Dublin | 23 January 2026 – Continued low fuel prices and resilient economic growth are expected to support global airline industry profits of US$41 billion in 2026, according to a new outlook paper published by Avolon. If achieved, 2026 would mark the fourth consecutive profitable year for the sector, enabling airlines to recover more than 80 per cent of the US$182 billion lost during the pandemic.

The paper identifies India, the UAE and Saudi Arabia as the leading regions in aviation’s next growth cycle. Combined, the three countries hold aircraft order backlogs exceeding 3,000 aircraft, more than double their current in-service fleets, with approximately 900 aircraft scheduled for delivery over the next three years.

Supply Constraints Shape Market Dynamics

While demand fundamentals remain positive, Avolon warns that airlines risk missing growth opportunities due to a persistent structural undersupply of aircraft. Order backlogs at Airbus and Boeing now extend beyond 11 years, reinforcing the strategic value of lessor-held delivery slots.

This prolonged shortage is expected to support higher lease rates and strong residual values, particularly for new-technology aircraft. The paper notes that these conditions favour well-capitalised lessors, especially those with established orderbooks.

Avolon’s 2026 Sector Outlook

Avolon’s 2026 Outlook: Up Next paper reviews key aviation trends expected to shape the sector:

Aviation growth will vary by region. India, the UAE and Saudi Arabia are emerging as primary growth markets. In Europe, expansion is being driven by low-cost carriers, while major airlines focus on consolidation. In the United States, network carriers are evolving into lifestyle brands anchored by profitable loyalty and credit card businesses, as low-cost carriers continue to realign networks and products. Asia-Pacific growth is constrained by limited fleet availability, with China facing a near-term requirement for 1,000 new aircraft.

Airline performance in 2025 benefited significantly from lower fuel prices, with reduced fuel expenses of US$8 billion accounting for around one-fifth of industry net profits. This trend is expected to continue in 2026, supporting balance sheet recovery despite rising labour and maintenance costs.

Manufacturers continue to attract investment despite geopolitical uncertainty. In 2025, more than 2,000 new aircraft orders were placed with Airbus, Boeing and Embraer. Market demand is shifting towards larger variants, with the A321neo outselling the A320neo by three to one over the past three years. The A330neo is benefiting from its position as the only new passenger widebody available before 2032. Engine manufacturers are increasing shop visit and spare parts pricing at rates above general inflation, with the market value of two full-life engines now representing approximately 80 per cent of a new aircraft’s value.

Lessors are expected to play a central role in 2026, with around US$120 billion of new aircraft deliveries, representing a 20 per cent increase year-on-year. Eleven lessors have now achieved investment-grade ratings, strengthening their ability to support airline fleet renewal and the transition to lower-emissions aircraft.

Risks highlighted include increasing competition for capital and talent from the rapid growth of artificial intelligence, ongoing geopolitical uncertainty, and the sensitivity of aviation to potential tariff changes. Economic growth remains supportive, with 80 of the world’s largest economies growing by more than one per cent in 2025, and 90 expected to do so in 2026.

Industry Perspectives

Commenting on the findings, Jim Morrison, Chief Risk Officer of Avolon, said global connectivity and economic growth continue to be supported by aviation, underpinned by strong demand and lower fuel costs. He noted that India, the UAE and Saudi Arabia are emerging as the next engines of growth, while lessors will remain vital in financing the delivery of new-technology aircraft.

The paper was co-authored by Morrison and Ross McKeand, Senior Vice President, Portfolio Strategy, and includes seven forecasts for 2026. These range from international markets driving the majority of capacity growth, to the expectation that Airbus and Boeing aircraft families above 150 seats will be sold out to 2035, and that more than 150 GTF-powered aircraft will return to service in 2026 as Pratt & Whitney increases shop visit capacity.

Other forecasts include improving prospects for U.S. low-cost carriers, rising lease rates for the A330neo, the return of aviation ABS equity notes, and preparations for a potential new commercial aircraft programme launch in 2027, involving manufacturers such as COMAC and Embraer.