The global aviation sector, buoyed by robust lease rates and relatively stable oil prices, is gathering in Dublin for its annual meeting. However, the industry faces significant uncertainties due to jet shortages and trade tensions. Ireland, a hub for aircraft leasing, controls about half of the world’s airline fleet. The Airline Economics conference provides an early opportunity each year to assess economic and trade risks globally. Leasing companies have seen increased rentals and resale values as airlines try to meet new demand while manufacturers struggle with post-pandemic recovery.

Leasing Market Thrives Despite Supply Chain Struggles

The aircraft leasing market has experienced a surge in profitability, driven by heightened demand for both new and older second-hand planes. Airlines are struggling to keep up with passenger growth, pushing up lease rates and fares. However, concerns loom over the availability of efficient new aircraft due to supply chain issues and labor shortages. Older planes are being heavily utilized to bridge the gap, but this is not a sustainable solution long-term.

Independent aviation consultant Bertrand Grabowski highlighted that the pace at which manufacturers can ramp up deliveries will significantly influence the market's future. While some industry experts predict a return to excess capacity within three years, others believe the shortage could last longer due to the 4,000 jets left unbuilt during the pandemic. Airbus aims to produce 75 A320-family jets monthly by 2027, though this target has been repeatedly delayed. Boeing is gradually increasing production to 38 737 MAX units per month, constrained by regulatory limits following safety incidents.

Trade Tensions and Economic Factors Add to Industry Concerns

Industry leaders are also grappling with the potential impact of political changes and economic factors. The upcoming change in U.S. leadership under President-elect Donald Trump has raised concerns about proposed tariffs, which could disrupt aerospace supply chains and dampen air cargo demand. Avolon's CEO, Andy Cronin, emphasized that any additional costs or challenges to supply chains would be detrimental to the industry's recovery.

Recent financial indicators add another layer of complexity. The surging U.S. dollar poses challenges for airlines that must pay for fuel and aircraft in dollars but earn revenues in weaker local currencies. For instance, India's rupee hit record lows recently, reflecting broader trends in emerging market currencies. The International Air Transport Association (IATA) predicts record passenger numbers by 2025, but the recovery of travel from China and business travelers has been slower than anticipated. These mixed results highlight the need for careful navigation through current economic uncertainties.