Macroeconomic and Airline Outlook
The economic outlook for 2026 looks broadly similar to that of 2025, with plenty of disruption, rapid market reactions and, hopefully, a gradual descent towards calmer conditions. Inflation is easing, interest rates are drifting lower, and oil prices are expected to remain subdued, reflecting weaker demand from China and steady supply from the US and OPEC (Organisation of the Petroleum Exporting Countries).
Trade continues to perform despite policy friction and high consumer costs. Demand remains the key driver. While luxury goods and housing remain weak, travel and general consumer spending continue to show resilience. In currency markets, both the US and China are pursuing weaker exchange rates to support exports and manage deficits.
For aviation, the environment is broadly supportive. Fuel prices remain low, profits are up, and airlines are in no hurry to add capacity beyond taking new aircraft deliveries. That discipline, however, tends to erode as route competition intensifies, often with painful consequences.
Aircraft Production and Delivery Forecasts
Aircraft supply is the main potential swing factor. 2025 marked a turning point, with meaningful production progress across OEMs. Airbus increased final assembly activity in preparation for higher rates, while Boeing’s return to a more stable production flow, although still behind Airbus, provided an important signal of confidence.
IBA‘s production forecast for 2026 is 1,800 aircraft across Airbus, Boeing, Embraer, ATR and COMAC. This represents a significant increase over 2025, but no greater than the rise seen last year over 2024. For Airbus, this equates to just over 900 aircraft: 700 A320-family jets, just over 100 A220s, 42 A330s and 65 A350s. For Boeing, I expect a total of around 670 aircraft, comprising roughly 510 737s, more than 100 787s, and 25–30 each of the 767 and 777F, alongside continued progress towards certification milestones. Deliveries from Embraer, ATR and COMAC are broadly in line with the growth expectations set two years ago, albeit delayed. Embraer is expected to lead with 85–90 E-Jets, ATR to return to more than 40 aircraft, and COMAC to deliver more than 55 units across the C909 and C919 programmes. This, of course, remains dependent on the ability to source US components.
Secondary Market, Transactions and Retirements
The key question is the impact on the secondary market. Lease rates for older aircraft have softened but remain well above historical norms, reflecting balance rather than weakness. There is no oversupply of flyable aircraft, and airlines are focused on maximising the use of existing assets rather than pursuing aggressive growth. Lease commencements and expiries are at historic lows, with shorter tenors now the norm.
As new deliveries ramp up, will utilisation of older aircraft ease back towards historical levels? High utilisation cannot be sustained indefinitely, particularly as maintenance and reliability pressures build, but unit costs and profitability have moved in the right direction, and it can become difficult to step back.
Wide-bodies remain a different story, with little sign of softening and continued upward momentum.
Transaction activity is expected to increase, driven in part by deliveries and sale-and-leaseback transactions, but growth in sales with leases attached is likely to dominate. Expect increased ABS issuance—potentially exceeding US$10 billion—alongside further significant M&A activity and short-term lease extensions.
The outlook for retirements remains uncertain. While engine demand should continue to support part-out activity, retirement volumes may remain below long-term historical norms if operators retain aircraft, particularly against the backdrop of elevated storage levels of GTF-powered A320s. Month-on-month improvements since the October 2025 peak are encouraging, although they may be seasonal. Even so, elevated engine values and lease rates are likely to drive further opportunistic part-outs.
