Just 11 years after the Wright brothers recorded the first aeroplane flight in 1903, the first airline service was established. Following huge expansion during the twentieth century, culminating in the deregulation of US and European markets in the 1980s and 1990s, more than 3.4 billion passenger trips now take place each year with the most rapid expansion of demand these days coming, not surprisingly, from emerging Asia.
Corporate leverage continues to rise strongly in the US. In Europe re-leveraging has again only occurred at a tentative pace. In contrast, profitability and margins have moved more in favour of Europe last year. We think despite the high level of leverage (and lately slowing loan growth), this will not result in the US reaching the blow-out phase yet – also due to methodological issues of how to assess leverage levels ‘correctly’.
Airlines are likely to experience strong growth in 2017, following multiple years of rising demand in passenger travel, driven by wealth creation in Asia-Pacific and the Middle East.
Over the past two months we have looked at future regulations that come into force over the next 12 months, this month we look at a regulatory requirement that is already live and is changing the way that OTC derivatives are traded and risk-managed.
According to the International Study Groups, almost all metal markets monitored will show another supply deficit this year, which in our view will later justify higher prices again. We expect the correction movement that has been underway for approx. two months now to continue in the short term, however. This is because the speculative excesses have not been completely eradicated in all cases as yet.