Is Commercial Aerospace Ready For A Demand Reckoning?
By Frank Coleman III
with John Moore, Tore Johnston, and Sabrina Archer
New survey reveals a widening gap between airline sentiment and the rest of the value chain.
The commercial aerospace industry has spent four years celebrating its post-COVID recovery. Demand surged, backlogs swelled, and MROs and aftermarket suppliers posted record margins. But a new survey of more than 150 commercial aerospace leaders across the value chain conducted by McKinsey & Company and Aviation Week tells a more complicated story.
Nearly half of respondents believe a demand slowdown is likely. Three-quarters expect growth to fall below the industry’s historical baseline of 3- to 5-percent revenue passenger kilometer growth over the next two to three years. Global air passenger traffic is now forecast to grow just 2.1 percent in 2026, less than half the rate projected at the start of the year, according to IATA’s Global Outlook for Air Transport. Airlines, which sit closest to the end traveler, are already feeling the pressure: 54 percent report that business conditions are worse than six months ago.
The rest of the value chain has not caught up. Only 30 percent of OEMs and suppliers report similar deterioration. Lessors, who may face some of the greatest exposure in a downturn, show the least concern of any segment surveyed, with just 17 percent expecting a slowdown.
That divergence is not simply a difference of opinion. It reflects structural incentive misalignments that could turn a gradual demand softening into something more disruptive. OEMs are rewarded by Wall Street for delivery volume, regardless of whether the market can absorb the capacity. Suppliers face a rational choice to moderate their ramp investments rather than commit capital to tooling that may be obsolete when next-generation aircraft arrive. MROs are riding a profitable wave of legacy fleet maintenance, a wave that could recede quickly if airlines accelerate retirements.
That last scenario is closer than it may appear. When airlines were asked what lever they would pull first in a slowdown, 56 percent said they would park or retire aircraft—4.5 times the share that would defer new deliveries. Roughly 3,000 aircraft are already past their expected retirement date. If they go, they could go quickly rather than gradually, and the aftermarket suppliers currently thriving on legacy maintenance would feel it almost overnight. The aftermarket profitability that suppliers depend on today is the same profitability most exposed to a retirement cliff.
What about preparedness? Seventy-seven percent of respondents said they could adjust their strategies within six months. McKinsey is skeptical. The evidence of the last five years suggests an industry for which rapid change is genuinely difficult. The complexity of that adjustment is routinely underestimated.
The survey findings do not predict a collapse. Instead, what they reveal is a value chain in which the warning signs are concentrated at one end, incentives are pushing segments in conflicting directions, and collective readiness may be less robust than the headlines suggest.
For more details on the factors in play and what they mean for industry stakeholders across the value chain, read the full whitepaper.