DUBLIN, Jan 10 (Reuters) - A long-running production

shortfall by planemakers will underpin supply and demand

dynamics that are boosting airline and lessor profits for at

least another decade, the head of the world's second-largest

aircraft leasing company Avolon said on Friday.

Aircraft manufacturers and suppliers have struggled to keep

up with a post-pandemic recovery in travel due to rising costs,

labour and parts shortages, issues that have been exacerbated by

safety woes at Boeing ( BA ) and a strike by its staff last

year.

Avolon's annual outlook report predicted that airlines' net

profit would rise by 16% to over $36 billion in 2025, driven by

low fuel prices, strong revenue and the fact that plane

shortages have allowed them to prioritise the most profitable

routes.

"That production shortfall underpins the supply and demand

balance, not just for the next three or four years, but for at

least another decade," Avolon Chief Executive Andy Cronin told

Reuters.

Cronin said Avolon's view that the supply and demand balance

would be "firmly in our favour" over that time period spurred it

to order 200 aircraft in 2023. It added 118 more aircraft last

year through the acquisition of smaller rival Castlelake

Aviation Limited, bringing its total fleet to 1,129 aircraft.

The Dublin-based lessor said Boeing ( BA ) and main rival Airbus

will continue to struggle to hit their targets to ramp

up production despite increasing their deliveries.

Avolon, which is a subsidiary of China's Bohai Leasing Co

Ltd, also predicted that orders from Chinese firms

will rise sharply to 800 aircraft in 2025, citing growth in

travel demand and a need to replace an aging fleet.

While Avolon's report described the aviation outlook for

2025 as robust, it also noted that economic cycles usually last

four to six years and that the current cycle is already in its

fourth or fifth year, with growth in Europe slowing.

"We characterize it as a low visibility environment at the

moment. I think there's uncertainty around foreign policy and

trade policy, and consequential impacts as it pertains to the

aviation industry," Cronin added.

(Reporting by Padraic Halpin and Tim Hepher; Editing by Emelia

Sithole-Matarise)