Jetrader - Spring 2017 - 14

Forecast for
the Global
Economy
and Aviation
in 2017:

Turbulence
Ahead
By A.P. Scott

Britain left the European Union, and the United States elected
Donald J. Trump. The Western world has made a move from
globalization to isolationism. What will this do to the global
economy, and what will it mean for an industry that connects
the globe? Not much in 2017, industry bellwethers say. But a
downturn is coming. And fuel prices are going up.
Adam Pilarski, Ph.D., senior vice president of AVITAS, Inc.,
brings a Yoda-like calm to any palpitations of panic: the U.K.
is still geographically in the same place it has been for thousands of years and is still part of Europe. The U.S. will carry
on, even with a president who most people did not believe
would ever be president. In economics, some will do better,
some will do worse. To people who buy, sell and trade aircraft,
Pilarski advises, "eat more chocolates" and "don't freak out."
"There may be more changes coming than all of us
expected," Pilarski continues, "but these won't necessarily
be 2017 changes that will destroy the world economic order."
Yes, he can draw some bad scenarios - a trade war - the
U.S. lowers taxes, the dollar grows stronger, the country cannot export as much as before and imports go up. "The way to
stop it would be to impose tariffs," Pilarski said. "If we, the
U.S., have tariffs, others will do the same, and then you have
a trade war around the world. That would be very, very bad."
His advice to aviation: Watch what happens and be able
to adjust.
The International Air Transport Association (IATA) forecasts
another strong year for aviation with 5 percent global traffic growth and $30 billion in profitability, even amidst the
abundant risks of rising oil prices, and political and economic
uncertainties.
The world has voted for change, acting on a romanticized
notion of "the good old days," Pilarski said. "I think that many
of the people who voted for Brexit, for Mr. Trump ... many
of these people want change, and they forget that change
is not always better. Change can go the wrong way for you."
But for ISTAT members, Pilarski said change may be good,
because it lends opportunity. "If you have a big recession
worldwide ... there probably won't be as many new planes
produced, and that will cause manufacturers to layoff many
people ... but even if this happens, other planes become
available and some people make good money. ... If there
aren't enough people flying, some airlines may not survive,
then others do better. Some leasing companies will have their
planes returned and may go under, then others are successful."
The economist sums it up with a witty quip: "In trade,
some people gain, some people lose, except Mr. Trump, who
always wins."
Pilarski predicts a down cycle in aviation - he sees a
potential aircraft bubble. "We have been selling a whole
bunch of planes and probably more than are needed," he
said. "Boeing, Airbus, talk about increasing their production
rates substantially. I don't actually believe this will happen,
because I think that by the time they will be able to do it,
they will have realized that there isn't as much demand as they
wanted. Some correction will happen. The question is when."
Pilarski is almost certain it will happen within the next three
to five years: a deceleration in world traffic, the slowing of

14 The official publication of the International Society of Transport Aircraft Trading

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