Leasing

Aircraft deliveries to increase to $100bn in 2024, Avolon

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Aircraft deliveries to increase to $100bn in 2024, Avolon

Commercial jet aircraft deliveries are expected to increase from $78bn in 2023 to an estimated $100bn in 2024, Avolon has found in its 2024 outlook report. With over 1,200 aircraft delivered in 2023, the report expects deliveries to rise to over 1,450 aircraft in 2024. Though, the production boost may be affected by supply chain pressure and regulatory oversight. India, Saudi Arabia, and the UAE are noted as emerging key drivers of growth for aviation industry.

With a shortage in new deliveries available for lessors, the secondary market is being turned to more as lessors without orderbooks compete for sale and leasebacks and look to portfolio trades to deploy capital. The report said that demand for aircraft is greater than supply and thus benefited used aircraft values while high inflation and interest rates have boosted new aircraft pricing. Lessor mergers and acquisitions (M&A) activities are expected to rise in 2024. Furthermore, aircraft lessors have $21bn of debt maturing in 2024, and an additional $20bn of capital expenditures to finance.

Avolon CEO Andy Cronin said: "Airlines’ growth in 2024 will be supported by around US$100 billion in new aircraft deliveries, with lessor orderbooks and capital supporting fleet expansion plans."

Flying will also get more expensive this decade as airlines face tighter labour markets, increasing sustainability pressures, and engine durability challenges. Avolon expects economic growth to "be down in 85 out of all 223 countries globally just as airline capacity returns to prior highs." And so while strong air fares have returned airlines to profitability, the year will require them to manage with discipline in a higher cost and potentially volatile demand environment.

Airline passenger revenue is expected to grow a further 12% in 2024 to $717bn after a successful recovery post-pandemic in 2023. This will be supplemented by the fact that passengers are now more likely to pay higher fares to travel. For airlines, this means they are able to add more expensive fleet capacity. Avolon expects "further lease rate increases in 2024 across popular widebody and narrowbody aircraft types." Furthermore, the reopening of Chinese international travel will further bolster airline revenue momentum.

Avolon also expects sustainable aviation fuel (SAF) will continue to build throughout 2024 and estimates $2 trillion is required to scale up SAF production levels in order to hit net zero goals. Avolon chief risk officer Jim Morrison said: "While new aircraft designs with step-change improvements in energy consumption will ultimately be required to decarbonise, in the short-term the industry must focus on scaling up sustainable aviation fuel production."

Political risk will also be a focus in 2024 as "over half of global passenger airline capacity will be in countries in an election year." With conflicts continuing and threatening to heighten in the Middle East and Ukraine along with tensions growing from China, and other potential issues in a changing political landscape, will pose a likely risk to the aviation market due to its global nature. The industry be forced to "adapt yet again."