2022 “Fearless Forecast” predicts continued aviation recovery as lessor’s share of large commercial aircraft fleet exceeds 50%
DUBLIN, January 18, 2022–(BUSINESS WIRE)–Avolon, the global aircraft leasing company, has released its annual 2022 outlook document titled ‘Overcome’. Co-authored by Jim Morrison, Head of Portfolio Management, and Rosemarie O’Leary, Head of Counterparty Risk, the paper reviews key aviation industry trends for airlines, manufacturers and lessors, identifying the themes that will shape the year ahead and establishing Avolon’s “fearless forecast” for 2022.
The seven forecasts for 2022 are presented below and the full document is available at: https://www.avolon.aero/newsroom-and-thoughts
Jim Morrison, Head of Portfolio Management, said: “Aviation recovery has gone ahead in 2021 as planned, with vaccines providing a springboard for easing government restrictions and reopening economies around the world. important, boarding our first plane in a post-pandemic period. It is clear from the reopening that the importance of air travel to society and the global economy remains intact.
Aviation’s resilience was again demonstrated in 2021, with airline operating losses halved to $54 billion as airlines position themselves to capitalize on the pent-up demand evident in the market. Going forward, the strong economic growth forecast for 2022 will lead to a further recovery in air transport demand. Although we are confident in the recovery, it will be a gradual and uneven recovery that will vary from region to region. In 2022, a strong recovery in international air traffic will follow the domestic air travel rebound of 2021, rebounding to 70% of 2019 levels by the end of the year. »
Rosemarie O’Leary, Head of Counterparty Risk, said: “Aircraft lessors will continue to be an integral part of the recovery, supporting airlines as they seek to repair their balance sheets, renew their fleets and grow. As airlines begin to deleverage and move to asset-light business models, lessors’ share of the commercial fleet will increase as they finance new deliveries.
Beyond the recovery, environmental considerations will remain at the heart of the aviation agenda for the period ahead. The aviation sector continues to focus on reducing emissions and committing to decarbonization. Solutions to support further decarbonization, such as sustainable aviation fuels, are progressing, but policies need to be structured to ensure adoption is economically viable. Emission-free flight is also on the horizon. Aerospace innovation is accelerating with the development of electric-powered aircraft that offer a glimpse into the sustainable future of flight.”
2022 “Intrepid Forecast”
The resumption of international air traffic in 2022 will mirror domestic air traffic in 2021: Governments will increasingly rely on vaccines and treatments to remove restrictions, access the benefits of air travel while maintaining pandemic resilience. A strong recovery in international air traffic will follow, rebounding to 70% of 2019 levels by the end of the year.
Operational challenges, not shortage of demand, limit aviation growth: A talent shortage has emerged. Recalls and new hires will be common in 2022, but pilots, flight attendants and mechanics need training as incumbent manufacturers compete with newcomers in a war for engineering talent. Supply chain limitations, stored aircraft reactivation delays and maintenance slot capacity will further complicate the return to full capacity.
Cargo pushes airlines to make profits: Cargo has accounted for more than a third of airline revenue over the past two years, a threefold increase in its normal share. Seaport congestion, supply chain recovery and e-commerce growth will continue to drive strong demand for air cargo. Another strong year for air cargo, coupled with continued improvements in the passenger market, could be enough to return the airline industry to profitability in 2022.
The share of lessors in the large commercial aircraft fleet exceeds 50%: Lessors fill the funding gap for new deliveries, while allowing airlines to access equity in owned assets. As a decade of deleveraging and decarbonization looms for airlines, leasing will enable asset-light business models. As the undisputed leader in aircraft financing, lessors are an integral part of the health of airlines and manufacturers.
Full-scale prototypes of ten all-electric aircraft will fly: A new era of aerospace innovation is accelerating. A handful of electric vertical take-off and landing (eVTOL) prototypes flew in 2021 with more to come in 2022. Disruptive technologies start small before expanding to attack incumbent strongholds. Pay attention to expanding customer bases as technology is proven and performance is improved.
Outlook for 2030 SAF production quadruples as projects are funded in 2022: Demand for SAF is strong but supply is limited. Policies must be structured to ensure the economy compares to other renewable fuels. The combination of mandates and production incentives will secure long-term demand, allowing airlines to sign off-take agreements. Once revenue is secured, projects will be funded and construction started, increasing SAF’s production capacity exponentially.
The price of carbon credits doubles again: Net zero goals imply that avoiding emissions alone will not decarbonize aviation. The global voluntary offset market could be worth $50 billion by the end of the decade, up from $300 million in 2018. The Task Force on Scaling Voluntary Carbon Markets is enabling this growth by developing market standards to create certainty about the value of carbon credits and liquidity. which creates price transparency. The price of mandatory EU carbon permits will continue to rise as demand increases due to the reopening of economies while supply is tight.
Headquartered in Ireland, with offices in the United States, Dubai, Singapore, Hong Kong and Shanghai, Avolon provides aircraft leasing and leasing management services. Avolon is 70% owned by an indirect subsidiary of Bohai Leasing Co., Ltd., a public company listed on the Shenzhen Stock Exchange (SLE: 000415) and 30% by ORIX Aviation Systems, a subsidiary of ORIX Corporation which is listed on the Tokyo and New York stock exchanges (TSE: 8591; NYSE: IX). Avolon is the second largest aircraft leasing company in the world with an owned, managed and committed fleet, as of December 31, 2021, of 824 aircraft.
Note Regarding Forward-Looking Statements
This document contains forward-looking statements, beliefs or opinions, including statements regarding Avolon’s business, financial condition, results of operations and plans. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond our control and all of which are based on our management’s current beliefs and expectations regarding future events. Forward-looking statements are sometimes identified by the use of forward-looking terms such as “believe”, “expect”, “may”, “will”, “could”, “should”, “should”, “risk”, “intends”, “estimates”, “aims”, “plans”, “predicts”, “continues”, “assumes”, “positions” or “anticipates” or their negative form, other variations or a comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may, and often do, differ materially from actual results. No assurance can be given that these future results will be achieved.
See the source version on businesswire.com: https://www.businesswire.com/news/home/20220117005488/en/
Head of Capital Markets
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