Aviation Finance Trends in 2025: Threats and Opportunities

The global aviation industry will reach a historic milestone in 2025, with revenues surpassing $1 trillion for the first time. This achievement comes with net profits projected at $36.6 billion, representing a 3.6% margin—a slight improvement from 2024’s $31.5 billion (3.3% margin). The average profit per passenger will reach $7.00, up from $6.40 in 2024 but still below 2023’s peak of $7.90.

These numbers tell a story of an industry that generates massive revenues but operates on exceptionally thin margins. Airlines must manage $940 billion in costs, plus interest and taxes, leaving minimal room for error. The buffer between profit and loss stands at just $7 per passenger, necessitating rigorous cost control across the entire supply chain, including aircraft financing.

Aircraft manufacturers face persistent challenges that will limit industry expansion throughout 2025. Airbus needs to increase deliveries by 25% and Boeing by 75% to meet fleet growth projections. However, engine manufacturer CFM International expects only a 10-15% rise in shipments for the year, impacting the overall pace of aircraft deliveries.

The production ramp-up remains sluggish, particularly in the single-aisle segment. Airbus averages around 50 A320-family deliveries monthly, well below its target of 65. Boeing’s 737 production faces regulatory constraints and will likely reach its limit of 38 aircraft per month by mid-2025 at the earliest.

The asset-backed securities (ABS) market shows strong signs of revival for 2025, particularly in relation to aviation assets. Market participants anticipate two to three issuances in the first quarter alone. While senior and junior debt tranches will lead this recovery, equity note transfers may take longer to materialise.

The market will evolve beyond traditional structures. Transactions will expand to include mid-life aircraft, more widebodies, and regional aircraft types. This diversification reflects growing investor confidence and the need to finance a broader range of assets in the post-pandemic era.

The upward trajectory in aircraft values and lease rates, driven by supply constraints and strong demand, underscores the importance of aircraft leasing as a vital financing option for airlines. Narrowbody lease rates sit slightly above 2019 levels, while values have increased significantly. This disparity suggests airlines may have reached an affordability ceiling for lease rates, potentially pushing more carriers toward aircraft purchases.

The fourth quarter of 2024 showed some signs of stabilisation, but room remains for growth, particularly in the widebody sector. Airlines and lessors will maintain older refurbished models longer than usual to protect their investments in heavy maintenance, engines, and interiors.

Sustainability regulations will significantly impact aviation finance decisions in 2025. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) moves toward its mandatory phase in 2027, while EU emissions trading system (EU ETS) free allowances will taper to zero by 2026. Financing new, fuel efficient aircraft will be crucial to meet these sustainability and environmental goals.

These regulatory changes will affect investment strategies in several ways:

Portfolio diversification toward more sustainable assets will become essential to reduce regulatory risk,

Sustainability-linked loans and green bonds will gain prominence,

Financing structures must adapt to support sustainable aviation fuel (SAF) infrastructure and fleet modernisation,

Aircraft residual values will increasingly reflect environmental performance.

Regional profitability variations will persist in 2025, with net profit margins ranging from 0.9% in Africa to 8.2% in the Middle East. Export credit agencies play a crucial role in supporting aircraft financing in different regions, particularly for airlines in emerging markets or with subpar credit histories. North American carriers will generate the largest absolute profits despite supply chain vulnerabilities in the low-cost sector. European airlines will see improved performance as they overcome fleet grounding issues, while Asia-Pacific carriers will benefit from strong demand growth despite yield pressures.

The Middle East will maintain its position as the strongest-performing region, benefiting from strategic infrastructure investments and premium long-haul business. Latin American carriers will show improved results post-restructuring, while African airlines continue to face operational challenges and currency constraints.

The introduction of Basel IV regulations will affect aviation finance significantly in 2025. Banks must adapt to new capital requirements, though implementation will vary by jurisdiction. U.S. banks will face relaxed Tier 1 capital requirements of 9%, down from the initially proposed 19%.

These regulatory changes may increase the role of alternative lenders and affect bank pricing strategies. Some banks will focus primarily on new-technology assets, while others maintain a broader lending approach. The cost of capital will increase across the board, pushing lenders to develop new financing structures and products, including finance leases, which will have implications for creditors' claims and financial recoveries during bankruptcy proceedings.

Sustainable Aviation Fuels (SAF) - use of sustainable fuels, such as biofuels, will reduce the environmental impact of air travel, but may increase the operating costs, especially for private jet companies.

Electric and hybrid-electric aircrafts - electric and hybrid-electric aircraft which are currently in development are expected to reduce emissions and operating costs.

Blockchain technology - use of blockchain technology will facilitate the financing and leasing of aircraft, improving the efficiency and transparency of aviation finance transactions.

Artificial Intelligence (AI) and Machine Learning (ML) - AI and ML helps analyse data and make predictions about the aviation finance market.

The aviation finance sector faces a transformative year in 2025, characterised by record revenues alongside persistent challenges. Financial institutions must adapt to evolving regulatory requirements, sustainability mandates, and shifting market dynamics. Success will require sophisticated treasury management solutions that can handle multi-currency operations, streamline compliance, and optimise liquidity across global markets.

Fyorin provides aviation finance professionals with essential tools to tackle the upcoming industry challenges. With unified treasury & cash management, automated financial operations, and seamless cross-border payment solutions, Fyorin helps organisations stay profitable despite tight margins while adhering to strict regulatory and environmental standards. Get in touch.