The aviation industry is undergoing one of its biggest transformations in decades, Gediminas Ziemelis, chairman of Avia Solutions Group, told Kriti Gupta, host of The Pulse With Francine Lacqua on Bloomberg TV.
The discussion focused on three key topics: whether Boeing can overcome its reputational and supply chain issues, how ongoing consolidation in Europe is affecting the market, and what the future holds for aircraft leasing prices in the coming years.
– A lot is happening in the aviation sector. Let’s take a broader look at this situation. For the first time in two years, Boeing has delivered more aircraft in a month than Airbus. This comes as the manufacturer begins to recover from a long wave of strikes and years of instability. Recently, you placed an order for about 80 Boeing aircraft. Tell us about this partnership.
– We took almost a year and a half to make our decision and finally chose Boeing in the first week after the strike ended. Ours was the first order placed after the agreement with the union was reached.
– You can understand my skepticism—many people working with Boeing, both suppliers and customers, remain doubtful about the company's recovery. How do you see this?
– Aviation is a highly organized and strictly regulated industry. We understand the steps manufacturers must take to move to the next stage, the documents they need to submit to authorities, and the actions and changes they must implement within their organization.
At the moment, we believe Boeing’s products are very safe. We expect that by 2030, when our orders begin to be delivered, they will arrive on time and follow the production schedules. This is despite the fact that Boeing is only the final stage of a much larger system involving 14,000 suppliers. We are part of this ecosystem, and we understand that aviation is highly cyclical.
If a disruption occurs somewhere, we will see even greater disruptions within hours or days. For example, if a flight in the morning is delayed by an hour, the same aircraft may be five hours late by evening.
– Yes, I completely agree. It’s like a snowball effect. You talk about the cyclical nature of the aviation sector. Right now, in the United States, we are seeing mass layoffs, cost-cutting measures, and ongoing consolidation. How do you assess the long-term impact of this situation? Do you see any signs of recovery in the aviation sector?
– Ultimately, the aviation and air traffic sectors are driven by aircraft manufacturers. They are the main drivers. Over the past five years, there have been no major aviation startups worldwide—simply because there haven’t been enough aircraft available.
Between 2016 and 2019, especially in developing markets, we saw the emergence of five or more large startups that placed orders for new aircraft and became major players in the market.
Consolidation happens where organic growth is not possible and where there is a shortage of new aircraft. Currently, 3,400 aircraft still lack replacements. Their maintenance programs have been extended because Boeing and Airbus have not produced enough planes over the past five years.
Yes, I see consolidation happening. Competition authorities are very strict, especially in Europe. In my opinion, they will block some potential mergers as they could pose risks to passengers. At the same time, we won’t see major startups emerging because there simply aren’t enough aircraft available.
In the next four to five years, we will witness an interesting market situation, and by the 2030s, everyone is predicting a new era in the aviation ecosystem.
– You mentioned production slowdowns as a reason for consolidation. Do you think this issue is now behind us, or will the aviation manufacturing sector continue to face more challenges?
– No, the problem is not over. We have to remember that this entire ecosystem involves 14,000 suppliers. If just one supplier fails to produce their component, the entire system suffers.
This is nothing new—it’s a highly certified and supervised industry. Innovation does not happen quickly. If someone wants to develop a new product, it can take decades before it enters the market and goes through all certification procedures.
– Where is the greatest cost pressure coming from? What are the main sources of demand?
– Demand is directly tied to GDP growth. If we compare highly developed countries with less developed ones, passenger traffic can differ by up to ten times.
In 2024, there were 4.8 billion airline passengers globally, while the world’s population is just under 8.1 billion. That’s 0.6 passengers per person. However, this varies significantly by region:
United States: 3 passengers per person; Europe: 2.8 passengers per person; India: Only 0.1–0.2 passengers per person.
Every region has different growth opportunities, but people want to travel. Business is moving, tourism is growing. The COVID-19 pandemic had some impact, but business travel isn’t going anywhere. Mobility will not disappear because it is driven by economic growth.
– We should remind our global audience that you run a leasing company that works with airlines and the aviation sector. What are your forecasts for leasing prices over the next one to two years?
– Our leasing model is unique because we provide a comprehensive service, including crew, maintenance, and insurance.
Right now, we work with 11 airlines, which allows us to offer capacity to other carriers and take advantage of seasonal demand fluctuations.
All narrow-body airlines in Europe suffer losses in winter because people travel more in the summer. As a result, about 40% of excess capacity accumulates during the winter season.
Some airlines keep aircraft grounded, others send them for long-term maintenance, while some continue flying at a loss. By tracking the stock market performance of publicly traded airlines, we can see these quarterly losses reflected in financial reports.
This, in turn, leads to higher ticket prices in Europe during the summer season.
Our goal is to help balance excess winter capacity so it can be used in the summer season for European carriers. We also shift some of our aircraft to markets with opposite seasonal cycles, such as Asia-Pacific and Latin America.
Ultimately, airlines across six continents are striving for cheaper ticket prices, as competition from 2030 onward will become even fiercer.
Aviation companies must prepare and find ways to increase their efficiency. Managing seasonal capacity between summer and winter will be one of the key solutions, something that has not yet been widely implemented on a large scale.
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