DUBLIN (Reuters) – A long-running production shortfall by planemakers will underpin supply and demand dynamics that are boosting airline and lessor profits for at least another decade, the head of the world’s second-largest aircraft leasing company Avolon said on Friday.
Aircraft manufacturers and suppliers have struggled to keep up with a post-pandemic recovery in travel due to rising costs, labour and parts shortages, issues that have been exacerbated by safety woes at Boeing (NYSE:BA) and a strike by its staff last year.
Avolon’s annual outlook report predicted that airlines’ net profit would rise by 16% to over $36 billion in 2025, driven by low fuel prices, strong revenue and the fact that plane shortages have allowed them to prioritise the most profitable routes.
“That production shortfall underpins the supply and demand balance, not just for the next three or four years, but for at least another decade,” Avolon Chief Executive Andy Cronin told Reuters.
Cronin said Avolon’s view that the supply and demand balance would be “firmly in our favour” over that time period spurred it to order 200 aircraft in 2023. It added 118 more aircraft last year through the acquisition of smaller rival Castlelake Aviation Limited, bringing its total fleet to 1,129 aircraft.
The Dublin-based lessor said Boeing and main rival Airbus will continue to struggle to hit their targets to ramp up production despite increasing their deliveries.
Avolon, which is a subsidiary of China’s Bohai Leasing Co Ltd, also predicted that orders from Chinese firms will rise sharply to 800 aircraft in 2025, citing growth in travel demand and a need to replace an aging fleet.
While Avolon’s report described the aviation outlook for 2025 as robust, it also noted that economic cycles usually last four to six years and that the current cycle is already in its fourth or fifth year, with growth in Europe slowing.
“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,” Cronin added.