Staying flexible in a strong but challenging aircraft leasing market

The outlook for the aircraft leasing market in 2026 is strong, resilient and opportunity rich, framed by a persistent mismatch between supply and demand, solid airline profitability and a supportive financing environment.

Global credit rating agency Morningstar DBRS suggests that the 2026 operating environment remains positive. This is supported by global economic growth, a persistent shortage of airworthy aircraft and engines, and strong lease volumes and yields. This supply-demand imbalance continues to lift aircraft values and maintains high utilisation across leasing portfolios.

However, risks do remain due to geopolitical instability, macro-economic pressures and more.

These trends require aircraft leasing companies to develop alternative financing structures to compete in capital markets for mobile funding.

The Airline Economics Dublin 2026 agenda included discussions on global economic expectations in the aircraft leasing market, technical management of new deliveries, leasing rates and asset valuations. Discussions highlighted the industry's focus on navigating ongoing supply constraints while capturing strong demand.

In this article, Ogier Tax partner John Perry picks out his key takeaways from those discussions and advises on the financing options to meet differing industry challenges.

Strong passenger recovery and airline profitability

Demand for Air travel remains high. KPMG's Aviation Leaders Report 2026 projects global passenger traffic to increase by 4.9% in 2026, maintaining strong momentum following the post pandemic recovery. Global airline net profit is forecast to increase to US$41 billion in 2026, driven by high load factors (84% in 2025) and lower fuel prices.

Airlines across Asia Pacific, Europe and North America expect continued improvements:

• Asia Pacific demand continues to strengthen, particularly on international routes and in the recovering China market
• US airlines are expected to stabilise after 2025 challenges
• Europe sees further industry consolidation, supporting long term fleet renewal needs

This solid airline profitability reduces default risk for lessors and supports ongoing lease rate strength.

Supply dynamics: normalising deliveries but ongoing bottlenecks

Despite gradual improvement in original equipment manufacturer (OEM) production rates, new aircraft deliveries are still short of global demand. Airbus and Boeing production remains below required levels due to delayed supply chain recovery and ongoing engine maintenance issues, which ground significant numbers of newer technology aircrafts.

PwC’s 2026 Aviation Finance outlook highlights a transition from the 2023-2025 era of extreme constraints toward a more “normalising” supply environment, yet still characterised by shortages, especially in engines and maintenance, repair and overhaul (MRO) capacity. PwC said that 2026 may see more parts, more people and more aircraft, though supply chains will remain stressed.

With OEM performance still lagging airline needs, older and mid life aircraft remain in high demand, not only sustaining but elevating lease rates.

Lease rates and asset values: elevated and supported by scarcity

The tight supply conditions continue to exert upward pressure on lease rates. These elevated rates reflect the acute aircraft shortages created by OEM delivery delays and engine groundings.

The shortage of airworthy aircraft and engines relative to demand will continue driving higher lease yields and strong secondary market sale values through 2026. The financial performance of aircraft lessors is expected to benefit from robust gains on aircraft sales, high utilisation rates and lower funding costs compared to previous years.

Funding conditions: active capital markets and refinancing needs

Aircraft lessors face significant capital market activity in 2026. Major lessors must refinance approximately US$19.3 billion in debt, in addition to funding large pipelines of new aircraft deliveries. Given the strong fundamentals of the sector, lessors are expected to remain active across both unsecured and ABS markets.

Interest rate conditions remain critical:

• in Europe, the European Central Bank’s deposit facility rate sits at 2% and is expected to remain steady through mid 2026
• in the US, decreasing swap yields (approx. 3.8% at the end of 2025) help ease financing costs

These conditions continue to flow through into higher lease rates as lessors pass through increased funding costs to airlines.

Market growth prospects: expanding leasing penetration and fleet renewal

Aircraft leasing continues to expand as a share of global fleets. Market reports show that the global aircraft leasing market will grow from US$209 billion in 2025 to US$226.7 billion in 2026, at a compound annual growth rate of 8.4%. Drivers of growth include:

• rising aircraft acquisition costs, encouraging airlines to lease rather than purchase
• airlines’ ongoing fleet renewal, particularly toward fuel-efficient narrow bodies
• increasing airline expansion strategies and global network growth
• sustained market demand in Asia-Pacific, the largest region in 2025

Long term market projections to 2033 show continued strong expansion of leasing as a structural component of airline fleet strategy.

Strategic themes for lessors in 2026

Mid-life and late-life opportunities

Panel discussions at Airline Economics Dublin highlighted strong trading demand for midlife and late life aircraft, driven by airline appetite and engine maintenance related groundings.

Consolidation in aircraft leasing and finance

M&A activity among lessors remains an important theme as scale becomes increasingly critical. The Dublin conference explicitly addressed where consolidation may leave the global leasing landscape.

Sustainability and ESG compliance

Lessors face pressure to align portfolios with airline decarbonisation strategies and emerging regulatory frameworks. The focus is shifting to sustainable financing structures, green asset-back securitisation and future fleet technologies.

Managing technical and supply chain risks

Topics discussed during conference sessions on technical management and Airline Working Group developments included how engine reliability issues and MRO bottlenecks require enhanced asset management capabilities.

Risks to the outlook

While the general outlook is positive, risks include:

• potential weakening labour markets affecting consumer travel demand
• persisting engine maintenance challenges
• macro economic pressures from geopolitics or trade tensions
• geopolitical instability, protectionism and airline bankruptcies could test portfolio resilience

Alternative financing structures for lessors

Alternative funding options can support stronger trading gains on secondary market sales as values remain elevated. Having a diversified portfolio favours investors that require greater scale and trending capabilities because they can avail of funds with diversified portfolios.

Irish funds

Irish funds are highly flexible investment vehicles capable of originating loans and acquiring loans or other finance assets including aircraft on both primary and secondary markets.

Profit participating notes (PPNs)

The issuance of PPNs by special purpose vehicles (SPVs) may also be utilised as they are commonly structured so that interest paid to noteholders is equal to the net income of the SPV and notes can be listed on a recognised stock exchange, offering further tax certainty and marketability

Parallel structures

Using series of feeders and multiple SPVs can cater for multi-jurisdictional investor groups, with Irish, US, Cayman, or other partnership vehicles feeding into the SPV holding direct US assets.

The greater reliance on diversified funding channels will ensure the cost of capital remains a differentiator.

Conclusion

The aircraft leasing sector enters 2026 with a broadly favourable global outlook, underpinned by a mix of a strong demand for air travel , constrained aircraft supply and resilient airline profitability.

Ireland leads the way for aircraft leasing and aviation finance with more than half of the world's commercial aircraft leased via a company managed or legally held in Ireland.

Increased lease rates, robust secondary-market values, expanding market size and active capital markets all point towards a year of strong performance for lessors, albeit with strategic challenges involving supply chain reliability, sustainability demands and macro economic uncertainties.

How Ogier can help

By bringing legal, corporate administration tax, regulatory and listing services together, our integrated Aviation Finance team works with aircraft lessors, asset managers, lenders, borrowers and investors across the commercial aviation sector. From structuring and establishment through to ongoing administration, we deliver aircraft finance and leasing services.

Learn more about our expertise: Ogier | Aviation Finance.

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice