DUBLIN (Reuters) – A prolonged slump in production at plane makers will support supply and demand dynamics that boost profits for airlines and lessors for at least another decade, the head of the world’s second-largest aircraft leasing company Avolon said on Friday.
Aircraft makers and suppliers have struggled to keep up with a post-pandemic travel recovery due to rising costs, labor and parts shortages, problems exacerbated by safety problems at Boeing (NYSE: ) and a strike by its staff last year.
Avolon’s annual outlook report predicts airlines’ net profits will rise 16% to more than $36 billion in 2025, boosted by low fuel prices, strong revenues and the fact that a shortage of aircraft has allowed them to prioritize the most profitable routes.
“That decline in production supports the balance of supply and demand, not just for the next three or four years, but at least another ten years,” Avolon CEO Andy Cronin told Reuters.
Cronin said Avolon’s view that the balance of supply and demand would be “solidly in our favor” over that time frame prompted it to order 200 aircraft in 2023. It added another 118 aircraft last year with the acquisition of smaller rival Castlelake Aviation Limited, bringing its total fleet of 1,129 aircraft.
The Dublin-based lessor said Boeing and main rival Airbus would still struggle to meet their targets for production increases despite increasing their deliveries.
Avolon, which is a subsidiary of China’s Bohai Leasing Co Ltd, also predicted that orders from Chinese companies would surge to 800 aircraft in 2025, citing growth in travel demand and the need to replace the aging fleet.
While Avolon’s report described the outlook for aviation to 2025 as robust, it also noted that economic cycles typically last four to six years and that the current cycle is already in its fourth or fifth year, with growth slowing in Europe.
“We characterize it as a low-visibility environment at this point. I think there is uncertainty around foreign policy and trade policy, and the resulting effects as it relates to the airline industry,” Cronin added.
