Aircraft assets will enjoy shorter economic lives, following in the footsteps of computers, cars and other asset classes, according to a senior aviation financier.
"I don't see why aircraft are different than other asset classes. Years ago computers and cars had a longer useful life and that has shortened a lot, "said Marc Bourgade, of Natixis at the International Society of Transport Aircraft Trading conference in Rome today.
"Given the introduction on new aircraft technology and new aircraft in the market, I don't see why aircraft will escape this rule.I think this a trend," he says.
He adds: "We are not talking about whether the aircraft can fly, or not, but rather if an aircraft has a real dollar value. That is what we mean and we see 15-20 years as the maximum term," he says.
"After that, the real value is in the engine, so to maintain the value you need to reinvest in the engine."
Natixis, which focuses on brand new aircraft, acknowledges banks used to finance assets with 12-year loans plus a balloon. Now banks have moved to 10-year loans with a full pay out.
"The move takes into consideration that the value of the aircraft will be stressed due to the introduction of new models and engines. Also, it reflects that financing costs tends to be higher for longer-term deals than shorter tenures."