China’s near-term requirement is for 1,000 aircraft
India, the UAE, and Saudi Arabia are positioned to lead aviation’s next growth cycle, with the three countries’ combined order backlog at over 3,000 aircraft, more than double the current in-service fleet, says an industry report https://www.bseindia.com/.
The continuation of low fuel prices and economic growth are expected to help global airline industry profits to reach US$41 billion in 2026, according to a paper published on 23 Jan by Avolon, adding that 900 aircraft to be delivered over the next 3 years.
This year (2026) is set to mark the fourth consecutive profitable year for the sector, helping airlines to recover over 80% of the US$182 billion lost during the pandemic, it said https://www.nseindia.com/.
Demand fundamentals remain positive but airlines risk missing out on growth opportunities due to the persistent structural undersupply of aircraft. Order backlogs at Airbus and Boeing now extend to over 11 years. The ongoing supply shortage will support higher lease rates and strong residual values, while increasing the strategic value of lessor-held slots for under-ordered airlines.
Aviation Growth: Regional growth will be varied. India, the UAE and Saudi Arabia are emerging as the next growth regions for the aviation sector. European growth is being driven by low-cost carriers as the majors focus on consolidation. The US network carriers are transitioning into lifestyle brands that run highly profitable loyalty and credit card businesses, while low-cost carriers continue to struggle as they work to realign their networks and products. Asia-Pacific is limited by fleet constraints, with China having a near-term requirement for 1,000 new aircraft.
Airlines: Lower fuel prices were a key driver for airline performance in 2025, with US$8 billion in reduced fuel expenses accounting for a fifth of the airline industry’s net profits. This trend is expected to continue in 2026, helping airlines further repair their balance sheets despite operational challenges and increasing labour and maintenance costs https://www.iata.org/.
Manufacturers: Despite the uncertain geopolitical backdrop, large investment decisions are being made with orders for over 2,000 new aircraft placed with Airbus, Boeing and Embraer in 2025. The market is shifting toward larger aircraft variants, with the A321neo outselling the A320neo aircraft three-to-one over the past three years. The A330neo is benefiting as the only new passenger widebody available before 2032. Engine manufacturers are increasing shop visit and spare part pricing at rates well above general inflation as they manage higher input costs and deliver rising shareholder returns. The market value of two full-life engines now represents c.80% of a new aircraft’s value.
Lessors: A structural re-rating of the aircraft leasing business model has occurred with eleven lessors now achieving investment grade ratings, positioning them to outperform in a market of scarce aircraft. Around US$120 billion of new aircraft are expected to deliver in 2026, up 20% on last year. With lessors expected to provide around half of the global fleet’s overall financing requirements, their importance in supporting the transition to lower emissions new-technology aircraft has never been stronger.
Risks: The rapid growth of AI is intensifying competition with aviation for capital and talent. Geopolitical risk will continue to be in focus in 2026, and whilst tariff fears for aviation subsided in 2025, they remain a sensitive issue. Economic growth proved resilient in 2025, 80 of the largest economies grew by more than 1% and 90 are expected to do so in 2026 with none expected to shrink.
Jim Morrison, Chief Risk Officer of Avolon commented on the industry trends, “Global connectivity and economic growth continue to be supported by the aviation sector, underpinned by strong demand and lower fuel costs. India, the UAE, and Saudi Arabia are emerging as the next engines of growth with order backlogs that are double their current in-service fleet.
“With an industry requirement to finance around US$120 billion of new aircraft in 2026, lessors will continue to play a vital role as a driver of the transition of the global fleet to lower emissions new-technology aircraft.”
He continued, “Airline financial performance continues to strengthen, with the industry expected to record its fourth consecutive year of profitability. Airlines’ ability to capture sector tailwinds will be impacted by a shortage of new aircraft deliveries and the long order backlogs at Airbus and Boeing. Well-capitalised lessors with orderbooks of new-technology aircraft are strongly positioned to outperform in the current market.”
Fearless Forecasts 2026 – International markets globally will drive all air travel growth
International markets fuelled 85% of aviation’s capacity growth in 2025 and are set to drive an overweight share again in 2026, underlining the need for more widebody aircraft in a capacity constrained world.
US based LCCs make money
Low-cost carriers in the US will recover by adjusting fleet, network and product to align with consumer trends despite recent challenges. Spirit’s Chapter 22 process will reduce capacity and pricing pressures, while fewer GTF engine groundings will enable higher asset utilisation.
150 GTF-powered aircraft return-to-service
Pratt & Whitney has largely resolved the powdered metal production quality escape, at the same time as dramatically increasing engine shop visit capacity and spare availability. While the groundings are likely to persist through to 2028, over 150 GTF-powered aircraft will return to service in 2026.
Airbus and Boeing >150-seat jets are sold out to 2035
Airbus, Boeing and Embraer are selling nearly two years of production each year. While Embraer and Airbus have some production capacity in the sub-150-seat segments remaining in this decade, in 2026 the largest aircraft families will be sold out until 2035.
A330neo market lease rates increase by more than 15%
The versatile A330neo has attracted more than 30 operators spanning low-cost carriers to premium network airlines. As the only new passenger widebody available before 2032, strong demand will drive market lease rates higher.
An aviation ABS E-note is successfully issued
Despite no aviation ABS equity notes being issued since February 2020, over US$10 billion of aviation ABS debt notes issued in 2025 demonstrated investor appetite. E-notes will return in 2026 as the market continues recovering.
Preparations are made for a new commercial aircraft program launch in 2027
Embraer has studied various program concepts and COMAC will eventually progress its widebody plans. Boeing’s 737-10 MAX is facing a market share gap to the Airbus A321neo that will demand a response. 2026 feels too soon to see a new program launch, but 2027 may just be the year.
Avolon is a leading global aviation finance company connecting capital with customers to drive the transformation of aviation and the economic and social benefits of global travel. Working with 139 airlines in 61 countries, Avolon has an owned, managed, and committed fleet of 1,132 aircraft, as of 31 December 2025. Fiinews.com
