The first half of 2026 has once again demonstrated the resilience of the aviation finance sector. Despite heightened geopolitical tensions, including conflict in the Middle East and associated volatility in energy markets, aviation finance capital markets have remained open, investor appetite has stayed strong and aircraft asset values have largely held firm.

Perhaps most notably, investors have shown an increased willingness to look beyond short-term disruption and focus on the long-term fundamentals supporting the sector. Strong global travel demand, constrained aircraft supply and attractive cash flow characteristics continue to underpin the appeal of aircraft as an asset class.

Positive Investor Sentiment despite Geopolitical Risk

One of the defining themes of 2026 to date has been the apparent disconnect between geopolitical uncertainty and investor sentiment.

Historically, aviation has been highly sensitive to external shocks. However, the sector’s performance through the Covid-19 crisis appears to have strengthened investor confidence in its long-term resilience. While higher fuel prices and regional instability continue to present challenges for airlines, capital markets remain supportive of aircraft leasing platforms, ABS transactions and new investment vehicles.

Liquidity remains available from a broad range of providers including banks, private credit funds and institutional investors. This depth of capital reflects continued confidence in the underlying fundamentals of airline demand and aircraft-backed cash flows.

ABS Market Returns in Force

The strength of the ABS market has been one of the clearest indicators of investor confidence during the first half of the year.

Lease and loan ABS issuance exceeded US$10 billion by early July, already surpassing record volumes achieved during 2025. The market has remained resilient despite geopolitical volatility.

This has been illustrated by the two MAPS securitisations (Perseus), completed in January and June respectively. Although the Middle East conflict emerged between the two transactions, the June issuance achieved the same spread on its Class A notes as the January deal, while Class B notes priced slightly tighter.

The result highlights the depth of liquidity available to aviation ABS issuers and the market’s continued confidence in aviation collateral.

Both repeat and first-time issuers have successfully accessed capital markets throughout the year and issuance activity is expected to remain strong through the second half of 2026.

Scarcity Continues to Support Asset Values

Supply chain challenges remain the defining structural issue facing the aviation sector.

Aircraft delivery delays, engine reliability issues and MRO bottlenecks continue to restrict available capacity across the market. Industry backlogs remain at historically elevated levels, while delayed deliveries are extending the operational lives of existing fleets.

The impact on asset performance has been significant. Trading activity across both aircraft and engines remains strong. Lease extensions have become increasingly common and demand for mid-life aircraft continues to support values.

Engine assets in particular have benefited from scarcity, while lease rate factors have strengthened across a range of asset classes. As a result, supply constraints continue to outweigh demand, creating favourable market conditions for lessors and asset owners.

New Sources of Capital Enter the Market

Another notable trend during 2026 has been the emergence of new investment platforms seeking exposure to aviation assets.  For example, Mustang Aerospace, the co-investment platform established by Dubai Aerospace Enterprise (DAE) and Neuberger Specialty Finance. The platform is targeting approximately US$6 billion of aircraft investments and has secured financing support from a consortium of international banks.

The launch reflects a broader shift as alternative asset managers, private credit providers and institutional investors increasingly seek access to aviation through dedicated platforms and joint ventures.

These structures enable investors to gain exposure to aviation assets without establishing traditional leasing businesses and are introducing additional pools of capital into the sector.

Consolidation Continues Across the Industry

Mergers and acquisitions continue to reshape the aviation leasing landscape.

Scale remains an increasingly important competitive advantage, providing access to diversified funding sources, stronger airline relationships and greater operational flexibility. Recent transactions demonstrate that market participants remain willing to pursue strategic growth opportunities despite broader economic uncertainty.

As larger platforms continue to seek greater scale and private capital looks for established routes into the sector, consolidation is likely to remain a feature of the market for the foreseeable future.

Implications for Ireland

For Ireland’s aviation finance industry, these trends reinforce the strength of the country’s position within the global leasing ecosystem.

As capital structures become more diverse and transaction activity remains strong, the concentration of leasing expertise, professional services capability and international investor relationships based in Dublin and the MidWest continues to represent a significant competitive advantage. Maintaining that position will be increasingly important as the industry continues to evolve and attract new forms of capital.

Outlook

Looking ahead, aviation finance continues to be supported by a distinctive combination of strong demand, constrained supply and abundant capital.

Geopolitical tensions and higher fuel prices will remain important risks to monitor, but investor appetite has remained remarkably resilient. ABS markets remain active, new capital continues to enter the sector and consolidation activity shows no signs of slowing.

Against a backdrop of persistent aircraft and engine shortages, asset values continue to benefit from favourable market dynamics. While challenges remain, the first half of 2026 has demonstrated the sector’s ability to absorb uncertainty while continuing to attract capital and support transaction activity.

Strong demand, limited supply and deep pools of capital continue to provide a constructive backdrop for aviation finance as the industry moves into the second half of the year.