Aviation is "coming to the peak of the cycle" says Adam Pilarski, senior vice-president, Avitas on the opening day of ISTAT Asia in Hong Kong.

Pilarski, who also spoke about the cycle at ISTAT Americas in San Diego two months ago, says that little has changed since his last address. "Life didn't change that much," adds the economist.

Borrowing costs remain low with continued GDP and traffic growth, yet yields are weakening.

Given the fundamentals of the business and economy today, Pilarski expects that short term growth is likely to continue for the next 12 to 18 months, but he is becoming increasingly concerned that the bubble may burst as long term problems mount, like higher interest rates and "double counting".

While he predicts that oil prices will remain between $40 and $60, he sees labour tension rising which could lead to increased pay, just as airlines start to report lower profitability. Last week, American Airlines chief executive Doug Parker was met with Wall Street criticism for pay raises to the airline's staff.

Another risk noted by Pilarski is the issue of double-counting, in which lessors and airlines place orders with the manufacturers for the same aircraft, leading to overcapacity in the market, often in a downturn. "It's a huge problem," he adds.

In his concluding remarks, he suggested that the bubble-bursting will not be bad for everyone. "Heightened uncertainties may produce more new opportunities."

Source: Cirium Dashboard

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