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Global developments presenting risks and rewards for the aircraft trading and financing market

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Headline News was last updated: December 31, 2009

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December 2009

Emissions plan: Caps are being imposed on carbon emissions by the EU that requires airlines that exceed limits to purchase credits.

Legal challenge to caps: Major US airlines mount a legal challenge to EU plan that will cap jet emissions and fine carriers for exceeding limits.

Basis of challenge: Want the European Court of Justice to review claims that the EU plan is broad, complex, & too expensive.

Air Transport Association, American Airlines, United Airlines, and Continental Airlines, filed suit against the emissions cap in London.

U.S. airlines want a global standard for reducing emissions set by the UN rather than a patchwork of regional policies.

Carbon Emissions cap: British government will be the first to implement the EU plan effective 2012. 

Carbon emission: Draft Copenhagen agreement says the World will reduce emissions by 50% by 2050 with the USA and EU cutting by 70%-plus.

United ordered 25 A350 XWB & 25 B787 aircraft & has options for 50 of each for delivery between 2016 & 2019. www.twitter.com/avreg

United Fleet retirement plan: It will retire its B747s and B767s flying on international routes between 2016 and 2019. www.twitter.com/avreg

United fleet rationale: The A350 has a range 11% greater than the B747, & the B787 has a range 32% greater than the B767. www.twitter.com/avreg

United engine selection: A350 /Rolls Royce Trent XWB engine, and the B787 powered by either the Rolls Royce Trent 1000 or the GE GEnx.  www.twitter.com/avreg

United fuel burn advantage: It will reduce its fuel costs and carbon emissions from the 50 aircraft by about 33%. www.twitter.com/avreg

United maintenance advantage: It expects average lifetime maintenance costs for the new aircraft to be approximately 40% lower per available seat mile than the aircraft that will be retired. www.twitter.com/avreg

November 2009

Biofuel: KLM operated the world's first passenger flight (40 pax) using Biofuel flying a B747-

400 partially powered by camelina-derived fuel.

Biofuel issue: Getting government, industry, and society to join forces to ensure that airlines get a continuous supply of Biofuel.

October 2009

CAO is looking at aircraft fuel efficiency and emissions over the next 40 years because of the expected growth in air travel over that period.

ICAO in consultation with IATA says air travel represent 2% of the total man-made CO2 emissions in the world.

Flying is the fastest-growing source of carbon dioxide emissions, accounting for more than 600M tons of the greenhouse gas annually.

Aircraft today are 70% more fuel-efficient than they were some 40 years ago says Denis Chagnon, representative for ICAO.

ICAO wants more energy-efficient aircraft engines, improved airports, & navigation to make flights shorter so that aircraft burn less fuel.

ICAO targets use less stringent standards than the ones in the Kyoto agreement, setting 2005 as a baseline year while Kyoto uses 1990.

Aircraft emissions: ICAO/UN near proposals to cut emissions from aircraft by 60% by mid-century.

ICAO approved a 13% cut from 2005 emission levels by 2012, a 26% cut by 2020, and a 60% cut by 2050.

ICAO says these targets are "aspirational”, and would not be binding on any country or airline.

September 2009

September 2009.

EU applies higher regulatory emissions standards to airlines than the USA potentially adversely impacting US aircraft manufacturers.

Emissions: A draft U.S. Senate bill requires the EPA & FAA to draw up standards for new aircraft gas emission standards by December 2012.

Emissions standards: The new standards must take account of the cost, energy, and safety factors related to the introduction of new technology.

Airbus is projecting that about 30% of jet fuel used by 2030 to be sustainable biojet fuel if alternative high yield non-food feedstocks are developed by the middle of the next decade.

Airbus says synthetic liquid jet fuels can be made from xTL fuels including biomass, woodchip waste, natural gas, and coal.

Airbus says that the A380 with Rolls Royce engines that flew in 2008 using a 40% blend of synthetic fuel derived from natural gas (GTL) supplied by Shell is a major step towards the introduction of alternative fuels.

Airbus, Qatar Airways, Qatar Petroleum, Qatar Fuels, Qatar Science & Technology Park, Rolls Royce, and Shell signed an agreement to investigate operational and environmental benefits of GTL fuel for aviation.

Airbus supports the standards set by ASTM International, one of the largest voluntary standards developing organizations in the world, for the use of a 50% synthetic jet fuel in commercial aviation.

Emissions:  Airline emissions account for less than 2% of global emissions, but have been growing fast.

Emissions: International Energy Agency says global CO2 emissions (all industries) will fall by 2%- plus in 2009 due to the weak economy.

Environment: IATA restates carbon-reduction goals to cut emissions in half by 2050 over 2005 levels.

Emissions: IATA’s emissions reduction will come from a four-part approach of technology, operational improvements, infrastructure upgrades, and economic measures.

Environment: IATA’s economic measures include carbon-trading schemes, tax-incentives that encourage investments in newer aircraft & fuel research.

Environment: IATA aims to improve carbon efficiency by 1.5% p.a. through 2020, and show carbon-neutral growth from 2020 onwards.

Environment: says the airline industry is on pace to produce 1.8% emissions reduction in 2009.

Environment: Critics say that using 2005 carbon levels as the baseline from which to cut is not as strict a measure vs. airline carbon emissions in the 1990s.

Airline carbon trading: By November 2010, IATA plans to begin trading carbon credits on a global market basis.

Airline carbon trading: IATA’s plan would supplant the industry’s participation in the EU’s carbon-trading market and would cost $4.8B.

Passenger rights: A three-hour time limit on tarmac waits for airline passengers will soon become law says Sen. Barbara Boxer (D-Calif.).

Traffic: IATA expects a 20% drop in the number of first class and business class passengers for 2009.

Cap & trade markets

The world is seeking to reach an agreement to cap aviation emissions as part of the effort to combat global warming.

If no action is taken soon then aircraft will produce up to 25% of global carbon dioxide emissions by 2050, compared to the 2% it contributes today.

The European Union has agreed to a 5% reduction in net aviation emissions from 2013-2020.

Climate experts want to cap future aviation emissions as part of the U.N. climate conference in Copenhagen in December 2009.

Those in favor of the goal claim that this cap would not require people to fly less than today, instead it would constrain the growth of aviation emissions.

National governments are promoting the creation of carbon offsetting, cap-and-trade markets based on the purchase of carbon credits for a period of time leading up to the full implementation of any carbon emissions curtailment plan.  

Carbon offsetting rights would be bought and sold in trading markets in a way that would permit aviation emissions to be traded-off against reductions in other sectors of the economy.

Environment groups argue that the developed economies need to end their obsession with the growth of air travel by cutting emissions without relying on carbon offsetting.

The purchase of carbon credits alone will not be sufficient to meet the aviation carbon emissions targets being set for 2050.

The redesign of aircraft airframes and engines and the development of new bio-fuels are expected to form a large part of the plan to reduce aviation related emissions.

The FAA is investigating harmful fumes  circulating in aircraft cabins.

The FAA is investigating whether potentially harmful fumes have been circulating in aircraft cabins.

Between 1999 and 2008, air became contaminated on 926 flights, reports the FAA, without specifying any possible health risks.

The  FAA is looking at a particular type of "fume event" that involves "bleed air," or air that's been compressed by the aircraft's engines.

If there's a malfunction in aircraft equipment, the air that's fed into the cabin can be contaminated with chemical residues from engine oil—specifically TCP, or tricresyl phosphate.

"Passengers may have symptoms like tremors," says Clement Furlong, a research professor of genome sciences and medicine at the University of Washington.

So far, federal reviews of the research have been inconclusive about whether bleed air actually endangers the health of passengers and flight crews, though two civil lawsuits about fume events are under way.

August 2009

Greenhouse gas emissions: ATA is objecting to Europe's "unilateral" approach to regulation based on the cap-and-trade program beginning in 2012.

Air Transport Association (ATA) claims that international flights are traditionally governed by treaties rather than unilateral regulations that violate national sovereignty.

Greenhouse gas emissions: Every major U.S. carrier operating flights to Europe will have to abide by EU emissions caps within three years. 

Greenhouse gas & competition: A new UK government policy states that it is in the public interest that the UK replaces short-haul aviation with $12 Bn, 250 mph high-speed railway network which could be built by 2020 as part of a plan to reduce the UK's CO2 emissions by 80% by 2050.

JULY 2009

Pollution: G8 summit called for a coordinated approach by ICAO & UN Framework Convention on Climate Change (UNFCCC) to guide aviation's contribution to reduce global emissions by 50% before 2050.

Pollution targets: Aviation industry agrees 3 sequential targets: 1.5% improvement in fuel efficiency p.a. to 2020; carbon-neutral growth by 2020 & 50% reduction in emissions by 2050 vs. 2005.

Pollution: Commercial aviation is the first global industry to commit to a carbon-neutral growth target by 2020 says IA

Alternative fuels

ATA and its member airlines are making extensive resource commitments to stimulate the development of commercially viable, environmentally friendly alternative fuels.  As a framework for doing this, they are a founding and principal member of the Commercial Aviation Alternative Fuels Initiative (CAAFI), a consortium of airlines, government, manufacturers, fuel suppliers, airports, universities and other stakeholders who hold the various keys to research, development and responsible implementation of alternative jet fuels.

Developing alternative jet fuels is a “higher hurdle” than developing alternative fuels for ground-based vehicles, as jet fuel must meet rigorous specifications, which include reliability and stability at altitude and in greatly varying temperature and pressure conditions to ensure safety. Given the technical hurdles associated with developing a viable alternative jet fuel, CAAFI is an essential initiative for marshalling the resources of the government, industry and scientific research community.

 

While each entity involved in CAAFI has a role to play, the airlines understand that – as end users of the ultimate product – they must not only make clear their requirements for alternative jet fuels, but also signal the market that they will financially back fuels meeting those specifications.  In this regard, the ATA Board of Directors issued the “ATA Alternative Fuels Principles.” Among other things, the Alternative Fuels Principles document stipulates that the ATA carriers require that any future alternative jet fuel be more environmentally friendly, on a life-cycle basis, than the jet fuel available today. Through CAAFI and other partnerships, they are undertaking the work to be sure that tomorrow’s alternative jet fuel meets that criterion.  Developing a more environmentally friendly alternative jet fuel will ensure the full decoupling of growth in aviation demand from growth in GHG emissions.

Other issues discussed by the ATA can be found on the ATA web site including:

1)Commerical Aviation Alternative Fuels: The ATA Commitment

2)Alternative Fuels: Q & A

3)December 15, 2008: Results of ASTM International Aviation Fuels Subcommittee Meeting

4)October 21, 2008: Approach to Greenhouse Gas Well to Wake Assessments

5)September 8-9, 2008: Fuel Producers and Buyers Meet to Spur Development of Viable, Environmentally Friendly, Alternative Fuels

Mauna Loa Observatory (MLO) is a premier atmospheric research facility that has been continuously monitoring and collecting data related to atmospheric change since the 1950's. The undisturbed air, remote location, and minimal influences of vegetation and human activity at MLO are ideal for monitoring consituents in the atmosphere that can cause climate change. The observatory is part of the National Oceanic and Atmospheric Administration (NOAA) - Earth System Research Laboratory (ESRL) - Global Monitoring Division (GMD). Source: NOAA

Mauna Loa Observatory (MLO) activities occur at six locations around the Big Island of Hawaii. The primary observation site is located at an elevation of 11,135 ft on northern slope of Mauna Loa. This facility is generally refered to as Mauna Loa Observatory, or the MLO Site. Behind the scenes, the administration and data processing for MLO occurs at the Hilo Office. Kulani Mauka Site is a rain collection site (see National Weather Service programs). The Cape Kumukahi Site is a flask sample site located on the eastern most point of Hawaii, used in several programs. The Old Hilo Airport Site is where weekly ozonesonde and special water vapor balloons are prepared and lunched. Source: NOAA