Kay McCarthy, Head of Jersey Office at The International Stock Exchange (TISE), examines the growing role of public markets in aviation financing.

Aviation linked debt listings on TISE have accelerated, highlighting strong investor appetite and signalling a structural shift in how the global aviation sector accesses capital. This momentum is part of the sector’s broader evolution, with market-based instruments increasingly complementing traditional bank lending for aircraft, leasing platforms and infrastructure.

Defining aviation finance

Aviation finance is the international capital framework that supports the acquisition, operation and long term advancement of aircraft and aviation infrastructure. It underpins airlines, leasing companies, manufacturers and a broad network of service and infrastructure providers. The system spans traditional bank lending, bonds, operating leases, export credit support and capital market instruments such as aircraft asset backed securities (ABS).

"Aviation finance is the international capital framework that supports the acquisition, operation and long term advancement of aircraft and aviation infrastructure."

Aircraft are high value, technically complex and globally regulated assets. Managing them requires legal, financial and operational frameworks that address cross border risk, airline credit volatility and residual value exposure. These frameworks underpin international air transport, and shape fleet strategy and capital allocation across the industry.

Market mechanics

The mechanics of aviation finance centre on how capital is structured, secured and deployed across borders. The system links aircraft and other aviation assets with funding through leasing and global financing channels. Transactions rely on legal entities, security packages and jurisdictional frameworks that allocate risk across counterparties in the aviation value chain.

"The system links aircraft and other aviation assets with funding through leasing and global financing channels."

Pricing reflects airline credit quality, asset condition and maintenance cycles, while broader forces such as interest rates, fuel costs, production output, travel demand and geopolitical conditions influence values and spreads. Over time, the system has become increasingly market driven, with bond issuance and securitisation complementing traditional bank lending and widening access to global liquidity. These market dynamics are closely connected to a long-standing structural feature of the industry: the central role of operating leasing in aircraft ownership.

The leasing transformation

Operating leasing has become the dominant ownership model for commercial aircraft. According to the International Air Transport Association (IATA), around 58% of the world’s commercial aircraft are leased rather than owned. This shift began in Ireland in the late 1970s when Guinness Peat Aviation (GPA) pioneered large scale operating leasing. By allowing airlines to use aircraft without owning them, GPA introduced a model that preserved capital and increased operational flexibility, becoming increasingly attractive as aircraft grew larger and more expensive. Over the following decades, leasing has remained the preferred ownership structure across commercial aviation.

The capital ecosystem

While leasing companies are the most visible participants, aviation finance is supported by a far wider ecosystem. Banks, export credit agencies, private credit funds, institutional investors and specialist aviation platforms supply capital in various forms through corporate bonds, syndicated loans, structured transactions and an expanding range of public market products such as aircraft ABS.

The sector also spans the full aviation value chain. At the top sit aircraft and engine manufacturers, producing high value assets that require long term funding. Airlines then rely on a mix of debt, equity, leasing and market based financing to build and renew their fleets.

"Aviation linked debt listings on TISE have accelerated, highlighting strong investor appetite and signalling a structural shift in how the global aviation sector accesses capital."

Surrounding these core participants is a wide array of operational and infrastructure providers — from maintenance and overhaul firms to airports, air navigation service providers, ground handlers, cargo logistics companies, fuel suppliers and global distribution systems. Each carries its own risk profile and capital requirements, yet all are linked through the financing and operation of aircraft, driving demand for flexible and scalable funding solutions.

Recovery dynamics

The Covid-19 pandemic placed unprecedented strain on the industry as passenger traffic collapsed and the value of aircraft and aviation infrastructure came under pressure. The recovery has been robust. According to IATA, global passenger traffic in 2024 rose above pre pandemic levels, ending the year 3.8% higher than in 2019 and boosting demand across airlines, airports and associated service providers.

The rebound has increased demand for additional aircraft whilst also supporting investment across infrastructure, maintenance, cargo operations and other aviation services. Larger, well capitalised airlines and service providers have been able to respond quickly, while smaller carriers and operators continue to face tighter liquidity and more challenging credit conditions. This industry wide recovery is generating a substantial pipeline of financing needs across the aviation ecosystem, setting the stage for greater participation from capital markets.

Capital markets in focus

As the recovery accelerates new funding requirements, capital markets are assuming an increasingly vital role. Bond issuance — including unsecured corporate debt from major lessors and structured products such as aircraft ABS — has become a core funding channel, supported by investor appetite and the need to refinance pandemic era debt. For many investors, aircraft backed debt offers tangible collateral and globally diversified revenue exposure. This growing investor participation is also extending into more tailored transactions and structured platforms.

Private credit funds and private equity investors are increasingly active, particularly in targeted transactions. They back specialist platforms, acquire mid-life aircraft portfolios and participate in securitisations, reflecting confidence in long-term lease cashflows and the resilience of aviation collateral. While banks remain important, the funding base is broadening, supported by innovations in securitisation, the use of intangible assets and the application of AI to enhance efficiency and expand financing options.

"Bond issuance — including unsecured corporate debt from major lessors and structured products such as aircraft ABS — has become a core funding channel..."

Technology and new funding approaches are further reshaping this landscape. Intangible assets such as airport slots and loyalty programmes are emerging as meaningful sources of value, while AI is streamlining lease documentation, improving portfolio oversight and boosting operational efficiency. Together, these developments support a shift toward more diversified, market driven capital structures across the global aviation ecosystem.

Sector outlook

Sustained investment will be required across the global aviation sector over the coming decade, as delivery backlogs, infrastructure development and the transition to next-generation aircraft drive ongoing capital needs. With interest rates trending downward, refinancing conditions are improving and capital markets participation is set to deepen. Green bonds and transition finance instruments linked to more fuel-efficient aircraft are emerging as an additional layer of innovation in funding structures. At the same time, the sector faces geopolitical, supply chain, fuel and market risks – with recent tensions in the Middle East, associated airspace disruptions and oil price volatility adding further uncertainty – requiring disciplined assessment in this cyclical industry.

Despite these challenges, the fundamentals remain solid: global air travel demand continues to rise, fleet modernisation is accelerating and investors are increasingly comfortable with aviation as an asset class. Reflecting this evolution, TISE has seen a growing range of aviation linked bond listings in recent years, from secured note issuances to structured debt vehicles. This growth underscores the sector’s increasing reliance on capital markets and highlights the role specialist exchanges now play in facilitating aviation linked financing.

This article was originally published in the Jersey Evening Post, March 2026