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What can you expect for this New Year?

The year 2009 was a generally lousy one for the global economy. It barely needs saying that aviation was hard hit. There are a large number of fine folks who are out of work as a result of the economic recession. However- there appear to be glimmers of hope. Some of the leading economic indicators are pointing to a technical end of the recession in the US.

A low US dollar makes US-produced goods more attractive- and this means aircraft and components. The price of oil was somewhat stable- inflation has yet to rear its head- and there is stability of sorts in the financial markets. US Federal spending has provided an economic boost.

Most economists are looking at a slow start to a recovery in 2010. When the jobless rate improves- then I'll believe them! By the way- overtime has been increasing in the US - a precursor to hiring.

There is a lot of uncertainty. Conservative financial decision-making is still suggesting a ‘wait-and-see’ on a lot of major projects. The financial industry is headed back to stability and interest rates remain low. So does the chance of getting capital- as only those with the lowest risk are finding financial institutions willing or able to work with them. Expect a very slow improvement in credit markets for 2010. Cash is still king- however.

Flight hours are showing signs of increasing. Charter demand is the leading indicator here. Those who got rid of their aircraft will start back with charter. Those who stopped chartering will start at low levels.

Companies with aircraft will start flying as their business picks up. Expect this slow growth in flight hours to continue.

Regarding business aircraft values- the used aircraft market is showing some signs of life- especially for newer models and those in excellent condition.

Prices have fallen 25% to 50% off of their highs. Prices are stabilizing and we are probably at the bottom in terms of residual values. With the weak US dollar- look for more sales activity outside of the US.

I expect a slight increase in Fuel Prices for 2010. This is tough to call- as there may be some minor volatility in crude prices. As demand for oil increases- prices may increase as well- but only after a lag of a few months or more.

While inflation is predicted at 2% for the US in 2010- there are inflationary pressures. Of course- interest rates are low and the Fed has room to maneuver should inflation pick up. Look for this to be an issue after 2010. Cash flow will be critical again in 2010. You need to track and understand your aircraft costs in order to effectively manage and control them. We look forward to helping you weather the storm in 2010.

David Wyndham is an owner of Conklin & de Decker. The mission of Conklin & de Decker is to furnish the general aviation industry with objective and impartial information in the form of professionally developed and supported products and services- enabling its clients to make more informed decisions when dealing with the purchase and operation of aircraft. With over 1-800 clients in 90 countries around the world- Conklin & de Decker combines aviation experience with proven business practices.

More information from www.conklindd.com; Tel: +1 508 255 5975

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