The aviation industry is currently experiencing a welcome surge in demand driven by the resurgence of air travel following the pandemic. There were some turbulent times between 2020 and 2022, but the industry has slowly begun its recovery from 2023 onwards and is expected to cater to more than 5 billion passengers in 2025, with projected revenue surpassing $1 trillion. The aviation industry has entered a new phase post-pandemic, now governed by digital transformation, decarbonization, and a regulatory shift to support alternative fuels and the next generation of aircraft platforms.
The government and private organizations are focusing on infrastructure to create a connected ecosystem that can integrate end-to-end services and operations, resulting in a more convenient flow of passenger traffic. This will enable airlines and airports to provide more customized services to their end-users, generating additional revenue sources for the aviation industry.
Digitalization Is Measurable Progress Happening Right Now in the Aviation Industry
Passenger expectations in 2025 emphasize speed, personalization, and control. Airlines such as Delta, Emirates, and Singapore Airlines are meeting these demands by leveraging AI-powered systems across the entire journey, from booking to boarding. For example, AI-driven bag tracking tools have proven highly effective, with Delta reporting a remarkably low mishandled baggage rate of just 0.47% by proactively rerouting bags and providing real-time status updates via mobile devices. Biometric systems represent an equally significant advancement, streamlining key chokepoints, such as border control. By 2023, the US Customs and Border Protection (CBP) confirmed that over 110 million travelers had utilized facial biometric systems, which match passenger photos to databases in under two seconds. This efficiency translates directly to the gate, where airlines like Delta have implemented end-to-end biometric boarding for international flights at its Atlanta terminal, significantly enhancing throughput and decreasing boarding times.
Beyond the customer-facing applications, the use of AI in predictive and prescriptive analytics is simultaneously transforming the aviation industry into a data-driven and condition-aware field. This shift is most evident in maintenance, where predictive maintenance enables airlines to anticipate component failures before they occur. This capability dramatically reduces unplanned groundings and increases overall aircraft availability. For instance, Lufthansa Technik’s AVIATAR platform collects vast operational data to identify anomalies, resulting in a significant decrease in unscheduled maintenance events. Similarly, KLM’s Prognos system monitors over 50 aircraft systems during each flight to optimize the “time-on-wing” of components, illustrating how AI ensures that the physical assets of the industry are as efficient and reliable as the digital systems that serve the passengers.
Source: MarketsandMarkets Analysis
Sustainable Aviation Fuel (SAF), the Most Viable Near-term Decarbonization Tool
According to MarketsandMarkets The sustainable aviation fuel market is estimated at USD 2.06 billion in 2025. It is projected to reach USD 25.62 billion by 2030. The imperative to reduce global greenhouse gas (GHG) emissions is rapidly expanding the market for Sustainable Aviation Fuel (SAF), driven by demand from governments, corporations, and consumers for environmentally friendly alternatives. Since air travel is a major source of global GHGs, the sector faces intense pressure to decarbonize, particularly due to international commitments like the Paris Agreement. As a viable, low-carbon substitute for conventional jet fuel, SAF provides the most effective pathway for the aviation industry to significantly reduce its carbon footprint. Consequently, the introduction of stricter government emission regulations and mandated reduction targets is forcing airlines to accelerate the adoption of SAF, which, in turn, fuels demand and incentivizes large-scale production. As public awareness and concern about climate change increase, there is a growing demand for sustainable practices across all sectors, including the aviation industry. Consumers and corporations are seeking ways to reduce their carbon footprints, which is influencing the aviation industry. Many airlines are already pledging to reach net-zero emissions by mid-century, and SAF is integral to meeting these goals. The growing awareness and preference for sustainable travel options will push airlines to prioritize SAF in their fuel mix. This demand, driven by consumer expectations and corporate sustainability pledges, enables SAF producers to scale up their operations and meet the growing market need.
In addition to regulatory pressure and consumer demand, the push for reducing emissions also encourages innovation and investment in SAF production technologies. To meet the demand for cleaner fuels, R&D investments are being ramped up to develop new feedstocks, improve production processes, and reduce the cost of SAF. The SAF industry benefits from financial and technical support as governments provide funding and incentives for green technologies. This focus on emissions reduction is accelerating the development of SAF infrastructure and increasing its availability in global markets, positioning SAF as a long-term solution for decarbonizing aviation.
Carbon Footprint of Global Aviation Industry Across Four Scenarios, 2011-2040 (MMT)
Source: MarketsandMarkets Analysis
Urban Air Mobility (UAM), with its EVTOLs, is the Future Promise of Aviation Industry
As cities grow and the impact of climate change becomes more apparent, there is a pressing demand for eco-friendly transportation solutions. Traditional transportation methods, including cars and buses, significantly contribute to air pollution and greenhouse gas emissions. UAM vehicles, particularly eVTOL aircraft, offer a cleaner alternative. These vehicles operate on electric power, producing zero emissions during operation and contributing to a reduction in the overall carbon footprint of urban transportation. Electric propulsion not only minimizes emissions but also reduces noise pollution, making UAM vehicles a viable option for densely populated urban areas where noise and air quality are major concerns. The integration of UAM into smart city infrastructures can decrease reliance on fossil-fueled vehicles.
The push for sustainable transportation is increasingly supported by government policies and incentives aimed at reducing greenhouse gas emissions. This regulatory environment creates a favorable market for UAM vehicle operators and manufacturers to capitalize on the growing demand for green transportation alternatives. In 2023, California’s Climate Investments Program aimed to reduce nearly 10 million metric tons of carbon dioxide equivalent, effectively demonstrating the state’s commitment to sustainability. As part of this initiative, California has invested over USD 10.5 billion in projects aimed at reducing greenhouse gas emissions, with a strong focus on clean transportation alternatives. This program offers significant incentives for the adoption of zero-emission vehicles (ZEVs) and other environmentally friendly technologies, aligning with the broader goals of the aviation industry in its commitment to developing sustainable urban mobility solutions.
Source: MarketsandMarkets Analysis
Future Outlook of the Aviation Industry
The aviation industry is poised to enter the digital transformation era, where the majority of the decision-making will be based on AI-enabled systems, from passenger experience to airport operations. These developments create opportunities for OEMs, aircraft component providers, and AI technology developers to differentiate their offerings, reduce lifecycle costs for operators, and position themselves early in the transition toward higher autonomy levels across the aviation industry.
With investment in the aviation industry, there’s a strategic shift towards specialized, integrated services that enhance AI-enabled systems, sustainable aviation, and the next generation of aircraft platforms. Using advanced digital platforms, the industry enables seamless integration across manufacturing, supply, and service operations, efficiently catering to customized demands. This approach enables rapid adaptation to technological shifts and regulatory changes, which are crucial for scaling operations. Government and private companies are already investing in this infrastructure development. Additionally, a comprehensive regulatory framework will be essential to ensure the safe and efficient operation of the aviation industry. Public acceptance will also play a critical role in the long-term success of smart airports, Sustainable Aviation Fuel (SAF), and Urban Air Mobility (UAM) in the coming decades.
