Welcome to my latest video presentation, posted January 18, 2025. The accompanying article is an edited transcript.
The geopolitical landscape today is increasingly reminiscent of Cold War dynamics, giving rise to what many analysts are calling “Cold War II.” While the original Cold War ended with the Soviet Union’s collapse in 1991, the anticipated “peace dividend” — the economic and social benefits expected from reduced military tensions — proved fleeting.
Rising defense budgets directly benefit commercial aerospace through shared innovation. “Dual use technology” is becoming more prevalent. Dual use refers to fields of research and development (R&D) that have application to both defense and commercial production.
Many technologies developed for military applications, such as lightweight materials, advanced avionics, and more efficient propulsion systems, find their way into commercial aircraft, enhancing their desirability and operational efficiency.
Furthermore, defense spending often revitalizes national aerospace industries, which can spill over into commercial production. Manufacturers with robust military contracts, such as Boeing and Airbus, leverage their infrastructure, supply chains, and R&D capabilities across both domains, creating a synergy that strengthens their commercial offerings.
This confluence of events is helping propel growth in the global aircraft market. Between 2024 and 2043, nearly 44,000 new commercial aircraft will be delivered. By 2043, single aisle (i.e., narrowbody) planes will be the most common type of plane in the world. Nearly 34,000 new planes will be delivered around the world.
Narrowbody planes represent a perfect balance of efficiency, adaptability, and demand alignment. They are ideal for high-frequency operations, cost-sensitive markets, and the evolving trends in global aviation. As technology continues to improve their range and fuel efficiency, their dominance in the commercial aviation market will only increase.
The market size of aircraft leasing will grow from $193.33 billion in 2024 to $210.4 billion in 2025 and $294.88 billion in 2029, for a compound annual growth rate from 2024-2029 (CAGR) of 8.8%.
Leasing growth during this period can be attributed to expanding global economic growth, cost-efficiency and flexibility, market deregulation, the emergence of low-cost carriers, and booming tourism in emerging markets.
Rapidly expanding aviation markets in regions like Asia-Pacific, the Middle East, and Africa are spurring demand for aircraft to meet growing passenger and cargo volumes.
It’s interesting to note that some airlines are turning to leasing due to trade restrictions and geopolitical uncertainties affecting aircraft procurement.
Indeed, international rivalries are adding vigor to commercial aerospace by driving global connectivity and national prestige projects, such as the Commercial Aircraft Corporation of China (COMAC).
COMAC is a quasi-military endeavor. The state-run company builds commercial jetliners, but Beijing considers the development of a commercial aircraft manufacturing base to be a matter of national security and strategic importance.
The COMAC C919 is designed to compete with the Boeing 737 MAX series and the A320neo series. The C919 focuses on the same core advantages as the 737 MAX and A320neo, such as fuel efficiency, reduced emissions, and lower operating costs, though it still lags behind in terms of global certification and operational history. Its entry marks a challenge to the Airbus-Boeing duopoly, especially in China, where local airlines are incentivized to prioritize domestically produced aircraft.
Countries seeking to project soft power or enhance economic influence often invest in aviation infrastructure, airline expansion, and aircraft acquisitions. For example, as nations vie for influence in regions like Africa and Southeast Asia, they stimulate demand for aircraft that can support growing trade networks and diplomatic outreach. The competition to secure airspace dominance or influence air cargo routes also inflates demand for reliable, modern fleets, further pushing up aircraft values and lease rates.
Geopolitical uncertainty often accelerates the replacement cycle for older aircraft, as airlines seek to ensure operational reliability amid global instability.
At the same time, governments may requisition commercial aircraft for troop transport, humanitarian missions, or strategic airlift, tightening market supply and driving up lease rates. In an era where aerospace sits at the nexus of commercial ambition and defense imperatives, the interplay between these sectors will only intensify.
Putin’s Imperial Vision
In the decades since the Soviet Union’s collapse, Russia has reasserted itself on the global stage, led by President Vladimir Putin, whose vision for the country is rooted in a desire to restore its former superpower status.
Putin’s aggressive foreign policy, characterized by the annexation of Crimea in 2014 and the full-scale invasion of Ukraine in 2022, signals a clear intent to challenge the West and re-establish Russia as a dominant geopolitical force.
This resurgence has upended assumptions of enduring peace in Europe and spurred a dramatic increase in global defense spending.
The United States is the largest military spender worldwide, surpassing the combined budgets of the next nine countries and spending more than three times that of the second-largest spender, China. (For several charts that flesh out these numbers, watch my video.)
If anyone tries to tell you that the U.S. military is “hollowed out,” they’re dead wrong. NATO, initially perceived by some as an outdated relic of the Cold War era, has experienced renewed purpose and expansion. The alliance recently welcomed new members, including Finland and Sweden, to counterbalance Russia’s revanchism.
The economic and military ripple effects of this renewed rivalry are profound. Defense budgets around the world have ballooned, particularly in Europe, as nations seek to modernize their forces and enhance readiness.
For its part, U.S. defense spending has consistently trended upward. In 2025, U.S. defense expenditures are projected to reach an unprecedented $850 billion. Approximately 25% of the total defense budget—roughly $212.5 billion—will be devoted to aerospace, primary for advanced aircraft.
The increased spending also highlights the role of the aerospace sector in integrating emerging technologies, such as artificial intelligence and autonomous systems, into defense applications.
As the defense budget climbs, so too does the demand for collaboration between the Pentagon and private aerospace firms, creating opportunities for technological breakthroughs in both the commercial and defense sectors, especially in the field of avionics.
Cold War II represents not only a clash of nations but also an ideological battle between democratic principles and authoritarian ambitions, with implications that extend well beyond the European theater.
In the hard-headed calculus of international business, Cold War II is generating a multi-year tailwind for commercial and defense aerospace. As the incoming Trump administration initiates a trade war and roils traditional alliances, this tailwind will pick up momentum in 2025 and beyond.
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