Ongoing tariff negotiations between global trade markets and the US as well as economic volatility will likely be a blip in the long-term forecast for the aviation industry, which maintains a positive outlook for 2025, especially in the Asia-Pacific region.
This view is conveyed through the newly published Aviation Outlook 2025 report by Alton Aviation Consultancy, a global firm with offices in New York, Dublin, Dubai, Hong Kong, Beijing, Singapore and Tokyo.
The report echoes IATA’s projection of more than five billion air passengers in 2025 and total industry revenues breaking the US$1 trillion mark for the first time in history.
The consultancy states that the aviation industry is expected to continue its long-term growth trend of four per cent per annum from 2024 to 2034, supported by a 2.7 per cent annual growth in global GDP. The Asia-Pacific region is projected to remain the largest market for air travel, with an anticipated growth rate of 5.1 per cent per annum, driven primarily by increasing long-term demand from China and India.
While Alton’s researchers agree that expectations are high for the aviation industry this year, they highlighted four conditions that could impact eventual performance.
First, supply chain issues continue to put pressure on aircraft production and delivery. Despite being able to ramp up production in early 2025, Boeing continues to see delivery delays, disrupting airlines’ fleet plans and limiting airlines’ network growth. Additionally, airworthiness directives grounding over 600 Pratt & Whitney Geared Turbofan (GTF) aircraft, combined with lower-than-expected durability of GTF and CFM International LEAP engines, are likely to remain an issue, as labour and material shortages continue to limit airline growth.
Second, airline yields are normalising, as increasing capacity and adjustments in leisure demand put pressure on top-line revenues.
Third, despite moderating revenues, cost inflation – particularly in labour and maintenance – will remain a key concern for airlines and the broader aviation ecosystem, as supply chain issues persist. Geopolitical tensions in Europe and the Middle East are also adding further strain to airline profitability.
Fourth, the growing risk of a global trade war is likely to reduce air cargo demand, putting additional pressure on the aviation industry and its profitability.
While there is a need to bear these conditions in mind, Alton Aviation Consultancy’s managing director Singapore, Mabel Kwan, told TTG Asia that air travel demand throughout past crises over recent decades was able to rebound after a period of adjustments.
“Unless there’s a fundamental shift that permanently dampens the desire to travel, I believe that you will see a slow adjustment back to the longer term demand curve,” she stated.
Kwan pointed out that airlines are also maintaining business confidence, evident in continued announcements of new aircraft orders despite economic woes.
Indeed, Vietjet, Vietnam’s largest private airline, announced on May 27 its order of 20 more Airbus A330-900 widebody aircraft to support its ambition to expand long-haul routes across Asia-Pacific and Europe in the next 10 years.
In the same week, Qatar Airways also put in an order with Boeing for 210 widebody aircraft.
Earlier in May, International Airlines Group, owner of British Airways, announced plans to buy 71 longhaul aircraft from Airbus and Boeing.
Kwan said airlines view the tariff negotiations as a “short term disruption” that would be sorted out before orders are delivered.
“There is a huge backlog in fleet orders and delivery of both narrow body and widebody aircraft. It may take close to 10 years to clear the backlog of narrow body aircraft, while for widebody aircraft, it could take five to six years,” she explained.
She added that “competitive tension” is also motivating airlines to order ahead, even in uncertain times, to facilitate growth in the next decade.
The long planning and development lead time adopted by airports also means that such facilities necessary for tourism development are insulated from cost fluctuations and global tensions.
“Master planning for airports takes 20 years,” stated Kwan, adding that this length of time allows authorities to lay down basic infrastructure – from electricity and sewage to roads and highways – far ahead to support the future air hub.
As the aviation industry navigates opportunities and challenges today, Kwan said there is a need for players to pay attention to technology, sustainability and resilience requirements.
Technology investments today will help address intensifying manpower constraints, which will determine efficiency and productivity.
“More importantly, in order for the aviation ecosystem to work as an integrated whole, there has to be an integration of technology platforms which will also move our industry up the productivity curve,” she said.
A sustainability mindset is essential, as the aviation industry aims for net zero by 2050 but remains far from meeting its targets.
Finally, a strategic approach to improved resilience is necessary, as the aviation industry has “undergone quite a few shocks” and more volatility can be expected.
