The outlook for 2025 has cautiously optimistic across the board from airlines to lessors. Cirium Ascend Consultancy global head Rob Morris provided an outlook with a share of optimism at Airline Economics' Growth Frontiers Dublin 2025 conference.
“Nothing can go wrong now,” he says for the year ahead. The driving factors behind this outlook are demand, supply, and leasing.
Despite the pandemic holding back global demand growth for around three years, that demand growth is back. However, geopolitical instability and sustainability headwinds may hinder this demand growth. Annual compound growth form 2000-2019 was “nearly 6%” and growth is projected to be 8% for 2025.
Overall, most regions demonstrated sustained growth across 2023, with that trend expected to be sustained. The global schedule is predicted to grow around 7% in the first quarter of 2025, compared to the same period last year.
However, passenger yields, which are currently stable or declining marginally, are forecast to decline on a global scale by around 3.4% in 2025.
“On the economic growth said, nothing can go wrong,” said Morris. “On the passenger side, with yields are down a little bit but that’s not going to impact demand globally.”
Non-fuel airline costs are expected to increase steadily and “not fundamental” increases, while oil and fuel prices are to “remain benign” in 2025.
“The oil and fuel price environment is always difficult for airlines to control,” said Morris. “They can choose to hedge the hedge funds will lose a bet. Often we lose bets as often as we win bets, but the airlines have enjoyed a pretty benign fuel in price environment through the whole of last year, so that last year, in fact, fuel represented about 29% of overall cost. But this year, to project, it will reduce to 26% because fuel costs. I think fuel prices are declined. They're predicting just over $2 a US gallon.”
Global airline profits are expected to remain stable in this year.
“In 2025, we expect profit net to increase $38bn net, so steady as we go,” said Morris.
For supply, Morris questioned whether there really is a supply deficit: “The fleet is as big as it needs to be. The utilization, the hours flown per day, per aircraft, is back to where it was in 2019, it doesn't feel to me like the fleet is in deficit right now, but the market seems to think it is.”
He continued: “The fleet we have today is about 17,300 aircraft. And the fleet we need is 17,500 The deficit is 200 aircraft. It's not fundamental. Analysis says the deficit is not as big as we think, and I think it could be relatively simply cured. The deficit is all about new aircraft. We don't have enough new aircraft for various reasons and the older aircraft are curing the deficit right now. The deficit is about not enough new aircraft.”
In addition, the Pratt & Whitney GTF engine issues are “fundamental” and will “take a while to fix”.
He added that he believed both Airbus and Boeing to increase their annual deliveries by 20% in 2025. “We’re projecting this year that Airbus will deliver 900 passenger aircraft and Boeing will deliver 600 aircraft,” Morris said. “We need to see a fundamental shift if Airbus and Boeing are going to achieve the projections.”
With Airbus aiming for a rate of 75 deliveries per month and Boeing potentially aiming for 50 per month in 2027 or 2028, Morris said there is “still a long way to go” for these targets to be achieved.
On the leasing side, outlook remains optimistic, where again “nothing can go wrong now”, said Morris. However, while lessors’ portfolio continues to grow, their market share of operating leases has shrunk slightly.
“It's not surprising that the share is declining because lessors are removing some older aircraft from their fleet,” explained Morris. “Lessors are selling more aircraft to airlines off lease than they were historically.” In addition, new leases for used aircraft are dampening, which Morris said is “not surprising” given the limited inventory in the market, though new leases for widebody aircraft are higher when compared to the previous cycle.
“There’s been a lot of activity in the widebody market because OEMs are delivering widebody aircraft,” he said.
Lessors are also expected to have fewer slots for delivery in 2029 and 2030. “Lessors have missed the boat in ordering aircraft for delivery in the back end of this decade,” said Morris. “Lessors will place more orders this, but they’ll be looking at a longer delivery horizon.”
Despite this, leasing continues to grow even if market share has paused slightly, with placement activity remaining strong.
Overall, while maintaining his optimism for the year ahead, he advised the industry “to manage its risk and enjoy growth”.