By Sarah Young, Conor Humphries and Tim Hepher

LONDON/TOULOUSE (Reuters) – Jetmakers see strong demand for airliners even as the industry braces for tough new environmental measures, but some financiers have raised doubts over forecasts that the $150 billion industry will return to pre-COVID growth in just a few years.

London saw lessors, underwriters and financiers of securities used to finance the purchase of aircraft this week. They met to assess COVID damage and consider how new regulations and technological advances will impact their business.

Some speculated the industry might face its deepest fears: The trends could shorten the operational life span – and even hurt valuations – of any modern aircraft.

It could be a major change in the industry’s perception of dollars, which has made it a popular investment destination for over ten years.

BOEING FORECAST

After trimming forecasts at the height of the pandemic, Boeing (NYSE:) last week increased its 20-year demand forecast, citing the swift U.S. economic recovery. It stated that if a travel pandemic ends by 2024, annual demand growth will resume at 4% to 5% annually.

Boeing downplayed concerns of a global structural contraction in leisure and business travel during a London conference. The leasing industry accounts for around 60% of worldwide jet output.

Boeing Vice President for Commercial Marketing, Darren Hulst said, “With business travel I think it is hard for me to believe it won’t return to where it was.”

Airbus laid out its vision of sustainable flying during a Toulouse-based company conference. This was ahead to its November outlook update.

Guillaume Faury Chief Executive stated that “we are still scratching out our heads trying to best account for all of the things which have changed in the last few years in this world and within our sector.”

He said that climate concerns would have an “impact, a substantial impact”, but demand for the products will remain strong as he has seen it all over the globe.

DEMAND SCEPTICISM

But at the Airline Economics and Airfinance Journal conferences, which both attracted just a small fraction of the 2,000 or so delegates who usually attend, many participants believed the industry would see slower growth than Boeing and some suppliers have forecast, at least in more mature markets.

A senior aerospace executive stated that COVID-19 cost the industry five consecutive years of growth. Post-COVID, the industry’s long-term growth may be less than previous trends, mainly because of environmental pressure.

Many analysts concur. According to Peter Morris (chief economist, Ascend by Cirium), which offers data analytics for the industry, “It will be a while before people get back to that comfort they had in 2019.”

He said that he believed we would be more careful than Boeing.

REGULATION AND ASSET VALUES

In the background, delegates fretted whether environmental regulation and faster technological change shorten the lifespan – and undermine the valuation – of the most popular jets.

Airbus’s and Boeing’s A320ceos and 737NG most loved mid-life aircraft, have already seen their values drop. This is because airlines are looking for newer planes in order to reduce fuel consumption and remain competitive in a highly regulated and competitive market.

Simon Clements from Novus Aviation Capital said the new generation of jets may need “a price reckoning”, referring to the sector’s resale value.

A bigger question is whether current short-haul aircraft, the 737MAX/A320neo, may have shorter service life due to climate change.

Valuers use a 25-year cycle to determine the value of assets. Any reduction in this life span could impact future sales.

There are many questions we get about whether that means you will not be allowed to use the MAX or the neo over the next 25 years. Phil Seymour (president of IBA) said.

According to Rob Morris, Ascend By Cirium, the industry’s average age at retirement has dropped from 30 to 25 in 2008 to just under 25 last year.

Seymour explained that while leasing models currently assume that an aircraft’s original value will remain 10% after 25 years, this can be reduced to 20% if values shrink.

EasyJet, a British low-cost airline (LON) said this month that it is reducing its assumption about how long jets will remain in the fleet from 23 to 18. The airline’s chief executive said that it was an accounting matter and not a judgment on the lifespan of jets.

Marjan Riggi managing director at Kroll bond rating said that Bond investors are willing to take on risks because they want yield. She said, “Everytime an aviation deal is out there it’s snapped up just as quickly.”