The 2025 Airline Economics Conference in Dublin highlighted several key trends and challenges currently shaping the aviation industry, with a particular focus on the leasing sector, sustainability, profitability, and financial trends. Below are the main insights discussed during the event.

Industry Growth & Outlook

Engine Sector Growth & Challenges

The engine sector is experiencing robust growth, with engine work expected to double over the next three years. This rapid expansion presents some challenges, especially in terms of managing the pace of growth and adapting to the uncertainty of this unprecedented period. One industry leader, emphasised that while growth is promising, the industry must navigate potential risks associated with such an accelerated expansion. When asked about the expectations for 2025, they explained that “it’s an exciting time, but also quite scary. It’s unprecedented in the engine leasing industry”.

Aircraft Leasing Recovery

The aircraft leasing market is on the road to recovery despite ongoing profit challenges. Demand for aircraft remains high, and supply chain issues that have hindered production in recent years are expected to ease in 2025. A leading executive in the industry, shared an optimistic outlook for the leasing industry, suggesting that the recovery will continue over the course of the year.

Profitability in Aviation

The global airline operating profit for 2025 is forecast at US$68 billion, reflecting a positive financial performance. However, in the US, there is an oversupply of aircraft post-COVID, which is affecting profitability. Airlines are increasingly focussing on customer loyalty and offering premium products to boost revenue. Many top international airlines continue to push forward on the delivery of aircraft with improved and more luxurious cabins. However, supply chain and staffing issues continue to cause delays to the production line of Airbus and Boeing orders, with Boeing in particular being scrutinised for significant errors in judgement on their production targets. This risks a domino effect impacting other stakeholders.

Airline Cost Pressures

Rising labour and maintenance costs remain a concern for airlines, but stable fuel prices have helped offset some of these pressures. As a result, airlines are expected to test higher price points, with airfares anticipated to rise in 2025.

Market Normalisation

An industry legal expert noted that “2024 was a year of market normalisation”, explaining that market conditions should become more predictable in the coming year, and that further stabilisation is expected in the supply chain by 2025.

Geopolitical & Economic Conditions

Geopolitical Risks

Leasing CEOs are closely monitoring geopolitical risks, particularly the ongoing Russia-Ukraine conflict. An asset management leader noted that geopolitical uncertainty, along with a stronger US dollar and rising oil prices, could in 2025 put pressure on non-US airline margins in emerging markets who rely heavily on oil imports.

Pro-Business US Administration

The current US administration’s pro-business stance is expected to benefit the leasing sector. This environment is seen as supportive for leasing companies, potentially fostering a favourable business climate for growth.

Oil Prices & Tariffs

Oil tariffs are expected to remain low, benefiting US carriers alongside a strong dollar.

Sustainability & ESG

ESG Goals

Environmental, Social, and Governance (ESG) initiatives continue to be a primary focus for the aviation sector. However, an industry legal advisor noted that “progress needs to be incremental”, and there was a general sense that commitment to ESG is waning as other issues take the forefront. Leasing companies are increasingly taking on responsibility for these initiatives, but there is ongoing debate over who should bear the costs of Sustainable Aviation Fuel (SAF).

Net Carbon Neutrality

The aviation industry is making strides toward achieving carbon neutrality. Sustainable aviation fuel (SAF) plays a critical role in this transition, but sourcing SAF from disadvantaged areas to meet regulatory requirements remains a significant challenge, according to industry experts.

Financial & Market Trends

Interest Rates

Elevated interest rates have now been priced into the market, influencing investment decisions and overall market conditions. Whilst there has been an overall settling of interest rates, experts note that interest rates will be “one to watch” in 2025, particularly in terms of how they are impacted by the new US administration.

E-Notes

E-notes are not expected to return immediately, but there may be an increase in demand for them in 2025. E-note holders are likely to seek greater control over their portfolios.

Aviation Loan ABS

Aviation asset-backed securities (ABS) are expected to continue to recover in 2025 and will focus on larger pools of revenue from interest rather than just lease exposure.

ABS Issuances

The aviation market is looking at potential ABS issuances of US$8-10 billion in 2025, which will cover aircraft, engines, and loans and these issuances will undoubtedly shape the financing landscape in the year ahead. There is growing optimism that demand is increasing and agreement that 2024 provided a foundation which strengthened the underlying economic environment which ABS issuances require.

Issuances & Election Uncertainty

Predictions from a banking leader suggest a potential US$5.7 billion aggregate aircraft issuances could be made in the first quarter of 2025, although political uncertainty in the months ahead will inevitably slow this down. Some believe that there could be up to US$10 billion of issuances in 2025.

Key Trends in the Leasing Market

Insolvencies

The airline sector has shown remarkable resilience post-COVID, with very few airline insolvencies reported. This suggests that the leasing market remains relatively stable.

Leasing in Russia

Leasing companies are unlikely to engage in aircraft leasing in Russia in the near future due to the ongoing geopolitical tensions. The Russian market had previously been a strong source of leasing activity, but this has significantly diminished since the conflict began. However, lessors have expressed an appetite for work in this area to recover.

Challenges & Opportunities

Aircraft Leasing Market

While challenges persist, leasing companies are generally optimistic about the future. The market conditions are favourable for leasing companies, and there are strong growth opportunities ahead, with Aegean Airlines noting they were “confident on the way forward”.

Risks and Market Evolution

The aviation leasing market is no longer dominated by one major issue, such as the COVID-19 pandemic. A leasing expert highlighted how companies have adjusted their business models and funding structures to return to pre-COVID profitability, despite the changing market dynamics.  One executive stated, “It’s a capital intense industry”, and explained that recovering profitability is “going to take some time to work through, although the industry has matured”.

Conclusion

The Airline Economics Dublin 2025 conference shed light on the evolving landscape of the aviation industry. Key trends include the resilience of the aircraft leasing market, the ongoing challenges in sustainability, and the impact of geopolitical risks on global aviation operations. Looking ahead to 2025, the industry remains optimistic, with growth prospects in both leasing and engine sectors, although cost pressures and geopolitical uncertainties will continue to shape the market.

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