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Aviation Industry Faces Challenges Amid Record Demand

Aviation Industry Faces Challenges Amid Record Demand
Supply Chain Strains and Rising Operational Costs
The global aviation industry continues to grapple with significant supply chain disruptions and escalating operational pressures as unprecedented passenger demand intersects with geopolitical instability and intensifying competition. Despite the passage of several years since the pandemic, airlines and manufacturers remain entangled in persistent bottlenecks that hinder recovery efforts. Korean Air recently highlighted the growing uncertainty and competitive challenges anticipated through 2026, underscoring the fragile state of the sector.
One of the most pressing issues is the prolonged use of older, less fuel-efficient aircraft, a direct consequence of delayed deliveries from major manufacturers such as Airbus and Boeing. Engine producers and component suppliers are stretched to their limits, tasked with simultaneously supporting new aircraft assembly and maintaining existing fleets. Jeffrey Lam, chief operating officer and president of commercial aerospace at ST Engineering, described material shortages and extended lead times as the “new norm,” a situation he deems unacceptable. These supply constraints have also driven up costs for carriers, prompting airlines like Singapore Airlines’ low-cost subsidiary Scoot to invest proactively in additional spare engines to mitigate operational risks.
Record Passenger Demand and Industry Response
The International Air Transport Association (IATA) reported that global air passenger traffic in 2025 surged to a record level, exceeding pre-pandemic figures by 9.3%, with further growth of 4.9% expected this year. To accommodate this surge, airlines have extended the operational lifespan of older aircraft by an average of two years, resulting in an estimated $11 billion increase in fuel, maintenance, engine leasing, and inventory expenses for 2025 alone. IATA Director General Willie Walsh expressed frustration over these mounting costs, emphasizing the urgent need for suppliers to enhance their performance and alleviate the strain on carriers.
Engine manufacturers are responding with increased production efforts. Gael Meheust, CEO of CFM International—a joint venture between GE Aerospace and Safran—reported a 25% production increase in 2025, with plans to sustain at least 10% annual growth. Nevertheless, he acknowledged that current demand levels are unprecedented. Suppliers such as ST Engineering, responsible for producing engine nacelles, face extended lead times that have grown from approximately nine months to up to a year, despite the relatively short six-week manufacturing period for the nacelles themselves.
Market Dynamics and Future Outlook
Despite these operational challenges, profitability persists in certain regions. European airlines are forecasted to achieve net profits around $14 billion, even as delays in new aircraft deliveries continue. Airbus maintains its dominance in single-aisle jet sales, while Boeing concentrates on widebody aircraft. The business jet segment is also experiencing strong demand, particularly within the Asia Pacific region.
The private aviation sector, although buoyed by recent growth, confronts its own set of challenges, including the impact of increased taxation as noted by ACC Aviation. As the aviation industry navigates the complexities of record demand, supply chain constraints, and geopolitical uncertainty, industry leaders concur that addressing these bottlenecks is essential to sustaining long-term growth and profitability.

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