The Sky Has Its Limits

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By Shama Shafiq

The ingenuity of the Wright brothers led to the first take-off in 1903. Since then, manned flights have seen massive technological upgrades. Almost a century later, air transport is not only a norm but an essential aspect of connecting the world. Moreover, with the advent of globalization, the aviation industry is reaching new heights. Economic growth, world trade, international investment and tourism, all contribute to the evolution and development of the airlines’ industry. Aviation prompts integration by bringing people and businesses together in the contemporary world. With over 3.3 billion passengers a year, a third of all world trade and half of all international tourists travel by air. This sector supports around 60 million jobs and 3.5% of the global GDP, and these numbers are forecasted to increase in the future. However, in order to maintain this rate of advancement, the airline industry needs to overcome its obstacles, especially in the context of sustainability.

The Crude Connection
The major constituent of jet fuel is crude oil, and as a result, there is an inherent relationship between crude oil prices and airline stocks. Consequently, volatility in oil markets pose a risk for the aviation industry. An increase in crude oil prices hike up the expenses on jet fuel, which remains to be the industry’s largest input cost. In order to sustain a stable profit margin, additional charges need to be imposed on the customers, which in turn diminishes demand. In theory, a fall in crude oil prices should have a positive outcome for the air transport industry with reduced costs for jet fuel and lower ticket prices for passengers and a general expansion in the airline industry. However, in reality, low fuel prices have resulted in some unexpected repercussions, where it has had a negative effect rather than a positive one. While the ebb of crude oil prices enhance profits, lead to lower airfare, spur demand for travel and push airlines to increase capacity, this growth is quite short lived. The erratic nature of crude oil prices makes it difficult to retain this progress. If airlines add too many routes or expand their fleet, it can erode their profitability when oil prices recover.

Elevating Environmental Awareness
Although aviation is a relatively small industry, it has a disproportionately large impact on the climate system. This sector is almost completely dependent on fossil fuels. It is one of the most energy and carbon intensive forms of transport, accounting for 4-9% of the total climate change impact of human activity. Globally, while only a small proportion of the world’s population account for the 2.1 billion passenger trips made annually, aviation is already responsible for 2-2.5% of global man-made CO2 emissions today and is expected to grow to between 4 and 15% by 2050. In fact, carbon emissions from airplanes are more detrimental compared to that of other forms of transport, as the emissions take place at a higher altitude. The aviation industry is exponentially expanding in part due to regulatory and taxing policies that do not reflect the true environmental costs of flying. While discounts and offers make fares seem cheaper, the price is in fact paid by the environment. In order to become a more sustainable mode of transportation, the aviation sector needs to address its environmental impacts.

Navigating Through the Turbulence
Sustaining this growth will require investment in the technology being deployed to reduce emissions, the search for sustainable sources of energy and improvements to operations that help to reduce emissions, delays, and noise; infrastructure innovation and the important role economic measures will play in allowing aviation to undertake its climate plan. New technologies on the horizon have the potential to significantly decrease greenhouse gas emissions from aviation. Even small savings here and there offer significant benefits in. Being able to operate efficiently is critical to the future of the aviation industry, not just for environmental reasons but also for financial ones, especially since fuel constitutes a large chunk of airline operating costs.

A fall in oil prices may give incentives to companies and countries to continue to rely on fossil fuels and cut back on investment in green technology. But this is a false economy since this technology will be needed in the future when the price of oil will eventually rise again.

In the longer term, the supply of fossil fuels is not infinite and will eventually start to run down – pushing up prices even further. One solution to this problem which has the benefit of being environmentally sound is the use of “biojet”, or biofuel for airplanes. The development of sustainable aviation alternative fuels could provide a very large part of the industry’s emissions-reduction. Commercialization and scaling up of the supply of biojet is currently the most important task. One critical factor is to manufacture biojet at prices competitive to fossil jet so that biojet can become a more active part of the aviation industry’s supply chain. However, the industry still has a long way to go for this to be a reality. It is imperative that airlines are willing to pay a premium for biojet until supply and demand are balanced and eventually fossil fuel becomes obscure in this industry. Striking the right balance between adding capacity, banking the benefit of cheaper fuel, and holding the line on the passenger is key.

Source: Southgate Aviation

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