5 Minute Read – The aviation industry is navigating a period of rapid change, shaped by supply chain constraints, geopolitical concerns, and the changing landscape of aircraft leasing and maintenance. These forces reveal an industry in flux yet full of potential.

A Decade of Delays: Aircraft Manufacturing Challenges

With a backlog of 17,000 unfilled aircraft orders (Forbes, 2025), and delays potentially spanning up to a decade, original equipment manufacturers (OEMs) are struggling to meet the demands of a rapidly recovering travel market. Issues like supply chain disruptions, engine durability concerns, and labour shortages are testing the industry’s resilience and ability to meet demand.

Supply chain disruptions

Aviation supply chains remain a significant bottleneck, hampering aircraft production and delivery schedules. Manufacturers like Airbus and Boeing are grappling with shortages of essential components, raw materials, and skilled labour. Last year, Airbus delivered 766 commercial aircraft, just slightly below its target of 770, while Boeing fell far behind, delivering only 348 planes. The shortfall has been attributed to increased regulatory scrutiny and a prolonged strike by factory workers (Business Insider, 2025), challenges of which are forcing both manufacturers and airlines to rethink their strategies for meeting rising demand.

Engine Maintenance and Durability Issues

Modern aircraft engines, while more fuel-efficient and environmentally friendly, are experiencing durability problems that require more frequent maintenance and repairs. Issues like contaminated powdered metals in Pratt & Whitney’s PW1100G engines (Reuters, 2023) and rapidly degrading fan blades in Rolls-Royce’s Trent 1000 engines (The Times, 2024) have led to increased maintenance demands, forcing airlines to ground planes more often than anticipated. As fleets face reliability issues, manufacturers are caught in a balancing act, meeting the demand for new engines while keeping existing ones operational. The result is operational disruptions that manifest as delays, cancellations, and heightened maintenance costs.

Labour Shortages and Production Bottlenecks

The pandemic’s shadow continues to cloud aviation labour markets. Skilled workers who left during the pandemic haven’t returned, and training replacements for the complexity of modern aircraft manufacturing takes time. This gap is slowing production, leaving manufacturers to deal with growing backlogs. Airlines, meanwhile, are keeping older aircraft in service longer to bridge the gap, placing additional strain on maintenance facilities.

A Golden Age for Lessors

Aircraft leasing has become the backbone of aviation. The share of leased aircrafts has skyrocketed from 3.6% in 1980 to over 51% today. For leasing companies, the production delays have opened the door to capitalise on rising demand for mid-life aircraft and lease extensions. Airlines are prioritising profitable routes and extending the lifespan of their fleets, creating opportunities for lessors to secure favourable lease terms and expand their portfolios. This period has reinforced the value of agile and strategic asset management within the leasing sector.



However, the surge in demand for repair and overhaul services has stretched maintenance shops to capacity, driving up turnaround times and costs. Lessors are also adapting to sustainability goals, investing in more fuel-efficient aircraft and exploring ways to stay competitive as the industry transitions toward greener operations. While full of opportunity, the pressures on maintenance, sustainability concerns, and the growing complexity of fleet management are likely to shape the aviation sector's landscape in the years to come.

Geopolitical and Economic Challenges

External geopolitical and economic factors are having a significant influence on aviation, shaping recovery efforts and long-term growth strategies. Three key challenges include geopolitical tensions, rising interest rates, and regional disparities.

Geopolitical Tensions

Trade disputes and political instability have disrupted supply chains and delayed aircraft part deliveries, adding uncertainty to manufacturing timelines. Airlines have also been forced to adjust flight routes to ensure passenger safety, further complicating global operations.

Interest Rate Normalisation

Historically low interest rates helped keep aircraft financing accessible. Interest rates are now expected to stabilise around 4% over the next 12 to 18 months (SMBC Aviation Capital, 2025). This higher rate environment raises the cost of capital for airlines and lessors, increasing financial pressure when purchasing or refinancing fleet assets, and potentially slowing growth and profitability.

Regional Disparities

Aviation’s recovery since COVID-19 has been uneven across regions. While North America and Europe are seeing strong rebounds, some parts of Asia, such as Thailand, are still operating at reduced capacity. Inflationary pressures and lower consumer spending in certain areas add another layer of complexity, making it harder for airlines to navigate their financial and operational challenges.

Sustainability and the Future of Aviation

The aviation industry is under mounting pressure to reduce its carbon footprint. Sustainability has moved to the forefront, with airlines, manufacturers, and lessors investing in greener technologies.

Sustainable Aviation Fuel (SAF)

One major advancement is Sustainable Aviation Fuel (SAF), which offers a significant reduction in carbon emissions by being made from renewable sources like agricultural waste. Industry collaborations, such as the partnership between SMBC Aviation Capital and Trinity College Dublin, are working to make SAF commercially viable and scalable.



Electric Aircraft

Electric aircraft are gaining traction as a solution for short-haul flights, promising even greater emission reductions. However, these technologies are still in development, and the transition to greener fleets presents challenges, especially for lessors managing mid-life and older aircraft that may lose value as airlines embrace newer models. Balancing the economic realities of fleet renewal with the urgency of sustainability will require significant investments, regulatory support, and a collaborative effort across the industry.

Conclusion

The aviation industry is at a crossroads. Challenges like manufacturing delays, supply chain disruptions, and geopolitical tensions are testing traditional business models. Yet, these same challenges are fuelling innovation and creating new opportunities, particularly in the aircraft leasing sector. One emerging priority is the need for tools and applications that help stakeholders make smarter investment decisions in leasing and fleet management. Understanding the details of lease structures and identifying the best options for pre-acquisition investments will be critical for maximising returns and minimising risk. These intelligent approaches can redefine how airlines and lessors manage portfolios in a dynamic market. At AerPrice, we are combining aviation expertise with technology to enable better decision-making and drive smarter aviation investments for lessors and investors. Reach out if you'd like to know more.

References

• Business Insider. (2025). ‘Airbus had a way better 2024 than Boeing, delivering 766 commercial aircraft’. Available at: https://www.businessinsider.com/airbus-boeing-better-year-aircraft-deliveries-order-backlog-2025-1. [Accessed 20 May 2025]
• Financial Times. (2025). ‘Aircraft shortages will drag on for years, predict leasing bosses’. Available at: https://www.ft.com/content/10b9a040-0ef8-4348-89fc-f5ede131ab6f. [Accessed 20 May 2025]
• Forbes. (2025). 'Aircraft Production Hurdles Create Record Order Backlog, Older Fleet'. Available at: https://www.forbes.com/sites/oliverwyman/2025/02/27/aircraft-production-hurdles-create-record-order-backlog-older-fleet/. [Accessed 23 May 2025]
• Reuters. (2023). ‘RTX engine issue will ground 350 planes per year through 2026’. Available at: https://www.reuters.com/business/aerospace-defense/rtx-expects-3-bln-hit-q3-pratt-whitney-gtf-engine-issues-2023-09-11. [Accessed 23 May 2025]
• SMBC Aviation Capital. (2024). ‘SMBC Aviation Capital and Trinity College Dublin today announce the Trinity College Dublin SAF Research Facility at SMBC Aviation Capital’. Available at: https://www.smbc.aero/news/2024/smbc-aviation-capital-announces-partnership-trinity-college-dublin-sustainable-aviation. [Accessed 23 May 2025]
• SMBC Aviation Capital. (2025). 'Push and pull factors on aircraft lease rates 2025'. Available at: https://www.smbc.aero/sites/smbc.aero/files/2025-03/SMBC_AC_PushPull_Whitepaper_AW.pdf. [Accessed 23 May 2025]
• The Times. (2024). ‘Rolls-Royce v BA: the debacle that grounded hundreds of flights’. Available at: https://www.thetimes.com/business-money/companies/article/rolls-royce-v-ba-the-debacle-that-grounded-hundreds-of-flights-6fsnjnvdb. [Accessed 23 May 2025]