IATA says airlines will have to invest $1.3 trillion in new aircraft to meet fuel efficiency targets

IATA says airlines will have to invest $1.3 trillion in new aircraft to meet fuel efficiency targets | IATA AGM 2010

Alan Joyce, Qantas CEO (left), and John Plaza, President & CEO, Imperium Renewables on Climate Change Briefing panel
Fri 11 June 2010 – The International Air Transport Association (IATA) says airlines will collectively have to save an additional 728 million tonnes of CO2 emissions over the next 10 years if the industry is to make its 1.5 percent annual fuel efficiency improvement target by 2020. This is predicated, says IATA’s Director of Aviation Environment, Paul Steele, on airlines spending $1.3 trillion on purchasing 12,000 new, more fuel-efficient aircraft. The association foresees passenger numbers reaching 16 billion by 2050 compared to just over two billion now but remains committed to halving the industry’s net aviation emissions by the same time.
To monitor progress against the goals, the IATA Board at its AGM in Berlin this week agreed to mandate all member airlines to annually report on fuel consumption and carbon offsetting activities.
The AGM passed a resolution that “strongly” endorsed IATA airline members and the International Civil Aviation Organization (ICAO) continuing their efforts to develop a global carbon emissions management framework under ICAO. It encouraged the industry, ICAO and governments to have a global framework endorsed at the ICAO Assembly in late September.
The resolution also stated the responsibility for reaching the aviation industry’s 2020 carbon-neutral growth target be shared equitably amongst carriers but taking into consideration the special needs of developing countries and the maturity of aviation markets.
However, the industry targets are subject to governments incentivizing technological R&D for airframes and engines and the commercial development of alternative fuels while also providing modern airport and airspace infrastructure.
“Governments must recognize that the industry’s ability to invest in new aircraft, currently the most effective tool for lowering CO2 emissions, is threatened by increasing and costly regulatory burdens, including taxes, charges and economic measures,” said the IATA Board of Governors’ report.
Ironically, at the same time as the resolution was being adopted, the German government elsewhere in the capital was releasing details of an air passenger departure tax designed to raise an annual €1 billion.
How to reach the industry targets was discussed during an Executive Briefing Session on Climate Change as part of the World Air Transport Summit held during the IATA event.
Pratt & Whitney CEO David Hess said engine technology had helped reduce aviation emissions by 70% over the last 50 years and believed there was more to come. “I expect a lot in further improvements over the next 10 years,” he said. “I think there is as much growth in technological improvements ahead of us as there is behind us and there are significant opportunities to reduce fuel burn in engines. It makes good business sense for airlines as well as manufacturers to improve their fuel efficiency. Compared to the political challenge facing the industry, the technical challenge is trivial.”
Guy Hachey, President and CEO of Bombardier Aerospace, said his company’s new CSeries aircraft, powered by the Pratt & Whitney new-generation geared turbofan engine, could reach 2020 target levels even sooner as it promises fuel burn and CO2 emissions reductions of 20% when it enters service in late 2013, together with NOx reductions of 50%. Half of the CO2 reductions would come from the engine and the other half from improved aerodynamics, he said.
Hachey said the introduction over the next few years of the CSeries, along with the Boeing 787 and the Airbus A350 represented big leaps in fuel-saving technology.
However, Lufthansa German Airlines CEO Christoph Franz said although the introduction of new aircraft like the CSeries would be a big contributor towards achieving the target, “this is not going to change the world by 2020 because aircraft run for 20 to 25 years. What we have to consider is not the aircraft to come but the aircraft delivered and running today. We must help take out the old polluters and bring more modern aircraft into service.
“I believe that new technology will have only a limited effect by 2020 but a big impact by 2050. For the 2020 horizon we will have to consider other important measures like shortening routes and improving ATM systems.”
Qantas CEO Alan Joyce agreed and said every airline should be worried by the suggestion that $1.3 trillion would be required to spend on new aircraft to meet the 2020 target. “There is a big question mark about how the industry will be able to afford that kind of money.”
According to IATA, biofuels will have to play a major part in helping the industry reach its 2050 target of halving current aviation carbon emissions.
Launching IATA’s Vision 2050, Director General and CEO Giovanni Bisignani, who enters his final year at the helm, said: “Today’s jet fuel cannot sustain air transport in the long term. We must find a sustainable alternative and our most promising opportunity is biofuels, which have the potential to reduce our carbon footprint by up to 80%.”
He urged greater support from governments who he said should be investing in biofuels and green technologies rather than “grabbing cash”.
“Local production with jatropha, camelina, algae or even urban waste will open up economic opportunities in virtually any location,” he maintained. “Not only will this secure a future power source for our industry, this will also break the tyranny of oil and drive economic development in all parts of the world.”
Speaking at the Climate Change Executive Briefing Session, John Plaza, President and CEO of biofuel developer Imperium Renewables, said rather than being a ‘silver bullet’, biofuels would be part of a ‘silver shotgun’ technology approach to reaching aviation industry goals but offered a very significant and added opportunity.
He said the current generation of biofuels were sustainable drop-in replacements for traditional jet fuel, and had the added benefits of being 2% more energy dense and worked extremely well at cold temperatures.
“Aviation offers the most significant opportunity for biofuels development that exists,” he told delegates. “Biofuels are one of the few technology solutions that will enable the aviation industry to meet its goals – road and marine transportation have a myriad of other potential solutions.
“However, the reality right now is that they are more expensive. Most of the cost in biofuels is the feedstock so as we transition agriculturally into dedicated energy crops those costs will decline. The challenge for the aviation industry, especially the civilian fleets, is how effectively it can use biofuels without increasing its costs significantly. If we cannot monetize carbon on an effective global level it will be extremely difficult.”
British Airways CEO Willie Walsh said biofuels represented a real opportunity for the aviation industry, and the challenge was for more and more airlines to commit to buying them, and then over time the costs would reduce.
Plaza believed a possible solution was for biofuel suppliers to make long term agreements at a fixed price although there were credit risk issues with airlines that would need to be overcome.
“When I talk to the airlines they tell me that they will take all we can make provided it’s competitive with petroleum,” he said. “At $70 a barrel for crude we can’t compete. If we see crude oil prices back to where they were in 2008 then I think we can, so it’s a measure of the willingness to pay a premium when oil is relatively cheap.
“Until that gap can be closed, through a monetization of carbon, mandates or other incentives, we’re both at the table wanting to work together but there is a pretty significant gap.”
Qantas CEO Alan Joyce said airlines should not have to make upfront commitments and biofuel producers should see the airline industry as a big business opportunity. Lufthansa’s Christoph Franz said although airlines were willing to buy biofuels, there were questions over availability.
 “We look forward to the day when we can fill our planes with biofuels rather than kerosene,” commented Hussein Dabbas, President and CEO of Royal Jordanian. “Fuel represents a major part of our costs and we would rather pay for biofuel than for kerosene if it’s available and feasible to do so.”

The aviation industry’s roadmap towards achieving 50% carbon emissions reduction by 2050 (source: ATAG)

Click on image below to view video of complete Climate Change Executive Briefing Session with Hussein Dabbas, President & CEO, Royal Jordanian; Christoph Franz, Deputy Chairman of the Executive Board, Lufthansa AG and CEO, Lufthansa German Airlines; Guy Hachey, President & CEO, Bombardier Aerospace; David Hess, Pratt & Whitney; Alan Joyce, CEO, Qantas; and John Plaza, President & CEO, Imperium Renewables:




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