Shortages of new aircraft impact aviation’s sustainability plans, says aircraft lessor Avolon

A new year overview of the airline industry by major commercial aircraft lessor Avolon says new technology fleets are “the largest lever available today to progress aviation’s sustainability agenda”, but warns that long and continuing delays to plane production and deliveries are forcing airlines to extend their use of existing, less-efficient airplanes. Avolon says huge orders for new jets have filled manufacturers’ order books into the next decade, while the complexity of new types, increased technical support required by operators and greater regulatory oversight have extended the time between programme launch for ‘clean sheet’ aircraft and their entry into service from seven years two decades ago to perhaps ten today. The lessor adds the best interim measure to reduce aviation’s emissions is to ramp up production of sustainable aviation fuel but in order to do so will require around $2 trillion of investment.

The Avolon report, titled ‘2024 Outlook: New Horizons’, was co-produced by two of the company’s key executives, Chief Risk Officer Jim Morrison and SVP Portfolio Strategy Marc Tembleque-Vilalta. Although it is focused on broader trends for commercial aviation this year, their report clearly identifies likely consequences of the industry’s current challenges, including potential setbacks to decarbonisation efforts.

“India, China and the Middle East are driving aviation’s growth,” commented Morrison, in reference to recent huge orders by airline companies including Air India Group and Emirates, while the report calls China “too big a market not to be a priority for Boeing and Airbus.”

“A structural undersupply of both narrowbodies and widebodies will take years to unwind,” added Morrison. “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.”

The report argues an international book-and-claim system would increase SAF availability by driving up demand, and attracting capital needed to fund increased production. “Airlines, lessors and corporates globally will have access to verified SAF credits that enable stakeholders to leverage SAF virtually to meet their net zero commitments without having to transport liquid fuels over long distances,” it says.

However, it cautions: “Issues abound, including defining what is SAF and what is not, and how government incentives should apply if the SAF buyer is out of the jurisdiction of production.”

Avolon highlights as a major issue the lack of new clean sheet aircraft models entering service before 2036.

“As aircraft have grown more complex and operators’ in-service reliability demands have increased, the time from programme launch to entry-into-service for clean sheet aircraft has increased from seven years two decades ago to perhaps ten today,” says the lessor. “The 2019 737 MAX grounding and realignment of international aviation regulators has contributed to prolonged development timelines.

“The 2010s was the first decade since the dawn of the jet era that no large new commercial aircraft clean sheet designs were launched by established manufacturers. That will change in the coming years as engineering talent needs to be redeployed or risk being lost, and market share competition forces product line refresh.”

The report says aero-engine manufacturers are already developing technologies needed to power all-new aircraft models. “Rolls Royce completed full power runs of its UltraFan demonstrator engine in 2023. CFM is progressing its open-rotor RISE concept. The next generation of aircraft are being prepared for when technology readiness levels and market conditions align.”

But Avolon adds that 2024 is too soon to launch a new programme as aerospace production systems stabilise and derivative aircraft models currently in development are certified by regulators. 

“The world’s delivered fleet of commercial aircraft grew every year until 2020,” says the lessor. “The sharp drop in new aircraft deliveries due to the pandemic, and the ensuing challenge to increase production rates, has meant 3,400 aircraft were not built. 

“With a shortage of new aircraft supply, major airlines are extending leases, buying used aircraft and using mergers and acquisitions to access new aircraft deliveries. Lack of capacity is supporting the return of the last generation of aircraft, with A380s and A330ceos back gainfully employed. Market lease rates rebounded with A330ceos up more than 35% in 2023, and further lease rate growth expected in 2024.

“Innovation will return to aviation, but market forces are stacked against bold bets at this point in the cycle. Given the 10 years plus it will take from project green light to certification, Boeing or Airbus will need to commit to a new clean-sheet design soon to enter service in the second half of next decade.”

Avolon says the value of new aircraft deliveries is expected to rise by over 15% to around $100 billion in 2024, with delivery of over 1,450 new large commercial aircraft helping to drive up passenger revenues up 12% to $717 billion. It projects airlines’ net profit will rise by 10% to $26 billion, with 4.7 billion expected to fly in 2024, more than any year in history.

It also foresees momentum building for sustainable aviation fuel, 600 million litres of which were produced last year, the equivalent of powering British Airways’ entire widebody fleet. But the lessor estimates $2 trillion of investment will be required to scale up production to levels required to hit net zero goals.