Soaring sales of private aeroplanes track economic growth

Alexander Forbes estimates a 30% increase in private plane sales over the last three years, following exponential growth during that period. This trend is neatly paralleled by an increase in the number of aircraft registered and pilot licences issued.

Gavin Naude of Alexander Forbes Risk Services Aviation division believes this reflects increased confidence in South African economic performance. "This also reflects a greater push into Africa by South African businesses increasingly regarding planes as necessary tools for doing business on the continent," he said.

The interest in aircraft acquisition reflect cash-positive balance sheets particularly for the mining and commodity trading industries, but professionals like doctors and veterinarians are also coming to Naude for advice. "Aeroplanes - either individual purchases or fleets for hire - are excellent investments," he said, "they offer not only freedom and access to distant regions, but they appreciate in value and generate US Dollar-denominated revenue."

As with vehicle sales, Naude has observed a relationship between Rand volatility, business confidence, growth and plane sales. Since planes are valued in US Dollars, and converted into local currencies at the time of sale, plane purchase figures can be seen as an indicator of economic performance.

"Buyers financing a plane purchased at R13 to 1 US Dollar found themselves financing a large deficit when the Rand moved to R6 to the Dollar". As business confidence declined, driven by negative Rand volatility, companies and individuals owning planes sought to unload these aircraft locally or globally. Conversely, as growth, Rand stability and confidence increased, as in the last 3 years, purchases soared.

Naude added that the advent of the World Cup in 2010 is also bound to track this growth pattern with the desire by wealthier spectators to be flown to tourist destinations around the region.

Financing risks aside, purchasing, operating and maintaining planes pose a range of risks, explained Naude. These include the obvious such as passenger, owner and pilot liability, as well as physical damage and injury. In addition, hidden risks such as maintenance, crew liability - and even pilot loss of licence liability have encouraged Alexander Forbes Aviation Risk to develop some 'first for South Africa' aviation risk solutions.

Traditionally the Aviation Risk market in South Africa has offered standard risk cover regardless of the underwriter or conditions of use. As such, traditional South African aviation risk cover fails to take risk-differentiating factors into account. Alexander Forbes Risk Services Aviation division is the first in South Africa to tailor solutions to specific ownership and usage conditions. For example; whether or not a plane was kept in a hangar, flew 4 or 40 hours a week, was flown by a registered pilot, landed on properly surfaced runways, or travelled to politically risky destinations; were not previously factored into the calculation of premiums.

The growing number of aeroplane owners can now have peace of mind in the knowledge that their assets are covered by an offering which is tailor-made for the usage conditions of different clients.

"The accurate matching of the right spend to the right risk was key in making sure that the offering was competitive and adequate," concluded Naude.

For the first time Alexander Forbes Risk Services Aviation division offers South Africas growing pool of plane owners the opportunity to tailor their risk to reflect the usage conditions of different clients, accurately matching the right spend to the right risk.