Jetrader - January/February 2009 - (Page 9) Photo by: Cubbie_n_Vegas/fl ickr.com out and directionally how fast it moves. If we see a dramatic drop quickly, then the manufacturers they’re going to have to figure out ways to adjust production as quickly as they can. Given the current economic environment, they need to be prepared to reduce production as customers fight for financing. The bottom line is manufacturers need to be extremely conservative in their production rates. concern where the world economy is going and how much pressure that could put on airlines. The fact of the matter is that if the world economy contracts in the 4th quarter and into the first quarter of next year, that will put pressure on all industries and obviously the airline industry will fall into that. The good news is that I think it is a function of the fleet that you have. We have spent an enormous amount of time making sure that we have a young, high-quality fleet, and we have found historically that there is still demand for younger aircraft, because people are looking for the most fuel efficient aircraft with the lowest maintenance costs possible. That bodes well for our fleet. That doesn’t mean that we will be able to avoid all the issues of a downturn, but a lot has to do with how dramatic the downturn ends up being. an airline perspective. I would like to see ISTAT take a leading role in that. Also, I do think that the regulatory bodies within countries and among countries need to do a better job of coordinating. That would help in terms of regulatory burden to make sure that we are not doing things that are not adding a lot of value to the system. By taking expenses out, by taking away unnecessary static in the system, we’re helping the airlines and helping the customer. With a membership as large and diverse as we have, I think we can bring some weight to the matter. J: To expand on that, do you have any recommendations for improvement to ISTAT to better serve its membership? J: To that extent, I recently read that Boeing is considering going back into aircraft financing. JK: I don’t think we can do anything other than be very smart about what we’re doing, make sure that we’re prudent in positioning our individual business for success, and help the airlines succeed, which is the core of what we do. J: Can lessors do something collectively to better weather the current crisis? JK: I think both manufacturers have said that they are going to look at using their balance sheets again, and both Airbus and Boeing feel that they are going to need to help plug a hole. I think you’ll see both Exim and the ECAs taking a larger role, you’ll see airlines trying to do their traditional financing, and you’ll see leasing companies and banks filling their traditional spot in the production line. Liquidity will be the key focus for 2009. J: There is a lot of discussion about being green or fuel prices, engine efficiency, et cetera, but a lot of that seems to be kind of bleak in comparison to the current economic crisis. How would you like to see this better addressed? JK: From where ISTAT started to where it is, is truly phenomenal. I do think that it has become much broader based than anyone would have imagined originally. What I mean by that is, whether it is airlines, manufacturers, leasing companies, consultants, parts manufacturers… it’s serving a very broad swath of the industry. We need to make sure that as we do that, we’re continuing to bring value to the membership. As you get broader in the number of constituencies that are involved in your organization, it’s more difficult to have focus. I do think that ISTAT has maintained focus and brought value, but I think continuing to do that will be a very important value driver. JK: I’m not sure “lessor panic” is the right term. We’re still seeing activity in airplanes, and that’s critical. When you see activity dry up, that’s what leads to lower lease rates, but the activity levels continue to be good, and that has helped slow down a reduction in lease rates. That being said, I think that there is significant J: What is your view on the phenomenon of “lessor panic” resulting in extremely low lease rates? JK: I think that there are a couple of things that, organizationally, we could and should promote. In my humble view, the green issue and the fuel issue and expenses of airlines to some degree can be all tied partially to one theme—the inefficiency of the world air traffic system. If we could improve the efficiency for our air traffic control system worldwide, we would burn less fuel, produce less hydrocarbon and have lower expenses from an airline’s perspective, thereby allowing them more financial flexibility to be profitable and make their way through this difficult situation. That is something that we should focus on from a lessor perspective and from JK: I think that people need to realize, even in difficult times, that aviation is an amazing business. Even from its start, over 100 years ago, to today, the transformation has been phenomenal. It’s truly a worldwide business with an amazing amount of technological innovation over the years. The one thing that we need to do as an industry is make sure that we are bringing the best and brightest into this industry; make sure that they have the passion that many of us have in wanting to see this industry grow and be successful. I think the ISTAT Foundation is critical in that, and we need to continue to grow that and support other foundations and universities that want to help perpetuate aviation. Jetrader 9 J: Any closing thoughts? http://www.ickr.com
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