Fuel efficiency seen driving demand for new aircraft in EU, globally

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Airlines struggling to sustain profits in an era of volatile jet fuel prices will increasingly turn to new and more efficient aircraft, according to industry forecasters who expect to supply more than 7,000 new aircraft in Europe over the next 20 years.

US airplane maker Boeing forecasts that passenger traffic will grow 5% annually and that airlines around the world will buy some 35,000 new planes through 2032 to meet demand but also to cut jet fuel consumption.

“Fuel has become the overall driver in how and when [airlines] operate their aircraft,” said Randy J. Tinseth, vice president of marketing at Boeing, adding that the tripling of fuel costs over 10 years “creates a difficult and challenging environment for our customers.”

Better-performing aircraft also would help address airlines’ need to comply with EU emissions laws and their international commitments to reduce noise and greenhouse gas output.

Jet fuel prices peaked at more than $160 per barrel in 2008, a year when the average cost was $97. The annual average price through mid-2013 was $110, though it tends to be higher in the European Union.

Higher fuel costs contributed to a slim $300-million (€230-million) net profit for European passenger airlines last year, compared to $2.4 billion in North America and $3.9 billion in Asia, according to figures from the International Air Transport Association.

Industry figures show that fuel now accounts for more than half the operating costs of a typical transcontinental airliner, and more than one-third the costs of mid-size aircraft, displacing labour as the biggest expense. Fuel accounted for about 13% of operating costs in 2002, according to Boeing’s Current Market Outlook 2013-2032, which Tinseth presented on Wednesday (3 July) in Brussels.

Boeing predicts that the Asia-Pacific region will be the hottest market for new aircraft over 20 years, with 12,820 new orders expected. The growth is attributed to rising demand, with passenger traffic projected to grow at a 6.3% annual clip.

Rivals promote efficiency

Airbus, Boeing’s global rival for transcontinental and mid-range jets, has projected more modest global demand of 28,200 new aircraft capable of carrying more than 100 passengers. But both manufactures see robust demand for more fuel-efficient, mid-range airplanes.

When all future demand is tallied, both manufacturers foresee a market for new aircraft valued at more than $4 trillion (€3 trillion).

If Boeing’s forecasters are correct, Europe will be the second largest market for new airplanes, with 7,460 expected to be ordered through 2032 mainly to replace older, less efficient planes.

European carriers are driven towards more efficient planes not just to trim fuel costs, but also to comply with the EU’s Emissions Trading System, the cap-and-trade scheme designed to cut greenhouse gas emissions.

The law took effect in 2012 for all carriers – foreign and domestic – using EU airports but enforcement was put on hold for non-EU carriers pending the outcome of talks within the Montréal-based International Civil Aviation Organization.

Boeing and Airbus are vying to promote their newest models as the most efficient ever, promising that aircraft now in the pipeline consume 15% to 25% less jet fuel than their predecessors.

Airlines have taken other steps to cut fuel consumption by switching to lighter seats and galley equipment, placing more weight restrictions on baggage and shuffling airline schedules so aircraft fly with fewer empty seats.

“The airlines have done the best job they’ve ever done to match capacity to demand,” Tinseth said in Brussels.

Boeing’s forecast, published annually since 1961, also calls for improvements in airport infrastructure and air traffic management to cope with rising passenger demand. A record 3 billion people are expected to travel by air in 2013 and that figure is to more than double by 2032 under Boeing’s projections.

More congestion in forecast

In the EU, the aviation industry has blamed the slow pace of implementing the EU’s Single European Sky for congestion and delays and worries that without action, the gridlock in the air will only grow.

“Everyone is trying to make the whole system more efficient to be able to cope with increasing numbers of traffic while improving safety levels even further, to be able to generate the capacity, improve safety and reduce environmental impact per flight,” Andrew Watt, head of environment at Eurocontrol, the Brussels-based civil-military air traffic management and safety organisation, told EURACTIV ahead of last month’s Paris Air Show.

With air traffic in the EU expected to grow 50% by 2030, the European Commission has waged an uphill battle to get member states to live up to their agreement to implement the Single European Sky, or SES, to make air traffic control more competitive and replace a network of national systems with regional traffic management.

Most national governments missed a December 2012 deadline to implement a key provision of SES, the creation of functional airspace blocks, or FABs, that are to consolidate national air control into regional operations.

Trade unionists in France and several other countries led protests on 11 and 12 June to oppose the current plan, saying it would cost jobs and compromise safety.

The aviation industry and environmental groups, however, support EU commitments to create FABs on grounds that improved coordination could lead to cleaner, quieter and more punctual air travel.

The aviation industry wants to save costs and cut their carbon emissions to comply with polices like the EU’s Emissions Trading System. The industry aims to improve fuel efficiency by an average of 1.5% per year in order to halve emissions by 2050 from 2005 levels.

Doing so won’t be easy with passenger traffic forecast to double in two decades. The Air Transport Action Group, a Geneva-based industry group, estimates that the number of people flying will double, to 5.9 billion, by 2030. That will require some 45,000 aircraft, more than twice the number in service today.

While carbon dioxide emissions from passenger airlines account for some 2% of the total, aviation emissions are growing at 6% to 7% per year in the EU, according to Friends of the Earth Europe, an environmental group. An Organisation for Economic Cooperation and Development transportation report shows that aviation carbon emissions in the EU-15 rose 85% from 1990-2007, a time of liberalisation and surging passenger traffic.

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