Brokers dream of greater aircraft choice

We first heard of 'green shoots' around six months ago. It was hogwash then, and maybe it's hogwash now, but there are hints that we might be hauling ourselves out of the financial quagmire. Nobody really knows how or when, but there are theories. The shape of the graph varies from the Bathtub (or Canoe), Soup Bowl or Saxophone – to letters of the alphabet – U, V, W or the alarming L.

A quick straw poll of brokers suggests that phones are ringing again (or inboxes filling up) but this renewed interest doesn't necessarily convert into fixtures yet. It's encouraging how the broker community is weathering the storm, with only a handful of names falling by the wayside, although in many cases hard decisions had to be made regarding infrastructure and staffing to keep the boat afloat.

In the hope that it's now safe to stick our heads over the parapet and look at the damage, it's not clear what kind of industry we could emerge into, and what products will be available on the shelf for the broker to sell.

IATA has taken an increasingly pessimistic view of the future, having recently revised its global forecast downwards, indicating airline losses in 2009 up from the previous guess of US $9 billion to US $11 billion. They say that airline revenues will not return to 2008 levels until 2012 at the earliest. That may sound unduly gloomy, but it's worth remem-bering that this reflects the opinions of the airlines themselves, and they have no obvious reason to lie. In contrast, Boeing (whose figures may be more speculative) predicts 2010 as a year of recovery, and says that cargo levels should return to 'normal' – whatever that is. The future is less certain for Boeing's 787 Dreamliner, currently more than two years late and even its 747-8 is running a year behind.

Airbus, as you might expect, is equally bullish. They say that air freight will grow by more than 5% per year for 20 years, and predict a global demand for nearly 25,000 passenger and cargo aircraft during the same period, partly due to replacement of ageing airframes, the increasing impact of noise regulations, the desire for greater fuel economy, and the move towards larger aircraft to handle route growth and airport congestion. They describe aviation as a 'growth industry'. Well, the only way is up.

For many of us humble brokers, Dreamliners will always remain the stuff of dreams, and the real action takes place lower down the food chain. Without intending to be unkind, one could start by looking at the former Soviet fleet, which is largely doomed. Many of the Ilyushin IL-76 and smaller Antonov cargo aircraft are already pushed out onto the grass, and it's a reasonable bet that the rest will join them soon. Most Tupolev airliners have a grim outlook too. When even Iran and Nigeria won't use a type, you know the end is nigh.

The only bright spot (apart from the handful of Stage 4 IL-76s) is the Antonov An-124, which still satisfies the authorities worldwide and has very strong market demand. But, despite skip-loads of words, promises and reports, there is no concrete evidence of what will happen to this aircraft. Will the production line be reopened? Will its life be extended? These vast and magnificent machines are working hard and the clock is ticking. As they time-expire, there is nothing realistic even on the drawing board to replace them. Air cargo could end up creating a vibrant new market and be unable to provide a platform to serve it.

Operational lifespan ends when the cost of maintaining and flying an aircraft exceeds the revenue you can earn from it. Even the word "ageing" can be misleading because it is usually not age, but economics that makes the decision. Of course in some cases it's the aviation authorities that decide when a type should be withdrawn from service, and that can lead to some rather bizarre sweeping decisions at times.

Factors such as corrosion and engine economics play a vital part in deciding when replacement is due, although re-engining doesn't seem to be as popular as it once was. The DC-8 and Boeing 727 – both rejuvenated by retrofitting a new engine – are effectively only viable when used as trucks (although it's a credit to them that they are both still in use), and the Airbus A300 and B737-300 are starting to appear in that role too.

At the smaller end of the market, whatever happened to the swarms of VLJs that were supposed to be darkening our skies? Announced with great fanfare three or four years ago, the operators who proudly claimed orders of 30 or 40 had to trim back expectations. Some are no longer around and some manufacturers have gone through the mangle too.

So it seems that only the corporate jet market might still be recognisable five or ten years from now. But forecasting is a very risky game these days, so perhaps we just have to wait and see how the resilient broker community handles the future. Let's hope there's something left to sell.