The global airline industry is optimistic about long-term growth, which is based on various macroeconomic and demographic trends around the world. But a shortage of aircraft — driven by supply chain disruptions, production delays, and labour shortages — is limiting capacity expansion.

Rising global population, higher incomes and affordability and pent-up demand post-Covid, are obviously driving the airline industry’s long-term optimism.

More people certainly means more potential passengers, especially in major emerging markets such as China and India.

Urbanisation and growing middle classes in other parts of Asia, and Africa and Latin America are expanding demand for both domestic and international air travel.

Gross Domestic Product (GDP) is the traditional driver of airline economics. However, although global GDP growth is expected to fall from 3.3% in 2024 to 2.5% in 2025, airline profitability is expected to improve.

This is largely on the back of falling oil prices, noted Willie Walsh, Director General of the International Air Transport Association (IATA). Walsh expects global airline industry’s net profit to exceed $36bn this year, improved from the $32.4bn earned in 2024.

At the recent IATA Annual General Meeting in New Delhi, he projected total traveller numbers reaching a record high of 4.99bn in 2025. While demand for airline seats is rising, airlines around the world face a supply constraint: they can’t get new planes fast enough!
This shortage stems from several intertwined issues such as woeful production delays at major manufacturers Boeing and Airbus, supply chain disruptions, post-pandemic, and labour shortages.

Walsh noted that the aircraft backlog exceeds 17,000 (sharply up from the 10,000-11,000 pre-pandemic), with an implied wait time of 14 years. “Should states exit from a multilateral agreement exempting aircraft from tariffs, supply chain constraints and production limitations could be further aggravated,” Walsh said.

Supply chain issues have had significant negative impacts on airlines: driving-up leasing costs, increasing the average fleet age to 15 years (from 13 in 2015), cutting the fleet replacement rate to half the 5-6% of 2020, and reducing the efficiency of fleet utilisation (using larger aircraft than needed on some routes, for example). In 2025, some 1,692 aircraft are expected to be delivered, he said. Although this would mark the highest level since 2018, it is almost 26% lower than year-ago estimates. Further downward revisions are likely, given that supply chain issues are expected to persist in 2025 and possibly to the end of the decade.

Engine problems and a shortage of spare parts exacerbate the situation and have caused record-high groundings of certain aircraft types, he said.

The number of aircraft younger than 10 years in storage is currently more than 1,100, constituting 3.8% of the total fleet compared with 1.3% between 2015 and 2018. Nearly 70% of these grounded aircraft are equipped with PW1000G engines.

“Manufacturers continue to let their airline customers down. Every airline is frustrated that these problems have persisted so long. And indications that it could take until the end of the decade to fix them are off-the-chart unacceptable!” said Walsh.

According to industry analysts, aircraft shortage limits the ability of airlines to expand their routes or increase frequencies.

Older, less fuel-efficient aircraft may stay in service longer (hurting margins and sustainability goals). Another challenge for airlines is that lease prices and second-hand aircraft values are surging.

For passengers, this situation results in reduced availability of seats, especially on popular routes and during peak seasons. The supply-demand imbalance obviously means higher airfares.

Walsh sounded a note of caution in the wake of conflicts in some parts of the world and trade tensions, which affect every nation on earth.

The resolution of conflicts such as the Russia-Ukraine war would have a benefit for airlines in reconnecting de-linked economies and reopening airspace. Conversely, any expansion of military activity could have a dampening effect.

Tariffs and prolonged trade wars dampen demand for air cargo and potentially travel. Additionally, the uncertainty over how the US trade policies will evolve could hold back critical business decisions that drive economic activity, and with it the demand for air cargo and business travel.

Successful tariff negotiations and strategic collaboration across the value chain, along with investments in sustainability and operational efficiency, will therefore be essential to navigate various constraints and support long-term industry growth.