A different business model is needed for aviation – not high-volume, low-profit per passenger
A new research paper, in the Journal of Air Transport Management (by Stefan Grossling and Andreas Humpe) looks at the likely increase in CO2 emissions from global aviation, with and without managing to use genuinely low carbon fuels. It concludes that the air travel sector is set to expand significantly, with ever more demand for air travel. But the only method the sector has to cut its CO2 emissions and climate impact is to local new, low carbon fuels. These will inevitably be more expensive than the fossil kerosene used now. The supply of the fuels will also be limiting, and even if electricity for electrofuels can be obtained from nuclear-generated electricity, if will be costly. This increase in cost will be the mechanism to reduce overall demand for air travel, though it is not the stated intention of governments. The current business model of the airline sector is high-volume, low-profit-margin. That is not a sustainable model for a sector with such high carbon emissions. Historically airlines have usually made losses, unless there are enough passengers. Unless this changes, the CO2 from aviation will continue to increase.
Journal of Air Transport Management
Volume 107, March 2023, 102353
Net-zero aviation: Time for a new business model?
Authors: Stefan Gössling and Andreas Humpe
- Provides a model for a credible and reliable net-zero pathway.
- Shows that business-as-usual scenarios will deplete remaining carbon budget.
- Argues that CO2-price and 4%/yr−1 drop-in quota necessary for transition.
- Highlights the central role of climate governance in creating markets.
- Concludes that new business model for aviation needed.
Recent years have seen vivid debate on decarbonizing aviation. Carbon-neutral flight is characterized by various barriers, however: Key transition technologies are in early stages of technology readiness, their scalability is uncertain, and airlines are not profitable. The replacement of fossil fuels will demand drop-in quota legislation at a global scale. This paper discusses the implications of continued growth in light of the sector’s financial situation. It models the cost of biomass-based and non-biogenic synthetic (electric) fuels in combination with carbon taxes. Findings serve as a basis for the assessment of aviation’s likelihood of achieving net-zero emissions without addressing growth. If the current business model – volume growth with very small profit margins – is continued, it is likely that aviation’s contribution to climate change will grow, due to constraints in biofuel production, cost, and an increase in non-CO2 warming. To stay within 1.5 °C warming, the sector has to reassess capacity and its relationship with profitability; and to possibly embrace an altogether different business model.
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This research is similar to other modelling in that it seeks to explore pathways to net-zero aviation. However, this paper has a starting point in the assumption that a transition to net-zero requires Jet A to be replaced with sustainable aviation fuels, as the only currently available option to reduce the sector’s emissions within existing supply chains and infrastructures (airports and aircraft). In contrast to other papers, the implications of continued growth and the aviation sector’s business model have been under specific scrutiny. In concluding that limiting growth is of relevance regarding the availability and scalability of alternative fuels, as well as the overall transition challenge in terms of fuel requirements, it is argued that a carbon tax reflecting on the cost of emissions needs to be introduced. The overall effect is that the transition to net zero becomes more credible and achievable, though it comes at the cost of curbing growth rates. This is not necessarily an issue, given that much air travel is characterized by wants rather than needs, induced by low and declining airfares, and concentrated in a small group of very frequent fliers. A new business model for aviation will lead to new equilibria in global travel, possibly aligning net-zero pathways with profitability for airlines.