Aviation finance – a new flightpath for investors

October 27, 2026

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As traditional lenders become more selective, aviation’s growing financing needs are creating new opportunities for specialist private capital.

For decades, aviation finance was dominated by commercial banks and specialist leasing companies. That landscape has evolved. Changing regulatory capital requirements and balance-sheet priorities are prompting many banks to become more selective, while strong passenger demand, fleet renewal and aircraft supply constraints are increasing the industry’s need for capital.

For investors, we believe this creates an opportunity to access contractual income backed by tangible assets, while gaining exposure to the long-term growth of global aviation.

Commercial aircraft are among the world’s most valuable productive assets but acquiring them requires significant upfront investment. Rather than tying up capital in aircraft ownership, airlines rely on leasing companies, which acquire aircraft using a combination of third-party debt and equity before leasing them to operators under long-term contracts. With more than half of the global commercial fleet now owned by lessors, external financing has become fundamental to the way the industry operates.

This financing requirement is only likely to increase. Airlines need to replace ageing fleets, add capacity to meet passenger demand and invest in newer, more fuel-efficient aircraft. At the same time, lessors require significant amounts of capital to finance aircraft purchases and refinance existing portfolios.

Forecasts are not a reliable indicator of future results.

Figure 1 Source: Airbus Global Market Forecast, July 2026. F = forecast.

Figure 2 Source: Kroll Bond Rating Agency and Airfinance Global, as of 10 January 2026. Covers aircraft and engine leasing and loan transactions.

Together, these dynamics create a sizeable and recurring financing need, opening opportunities for institutional capital to play a greater role in an industry historically reliant on traditional lenders.

Contractual income backed by tangible assets

Aviation finance encompasses a range of strategies through which investors can provide debt or equity capital to support aircraft deliveries, fleet expansion, refinancing and portfolio acquisitions. For lenders, transactions are typically secured against the aircraft and, where applicable, associated lease receivables.

This asset backing is an important feature of the investment proposition. Investors are not simply assessing a company’s ability to meet its obligations; they are also analysing the value and characteristics of an identifiable underlying asset with low obsolescence risk.

That requires an assessment of aircraft type, age and maintenance condition, lease structure, residual value and secondary-market liquidity. The creditworthiness of the airline or lessor and the jurisdiction where the aircraft operates are also important, particularly when assessing the enforceability of security.

Should a borrower default, senior secured lenders have the ability, if required, to enforce their security, repossess the aircraft and seek to recover value through its sale or re-leasing. Commercial aircraft are also unique assets in that they are both globally mobile and supported by an established international leasing and secondary market.

In-demand aircraft can routinely be redeployed between airlines and geographies, reducing reliance on the fortunes of any single operator. The breadth of the potential operator base can therefore provide an additional layer of downside protection, particularly for widely used aircraft types with established maintenance infrastructure and strong demand from airlines globally.

For investors, the combination of contractual cashflows and security over tangible, income-producing assets can therefore offer an alternative source of income and provide diversification alongside more traditional fixed-income and private-market investments.

A structural need for capital

The current market backdrop is reinforcing the opportunity. Passenger demand has remained strong, despite macro headwinds in 2026. On July 23rd 2026, aviation experienced its busiest day ever with over 153,000 commercial flights recorded.¹ This robust demand supports airline profitability and fleet utilisation, while aircraft supply remains exceptionally constrained.

Forecasts are not a reliable indicator of future results.
Source: IATA Global Outlook for Air Transport, June 2026. RPK = revenue passenger kilometres. F = forecast.

Forecasts are not a reliable indicator of future results.

Source: IATA Global Outlook for Air Transport, June 2026. E = estimate, F = forecast. Grey bars denote loss-making years; light blue bars denote estimates and forecasts.

Airbus and Boeing have combined order backlogs exceeding 15,000 aircraft – representing more than a decade of production at current rates – while supply-chain constraints, manufacturing challenges and engine shortages continue to restrict the pace of new deliveries.

This imbalance has important implications for aircraft finance. Airlines cannot simply order additional aircraft and expect near-term delivery. They therefore need to make greater use of existing fleets and compete for available aircraft in the leasing market.

That scarcity has supported lease rates, utilisation and the value of existing aircraft, particularly newer, fuel-efficient narrow-body models. Aircraft values have recovered strongly from their COVID-era lows, strengthening the collateral underpinning many aviation finance transactions. With new aircraft difficult to secure, existing aircraft have become increasingly important in meeting airlines’ capacity requirements.

Forecasts are not a reliable indicator of future results.

Source: Boeing, as of June 2026. F = forecast.

Notable bank exits: DVB (2019); NAB (partial sale) and CIT Bank (2021); Standard Chartered (2023); Nord LB (2024); Hamburg Commercial Bank (2025). Source: Companies’ publicly available data; Muzinich analysis. References to specific companies are for illustrative purposes only.

Meanwhile, the sources of finance available to the industry are evolving. Banks remain important participants in the market, but the changing financing landscape is creating more room for alternative providers of capital.

Specialist private capital is filling an increasing proportion of this funding gap, particularly where borrowers value certainty of execution, flexibility or bespoke financing structures. Due to traditional lending capacity becoming more constrained, investors can potentially negotiate attractive pricing and stronger structural protections while maintaining disciplined underwriting standards.

The result, in our view, is a distinctive combination: a large and recurring requirement for capital, constrained aircraft supply, resilient collateral values and an evolving lender base.

Why specialist expertise matters

These characteristics do not make aviation finance without risk. The sector is cyclical and can be affected by economic downturns, geopolitical events, fuel prices, airline failures and unexpected disruptions to passenger travel. Aircraft values can fall, while repossession and remarketing may be complex, particularly across different legal jurisdictions.

Aircraft are also highly technical assets. Their value can vary significantly according to model, age, engine type, maintenance history and market demand. Two aircraft of a similar age can therefore present very different investment risks.

This makes specialist expertise critical. Investing successfully in aviation finance requires capabilities spanning fundamental credit analysis, aircraft valuation, lease structures, maintenance, legal jurisdictions and asset remarketing, alongside established relationships across airlines, lessors, manufacturers, banks and other industry participants.

These capabilities matter throughout the investment lifecycle: from sourcing transactions, assessing collateral and structuring protections to managing the asset and, where necessary, remarketing an aircraft if a borrower encounters difficulties. They can also help investors distinguish between opportunities where the potential return adequately compensates for the underlying risks and those where it does not.

A differentiated source of income and diversification

For investors considering how to diversify sources of portfolio income, aviation finance offers characteristics that differ from both conventional corporate credit and many other private-market investments.

Returns are linked not only to the creditworthiness of a borrower, but also to the contractual lease income and value of an underlying physical asset. At the same time, the fundamental drivers of the aviation market – including passenger demand, aircraft availability and fleet replacement – can differ from those influencing other areas of corporate credit.

As private capital continues to move into areas historically financed predominantly by banks, aviation provides an example of how the investment opportunity set is broadening.

For investors able to access the necessary specialist expertise, we believe aviation finance can offer a differentiated source of uncorrelated contractual income, hard-asset security and portfolio diversification, while providing capital to an industry with substantial long-term financing requirements.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of October 2026 and may change without notice.

References

1. Flightradar24, as of 2nd August 2026

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