Summary

Aviation is the sector that sees technological developments as one of the best reasons to be optimistic about the market. A quarter of aviation respondents cite investment in new aircraft as the number one investment opportunity (followed by new markets). It is also the sector that worries most about the global economic uncertainty.

Investment opportunities

Among the 25 per cent of aviation respondents who cite additional aircraft as the industry’s best investment opportunity, 34 per cent of those are participants rather than commentators.

The lowest investment priority for this sector is workforce and skills.

Although the sector sees the positive aspects of high-capacity or high-speed assets, it also harbours doubts about the sustainability of operating such assets. Aviation participants, in particular, are cautious about the impact of these assets, compared with industry commentators.

Funding

Forty-four per cent of aviation respondents (55 per cent of participants) had sought or offered funding over the previous 12 months, with pricing being cited as the most pressing issue, followed by availability and liquidity.

This industry has seen a sharp fall in popularity of export credit, so while shareholders/equity remains the most popular source of funding, the sector would ideally like to see governmentsupported soft loans, government guarantees, and the creation of specialist transport funding institutions. Infrastructure investment is the favoured form of support, followed by deregulation (ahead of fiscal incentives by an increasing margin).

The sector is less interested in the possibility of factors such as relaxation of stock exchange rules and tax incentives for lenders. State aid is also of low interest.

The next five years

The view from the industry is a theme of more of the same. In common with other sectors, aviation respondents believe that the industry is set to become dominated by larger participants. The second most significant change is predicted to be a rise in joint venture/alliance/pool activity. New arrivals in the form of start-ups or newly-privatised operators are not seen as significant trends.

Predictably, the number one concern for the sector is fuel availability and cost, with 58 per cent of respondents agreeing that their fuel choice was determined by price/economy, (overshadowing considerations such as subsidies or access to markets).

The number two preoccupation for the sector is a concern about a lack of suitably-qualified people (of greater worry to commentators than participants, perhaps reflected in the low investment priority given to workforce/skills, cited above).

Fewer respondents anticipate rising fares than did in 2010 (61 per cent to 2010’s 66 per cent) and 13 per cent say they think fares will fall (11 per cent in 2010). However, optimism that overall passenger numbers/freight volume will rise is up 6 per cent from 2010, at 81 per cent. This sector is also the most optimistic of the three when asked about a rise in routes/services offered, with 64 per cent predicting a rise (up from 47 per cent in 2010).

On the other hand, respondents also think it likely that there will have to be a rise in the redirection of funds going towards running cost (36 per cent – up from 30 per cent).

The sector trend is away from retrenchment, while the strategic disposal of non-core assets continues. Interest in alliances/joint ventures/pools remains strong, and equity-raising and strategic acquisitions are gaining in interest. However, the strongest surge in interest is for takeover or mergers.