As we enter 2025, the aviation industry is facing a challenging period marked by a significant shortage of serviceable aircraft, engines and parts. Reports of airlines grappling with grounded fleets due to supply constraints are becoming increasingly common. British Airways, for example, has adjusted its flight schedule due to a lack of serviceable Rolls-Royce Trent 1000 engines for its 787 fleet, while half of Pakistan International Airlines’ fleet of 777 and A320 aircraft was recently out of service due to parts shortages. This challenge is not going away anytime soon — and may worsen before it improves. This issue is widely misunderstood because it varies across subcategories and product lines. For example, challenges with the Trent 1000 are tied to issues like new engine production delays, MRO capacity constraints, and shortages of critical components such as high-pressure turbine (HPT) blades. The scarcity of used serviceable material (USM) compounds the problem, as the market lacks the inventory to make a material impact.
Similarly, aircraft like the Boeing 787 highlight the broader shortage. With only a handful of airframes torn down, the supply of USM remains constrained as a cost-effective alternative to the OEM’s sale of new parts. Meanwhile, for mature, midlife aircraft types, operators do often look to USM as a better option to meet short to medium term operational and/or lease return requirements. The challenge for the supply of such USM is that, for platforms like the A330 classic and 777-300ER, teardown activity has been more limited in recent times because airlines are extending these aircraft in service instead of retiring them.
This has created a spike in demand for major assets like landing gears, auxiliary power units (APUs), nacelles, and thrust reversers. With limited availability, prices for USM have risen by 20% to 40% over the last 12 months, depending on factors such as the product line, maintenance condition and the quality of technical records.
A Perfect Storm for Operators
Looking ahead, 2025 could prove to be another pinch-point year in aircraft retirements due to the ongoing delays in new aircraft deliveries and further extended operation of midlife fleets. In recent weeks, airlines have chosen to extend the operation of midlife aircraft not just by one or two years, but by as many as four to six years, for both narrowbody and widebody platforms.
Operators are prioritising servicing passenger demand by retaining or growing lift, but this is easier said than done. Lease extensions are rarely short-term in the current market. Lessors are unlikely to grant one-or two-year extensions when other airlines are willing to commit to longer leases. As a result, operators face tough decisions: commit to longer leases or buy aircraft outright to shield themselves from further delays and uncertainties.
This behaviour indicates a lack of confidence in a near-term resolution. Airlines are unlikely to sell their fleets or reduce operational capacity, further tightening the market. This puts even greater pressure on companies like AerFin to secure the critical assets needed to support operators.
Investor Trends: Capital Diversification in a Competitive Market
The parts shortage has also created shifts in investor behaviours. There is a noticeable increase in capital flowing into midlife trading and part-out activities. While some investors are focusing on the perceived stability of new or midlife on-lease aircraft, others are exploring more innovative opportunities in the midlife naked asset and part-out spaces.
This trend is partially driven by intense competition in the new-technology sale-leaseback market, where equity returns have been under significant pressure. Many large players focus exclusively on new production, favouring investment in young aircraft and engine leases to airlines with strong credit ratings. This has created a highly compressed market, forcing capital to diversify into midlife assets to achieve a better blend of returns.
A Call to Adapt and Innovate
The aviation aftermarket is at a crossroads. The pressures of part shortages, rising USM prices, and limited aircraft retirements demand adaptability, foresight, and innovation. At AerFin, we are uniquely positioned to navigate these challenges, leveraging our expertise to provide solutions that help operators see the way ahead with clarity and move forward with confidence.
As the market evolves, collaboration between airlines, lessors, investors and aftermarket specialists will be critical to overcoming these hurdles and ensuring the aviation industry remains resilient in the face of unprecedented change.
Opportunities in the Midlife Trading Space
Despite the challenges, AerFin is taking proactive steps to overcome these obstacles and seize opportunities in the midlife trading space. Our strategy centres on recruiting, developing and retaining world-class talent to drive innovation and execution. By opening new global locations, we are bringing expertise and metal closer to our customers, enabling a more responsive and tailored service. We are also broadening our product line offering to address market shifts, as new aircraft delivery rates and reduced retirements make certain asset classes more attractive through their extended operation. Additionally, we are targeting assets with unique location or technical challenges, leveraging our deep expertise to unlock value where others might see risk.
This strategy has already facilitated the acquisition of key purchases, including Scoot A320s, Hong Kong Airlines A330s, and a JAL 777. These successes allow AerFin to demonstrate a consistency of supply in a highly constrained market, further cementing our reputation as a trusted partner in the aviation aftermarket.
Simon Goodson is CEO of AerFin
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