- China presents the greatest opportunity for investment for the global aviation sector
- Just 16% of respondents are satisfied with their current access to funding, compared with 21% of respondents from the shipping sector
- A more beneficial view of asset values for risk weighting purposes would help to unlock funding for aviation
- Investment in infrastructure is seen as the most helpful form of state support
- 75% of respondents believe current market conditions are positive for their aviation business
- Further consolidation is expected, with larger participants expected to become more dominant
According to global legal practice Norton Rose Fulbright’s fifth “The Way Ahead” Transport Survey, Asia presents the greatest investment opportunity for the aviation sector in the next two to five years. 16% of respondents from the global aviation sector believe China offers the best prospects for future investment, followed by South East Asia and the Middle East and North Africa (both selected by 11% of respondents).
The survey report, entitled Where Next? also reveals that while various forms of government support would be welcomed by respondents in order to help unlock funding for the aviation sector, a more beneficial view of asset values for risk weighting purposes is viewed as the most effective way of increasing the availability of funding, by 15% of respondents.
The aviation sector continues to call for state support in the form of investment in infrastructure, with 40% of respondents of the belief that this would be the most helpful form of government support for their sector. Despite this just 52% expect investment in infrastructure to increase, compared to 60% of respondents from the rail sector and 62% from the shipping sector.
While concerns over funding and infrastructure persist, 75% of respondents believe current market conditions are positive for their aviation business. Almost half (46%) believe new opportunities are emerging and investment in additional aircraft and in the development of new markets are seen as the most promising investment opportunities by 25% and 22% of respondents respectively.
Further consolidation within the aviation sector is also anticipated. Almost a third (31%) of respondents are planning a strategic alliance or joint venture in the next 12 months, and 18% intend to make a strategic acquisition. In line with this, over a quarter (26%) expect the most significant change in the participants in the aviation sector to be the increased dominance of the larger owners and operators.
Almost half (43%) of respondents from the aviation sector have sought or offered funding in the past year but just 16% are satisfied with their current access to funding. The survey indicates that the sector now draws on a more diverse range of funding sources, with 20% anticipating that their primary source of finance will be shareholders over the next year, in comparison with 15% who expect it to be the capital markets, 13% to be bank debt and 11% to be private equity.
Ralf Springer, head of aviation, Norton Rose Fulbright, commented:
“While concerns around the provision of infrastructure, rising fuel costs and access to finance remain, the majority of the aviation sector believe current market conditions present opportunities for their business. Demand for air travel is growing, particularly in Asia, driving many of our clients to look at opportunities for investment here while at the same growing their fleet of aircraft.”
Duncan Batchelor, deputy head of aviation, Norton Rose Fulbright, commented:
“Funding for the aviation sector will be crucial if it is to take advantage of improving sentiment. The sector is eager not only for governments to step in by providing support but also for a more favourable view of aircraft asset values to be taken in order to release additional funding from those financial institutions now subject to more stringent regulation. Increased investment in infrastructure to support the growth of the aviation industry would also be welcomed.”