Jetrader - January/February 2010 - 11

that the airlines have had to remove lift, and that’s been one of the airplanes of choice. One of the things that we learned in 2001 is that once an airplane is parked it stays parked, but I would imagine that some of the newer generation 737-300s and -400s will find a way back, especially as we see growth in the market. I was just in Latin America last week, and there are carriers in that part of the region that are flying a classic 737 as an important part of their strategy, and people forget that that airplane is only five or six percent less fuel efficient than production airplanes of today. An MD80 is 30-35 percent less fuel efficient, so they’re going away, so I would imagine that as the market comes back we’ll see more of those classic 737s, but it’s hard to say, because we thought airplanes would come out of the desert in 2002 and 2003 after the crisis, but they have just stayed. J: Do you foresee that the CMV of the B737-800 will share the same characteristics of the classics? RT: Again, aircraft values aren’t where I’m most familiar, but the 737-800 continues to be a fabulous investment. It’s been great value for our customers due to its reliability, and its greater range than the competition, better efficiency and its overall operating costs. If we continue to invest in it like we have with a new interior and performance improvements, I see that plane continuing to be the workhorse of airlines around the world. J: Boeing just handed over the first B777 freighter to its largest customer, FedEx. How do you see the B777F competing in the general freight market with lower cost converted B747-400s and at the other spectrum with the similarly priced new B747-8F? RT: The cargo market is really hurting, as we all know. For the first six months of the year, traffic was off by about 20 percent. We expect a little bit of an improvement in the second half of the year, but year over year, cargo will decline about 15 percent. That’s on top of year-end 2008 when we saw about a six percent decline. We don’t expect to see the cargo market return to the peak of the cycle, which was 2007, until probably a 2012, 2013 timeframe. There are challenges in that market, but the fundamentals are still strong. Once the economy starts to grow again and once trade starts to grow again, there’s going to be a high demand for air-cargo services. The market will come back, but it will come back slower than the passenger market. As a result, demand for airplanes in that segment has been impacted. More aircraft are being parked, utilization is down on the freighter fleet, and it’s a challenging marketplace right now. As a result of those challenges we did two things: we decided to slow the rate on the 777, beginning in June of next year, and as part of the announcement that we made on the 747-8, we made the choice not to ramp up our production as quickly as we had planned due to what’s going on in the freight market. There’s clearly a place for both airplanes in the market with different types of companies, and that’s why we went forward with both aircraft, and that’s why we think they’ll both be successful. J: The leasing company landscape will look significantly different next year with RBS on the selling block, Babcock & Brown, the issue with ILFC and AIG. These leasing companies who we now read about daily in the news represent a significant amount of new aircraft orders with Boeing. How is Boeing preparing to deal with this changing lease and financing landscape? RT: I don’t know how that market is going to shake out over the next couple of years, and I bet if you went [to the ISTAT membership], you’d get 400 different opinions on what will happen. Leasing companies are an incredibly important part of our business model—about 25 percent of our capacity goes to leasing companies. Frankly, over the last couple of months, there’s some activity in that market. Some of the companies are starting to see that there is stability in the market, and we might be closing in on an upturn. What shakes out over the next six or 12 months, I don’t know. I expect that we’ll continue to see some consolidation just as we’ve seen in the airline industry. I believe that that will continue to be an important part of our business model, that we’ll be able to provide a lot of financing for a lot of aircraft moving forward, and there will be big and small players—they just may have different hats. J: Is there anything else you would like to share with our Jetrader readers, and do you have any advice to further improve ISTAT? RT: First of all, we’re proud to be a part of ISTAT, and I am so fortunate to get to come and be a part of this gathering, and I probably learn more in the conversations that I have in the hallway than I do when I’m on the road talking to our customers and when sitting at home in Seattle, trying to understand what’s going on in the market. It’s definitely a win-win perspective. The other thing I want to add is that this has been an incredibly difficult time for our industry. One of the first things that I got to do in my job was go to the Airfinance Journal conference in Dublin, which is a very interesting event. Little did I know, back in January of 2008, was that we were at the top of the market, the peak of the cycle. Ever since that time, we’ve seen a slow but consistent deterioration of the market, which was accelerated in September, October of last year. But, we are starting to see signs that the market is stabilizing, that economic growth will, hopefully, start to take hold later this year, that 2010 should be the year of economic recovery, traffic should start to recover in 2010, 2011 will be a year where the airlines start to recover, and finally for us, we should see an upturn in demand for 2012. Jetrader 11

Jetrader - January/February 2010

Table of Contents for the Digital Edition of Jetrader - January/February 2010

Jetrader - January/February 2010
A Message from the President
Q&A: Randy Tinseth
Thinking Global
Dateline: Dubrovnik
Aircraft Appraisals
Aviation History
From the ISTAT Foundation
Advertiser Index
Jetrader - January/February 2010 - Jetrader - January/February 2010
Jetrader - January/February 2010 - Cover2
Jetrader - January/February 2010 - A Message from the President
Jetrader - January/February 2010 - 4
Jetrader - January/February 2010 - Contents
Jetrader - January/February 2010 - 6
Jetrader - January/February 2010 - Calendar/News
Jetrader - January/February 2010 - Q&A: Randy Tinseth
Jetrader - January/February 2010 - 9
Jetrader - January/February 2010 - 10
Jetrader - January/February 2010 - 11
Jetrader - January/February 2010 - Thinking Global
Jetrader - January/February 2010 - 13
Jetrader - January/February 2010 - 14
Jetrader - January/February 2010 - Dateline: Dubrovnik
Jetrader - January/February 2010 - 16
Jetrader - January/February 2010 - 17
Jetrader - January/February 2010 - Aircraft Appraisals
Jetrader - January/February 2010 - 19
Jetrader - January/February 2010 - 20
Jetrader - January/February 2010 - Aviation History
Jetrader - January/February 2010 - 22
Jetrader - January/February 2010 - Advertiser Index
Jetrader - January/February 2010 - Cover4