Second-half aerospace trends to watch

I recently asked Raman Ram, aerospace, defense & mobility leader at EY Americas, to share his assessment of the aerospace industry, especially the trends emerging in 2H 2025. In an interview following the Paris Air Show, he noted a few factors influencing the market.

“One is we see a lot more private equity,” Ram explains. “For the past 15 years, when the private equity industry started looking at aerospace, they saw a huge backlog. It’s predictable. But now they’ve got all this cash tied up, and they’re not able to do exit transactions. The value of the portfolio private equity has been sitting on is the highest it’s ever been.”

Ram continues, “Typically, private equity has about a four- or five-year exit time frame. They’ve made all these investments over the past years, and now I think they’re not exiting because of all the uncertainty around tariffs, interest rates, and air traffic demand.”

Ram believes they’re raising the next round of funding, but they’re also waiting for things to calm down. Added to the uncertainty, markets have run up the value of their holdings, so the seller isn’t lowering prices, and the buyer is holding back. “I think it’s kind of a stalemate right now,” Ram says. “Transactions aren’t happening as they should.” However, he sees private equity coming up with innovative ways to start doing more deals. “In the next 12 to 24 months, I expect to see a lot more transactions being announced.”

Another factor Ram warns against is the belief air travel demand is diminishing, based on what are likely only short-term, geopolitically influenced declines seen this past summer.

“Airlines don’t make decisions based on the short term,” Ram says. “Their long-term decisions are based on what the traffic is going to be throughout the next 10 to 15 years, and that’s pretty robust.”

Ram explains air traffic is predicted to experience 3.5% to 4% annual growth during the next 20 years, with big fleet growth in Asia and the Middle East. “The fleet is going to grow significantly despite all the short-term perturbations,” he says.

Another trend to watch: how the supply chain is rebounding.

“Supply chain issues are getting better. It’s in pockets, but the supply chain is definitely much better than what it was 12 to 18 months ago,” Ram says. There’s a concern though, that with the anticipated spike in defense spending, the supply chain may be stretched thin trying to serve commercial and defense aerospace.

On the topic of aerospace manufacturing, Ram notes, “We’re not seeing automation take off as much as we expected.” However, that slow adoption could change with the announcement of a new single-aisle jet likely to happen in the next few years. “We think companies will be forced to change their production system completely, and consequently, there would be need for more physical automation.” – Eric