AB CarVal's Gregory Belonogoff explains where institutional investors are allocating in aviation and whether they're pulling out amid airline disasters
For an industry plagued by headlines of air disasters, aircraft malfunctions and labour strikes, commercial aviation remains sticky in institutional portfolios. It might not command hefty allocations, but as one aviation expert highlights, it’s not going anywhere either.
If you were to ask Gregory Belonogoff whether plane crashes and regulatory scrutiny have cooled institutional appetite for aviation, he simply dismisses the idea.
“No, they’re not pulling out,” said Belonogoff, principal and head of transportation assets for AllianceBernstein CarVal. “First and foremost, these are always tragedies… but on a percentage basis, it’s actually very low, and the incident rate continues to decline,” adding that the causes behind recent crashes like Air India was linked to a possible pilot mistake involving the fuel system, and how the Jeju accident was triggered by a bird strike followed by a critical misjudgment in the cockpit.
While he admits both were tragic, neither undermines the core safety or reliability of the aircraft market from an investment standpoint.
For institutional allocators, the real question isn’t emotional, but rather financial. According to Belonogoff, aircraft typically show up in portfolios as private market infrastructure; not quite real estate, not quite credit, but sharing traits with both. Institutional investors typically take multiple approaches to aviation, depending on their broader portfolio strategies.
Some treat aircraft like infrastructure, comparing it to assets such as toll roads, power stations, or even real estate, due to its steady cash flow and hard-asset characteristics. Others view it through a fixed income lens, drawn to the lease-attached income stream that aircraft provide.
“At the end of the day, you’ve got that hard asset, but it’s got a lease attached to it that’s producing monthly cash flows,” he said.
AB CarVal, as a specialist in aviation leasing, typically allocates 10 to 20 per cent in aviation within its commingled strategies but at the institutional level, allocations are modest, noted Belonogoff
“It’s a very small percentage of what they’re adding to a portfolio, but it gives diversification,” he said.
While it's not a dominant position, Belonogoff argued the sector’s value lies in its lack of correlation to traditional assets. Aircraft leasing, he noted, has shown resilience across market cycles, unlike airlines themselves.
“There’s a bankruptcy every year in the airline space, but the actual aircraft leasing bid is very stable and continues to produce cash, come what may,” he said. “It is a private market. It's not easy to access. There are some big, listed companies out there, but they typically start to trade on earnings multiple when they're big and successful. So you're valuing the business, not necessarily the assets. To actually acquire, own, [and] harvest an aircraft, you’ve got to have specialist skills and [be] able to tap into that market.”
For Belonogoff, the appeal lies in stable, risk-adjusted returns, with diversification benefits. Unlike equities or even other private markets like real estate, aviation tends to move independently.
“It’s not correlated. It’s not going to be moving around when you’ve got periods of volatility in listed markets,” Belonogoff said, noting that flexibility and consistent cash flow make aviation “a part of anyone’s portfolio” worth considering.
He added that aircraft have an advantage most hard assets lack: mobility. If a building in San Francisco underperforms, for example, it can’t be relocated. But aircraft can be shifted from weak markets to stronger ones, with minimal turnaround
The aviation industry also offers a long-term demand story. For more than 50 years, air travel has expanded at roughly 1.7 times global GDP growth, he explained. In emerging markets like India, that multiplier is even higher, with airlines such as Indigo recording growth above 15 per cent in 2023. He pointed out that Americans average two air trips annually, while in Asia the figure is less than one, signaling significant room for expansion.
On the supply side, the fundamentals are just as clear. With Boeing and Airbus forming a duopoly, order books stretch years into the future. But COVID-era production cuts left the market structurally undersupplied and is “taking them forever to catch up,” Belonogoff said.
Additionally, Boeing’s recent setbacks have only tightened the squeeze, leaving airlines grappling with higher ticket prices and limited fleet capacity.
That imbalance, he argued, ensures ongoing demand for lessor capital. Airlines not only need aircraft to support growth but also to replace aging fleets that become too costly to maintain. For investors willing to navigate the private market’s complexity, Belonogoff sees aviation leasing as a durable source of income with a long runway for growth.
For investors concerned about catastrophic loss, Belonogoff pointed to the strength of the aviation insurance model. Triple net leases shift all operational and insurance responsibilities to the airline. Lessors often add a secondary insurance layer, but even that has rarely been needed.
Belonogoff emphasized that many of the technical concerns investors raise—such as catastrophic risk—are largely mitigated by insurance and the structure of aviation leasing.
“Don’t worry about that. There is insurance there to protect you. It’s a very safe industry,” he said.
