvement until 2011. Still, there are some positive sentiments in the survey and only a small minority of those surveyed suggested that the market would worsen in 2009. Over half expect to see improvement in their business within a six or twelve month period, so this might be the time to address the wider state of the company in anticipation of an upturn”.