The emerging markets that offer the greatest growth potential for the commercial aviation industry include China, the Philippines, Malaysia, Indonesia, and Latin America, according to Jeff Knittel, President of Transportation Finance at CIT Group Inc.
 
This topic is one of many discussed in CIT’s 2012 Global Commercial Aviation Industry Outlook, the latest in a series of in-depth executive video Q&As featured in CIT’s Executive Insights series.

Emerging Markets Ready to Take Off

With recent growth in emerging markets and a growing base of flyers, Knittel emphasizes that: “It’s really about demographics. Every day there are more and more people entering the middle class. They want to have nicer things – whether it’s TVs or refrigerators. But they also want to see the world. And the best way to see the world is to fly.”

Rising Fuel Creating Efficiencies

With oil hovering at more than $100 a barrel, airlines have now developed an operational hedging program in search of efficiency. “One of the ways they have been in search of efficiency is looking for newer airplanes,” Knittel explains.

Aircraft Leasing Provides Financial and Fleet Flexibility

 According to Knittel, aircraft leasing provides the airline industry financial and fleet flexibility. In addition to using less capital, fleet flexibility allows lessors and airlines to optimize a specific situation. “As assets, airplanes have 25 to 30 years of useful life, but airlines may only have a demand for that asset for 10 to 15 years,” says Knittel. “The role of the operating lessor is to take that aircraft, deploy it for that 10 to 15 year period, and then redeploy it to someone else who has a demand for that type of asset.”

Long-Haul Aircraft Is the Future

According to Knittel, the 2012 outlook for the global aviation sector is dependent on overall economic growth. “I think we’ll see continued slowness in Europe until there is a resolution to some of the European debt issues.” Despite these headwinds, Knittel says, “I think underlying growth in the United States and Asia is going to be a net positive and you will start to see an acceleration of growth throughout the year.” And as the world becomes a smaller place, “people want to visit new places and go to places they couldn’t go before. The way they do that is with newer, fuel efficient long-haul equipment.” Knittel continues, “Efficient long-haul
aircraft are going to allow the industry to grow profitably and we believe that’s a segment that will continue to grow in the future.”


To read the full 2012 Global Commercial Aviation Industry Outlook, click here.