Airlines face constraints on capacity growth, reduced scheduling flexibility and higher costs

The Irish Times, Aviation & Finance Special Report, January 2026

With a bottleneck in new aircraft supply, shortages are exerting upward pressure on lease rates and extending delivery timelines.

The Covid-19 pandemic, problems with the Boeing 737 Max and industrial disputes are among the factors that have led to severe aircraft supply disruptions. With demand far outstripping availability, airlines are feeling the impact of these aerospace supply chain challenges right across their business.

In December, the International Air Transport Association (IATA) offered an updated analysis of aerospace supply chain bottlenecks. It noted that aircraft availability remains one of the “most significant constraints on industry growth”, with delivery shortfalls now totalling at least 5,300 aircraft.

Although deliveries of new aircraft began to pick up slightly in late 2025, and production is expected to accelerate in 2026, the IATA says demand is still forecast to outstrip the availability of aircraft and engines. This “structural mismatch” between airline requirements and production capacity will not be rectified before at least 2031, given the record-high order backlog, which has now surpassed 17,000 aircraft, more than half of the active fleet. Aircraft are also inevitably getting older; the average fleet age has risen to 15.1 years.

“Higher leasing costs, reduced scheduling flexibility, delayed sustainability gains and increased reliance on suboptimal aircraft types are the most obvious challenges,” IATA’s director general Willie Walsh has said. He added that airlines are missing opportunities to strengthen their top line, improve their environmental performance and serve customers. “No effort should be spared to accelerate solutions before the impact becomes even more acute.”

Marina Efthymiou, Professor of Aviation Management at Dublin City University Business School, notes that aircraft supply shortages are exerting upward pressure on lease rates and extending delivery timelines – a situation that is fundamentally reshaping the economics of fleet planning.

“Airlines face constraints on capacity growth, reduced scheduling flexibility and higher operating costs as older aircraft remain in service longer than intended,” she says.

Keith Mulhern, partner in the aviation and transport finance practice of A&L Goodbody, says delays in the delivery of new aircraft and supply chain disruption have been a “core challenge” for all industry stakeholders in recent years.

“Global passenger demand for air travel continues to increase, presenting opportunities for airlines and lessors to grow,” he says.

Yet capacity constraints have meant uncertainty and complexity in fleet planning, increased costs relating to leasing, maintenance and fuel burn in older aircraft, and setbacks on sustainability targets in terms of emissions reductions and fuel-efficiency gains, he says. The latter is a significant problem for an industry with ambitious climate targets – the IATA notes that while fuel efficiency had been improving by 2 per cent per year, this slowed to just 0.3 per cent in 2025 and is projected to be 1 per cent for 2026.

Airlines are adopting more flexible fleet strategies, including extending leases, converting purchase options and prioritising the acquisition of fuel-efficient aircraft where possible. Efthymiou also notes that many are renegotiating delivery schedules and diversifying suppliers to mitigate dependence on any single manufacturer. “Lessors, meanwhile, are engaging in more active portfolio management, accelerating the placement of midlife aircraft, and leveraging strong demand to secure improved lease terms,” she says.

Indeed, for lessors, the scarcity has strengthened their bargaining position and boosted asset values, but it has also increased exposure to maintenance risk and residual-value uncertainty, particularly for ageing fleets, Efthymiou says. “This prolonged imbalance between supply and demand is reinforcing the strategic importance of leasing within the global aviation system.”

Mulhern agrees that lessors have benefited from increased demand for aircraft and improved lease rates. Airlines are utilising medium- and short-term leasing solutions and extensions for aircraft and engines to maintain schedules and meet demand. He adds, however, that lessors face uncertainty and operational challenges, with longer service periods for existing aircraft, increased maintenance requirements, competition for maintenance slots and planning for ongoing risks with redelivery condition compliance and parts availability.

He says the backlog of delayed deliveries will take time to unwind. “Signals from manufacturers indicate gradual improvement bringing cautious optimism to the industry for the medium term,” he says, adding that manufacturer investments in production, the supply chain and workforce will address long-term issues. Demand for leased aircraft assets remains strong. “Ireland is a global hub for aircraft leasing and Irish businesses as leaders in this sector will continue to play a key role in overcoming these challenges.”

This article was first published in The Irish Times on 28th January 2026.