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Future flight: the business impacts of sustainable aviation

Author: ICAEW Insights

Published: 27 Jun 2022

Smarter, greener approaches to air travel are spurring ambitious methods for tackling climate change. But while they’ll be gauging the direction of travel, aviation companies are unlikely to be early adopters.

In what was greeted as a major boost for green-sky thinking, Cranfield University has secured £3.1m of additional finance for its work on sustainable aviation. Announced last month, the Research England funding will support the university’s efforts to develop low-carbon aircraft and decarbonise airport logistics.

In scale and breadth, the decarbonisation challenges facing the aviation sector cannot be underestimated. “Arguably the single biggest challenge is propulsion technology,” says Cranfield Associate Professor of Aviation and the Environment Dr Guy Gratton. “We will see multiple technology waves going forward – and it’s far from clear what all but the first couple will look like.”

At present, Gratton points out, carbon trading is already taking place through the UN’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). In parallel, the UK government is “extremely enthusiastic” about sustainable aviation fuels.

However, it “would not be legitimate” to view either solution as anything other than temporary, Gratton adds. “Carbon trading works only for as long as industry stakeholders exceed their decarbonisation targets and have spare reduction to sell you. As time goes on, that will become scarcer.”

Turning to sustainable fuels, Gratton says: “The government sees them as a means of creating jobs and revenue in the UK, which is all very laudable. But there are flaws – a significant one being that the available stock of materials for making those fuels is finite. Probably more so than many commentators are claiming.”

For example, one highly prized constituent is agricultural waste. “But the reality is there’s hardly any such thing, because much of it is being reabsorbed into agriculture. As for what little is left, we’re not the only industry that’s chasing it.”

Future of flight

Looking ahead, Gratton foresees the collective R&D effort behind sustainable aviation unfolding across four phases of increasing precision and difficulty.

  • Short to medium term Emission reductions through operational efficiencies – eg, by reducing the stacking and holding of aircraft and enhancing them to fly the optimal longest distances with optimal loadings.
  • Medium term Purging emissions from airport ground infrastructure – eg, by removing diesel-fuelled power units, tugs and tractors and better enabling passengers to use public transport from home to airport. “All of that will have a significant impact,” Gratton says.
  • Medium to long term “Here it gets tougher,” Gratton says, “because we want to start eliminating our reliance on the burning of chemical fuels altogether.” To that end, Cranfield is currently engaged in R&D on electrical and hydrogen solutions, with one electric-powered, light aircraft already in use for research purposes and another on the way.

“This is all about establishing proof of concept and learning how to both operate and certify this type of vehicle,” Gratton explains. “It’s incredibly intricate. I’ve lost count of the number of meetings I’ve had about electrical connectors, which sounds trivial but has turned out to be a huge showstopper if you don’t get it right.”

While electrical flight will have a significant role in our future, it is only part of the answer, Gratton says. “It’s not the future. We’re essentially learning lessons that will enable us to step on to the next stage – which may be hydrogen, or a hybridised model.”

  • Long term “Right now, the only game in town for getting an aircraft across, say, the Atlantic Ocean is hydrocarbon fuel. And I’ve already outlined the capacity issues with sustainable fuel.” To surmount that critical distance challenge, Cranfield is collaborating on research towards something revolutionary: an entirely new type of fuel. 

The idea is to use lots of electricity from a nuclear power plant to create large amounts of hydrogen, which will be put through a series of chemical processes to create an artificial fuel. “If we could generate massive amounts of green hydrogen, that would solve most of our problems. But it’s a long way off yet,” Gratton warns.

Demand control

Amid those hurdles, there are two looming questions: how much difference can sustainable aviation make in the context of the broader net zero challenge? And what sorts of impacts will decarbonisation have on the air travel business model? 

For Gratton, those questions are intrinsically linked. “Over the past 20 years, air transport has cut its emissions per passenger mile by 2% per year. But at the same time, it has increased its total passenger miles by 5% per year – mainly to cater to emerging middle classes in developing economies. So, we have that critical 3% difference, in parallel with a continuing reliance on hydrocarbons.”

Gratton believes it is not politically acceptable to tell those new middle classes that they should not be able to enjoy the privileges of air travel that people in developed economies take for granted. But, by the same token, he stresses: “If aviation emissions are growing by 3% per year while everyone else is successfully decarbonising, then by 2050, air travel could be the world’s largest industrial emitter. And that’s a massive problem.”

Against that backdrop, the steady uptake of environmental protections may provide an appropriate brake through cost rises. “If everyone’s costs go up by the same amount, we’ll have a level playing field,” Gratton says. “Ultimately, that will have to be paid for through ticket prices, which will inevitably create a certain amount of demand control. That’s not only manageable, but healthy – and perhaps even necessary.”

One process that will be vital for defining the pace of change over the coming decades is certification. “The average lifespan of a commercial airliner is 22 years,” Gratton points out. “If we look at the potential cost of certifying a hydrogen-based model of the future, the best estimate I’ve seen is around $30bn. To put that into perspective, the cost of certifying the Boeing 787 was $21bn. In the case of the 737-8 MAX – for which Boeing cut a lot of corners – it was initially $2.5bn. However, once Boeing was forced to do it properly, the total MAX certification bill came to $23bn.”

“These are big numbers. We’re basically talking about a 50% increase that will have to be amortised across all the aircraft delivered to market. And it will have to be paid for through consumer pricing,” Gratton says.

Needless to say, accountants in the aviation sector are going to be extremely busy, Gratton predicts. “There will be lots of estimation, predictions and modelling going on – particularly around the relationship between investment costs, new emissions-reduction technologies and low-emission fuels – to gauge the impact of sustainability on delivery prices.”

For many companies, it won’t be in their economic interests to be early adopters. “We should assume that there will be regulations for parallel adoption across the industry – probably driven by the UN-based International Civil Aviation Organization (ICAO). That will require accountants to keep pace with any timeframes those regulations stipulate, as they work to ensure that airlines, manufacturers and ground-infrastructure providers have the correct business models in place and are financially viable to fulfil what’s required.”

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