Expert interview on aviation finance

Michaela Altmann , Head of Origination in Aviation at KfW IPEX-Bank , talks about aviation finance and developments in the industry.

Michaela, with your eye close on the aviation market, what are the most important developments you expect in the next years?

Players in the aviation market have learned to react very quickly. The aviation market usually develops in a very cyclical way. From my perspective, the main developments will be the following: The demand for air travel is not only persistent but it will grow because people want and need to travel. On time deliveries of new aircraft are needed because airlines and leasing companies will have to (re)invest in new aircraft. And, very important, as an industry we need to get our head around the need for decarbonization. I’m very hopeful on this last aspect as it is a widespread understanding in the aviation sector that this is essential to secure a successful and responsible future for the industry.

The aviation sector was hit hard by the COVID-19 pandemic. What is the state of the industry now, in the second half of 2023?

Personally, I’m very impressed. The COVID-19 pandemic has led to an unforeseen and nearly complete stop of airline travel. Nevertheless, the industry as a whole has shouldered the storm, including a monumental performance by the leasing community. We have seen traffic figures rebound and, in some markets, even outgrow those prior to the pandemic. Both freight and travel are back and are the backbone of the aviation market.

Achieving decarbonization is the key goal in mobility and transport globally. As part of KfW Group, KfW IPEX-Bank is committed to the group’s Paris-compatible sector guidelines which apply to new financing activities in the sectors addressed, among them aviation. How does this affect your aviation financing activities?

We will continue to focus on financing newly built aircraft. These are the most efficient ones in terms of CO2 footprint and we thus rely on the best technologies available. As no marketable transformative propulsion technologies are currently available to promote a greenhouse gas-neutral future, we ensure Paris-compatibility by systematically limiting emissions from a portfolio perspective. In accordance with the underlying decarbonization path published by the International European Agency (IEA) a portfolio approach defines a CO2-budget for new financing activities in the aviation sector, and the budget gradually decreases compared to the previous year. This is based on the modern aircraft technology currently used. Should new aircraft technology or a widespread use of SAF (Sustainable Aviation Fuels) become reality, then the Paris compatible accounting mechanism will change.

You are invited to get in touch with Michaela Altmann and talk about aviation finance!