Another good year for lessors in 2025

February 1st 2025

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In 2025 forecast growth in the Asia-Pacific will help drive global airline revenue to more than US$1 trillion for the first time. Read More » More capacity will be added to the region’s schedules than all other regions combined, lessor Avolon’s 2025 Outlook Fast Forward predicts.

A third year of profitable growth will help airlines recoup losses wiped out by the pandemic in 2020 and 2021, it said. The first markets to recover - North America and Europe - are growing, but at a slower pace, while the Asia-Pacific is gaining momentum.

Airline revenues have returned to their long-term average share of world GDP, with an additional $100 billion of revenue possible if peaks experienced in the last decade are achieved.

The Asia-Pacific has returned to its former position as the growth driver of the industry. Its airline capacity was the last to return to pre-pandemic levels, but it will take back the lead in route openings and passenger growth as the emerging middle class takes flight.

The aviation outlook for 2025 is robust. Avolon CEO, Andy Cronin, said reflecting travel demand against a backdrop of structural under supply of new aircraft. “The Asia-Pacific will be the engine of that growth and we anticipate global airline revenues will exceed $1 trillion for the first time. In this environment, lessors will benefit from continuing strength in lease rates and valuations as airlines compete for scarce aircraft. Lessors with strong balance sheets and attractive order books of new technology aircraft are best placed to outperform and serve the growth needs of the world’s airlines,” Avolon said.

Co-authored by Avolon chief risk officer, Jim Morrison, and senior vice president portfolio strategy, Marc Tembleque, the forecast said lower oil prices in 2024 more than offset a 19% increase in maintenance rates and an 8% rise in labour costs, helping the sector return to pre-pandemic profitability.

For 2025, the leasing sector’s collective profit is on track to be 16% higher, to more US$36 billion, for the 12 months.

Securing aircraft for expansion and fleet replacement will be major challenges in 2025 as has been the case in the last three years with slots for new aircraft sold out beyond 2030.

“Airlines are adapting to structural undersupply with lease extensions and extending the lives of their existing fleets. As a result, lease rates have risen as much as 50% in the past two years and are expected to remain strong in 2025 as will aircraft valuations.

Morrison said: “While higher demand for air travel is evident, we are entering a low visibility operating environment. There are uncertainties about the implications of political changes for trade and growth, but the structural fundamentals of the industry remain favourable.”

Interestingly, despite some of the most promising demographics and economic growth profiles, airline fleets in Southeast Asia have not grown in the past five years.

“Thailand’s installed fleet is 25% smaller today than in 2019. Vietnam is down 14%, while fleets in Indonesia, Malaysia and the Philippines are up 6% despite GDP per capita increasing 25% in that period,” the forecast said.

China is “severely under-ordered” with a backlog of 570 Airbus and Boeing aircraft that barely meets replacement needs for the next decade. “COMAC’s C909 and C919 programs are steadily building scale but at too slow a pace to fill the country’s near-term fleet requirements.

Airlines are being forced to hold in-service fleets and accept used aircraft transitions. Lessor order books will be critical to filling the capacity gap, Avolon said.

An estimated 182 aircraft were delivered to China in 2024 and this figure is expected to rise substantially in 2025. International relations will play a role in China’s central aircraft procurement process. It will create win-win opportunities for large scale transactions.

Avolon works with 140 airlines in 59 countries and has an owned, managed and committed fleet of 1,129 aircraft.