Posted May 24, 2011 12:19 PM
By Olga Razzhivina
Review of the first ISTAT China conference...
The first ISTAT China conference was a sound success attracting more interest than the organisers have hoped. Some 250 delegates represented Chinese lessors, banks and law firms as well as Western banks, lessors, appraisers and OEMs. Only a handful of airlines attended and none of the Chines OEMs were present.
The presentations revolved around several key themes, including aircraft financing in China, import age restrictions and China’s developing role in aviation finance and the industry in general.
One of the main factors affecting Chinese finance at present is the expectation that the PRC Government will increase interest rates at least twice in the course of this year to cope with rising inflation and an overheating economy. The local banks confirmed that they are maintaining their focus on the internal market. Lending remains mostly credit-based with the Big Three airlines being their preferred customers. The airlines outside China are still deemed less attractive, as most of them lack their respective governments’ backing.
The issue of aircraft import age restrictions received much attention both on the podium and outside the conference. Confusion remains, with rules not clearly outlined and the handling of imports being done on a case-by-case basis. It was claimed that an aircraft imported from the registry of the OEM country (eg US for Boeing or UK, France or Germany for Airbus) should not meet any resistance. Yet no one volunteered to either prove or challenge it based on real experience. Age restrictions were in particular played down by conversion agencies actively pursuing the Chinese market for converted freighters. The main concern when exporting aircraft from China is still focused on the aircraft records. Until recently, China was a market that only absorbed aircraft, with few coming out. Now that there is a fleet replacement story (as well as continued growth) the issue of aircraft leaving China is gaining focus.
Unlike the ISTAT US conference, nothing was said about the Chinese manufacturers posing a threat to the existing status quo in the manufacturing arena. The C919 was barely mentioned and the Western manufacturers projected an image of the world being their oyster. Despite heavily referencing China's 12th 5-year plan in relation to route and airport development, no reference was made to those networks being operated by locally manufactured aircraft.
While the subjects discussed inside were typical for the Chinese market, the conference was rich in networking opportunities with numerous meetings running on the fringes.
Perhaps one of the most interesting nuggets from the podium came from GE, who highlighted some of the engine developments planned for this decade, including hybrid engines, alternate cycle, integrated propulsion systems, I/C recoup, and variable cycle engine technologies, with Open Rotor featuring as the nearest term 'step change' in aviation engine technology, with a 2020 date stamp.
Olga Razzhivina
Manager - Valuations
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