A new report by Avolon anticipates that global airline revenue will exceed one trillion dollars in 2025, fuelled by growth in the Asia-Pacific region.
The airline sector is trending towards pre-pandemic profitability levels, aided by lower oil prices offsetting rising maintenance and labor costs, with a forecasted net profit increase of 16pc.
Challenges concerning aircraft availability and production targets for Airbus and Boeing may persist, leading airlines to extend leases and operational lifespans to meet demand.
The report calls on governments to invest in sustainable aviation fuel and electricity-powered flight, addressing the industry’s contributions to global emissions. IATA estimates that $4.7 trillion is needed to fund aviation’s transition.
Avolon’s 2025 Outlook: Fast Forward paper, available here, reviews the key trends in the aviation sector in 2025 and beyond, including:
- Airlines: A third year of profitable growth in 2025 is set to help airlines recoup losses in 2020 and 2021 that erased the prior decade of profitability. The markets that were first to recover – North America and Europe – are still growing, but at a slower pace, while Asia-Pacific gains momentum. Airline revenues have returned to their long-term average share of world GDP, with an additional US$100 billion of revenue potential if peaks experienced last decade are achieved.
- Manufacturers: Having declined in 2024, new deliveries will increase by c.20% in 2025 with over 1,400 aircraft to be delivered. Despite increasing deliveries, Airbus and Boeing will continue to struggle to hit their targets to ramp up production. The structural under-supply of new aircraft is driving aviation industry market dynamics. Airbus and Boeing’s next production slots are not available until the 2030s, meaning airlines will continue to extend leases and in-service life to meet their fleet plans.
- Lessors: Lessors now hold more new aircraft supply out to 2030 than Boeing and Airbus combined. Orderbooks have consolidated around a smaller number of lessors who will benefit from higher placement returns as under-ordered airlines compete for scarce aircraft. The availability of capital and access to aircraft is differentiating the largest, investment grade lessors who are best positioned to outperform.
- Innovation & Sustainability: Aviation generates US$3.5 trillion in global GDP, supports 88 million jobs, and accelerates social and economic development, but it also contributes c.2% of global emissions and so the goal of achieving net zero emissions remains key. IATA estimates that US$4.7 trillion is needed to fund aviation’s transition. Governments have a strong role to play in setting coordinated global policies that attract private investment both in sustainable aviation fuel production, and transformative new technologies such as hydrogen and electric-powered flight.
- Risks: A low-visibility operating environment has emerged. Global economic growth is slowing from a peak of 6.6% GDP growth in 2021 to a steady 3.2% in 2025. Inflation is reducing towards central bank targets as the fastest rate hiking cycle in four decades has transitioned to easing in most major markets. Credit spreads have touched multi-decade lows with markets priced to perfection.
Andy Cronin, CEO of Avolon shared: The structural under-supply of new aircraft is driving aviation industry market dynamics. Airbus and Boeing’s next production slots are not available until the 2030s, meaning airlines will continue to extend leases and in-service life to meet their fleet plans. In this environment, lessors will benefit from continuing strength in lease rates and valuations as airlines compete for scarce aircraft. Those lessors with strong balance sheets and attractive orderbooks of new technology aircraft are best placed to outperform and serve the growth needs of the world’s airlines.”“The aviation outlook for 2025 is robust, reflecting continued growth in travel demand against a backdrop of structural under-supply of new aircraft. Asia-Pacific will be the engine of that growth, and we anticipate global airline revenues will exceed the US$1 trillion mark for the first time. In this environment, lessors will benefit from continuing strength in lease rates and valuations as airlines compete for scarce aircraft. Those lessors with strong balance sheets and attractive orderbooks of new technology aircraft are best placed to outperform and serve the growth needs of the world’s airlines.”
Governments have a strong role to play in setting coordinated global policies that attract private investment both in sustainable aviation fuel production, and transformative new technologies such as hydrogen and electric-powered flight.
Jim Morrison, Chief Risk Officer of Avolon shared: “Airline profitability in 2025 will build on a strong performance in 2024 where lower oil prices helped offset higher maintenance and labour costs. While the higher demand for air travel is evident we are also entering a low visibility operating environment. There are uncertainties around what political changes will mean for trade and growth, but the structural fundamentals of the industry remain favorable. Aviation’s net zero challenge will also require global policy coordination to stimulate investment, but mitigating emissions remains a key industry priority.”
