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AIRCRAFT FINANCE STILL BUMPY BUT FITCH PREDICTS UPTURN IN 1994 -- FITCH FINANCIAL WIRE --

 NEW YORK, June 11 /PRNewswire/ -- While the aircraft finance business has not crash-landed, it continues to experience major turbulence. A new Fitch study forecasts aircraft residual values to continue their fall into next year, although improvement is expected by year-end 1994.
 The industry currently faces the most pervasive oversupply of aircraft in its history. This contributed to an average 20 percent drop in residual aircraft values over the past eighteen months. Most affected were older, noisier Stage II aircraft, although some quieter, more efficient Stage III models also fell.
 The Fitch study points out that lenders' inventory levels have improved slightly since their 1991 peak, aided by increases in the number of completed lease and sale transactions. Therefore, Fitch expects a modest upturn in the aircraft market in late 1994 after painful inventory adjustments. Results of the study will be published Monday in a new report, "Aircraft Finance's Bumpy Ride".
 The fundamentals of aircraft finance remain fragile, marked by too many airplanes and too little demand. Oversupply is attributable to aggressive orders by third party owners, the popularity of "walk-away" leases, a doubling of aircraft deliveries to 800 planes in 1991, and newly implemented noise regulations.
 Residual values are not easily predictable and could fall further until the excess inventory is eliminated. The current glut has depressed values so badly that former residual value assumptions are invalid and liquidity has fallen off dramatically. Over the past three years, lack of liquidity prompted many aircraft leasing companies to exit the business while others had no alternative but to park their aircraft in the desert, unlikely to fly again. Fitch believes that massive retirements, mostly of older Stage II planes, will ease the existing oversupply.
 Creditors with large aircraft exposures will continue to experience deterioration. Leasing margins are depressed from historical levels due to the carrying costs of higher non-earning assets, maintenance related expenses, and shorter lease terms, and are not expected to strengthen until a recovery takes hold. Further residual value writedowns are possible depending upon auditors, the patience of each investor, and original value assumptions.
 Aircraft creditors traditionally assessed this type of financing based on the profit potential inherent in residual values. In the future, participants are likely to change profitability evaluations to emphasize current income rather than gains on sale or other residual adjustments.
 -0- 6/11/93
 /CONTACT: Valerie L. Gerard of Fitch, 212-908-0577/


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TS -- NY030 -- 1025 06/11/93 11:01 EST
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Date:Jun 11, 1993
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