Avolon Outlook on Aircraft Supply and Demand

DUBLIN (Reuters) – Avolon, the world’s second-largest aircraft leasing company, indicated that ongoing production shortfalls among plane manufacturers will maintain supply and demand dynamics favoring airline and lessor profits for at least another decade.

Aircraft manufacturers are facing challenges in meeting the post-pandemic recovery in travel, primarily due to rising costs and shortages of labor and parts. These issues have been worsened by safety concerns at Boeing and recent staff strikes.

Profit Forecast

Avolon’s annual outlook report predicts that net profits for airlines will increase by 16% to over $36 billion by 2025, attributed to low fuel prices, strong revenues, and the ability to focus on the most profitable routes due to aircraft shortages.

Avolon CEO Andy Cronin stated, “That production shortfall underpins the supply and demand balance, not just for the next three or four years, but for at least another decade.”

This favorable supply-demand balance prompted Avolon to order 200 aircraft in 2023, and with the acquisition of Castlelake Aviation Limited, they now have a total fleet of 1,129 aircraft.

Manufacturer Challenges

Avolon noted that Boeing and Airbus are likely to continue struggling to meet their production targets despite increased deliveries.

Chinese Market Growth

Additionally, Avolon forecasts a significant rise in aircraft orders from Chinese firms, estimated to reach 800 by 2025, driven by a surge in travel demand and the necessity to update an aging fleet.

Economic Concerns

While Avolon characterizes the aviation outlook for 2025 as strong, it remains cautious, pointing out that economic cycles typically last four to six years and we are currently in the fourth or fifth year. Growth in Europe is already experiencing a slowdown.

Cronin remarked, “We characterize it as a low visibility environment at the moment. I think there’s uncertainty around foreign policy and trade policy, and consequential impacts as it pertains to the aviation industry.”