Soaring Demand, Stalled Production: Why Aviation Leasing and Aftermarket Services Are the New Frontiers in Aviation Investing

The aviation industry is at an inflection point. As Airbus and Boeing grapple with supply chain bottlenecks that could extend delivery delays into 2028, airlines are turning to alternative solutions to meet rising passenger demand. Chronic aircraft shortages are now driving a paradigm shift: aviation leasing companies and aftermarket service providers are emerging as critical growth engines in an era where OEMs (original equipment manufacturers) cannot keep pace with demand. For investors, this presents a compelling opportunity to capitalize on sectors insulated from production bottlenecks while profiting from the structural needs of airlines.

The Perfect Storm: OEMs Struggle, Airlines Suffer

Airbus and Boeing's production delays are well documented. As of June 2025, Airbus's backlog exceeds 8,668 aircraft, representing over a decade of production at current rates, while Boeing's backlog stands at 6,273 aircraft. Delays now stretch to 2028, with engines and structural components (e.g., landing gear, avionics) remaining key constraints.

The ripple effects are stark. Airlines face six-month delays for narrowbody deliveries, forcing them to extend leases on older aircraft or shrink flight schedules. Legacy fleets are now overworked, increasing maintenance costs and wear-and-tear—a problem that will only worsen as OEMs prioritize new orders over repairs.

The Silver Lining: Leasing and Aftermarket Services Gain Traction

Here's where investors should focus:
1. Aviation Leasing Giants: Companies like AerCap (AER) and Avolon (AVOL) are poised to benefit as airlines turn to leased aircraft to plug capacity gaps. With OEMs unable to deliver on time, leasing firms can deploy their existing fleets (e.g., AerCap's 2,000+ aircraft) to meet urgent demand.
- AerCap's backlog of $43B in committed orders includes 70+ aircraft for airlines desperate to avoid delays.
- Avolon's 2025 revenue guidance reflects a 15% increase over 2024, driven by demand for narrowbody leases.

1. Aftermarket Service Providers: Maintenance, repair, and overhaul (MRO) firms like Lufthansa Technik (LHA) and SATA Airline Solutions are critical to extending the lifespan of aging fleets. As airlines delay new deliveries, they're spending more on engine overhauls, avionics upgrades, and parts replacements.
2. Lufthansa Technik's 2024 earnings surged 22% due to increased demand for MRO services.
3. Forecast International predicts global MRO spending will hit $102B by 2026, up from $85B in 2022.

Why These Sectors Are Resilient to OEM Delays

• Asset-light models: Leasing firms and MRO providers don't rely on OEM production. They profit from existing fleets and aftermarket demand, which is less volatile than new aircraft sales.
• High margins: Leasing contracts often include escalating rental rates, while MRO services have inelastic demand (airlines must maintain safety standards).
• Long-term contracts: Leasing agreements typically span 5–10 years, providing stable cash flows even as OEM backlogs persist.

The Investment Playbook: Act Now Before the Surge

The window to capitalize on this trend is narrowing. Airlines are already pivoting:
- Delta Air Lines recently signed a 10-year lease for 20 Airbus A321neos from Avolon.
- Emirates is accelerating MRO spending to maintain its fleet while waiting for delayed Boeing 777X deliveries.

Investors should:
1. Buy leasing stocks: AerCap and Avolon offer dividend yields of 4–6% with growth tied to airline demand.
2. Target MRO firms: Lufthansa Technik's stock has outperformed the broader market by 20% since 2023.
3. Monitor ETFs: The Global X Airplanes & Aviation ETF (AERO) provides diversified exposure to leasing and aftermarket players.

Risks? Yes, But the Upside Outweighs Them

Critics may cite overvaluation or a potential downturn in air travel. However, rising leisure demand (up 18% in 2024) and business travel recovery (2025 bookings at 95% of 2019 levels) ensure sustained demand for capacity. Even if OEMs eventually resolve bottlenecks, the legacy fleet maintenance backlog will remain a decades-long cash flow generator for MRO firms.

Conclusion: The Next Aviation Bull Market Isn't in Airplanes—It's in the Services That Keep Them Flying

Airbus and Boeing's struggles are a gift to investors willing to look beyond the headlines. Leasing firms and MRO providers are the unsung heroes of this crisis—asset-light, cash-rich, and insulated from supply chain chaos. With airlines scrambling to meet demand, now is the time to position for the next wave of aviation growth.

Don't wait for the next Boeing or Airbus delivery. Invest in the companies keeping their planes in the air—and profits on the rise.