2025 has been a challenging year for the aviation industry, marked by continued supply chain disruption, rising costs, and global uncertainty triggered by tariffs and trade restrictions.
At the same time, demand for air travel shows no sign of slowing down, with global annual passenger traffic set to challenge the historic milestone of 10bn for the first time in 2026.
Against this backdrop, ESG concerns continue to take a back seat to more immediate business challenges — a fact that is increasingly acknowledged within the industry.
According to the IATA, the global backlog of commercial aircraft currently stands at record high of more than 17,000 — or the equivalent of 12 years’ production at current capacity.
As a result, aircraft buyers and lessees are paying record-high prices and rates, while used aircraft and engines are being kept in service for longer.
And though the aviation industry collectively aspires to invest more and progress further on environmental issues, the current supply chain and cost environment does not lend itself to these goals.
Haldane Dodd, executive director at Air Transport Action Group (ATAG), spoke to Airline Economics about the business and environmental challenges that aviation operators are currently facing.
As a non-profit association pushing for net zero in air travel by 2050, ATAG counts among its members all of the world’s principal OEMs — including Airbus, Boeing, Rolls-Royce, GE Aerospace, Pratt & Whitney, and Safran, as well as many other aviation businesses.
Dodd acknowledged that 2025 has produced a number of headwinds that are pushing back against sustainability goals, from anti-ESG rhetoric among politicians to “backsliding” on prior commitments from traditional finance and energy companies.
But the ATAG director said that aviation businesses should not be discouraged by these developments, and should instead be galvanised to take action on environmental goals sooner rather than later.
“Decarbonising the economy is a massive, multi-generational challenge with few easy solutions, so some of this blacksliding is inevitable,” he said.
“But the fundamental reason for pursuing net zero in aviation and all other sectors has not gone away.
“Decarbonisation will have to happen, and the more it is delayed, the more expensive it will get.”
In the aviation world, Dodd believes the next five years will be crucial for getting the right policy framework in place that will set the trajectory towards 2050.
“The good news is that in aviation, we have a plan,” he said. “We have a lot of the institutional foundations in place or in development, and despite traditional energy players showing little signs of evolution, there are new energy companies really taking significant steps forward.”
Taking sustainable aviation fuel (SAF) production as an example, the ATAG director sees reasons to be optimistic that significant progress will be achieved by 2030, setting the industry on a positive trajectory towards 2040 and 2050.
SAF idealism and SAF reality
On SAF production and distribution, the EU has taken a lead with its ReFuelEU Aviation Regulation, which mandates that a minimum proportion of SAF be supplied at all EU airports.
Starting at 2% in 2025, the requirement rises to 6% in 2030, 34% in 2040, and 70% in 2050.
The EU’s approach has already been copied by the UK, and, it is hoped, will set an example for other jurisdictions to follow.
However, as Airline Economics has covered previously, some aviation operators see the EU’s policy framework as little more than a form of window dressing, despite its good intentions.
Earlier this month, CEOs from Airlines for Europe (A4E) — a group that includes IAG, Ryanair, Air France-KLM, and Lufthansa Group — issued a “wake up call” to EU leaders on SAF affordability and competitive distortions.
“Simply implementing mandates does not create a functioning SAF market, and European airlines are currently paying the price with excessive surcharges and no price transparency,” they said.
Concluding that large-scale use of SAF in flight operations is currently “impractical”, the group called on the EU to derisk investment in SAF production and bring down the cost of SAF.
They also called for a European market intermediary for SAF, more multi-year SAF allowances, and new policy measures to fairly distribute SAF costs between EU and non-EU airlines.
“The SAF mandates in their current form disproportionately increase the costs of flying through EU hubs and to EU destinations, while driving traffic, jobs and emissions outside Europe,” they said.
“European airlines remain committed to decarbonising, but this should not come at the cost of competitiveness and accessible air travel for all.”
Financial sector wavering on ESG
In the financial sector, 2025 has also been marked by a waning enthusiasm for previously established environmental commitments.
In October, as covered by Airline Economics, the UN-backed Net-Zero Banking Alliance (NZBA) announced that its last-remaining members had voted to close the organisation with immediate effect.
Over the preceding 12 months, the NZBA had witnessed an exodus of member banks following the election of President Trump and rumblings of judicial action against ESG initiatives in the US on antitrust grounds.
After Goldman Sachs left the NZBA in December 2024, it was soon joined by Citi, Bank of America, Morgan Stanley, Wells Fargo, and J.P. Morgan.
From over the border, these banks were soon joined by Royal Bank of Canada, the Bank of Montreal, and Toronto-Dominion Bank.
By the end of January 2025, the NZBA’s entire North American contingent had left, and in July and August this year respectively, UK banking giants HSBC and Barclays also exited the group.
The NZBA’s published guidelines on decarbonisation goals for financial institutions will continue to be available, but the group will produce no further work or provide any form of coordinating or advisory role.
For the aviation industry, the dissolution of NZBA comes little more than a year after the launch of the Pegasus Guidelines, which were developed to align with the recommendations of the NZBA.
Launched in April 2024 by the Rocky Mountain Institute (RMI) and five major banks, the Pegasus Guidelines provide a voluntary framework for banks to measure and disclose the emissions of their aviation lending portfolios.
RMI was contacted by Airline Economics to comment on how the dissolution of the NZBA will affect the Pegasus Guidelines project, but declined to do so.
What now for ESG commitments in aviation?
At the very least, the loss of the NZBA prompted a revaluation of the aviation industry’s current commitment to sustainability goals and its readiness to fulfil them.
Nicola Checacci, head of finance and credit management at aircraft manufacturer ATR, said the company and its partners continue to embed ESG principles “at the core” of their strategies, and that these remain a “pivotal consideration”.
“This is particularly true for our financial partners, including lessors with forward orders, who view ESG criteria as central to both their investment decisions and the management of their portfolios,” she said.
“Their long-term investment horizons make sustainability a key priority.”
Checacci added that ESG strategies are taking on increased importance in markets outside of Europe — such as Japan, Taiwan, and New Zealand — where sustainability is a priority for ATR operators and end customers.
“Our aircraft’s fuel efficiency is a major driver of market leadership,” she said. “The ATR 72-600 burns up to 45% less fuel than similar-sized jets, and operators often choose it because it aligns with their ESG objectives.
“Our global footprint reflects this shared commitment to lower emissions, and we remain dedicated to supporting our partners in navigating the evolving ESG landscape.”
But elsewhere in the industry, other operators are increasingly willing to admit that enthusiasm for ESG is not what it once was.
Raphel Haddad, president and board member of aviation trading firm Jetcraft Commercial, said as much at Airline Economics' Growth Frontiers conference in London, as did many other panellists.
Speaking to Airline Economics after the event, Haddad said that ESG is “no longer a front-and-centre topic” in most industry conversations.
“Not because it's unimportant, but because operators are focused on more immediate challenges, such as rising costs, supply chain constraints, labour shortages, and matching capacity with demand,” he said.