Aircraft lessor Avolon expects supply problems to continue to impact for a decade by Reuters

DUBLIN (Reuters) – Long-term production shortfalls by planemakers will reinforce supply-and-demand dynamics that boost airline and lessors’ 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 are struggling to keep up with the post-pandemic travel recovery due to rising costs and shortages of labor and parts, problems exacerbated by safety problems at Boeing (NYSE:) and a strike by its employees last year.

Avolon’s annual forecast report forecast airline net profits will rise 16% to more than $36 billion in 2025, driven by lower fuel prices, strong revenues and the fact that a shortage of aircraft has allowed them to prioritize more profitable routes.

“This production shortfall supports the balance of supply and demand, not just for the next three or four years, but for at least another decade,” Avolon CEO Andy Cronin told Reuters.

Cronin said Avolon’s view that the balance of supply and demand would be “strongly in our favor” during that time period led it to order 200 planes in 2023. It added another 118 planes last year through the acquisition of smaller rival Castellic Aviation Ltd., raising its sales volume. to another 118 aircraft last year. The total fleet reaches 1,129 aircraft.

The Dublin-based lessor said Boeing and its main rival Airbus would continue to struggle to meet their targets to increase production despite the increase in deliveries.

Avolon, a subsidiary of China’s Bohai Leasing Co., Ltd., expects orders from Chinese companies to rise sharply to 800 aircraft in 2025, citing growth in travel demand and the need to replace the aging fleet.

While the Avolon report described the aviation outlook for 2025 as strong, 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 describe it as a low-visibility environment right now,” Cronin added. “I think there is uncertainty around foreign policy and trade policy, and the implications of that in terms of the aviation industry.”