There is a noticeable difference from previous years when you walk into any aircraft finance conference these days. The underlying theme has shifted, but the conversations about leasing arrangements, delivery schedules, and credit quality remain the same. The room has a sense of caution that wasn’t present in 2022 or 2023. In a world where three significant geopolitical disruptions are occurring at precisely the same time, each of which is changing the risk calculus that aviation finance depends on, the industry that survived COVID by emerging as a legitimate alternative asset class and drawing in sovereign wealth funds and pension managers in addition to the traditional lessors is now facing something for which it was ill-prepared.
The three shocks don’t have independent plots. They intensify one another. Crude oil prices have risen above $100 per barrel due to the U.S.-Iran conflict, which directly affects airline operating margins and increases fuel hedging costs for already stretched carriers. Global flight planners have been forced to reroute traffic away from the Gulf due to the Strait of Hormuz situation, which has resulted in longer flight times, more fuel consumption, and a concentration of aircraft in already congested air corridors over Egypt and Turkey. Even if the Hormuz situation returns to normal, there will likely be months of disruption, according to World Bank President Ajay Banga. That is operational reality, not pessimism. This level of detour flying was not anticipated in flight schedules, insurance contracts, or lease agreements.
And there’s Russia. After the invasion of Ukraine in 2022, more than 400 aircraft leased by the West were detained, which led to one of the most complicated insurance situations in aviation history. The way war risk policies apply when aircraft are detained by state action was finally made clear by a significant ruling in London’s courts in June 2025. This ruling is currently changing how insurers write hull war coverage and how lessors structure every new agreement they sign. The shift is not hypothetical. Contract language, premium pricing, and the risk appetite of new players who entered the aviation finance market during the boom years and are now reevaluating their exposure are all examples of how it manifests. There is no clear timeline for when war risk and related lines will stabilize.
The third disruption, which includes trade tensions between the United States and China, tariffs, and a wider reorganization of global supply chains, is the least noticeable of the three but may have the greatest long-term structural impact on aviation finance. The pandemic had already severely harmed supply chains for engines and aircraft parts. Currency volatility, parts availability uncertainty, and regulatory complexity are all exacerbated by trade friction. Five years ago, there were no balance sheet risks associated with airlines operating in markets impacted by both Western tariff escalation and Chinese economic pressures. According to IATA, approximately $1.2 billion in airline funds are presently blocked in different jurisdictions and awaiting repatriation into dollars. When exchange rates are affected by geopolitical unrest, the value of those blocked funds changes in ways that no one had anticipated.
Prior to this point, the aviation finance sector had been developing nicely. An entire generation of leasing executives was influenced by the old Guinness Peat Aviation collapse of the 1990s. Prior to its collapse due to funding mismatches, GPA was the largest aircraft lessor in the world. The lesson was to match your liabilities, diversify your funding, and avoid letting your book become overly focused on any one area or currency. And that discipline persisted for years. However, the current environment is putting it to the test in ways that diversification alone cannot completely handle because the disruptions are simultaneous and global rather than local.
Aviation financiers currently believe that the repricing has only partially taken place. Narrowbody aircraft lease rates have increased as manufacturer delivery issues at both Boeing and Airbus continue to limit the supply of new aircraft. Because there is nothing to replace them, older aircraft that would have been retired are being kept in service. The cost of hull war and war liability insurance is fluctuating, sometimes dramatically. However, it’s still unclear if credit evaluations for airlines in vulnerable areas accurately reflect the exposure and whether the capital in aviation finance funds has been appropriately marked to a world where volatile oil prices, contested airspace, and blocked funds are now normal operating conditions rather than tail risks.
The theme for the Willis Aviation Conference in Istanbul in May is “Smarter Skies: Managing risk and complexity for a sustainable future in aviation,” which seems to have been carefully chosen.” Istanbul, which is situated at the meeting point of European and Middle Eastern airspace and manages the rerouted traffic flows brought about by the very geopolitical disruptions the conference is convening to discuss, is a useful location. It’s a sharp irony. Because of the conflicts that are reshaping global aviation finance, the industry is gathering in a city whose airspace has become one of the most strategically dense in the world. Finding mutual stability in a geopolitical environment that is becoming more unstable is no longer a theme for conferences. Finance teams, insurers, and lessors deal with this operational reality on a daily basis.
