The aviation manufacture is at a critical minute – the problem is not the request for air transport, but the bottlenecks and dramatically large delays in the transportation of fresh aircraft. It would take 14 years to get them done at the current production rate (i.e. twice as much as before the pandemic). The slow pace of modernisation of the fleet is besides a higher cost for airlines, and the challenge for them is to balance the scale of operating activity with profitability in a fewer years.
In short:
•The imbalance between increased request and reduced supply has increased: request for transport and so for aircraft has increased, their supply is smaller than before the pandemic, and nothing bodes to change rapidly due to trade friction – disruptions in the supply of natural materials and components for production and return towards increased production for military purposes.
•Interruptions in the supply chain stay a serious narrow throat – in 2024 aircraft supplies decreased by 31% compared to the industry's highest in 2018.
•Historically advanced levels of delays in deliveries – at the current rate, their liquidation would take 14 years.
•Another evidence – the average age of the aviation fleet on a global scale increased to a evidence level of 14.8 years. The ageing fleet is burdened with airline performance, not only reducing their growth possible in consequence to increased request for transport but besides contributing to increased fuel consumption costs (including rising fuel and labour costs)
•The challenge will be to balance the increase in transport with its profitability – to meet request not only will it not be easy but it will besides be profitable.
•Limited airport capacity and the efficiency of the traffic control strategy – last summertime only 65% of flights arrived on time, and forecasts indicate delays will increase in subsequent years! According to the European Commission, delays in European airspace can increase six times by 2035. Central Europe's airspace is peculiarly crowded, so it may be time to return to the European airspace project.
•Aeronautics production: most innovations will require another decade to scope the maturity phase to be implemented on a production scale, in the meantime, investment in expanding current production and in developing production capacity of fresh technologies must be carefully balanced
The aviation manufacture is at a critical moment, facing, on the 1 hand, economical recovery (a request for flights besides related to reborn tourism) after the pandemic, but on the another hand being exposed to geopolitical tensions, persistent constraints in the supply chains, while accelerating rapidly on a global scale an action programme for sustainable improvement in aviation. In the manufacturing and air transport sectors, the Allianz Trade view remains a serious narrow throat. Engine manufacturers, component suppliers and first equipment manufacturers (OEMs) have difficulty accelerating production in consequence to expanding demand. In fact, bottlenecks in skilled labour, natural materials and logistical capacity proceed to hold aircraft supply worldwide, crossing airline plans and expanding their costs. We estimation that in 2024 deliveries fell by 31% compared to the industry's highest level in 2018, erstwhile it managed to deliver around 1800 aircraft worldwide. Last year's consequence was besides 30% lower than the manufacturers' forecasts (which shows that even at origin there is no control and certainty regarding the script of the situation).
There are 2 main negative effects with the persistent imbalance between request and supply of fresh aircraft:
1. request exceeds transportation = backlog reaches historical level: In the light of the continuing strong request for commercial but limited supplies, the backlog reached around 17,000 aircraft at the end of last year, which is simply a evidence level in the industry. For this reason, at the current transportation rate, it would take almost 14 years to destruct the current backlog, twice as much as the average of 6 years before the pandemic.
2. Ageing fleet = advanced costs and carbon dioxide emissions: The second major consequence is that the average age of the global fleet increased to a evidence of 14.8 years as a consequence of delays in deliveries, which represents a crucial increase compared to an average of 13.6 years between 1990 and 2024. The airline itself is most affected by this due to the fact that the older fleet means higher maintenance costs and more fuel consumption. According to IATA, had it not been for the industry's fuel efficiency to decline (in the wake of the ageing fleet), airlines would have utilized up 1.4 billion gallons little aviation fuel and CO2 emissions would have been 13.6 million tonnes lower.
Continuing on the subject of the environment, the Allianz Trade view that the request to decarbonise aviation is no longer a long-term ambition, but alternatively an urgent necessity. The regulatory framework, specified as the EU's "Fit for 55" initiative, and the requirements for SAF aviation fuels (organic fuels produced from alternate sources alternatively than fossil fuels) and global carbon accounting mechanisms force both airlines and manufacturers to accelerate the implementation of sustainable improvement strategies, frequently before technological readiness to implement fresh industrial solutions. This discrepancy will persist and will pose an expanding challenge for the industry. For example, SAF is presently a serious problem for airlines, as it costs 2 to 5 times more than conventional aviation fuel, resulting from limited production capacity, advanced natural material costs and restrictive supply chain regulations. However, with the increase in requirements for the usage of SAF, the request for this green fuel outweighs the supply, which will further induce an increase in its prices. This represents an crucial financial burden for airlines (industries with comparatively low margins) and threatens to increase the scale of decarbonisation efforts in the close future.
In fact, in the close future, the direct challenge for airlines in Allianz Trade's opinion is to balance the restoration (or even increase) of operating activities with profitability. Air travel request has increased strongly, with peculiar benefits for tourism sectors and increased request for low-cost airlines operating short-distance routes, but at the same time the cost force on airlines is high. Air fuel prices (biofuels), labour shortages and inflationary pressures inactive may lead to an erosion of margins, and the request to reinvest in fleet renewal and digital transformation represents an additional burden for carriers.
In addition to decarbonisation and higher costs, there is another major obstacle: the limited capacity of airports, which prevents airlines from gathering increasing demand. In addition to delays in the transportation of aircraft, which reduce the number of seats in aircraft, carriers besides face airspace problems, especially in Europe. According to the European Commission, delays in European airspace can increase six times by 2035 as up to 80% of air traffic control centres can be expected to end their capacity. Already in the summertime of 2024, only 65% of flights arrived on time, and forecasts indicate that delays will increase in subsequent years. The Commission warns that many national air traffic control systems are operating at or beyond their capabilities and will not be able to cope with the future growth of air traffic without urgent reforms. To remedy this, Brussels calls for immediate policy action and investment in the recruitment, training and modernisation of airspace control. It calls for velocity up the hiring of fresh controllers to meet the needs before 2030 and at the same time for associate States to rethink the European airspace task (especially in a crowded Central Europe) and for robust financing of technological modernisation, including automation and systems supported by artificial intelligence at airports.
On the another hand, geopolitical instability, linked to commercial tensions, conflicts or airspace constraints, besides changes the planning of air routes, leasing agreements and defence priorities of OEM producers. president Trump's re-alignment of duties casts fresh shadows on the aviation industry, threatening to disrupt its fragile recovery after the pandemic. Tourism to the United States, the key origin of gross for many (especially European) airlines is weakening, with a traffic drop of 17% y/y from Western Europe in March, and the aircraft burden rate at the beginning of Q1 fell to 78% (from 84% earlier). The change in politics has led to a boycott of travel by Canadians who are the largest group of tourists in the US, and anti-American sentiments are increasing throughout Europe. At the same time, Airbnb, Booking.com and Expedia warned that their financial performance would be lower than expected due to mediocre request in the United States. North American airlines are presently forecasting the world's weakest gross growth in 2025 , with a decrease in revenues in the first 4th of the year of 10% in quarter.
Innovation on the part of manufacturers: for aircraft manufacturers, the emergence of fresh technologies, specified as advanced air mobility (AAM), hydrogen propulsion and artificial intelligence-based operations means in Allianz Trade's opinion changes that are expected to become a key area of activity, but... most of these innovations will require another decade to scope the maturity phase to be implemented on a production scale. In the short to average term, therefore, the challenge will be to adapt request (to current production capacity), to harmonise investment with technological readiness and to guarantee safety and compliance.
