2024 Aviation Industry Review & Outlook

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  • Report
  • January 25, 2024

Commercial aviation produced a strong performance in 2023, leaving COVID-19 firmly in the rear-view mirror. What are our predictions for the aviation industry for the coming 12 months?

War and conflict have replaced pestilence as headline issues on the world stage, keeping economic and political uncertainty at an uncomfortably high level throughout 2023 and likely to stay elevated throughout 2024. Although the threat of a global economic recession has, for the moment, receded and interest rates and inflation have both passed their recent peaks, supply chain bottlenecks and the availability and cost of key commodities, manufactures and skilled personnel continue to apply headwinds to economic growth and to many industries, not least the aviation sector.

The expansion of regional trouble spots during 2023 marks a worrying raising of the stakes for global security. The continued war in Ukraine coupled with tensions in the Middle East are increasing global uncertainties. Coupled with unprecedented water shortages affecting the Panama Canal, the cost of seaborne cargo shipments has rocketed in recent months to reflect increased transit times and shipping costs for goods moving from Asia to Europe and North America in particular. Airlines also continue to face operational challenges and increased costs due to the closure of Russian airspace, which will be a fact of life for the foreseeable future.

Two of the largest global economies have been making news during 2023. China and India have now officially swapped places in the global population rankings and the Indian economy has been performing very strongly, while China continues to wrestle with the challenge of hitting critical GDP growth targets. Together, the two countries generate more than 50% of Asia’s total GDP and, measured by GDP purchasing power parity, China is in first place globally, with India ranked third. Both will greatly influence global economic performance over the coming years, even starting to eclipse the impact of the USA, which risks becoming more insular depending on the outcome of the 2024 presidential race. This is one of more than 60 national elections to be held in 2024, many of which could usher in radical new social and economic policies as electorates become more polarised - Argentina being a recent example.

Surging demand for passenger air travel benefited all air travel markets and regions in 2023 as the remaining COVID-related constraints were lifted and travel freedoms were reestablished. However, many airlines have been unable to mount their planned responses to this demand due to a mix of supply chain, infrastructure and labour shortages. In addition, the air freight market remains weak, with cargo tonnage down by 5% compared to 2022, accompanied by a 32% reduction in average yield. Nevertheless, IATA estimates a $23bn net profit for the airline industry in 2023, with a small improvement forecast for 2024.

A respectable 70% of the New Year predictions for 2023 came to pass:


  • China’s domestic passenger traffic will surge in 2023…
  • …with Chinese international traffic recovering up to 65% of pre-Covid volume
  • COVID testing for passengers arriving from China will be widely imposed, without materially impacting demand
  • China’s passenger recovery will offset the impact of recessionary headwinds on travel in Europe and North America
  • Inflation will gradually abate during the year, but interest rates will remain elevated until 2024
  • OEM supply chain issues will improve only slowly, resulting in further delivery shortfalls
  • Orders will remain buoyant, supported by Asian growth and fleet efficiency needs
  • Boeing will achieve certification of the MAX7…
  • …but the MAX10 will slip into 2024
  • More aviation lenders and investors will include ESG performance metrics in their transaction analysis and business strategies

Most of the misses were connected to China, where international passenger recovery only managed to reach 35% of the 2019 level even though, contrary to all expectations, Chinese travellers were not subjected to COVID-19 testing by their destination countries. MAX7 certification also missed its 2024 target after another frustrating year for Boeing, where “quality escapes'' continue to cast long shadows.

The airlines

2023 marked a clear turning point for the airline industry as passenger demand continued to rebound strongly from COVID-19. Asian airlines are still behind the recovery curve compared to Europe and North America, but their rebound is now well under way, with regional passenger capacity back close to 80% of the 2019 level by the end of the third quarter, in no small part aided by the reopening of China.

Premium travel demand came back strongly in 2023, providing the full-service airlines with a welcome boost to their revenues and profitability. Operators have benefited from a meaningful trading up of leisure travellers from economy to premium cabins, especially in long-haul markets, as the air travel “experience” is increasingly considered part of post-COVID vacations. Across the industry, the constrained capacity situation has led to load factors running at, or slightly above, pre-COVID levels throughout 2023.

All of these tailwinds resulted in an expected industry operating profit of US$41bn and a net profit of US$23bn, according to IATA’s recent Global Outlook paper. This is a remarkable performance that speaks volumes for the resilience and adaptability of the industry as well as the undisputed global demand and need for air travel.

This outcome is materially ahead of mid-year expectations largely due to the airlines’ ability to pass on cost increases to passengers which, on top of the demand-driven pricing opportunity, resulted in fares that in many markets were 20-30% higher than pre-COVID. However, it should also be noted that real average fares remained 40% lower than a decade earlier and the achieved profitability equates to less than US$5.50 per passenger, leaving airlines with no choice but to maintain a relentless focus on costs and efficiency. This is currently even more challenging than in the past, given the shortages of skilled staff and widespread wage inflation driven by the macro-economic landscape, coupled with higher debt service costs and lease rates.

One key metric that delivered a material tailwind to the industry in 2023 was a 20% reduction in the average price of jet fuel, which closed the year below $2.50 per USG. Unfortunately, the crack spread remained stubbornly high, adding 85c to every gallon, or almost 50% on top of the unrefined price. Again, it seems likely that the spread will remain elevated throughout 2024 and the IMF expects little movement in the average crude oil price until 2025.

North American and European airlines continued to deliver the strongest economic performance, together accounting for more than 90% of total industry profits. The Middle East has experienced one of the strongest traffic recoveries and also enjoys the lowest break-even load factor at less than 60%. Asia Pacific airlines are expected to break even in 2023, with other regions still loss-making.

Global passenger numbers rebounded by a further 23% in 2023, to 4.3bn, which is within 5% of the 2019 pre-COVID level. Over the same period, revenue passenger kilometres (RPKs) increased by 38%, the higher rate reflecting the delayed return of long-haul travel and consequently longer stage lengths.

Domestic travel has recovered faster and further than international traffic. Aggregate January to November domestic RPKs (reported by IATA) were 3.7% ahead of 2019, while international RPKs still lagged by 13%, for an overall industry shortfall of 9%.

By region, passenger volumes in the Americas have recovered the most, exceeding 2019 RPK levels in the 11 months to November. Other regions, including Europe, are still 10-15% shy of 2019.

It is arguable, however, that measuring traffic levels relative to 2019 is misleading, since this fails to account for the underlying growth trend that would, in normal market conditions, have added between 15-20% compound growth over the intervening four years. On that reckoning there is still some way to go and, although a full global return to pre-COVID levels will occur in 2024, recovering the lost growth will probably not occur much before the end of the decade.

The delayed recovery in Asia Pacific is linked to what has been happening in China’s aviation market since the remaining COVID-19 restrictions were removed at the end of 2022. In the first ten months of 2023, Chinese domestic passenger numbers increased by 127% compared to the same period in 2022 (according to CAAC statistics), to a level slightly more than 1% above the 2019 pre-COVID numbers. International passenger traffic has been far weaker, however, in part due to a restriction on the number of outbound leisure travel visas issued and, for inbound travel, a requirement for pre-entry COVID-19 testing that was only dropped in August. Consequently, the total number of international passenger journeys were still 65% below the 2019 level, at almost 22m from January to October compared to 62m.

In a move to expand inbound visitor levels, China recently announced additional visa-free entry for tourists from a number of additional countries, including Ireland, Thailand, France, Germany, Italy, Malaysia, the Netherlands, and Spain. However, given the broader economic backdrop, a full recovery may not be achieved in 2024 with implications for the wider intra-Asian travel market given the previously heavy traffic flows from China to Vietnam, Thailand etc.

For India, another key Asian market, 2023 was a significant year during which the “new” Air India further consolidated its multi-branded operations and placed one of the largest new aircraft orders of recent times. The expanded and recapitalised Air India Group took a 28% share of the domestic passenger market in the first 11 months of 2023 (according to India’s DGCA), still well behind Indigo’s 59% share but leaving the remaining domestic operators in the shade. A combination of elevated market and operational pressures has taken its toll among the ranks, with GoAir forced to suspend operations in May and Spicejet requiring a substantial equity infusion.

Air India placed orders for 470 aircraft during 2023, with delivery dates extending out to 2030. 70 of these are widebodies that will be put to good use rebuilding Air India’s international network and recapturing market share from non-Indian carriers. The rest are single aisle aircraft which will operate on domestic and regional routes alongside 500 new A320neo family aircraft ordered by Indigo in 2023. In a market where over-capacity regularly delivers an existential challenge, the induction of these huge capacity increases will need to be rigorously managed to profitably tap the substantial market growth potential that undoubtedly exists over the coming decade.   

In contrast, mainland Chinese airlines did not place any orders for western aircraft in 2023, preferring to support the domestic industry by adding 40 ARJ21s and 160 C919s to the backlog. This may reflect ongoing political tensions, especially with the US, or perhaps is linked to the fact that the major Chinese airlines continued to lose money in 2023 in a challenging economic environment. The fact remains, however, that China is substantially under-ordered and, with western original equipment manufacturer (OEM) production largely sold out through the rest of the decade, will become increasingly reliant on lessor availability to support growth and fleet replacement. Despite declared ambitions, the scaling up of C919 production will not realistically come close to plugging the gap.

The last region worthy of a special mention is the Middle East, where traffic recovery has been strong enough to support an accelerated return of the Emirates’ A380 fleet, with almost 70% back in service by year-end. 2023 saw the beginning of Saudi Arabia’s new commercial aviation transformation strategy, with Saudia and Riyadh Air each placing orders for 39 widebody aircraft with an estimated combined value of over $10bn. The orders are linked to an ambition to develop inbound tourism beyond the pilgrimage market and to create alternative gateways to those already successfully operating in the region. 

Inactive fleets

The level of stored passenger aircraft continued to fall throughout the past year, from 5,600 at the start of the year (19% of the fleet) to 3,900 by 31 December (13%). Within the overall numbers, the single aisle passenger storage level had fallen to 9.3%, with twin aisles at 14% following the biggest year-on-year reduction. The level of stored regional aircraft remained stubbornly high, at 25%, but these numbers still include over 400 50-seat RJs, accounting for one-third of the fleet, most of which have already been retired from airline operations and are awaiting part-out.

The age profile of inactive fleets remains highly skewed towards older models, with over 60% being 15 years or older. Many of the latter have already been retired from airline service and have been stored prior to part-out.

The storage levels for younger fleets would likely be even lower but for the need for maintenance prior to re-entering service. One of the consequences of the airlines’ focus on cost conservation during the COVID-19 pandemic was the widespread deferral of airframe and engine maintenance events, which resulted in a growing bottleneck at maintenance, repair and overhaul facilities (MROs) and engine shops as the tide turned and airlines sought to reactivate their fleets. The delays in accessing maintenance resources are now magnifying the mismatch of hangar and shop capacity to rising demand, with the situation at engine shops further exacerbated by the requirement to inspect hundreds of geared turbofan (GTF) engines and the emerging pattern of more frequent shop visits for both GTF and Leap engines compared to their previous generation powerplants. The typical transit time for a single aisle engine shop visit, including the wait to enter the shop, is now reported to be at an unprecedented 250-300 days.

At the end of 2023, the lowest fleet storage rates were for 737MAXs (2%), 787s (3%), A350s (4%), 737NGs (4.5%) and A320 family (9%). The highest include 777s (13%), A330s (17%) and A380s (31%).

However, within the A320 family there is a large and growing discrepancy in the proportion of inactive GTF-powered Neos compared to other sub-fleets, with over 300 examples (22%) currently parked—the corresponding number for the LEAP-powered fleet is 3.5%. The impact of the GTF problems is also reflected in the A220 fleet, where 15% are currently inactive.

The lessors

2023 has been a stand-out year for aircraft lessors with COVID-19 firmly in the rear-view mirror, very strong demand for aircraft and substantial improvements in lease rates, all of which led to strong profitability.

Leasing continues to be the dominant source of financing for new aircraft deliveries, despite taking a lower share than in recent years (albeit likely to be higher than the 52% currently reported due to the lag in capturing these transactions in industry fleet databases).

Lessors contributed an estimated $40bn of delivery financing in 2023, with a further $6.5bn in used aircraft sale and leaseback transactions.

One reason for the lower lessor share is that some airlines that would normally utilise sale-and-leaseback (SLB) financing have instead been using cash reserves either generated during the recent much improved revenue environment or from unutilised liquidity facilities secured during the COVID-19 pandemic.

Another reason for the reduction may be an increase in the use of finance leases, previously used mainly by Chinese airlines and lessors. Recently, lessors such as BOCA have been broadening their product offerings to include finance leases for stronger credit airlines – a route that was recently taken by Air India for their new A350 financings utilising India’s GIFT City facility, which is attracting a growing number of domestic and international lenders and lessors and will potentially become a game-changer for Indian aviation finance over the longer term.

On the subject of leasing in China, there was a good deal of speculation at the start of 2023 on a reported pivot of Chinese lessors to concentrate their activity in China and reduce international exposure. While this did not materialise to a significant degree, there have been examples of western lessors selling down their Chinese exposures to Chinese lessors and, at the same time, dollar borrowing costs have become more expensive for Chinese lessors due to China’s weaker economic outlook and rating, leading to an economics-driven shift away from international lessees. 

A flurry of activity towards the end of 2023 saw a number of financial settlements between Russian airlines and western lessors with outstanding insurance claims following the illegal expropriation of their aircraft. More than $2.5bn dollars has been recovered by at least eight lessors relating to around 100 aircraft. The settlements were agreed and paid out by Russian state insurance company NSK, which is not sanctioned, with ownership of the aircraft then passing to the Russian airlines, predominantly Aeroflot, Ural Air and S7. 

The shortage of new capacity coming into the market has materially increased demand for existing lessor product. All lessors have seen a significant increase in the proportion of maturing leases that are being extended to lock in capacity and, with almost all excess young and mid-life A320ceo and 737-800 availability placed, higher lease rates are being achieved across the board. As demand outstrips supply, lessors have also been able to improve portfolio credit quality by avoiding placements to weaker airlines and, indeed, declining to extend leases where better quality alternatives exist.

As lease rates and lessee profile quality improve and availability dwindles, aircraft values have been improving, especially over the second half of 2023. Mid to high single digit percentage improvements in young new generation single aisle types have been outpaced by increases of up to 25% and more for mid-life A320ceos and 737NGs, for example, compared to mid-COVID values. Widebody values have also started to move up, for the same reasons, less dramatically so far due to their lagged operational recovery, but with considerable runway left for further improvement in 2024. At the older end of the market, economic lives are being extended to help bridge the capacity shortfall, which again is having a positive impact on values.


Supply chain and production quality issues continued to apply the brakes on deliveries throughout 2023, with several new problems coming to light in the Boeing camp and some serious engine performance and quality failures, most notably on Pratt & Whitney’s Geared Turbofan, that taken together will curb airframer production rate ambitions for several years to come. The most recent MAX incident, when a plug door blew out in early January, will have lasting consequences for Boeing’s ability to certify and deliver aircraft and on airline and traveller confidence.

The traditional year-end rivalry to secure the most commercial airliner deliveries has been skewed for a while now and was again won convincingly by Airbus in 2023, with 729 deliveries compared to Boeing’s tally of 505. Within the totals, Airbus delivered 636 single aisle and 93 widebodies, while Boeing handed over 387 737MAX and 118 widebodies. 

The competition for new orders generated a great deal more momentum which took them past 2014’s record booking level, to a new high of over 4,000 firm orders.

Airbus secured 57% of the total with 2,310 gross orders, with Boeing taking 1,426 (35%). Net orders after cancellations and model changes were 2,094 and 1,314 respectively. Embraer and ATR together booked slightly more than 100 firm orders, representing 3% of the total, while Comac accounted for 5% with an additional 160 C919s and 40 ARJs. 

An estimated combined current market value of $275bn also set a new record, beating the previous high by 25%. Most of the orders came at or after the Paris air show and in the final quarter, with little activity from January to May.

The largest orders came from Air India, Indigo, Emirates and Turkish Airlines, each of which placed orders valued at over $20bn at current market values. Air India’s 470 aircraft, $31bn fleet regeneration initiative is also the largest scale single year order ever placed by value, even taking account of inflation.

Several lessors topped up their backlogs with orders for 368 aircraft valued at $18bn, despite the challenge of finding delivery slots in the next five years. Lessor backlogs comprise 15% of the OEMs’ total, well below historical levels.

The demand side of the equation is looking extremely robust for the western OEMs well into the future, with an average of 7.5 years’ production on backlog (a total of 14,800 aircraft) and 2023 generated an average book-to-bill of 2.9.

The profile of the orderbook has evolved over recent years, with the lessor share of backlogs at Airbus and Boeing below 20% and the lessor mix more concentrated in the large, experienced players - 50% of the lessor backlog is with five lessors. The regional distribution of airline orders has also been changing to reflect the lack of recent orders from China. This has resulted in the proportion of backlog delivering into Asia Pacific falling from over 40% to 36% - still the largest customer base, despite the Chinese airline backlog of western aircraft representing only 5% of the total. North American carriers hold 21% of the backlog and Europeans 17%. 

With the pressure on to raise production rates in line with demand, the ability to build aircraft that meet fundamental safety and quality requirements, which should be an absolute given, too often continues to fall short. Supply chains remain broken, and production will consequently continue to fall short of where it needs to be throughout 2024 and beyond. A delivery shortfall of almost 4,000 aircraft has built up since the start of COVID-19, with no prospect of recovering this loss in the future. Furthermore, delivery delays have become the norm and, although gradually improving, will continue to impact the airlines’ ability to manage their network operations and lessors to manage their portfolio and balance sheet growth.

While Airbus, CFM and others are not blameless in this regard (indeed, the challenges and scale of the industry imply that a 100% pass rate is an impossible target), serious questions are rightly being asked in particular of Boeing, Spirit AeroSystems and Pratt & Whitney. Whether the issues arise from corporate culture, insufficient oversight and control of supply chains, skilled manpower shortages or over-expansion, the solutions are still in the making and frustratingly elusive. 

Boeing’s relationship with the FAA remains fragile, with an obvious shortfall in the necessary levels of trust, which impacts not only production and delivery of current products but also the approval and certification of new ones, including variants. Boeing must urgently find a way back to prioritising the engineering fundamentals of their business. Their relationship with Spirit, for whom they are by far the largest customer, will need to be much closer going forward, with the focus on technical excellence instead of cost reduction.  

Spirit received some positive news at the end of September with the installation of Pat Shanahan as CEO. Shanahan comes with a strong track record of over 30 years’ experience at Boeing, where he played a key role in getting the 787 program back on track more than a decade ago prior to a stint in charge of supply chain. Despite his deep experience, however, Spirit will likely be his toughest challenge to date. 

Pratt & Whitney’s new parent must be wondering what they invested in as the estimate of potential penalty and rectification payments for virtually all the GTFs so far delivered continues to rise. In addition, they will need to factor in the loss of customer confidence and goodwill which, at the very least, will affect their share of new engine orders to be won over the next several years.

Aircraft trading

For the majority of lessors and aircraft owners, trading had become a core component of asset management and an important profit generator well before the onset of COVID-19, with non-SLB trading volumes [1] approaching $20bn per annum from 2016 to 2019. Unsurprisingly, this fell by two-thirds in 2020 but has since recovered, although still 25% below the previous peak. The big drop can be easily understood, but the slower rate of recovery, especially in 2023, which was flat compared to 2022, is reflective of the shortfall in new aircraft delivering directly to the lessors or available for sale and leaseback which has driven lessors to retain assets that would otherwise have been on the docket for sale, in order to maintain balance sheet and revenue volumes. 

Where trading has been taking place, in many cases the objective has been to recycle capital rather than specifically to harvest profits, thereby reducing the requirement to raise debt in the prevailing elevated interest rate environment. Now interest rates appear to have passed the peak, investors will be more comfortable pricing transactions in 2024, which should ensure that trading activity continues to recover strongly.

[1] Trades excluding aircraft over 15 years old, sales by airlines and non-financial owners, and sales for part-out

The money

The availability of both debt and equity is still below pre-COVID-19 levels due to a combination of macro-economic and fiscal uncertainty, broad concerns around the aviation sector in particular and perceived better value to be found in other sectors. However, the industry is still securing substantial amounts of capital for delivery financing, estimated at around $83bn in 2023. 

The traditional aviation lenders are largely back in the market, with competitive rates available in scale for the right assets and stronger counterparties. They are increasingly being augmented by alternative lenders, which in many cases are drawing on private equity funds and taking a broader view on asset quality, albeit with an appropriate risk premium, consequently finding strong traction with acquirers of mid-life aircraft in particular. The bond markets also remain open for business, although pricing here has generally moved up further than for vanilla debt.

Notwithstanding the availability, lessors have shown a reduced appetite to lock in long term financing or refinancing in the debt capital markets due to the high interest rate environment and an expectation that rates will fall over the next one to two years. Selling assets to recycle capital has become more prevalent, especially for the larger players.

SLB lease rates are now pricing in the higher interest rates, but this has lagged more than has been the case for aircraft lease placements, given the still competitive nature of the market. Over the past 18 months or so, large pools of capital that were accumulated and financed at interest rates that predated the current run-up have been largely deployed and that competitive advantage will likely disappear during 2024.

The asset-backed securities (ABS) market saw just two transactions in 2023 – a portfolio of engines from Willis and an aircraft loan portfolio from Ashland Place. The outlook for 2024 is for an increase in activity but falling well short of peak pre-COVID levels. Loan portfolios are also likely to become more prevalent in the mix. 

The Japanese operating lease (JOL) and Japanese operating leases with call option (JOLCO) market has seen more activity over the past 12 months, sustained by Japanese investors that continue to have tax exposures to shelter. However, the softening of the Yen relative to the US dollar has been tempering investor appetite.

For investors, commercial aircraft assets and aircraft lessors have continued to demonstrate their resilience and ability to generate strong risk adjusted returns through extremely challenging market events, with lessors viewed as the lower cost, lower risk channel for financing the sector. 

Those investors that are already committed to the sector have, by and large, shown their willingness to remain invested or to increase their exposures. A small number have elected to exit the space, such as Ares Management, which is in the process of divesting VMO Air. However new entrants like AIP Capital continue to emerge and, alongside the deep resources and ambitions of the likes of Saudi sovereign fund PIF, help to bridge the so-called funding gap.

The environment

So much has been debated, researched, published and invested on the subject of commercial aviation sustainability over the past 12 months that it would take a dedicated white paper to do justice to the breadth and complexity of the issues. Instead, the statement reproduced below, which was published in June 2023 by the Chief Technical Officers of seven of the world’s major aerospace OEMs [2], admirably sums up the challenges and initiatives that are engaging many of the keenest technical minds across multiple disciplines:

“We are unified in the proposition that our industry has a prosperous and more sustainable future, and that we can make it happen through the near-term implementation of lasting industry-wide and globalized harmonized policies.”

“Over a decade ago the aviation industry was the first global sector to set ambitious emission reduction goals. Today, we come together again to support the industry’s commitment to achieving net zero carbon emissions for civil aviation by 2050 and to highlight the importance of the production, distribution, and availability of qualified Sustainable Aviation Fuel (SAF) needed to achieve this goal.  The development of fuel-efficient aircraft technologies has been a priority for the aviation industry for over 50 years and remains a priority.  Greater uptake of SAF would mitigate the projected growth in aviation CO2 emissions as the customer demand for global air travel increases.

Our companies are steadfast in delivering the technical solutions required to reduce the carbon emissions of the air transportation sector through our work in three key areas: 

  • Developing advanced aircraft and propulsion technologies that enable net-zero carbon emissions while maintaining the safety and quality standards of our industry;     
  • Implementing improvements in aircraft operations and infrastructure; and     
  • Supporting policies and measures that accelerate the availability and adoption of qualified SAF.     

Increasing the production and utilization of SAF is a critical step for achieving the air transportation sector’s net zero CO2 emissions goal by 2050. However, the production of SAF is currently estimated at less than 0.1% of the global demand for jet fuel today. Moreover, SAF prices are typically two to five times higher than the price of conventional jet fuel. The supply is further constrained by competition for renewable fuels from other sectors that have alternative decarbonization options, such as with surface transportation and heating.

We support government policies and initiatives that stimulate investment in production capacity, reduce costs, and encourage greater industry uptake. This includes the US Inflation Reduction Act of 2022 (IRA), which provides a blender’s tax credit. The IRA also authorizes funding to support advanced technologies and infrastructure that enable expanded SAF production and distribution capacity in the US, as well as projects to develop fuel efficient aircraft or otherwise reduce emissions from flying. Public-Private Partnerships, such as the FAA FAST Tech Program, would enhance OEM adoption, testing, and technical clearance of new emerging SAF pathways to ensure seamless insertion into the commercial fleet.

Similarly, the CTOs welcome the political agreement found on ReFuelEU Aviation [3 ] which will provide a strong signal for the deployment of SAF in air transport, and look forward to the legislation being adopted as soon as possible. The EU needs to implement the right industrial support policies, within the Net Zero Industry Act, to accelerate the availability of SAF and synthetic kerosene at commercial scale, building on the work of the Industrial Alliance for Renewable and Low Carbon Fuels (RLCF). In addition, qualification efforts that support the development of co-processing technologies that can harness the existing capital infrastructure will accelerate the availability of SAF at commercial scale.        

Public-Private Partnerships can play a key role in increasing the development and use of SAF through policy definition and alignment, along with financial incentives.  Policymakers have the chance to accelerate these processes by providing sustained and predictable support to the multi-year development of novel technologies, and by stimulating the ramp-up of capacity. Recognizing the technical challenges associated with decarbonizing aviation, greater public policy and financial support to accelerate SAF production and distribution over fuels used for surface transportation is essential. Additionally, close collaboration with the aviation industry and fuel suppliers is required in the development of infrastructure and investment in SAF production capacity to accelerate availability in support of demand. Lastly, establishing standards for qualification of 100% SAF pathways that ensure full compatibility with engines and aircraft for civil and appropriate defence applications as they become available is essential.

We, as CTOs, are committed to supporting policies that increase the supply of SAF while ensuring a consistent and predictable demand through harmonised global measures. The aviation industry plays a pivotal role in modern life connecting people, economies, and nations. We are unified in the proposition that our industry has a prosperous and more sustainable future, and that we can make it happen through the near-term implementation of lasting industry-wide and globalized harmonized policies.”

In Europe, preparations for the Corporate Sustainability Reporting Directive (CSRD) are underway, with mandatory reporting required from 2025 for the first tranche of affected companies.  EU listed airlines and OEMs have just started their data collection and lessors will need to begin their preparation in earnest this year.  

In November 2023, PwC’s global Strategy& consulting group published a briefing paper, “From feedstock to flight – how to unlock the potential of SAF”.

[2] Airbus, Boeing, Dassault Aviation, GE Aerospace, Pratt & Whitney, Rolls Royce & Safran

[3] An EU directive that mandates a minimum blend of 2% SAF in 2025 on all fuel uplifted from EU airports, rising to 6% by 2030


Although airline profitability turned a corner in 2023, moving solidly back into the black, IATA expects only modest financial improvement in 2024, with $49bn in operating profit and a net profit of $25.75bn, held back by low yield growth, a higher cost base, especially labour costs and, at the net level, a higher debt service burden. However, the return on invested capital for airlines is still expected to come close to 5% this year and there is scope for the airlines to do better than forecast.

Passenger traffic will reach or surpass 2019 levels in all regions in 2024, but recovering the four years of lost growth will take a good deal longer. Air freight markets will remain relatively weak, with a recovery in volume growth, assisted by the disruption of seaborne cargo through the canals, partially offset by soft rates. With the return of more widebody belly capacity, the dedicated freighter operators will continue to face challenges.

Supply chain and quality issues will continue to frustrate OEM plans to increase production rates. Airbus and Boeing will improve on 2023 levels this year but remain stymied by events both within and outside their control. Overall delivery financing of between $105bn and $110bn will be required in 2024, with lessors providing more than 50%. Replacement of older fleets will continue to be delayed, with consequential benefits for aircraft values and lease rates.

The surge in orders experienced in 2023 will probably not be repeated in 2024, although this could change depending on the timing of additional orders from China, which remains heavily under-ordered.

2023 was the year when Generative AI entered mainstream public awareness and applications like ChatGPT demonstrated how the power of AI might be harnessed. 2024 will see a rapid expansion of AI integration into airline, OEM, MRO and leasing businesses that, over time, will facilitate a wide range of potential advances in areas such as airline fleet and network optimisation, predictive maintenance, development of digital twins to explore aircraft design and repairs, forecasting of maintenance events for lessors and ABS portfolios, airline interline payment settlement and sustainability reporting.

Naturally, in an industry where safety is paramount, with no room for error, implementing AI-based solutions will need to proceed with caution, often requiring close cooperation with regulators. AI will, nevertheless, transform many industry activities and deliver substantial efficiencies over the coming years.

To close, here are some more predictions for the coming 12 months:

  • Airline profitability will exceed the IATA forecast, boosted by strong demand and robust pricing power
  • Western OEMs will deliver more than 1,500 aircraft
  •  Aircraft values will recover further, with widebodies outpacing narrowbodies
  • Expect to see more lessor consolidation, but few new entrants
  • There will be a marked uptick in aircraft trading
  • 737 Max 7 and 10 certification will not happen in 2024
  • Investor appetite for aviation assets will increase, through direct lessor platform investments or via deployment of managed funds
  • The burden of sustainability reporting will start to be felt by airlines, lessors and financiers
  • 2024 will be the year when it becomes possible to see a real path to 5-10% SAF by 2030, through actual contracts and projects as opposed to theoretical ones
  • Generative AI will become more widely used as the industry begins to explore its potential

Author: Dick Forsberg, Senior Consultant to PwC’s Aviation Finance Advisory Services.

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