Aviation Leaders Report 2026

We are delighted to present you with our Aviation Leaders Report 2026: Evolution & Opportunity. The report captures the views of industry leaders across the leasing, airline and banking markets and includes input from analysts covering the sector.

Our 2025 report, the Supply Strain, focused on the supply challenges facing the industry with deepening concerns around engine reliability and a significant backlog of deliveries from the OEMs.

This supply challenge was set against the backdrop of stellar airline recovery in 2024. Industry leaders are consistent in their view that the aviation market continued to thrive in 2025 driven by strong demand, slowly improving supply and a real appetite for aviation in the financing markets.

The industry is evolving and maturing with continued opportunity for lessors, airlines and financiers.

James Kelly, Head of Aviation Finance at KPMG Ireland, provides his overview of the key issues driving the aviation market over the past year and shares insights he has learned from his discussions with major aviation leaders.

Airline performance

Airlines performed well in 2025, and 2026 is shaping up to be another year of strong financial performance. IATA predicts that global passenger traffic will rise by a healthy 4.9% in 2026. Airline net margins are predicted to remain stable but tight at 3.9%.

A record global net profit of US$41bn in 2026 is anticipated for airlines driven by continued global growth and lower fuel prices. This is an increase from US$39.5bn in 2025. Aside from fuel, cost pressures remain for airlines, with maintenance costs a deepening concern.

Record high global load factors of 84% helped to offset some of the cost and capacity challenges facing airlines in 2025.

A highlight in 2025 was the continued emergence of the Asia-Pacific region from the legacy of the pandemic with strengthening demand across the region’s international corridors and a steady improvement in the China market. This recovery has translated into an increased demand for aircraft in the region. Whilst the US market faced some challenges in 2025, there is renewed optimism that the US majors are well positioned facing into 2026.

Airline business models are evolving with premium offerings and loyalty programmes now a key driver of airline profitability, particularly in the US. Demand for premium product continues from business customers but is expanding in the leisure market. In Europe, the slow consolidation of airlines is speculated to continue in 2026 and beyond.

The widely held view of participants in our report was that airline bankruptcies were at a manageable level with constrained supply allowing aircraft to be deployed to meet demand elsewhere. Bankruptcies were driven by airline specific challenges rather than systemic weaknesses. Despite challenges for low-cost carriers in the US, the picture in Europe and Asia Pacific for the model was much brighter.

Supply

While supply challenges remain, OEM supply of new aircraft is slowly improving, although it could take until 2030 or later for supply to fully recover. Participants acknowledged the positive steps being taken by OEMs to strength their resilience and performance, though challenges remain across the supply chain due to tariff and inflation pressures on raw materials such as steel, aluminium and other components.

Airbus reported a 3.5% increase in its commercial aircraft deliveries in 2025 to 793 aircraft. Boeing was granted permission to increase production for the 737 MAX aircraft to 42 per month in October 2025 providing scope for the continued ramp up in production in 2026, providing quality can be maintained.

The “zero-for-zero” tariff agreement between the EU and the US in 2025 was widely welcomed by airlines, manufacturers and lessors and continues a longstanding policy that dates to the 1970s. Tariffs have a disproportionate impact on the aviation industry given its global reach and complex supply chains.

While some geopolitical tensions continue, a 0% tariff regime for aviation remains essential to the success of both global aviation and the global economy. It is hoped that the continuing 10% tariff on the import of Embraer aircraft into the US can be addressed during 2026.

Engine reliability remains a significant concern impacting the supply of new aircraft as well as airline fleet planning. The GTF power metal issue discussed in our 2024 report is now better understood but is likely to take another 2-3 years to fully resolve.

Maintenance and engine capacity

There is also a growing acceptance that new technology engines will require earlier and more frequent maintenance (MRO) visits. The trade-off emerging for airlines is between lower fuel costs, driven by the impressive efficiency of the new technology engines, and structurally higher lifecycle maintenance costs.

Airlines are building a deeper pool of spare engine capacity – often with support from lessors – and are also seeking to defer aircraft retirements to maintain capacity.

Financing environment

The consistent view from participants in our interviews was that the aviation debt market had matured and is in rude health.

The interest cuts by the US Federal Reserve in 2025 gave real momentum to the financing markets as spreads tightened. The historic close link between interest rates and lease rate factors was disrupted in 2025 as aircraft shortages kept lease rates strong, despite falling spreads.

As well as cost, diversification of funding sources and matching maturities remains critical for the industry. Aviation continues to source funding from the unsecured capital markets, the structured product market, traditional banks, alternative lending / credit funds, as well as more niche products such as sukuks and Japanese equity.

These financing markets are open and actively seeking aviation exposure. With the industry delivering over US$100bn of aircraft in 2025, with an anticipated increase to US$125bn in the near term, diverse and deep sources of capital are essential.

An investment grade rating remains critical to the competitive position of large aircraft lessors and for certain airlines, allowing access to deep pools of efficient capital that remain available even during periods of turbulence.

The growth in the number of investment grade lessors is consistent with the evolution and increasing maturity of the aviation leasing market, with a number of aviation lessors benefiting from rating upgrades in 2025 and speculation surrounding further potential upgrades in 2026.

Banking market appetite

The appetite of the traditional banking market remains resilient, benefiting from a favourable regulatory environment in the US and the emergence of some new bank lenders as new equity investors in aviation are able to access their existing local banking relationships to raise capital in regions such as the Middle East and Asia.

For structured products, the aviation ABS market surged back in 2025 with US$10bn of debt issuances, which could hit record levels in 2026 if conditions remain stable. While there have been secondary trades of aviation ABS E-notes, primary issuances have been slower to return but there is growing confidence that a primary issuance of aviation ABS E-notes will happen in 2026.

The aviation loan ABS market also continues to grow as alternative lenders fund gaps in the aviation financing market and become an additional pillar of the capital stack.

Sustainable financing took a back seat in 2025 but is acknowledged as a key long-term industry trend that will re-emerge.

Aviation leasing

Aviation leasing companies enjoyed a stellar performance in 2025, primarily driven by a continued airline demand and a favourable interest rate environment.

There was a noticeable strengthening in lease rates for widebody aircraft in 2025 as airlines seek to capitalise on demand for long-haul travel and supply remains constrained. Leases agreed at lower rates during the pandemic are being gradually repriced.

A combination of higher transition costs and airlines seeking to maintain capacity has resulted in continued high level of lease extensions as well as airlines seeking to acquire aircraft at lease expiry. Lessors are already discussing lease placements and extensions for aircraft into 2027 and 2028 with airline customers.

Aircraft values have continued to increase in 2025 with lessors recording significant gains over book value on their trading activity. With OEM orderbooks sold out for the foreseeable future, lessors are turning to trading activity and M&A to grow and sustain their portfolio.

An ever-increasing population of financial investors (including private equity, insurance and infrastructure investors) are also attracted to aviation by the asset’s stable cash returns and the attractive medium-term fundamentals.

Growth strategies

The consolidation of the aviation leasing industry continued in 2025 with several large M&A transactions executed by lessors. There is likely to be further M&A activity in 2026 as lessors seek to reinforce and strengthen their competitive position, achieve economies of scale and stay relevant to their airline customers and OEMs.

But smaller lessors have also flourished as they exploited leasing opportunities in specialist areas such as engines, regional aircraft or mid-life or end-of-life aircraft. The engine leasing market expanded again in 2025 and looks well placed for further growth.

The long-term fundamentals of aviation leasing remain strong with Airbus predicting a 20,000+ increase in the global aviation fleet over the next 20 years, creating significant long-term opportunities for aviation leasing where the proportion of leased aircraft hovers around the 50% mark.

In this context, it was noted that aviation leasing is capable of a compound annual growth rate (CAGR) of 8% over the next 10 years. As the pandemic and the Russia/Ukraine crisis are thankfully confined to history, lessors are carefully reflecting on their strategy for growing into the future.

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In closing

Despite the geopolitical and other challenges of the last 12 months, the industry outlook is positive with continued robust consumer demand, slowly recovering supply and a favourable financing market. The industry has evolved, consolidated and specialised. Coupled with favourable long-term fundamentals, 2026 should continue to see significant opportunities in the aviation market.

I would like to thank all those who generously gave their time and insights and I really hope you enjoy the read.

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