Airbus And Boeing Recovering From The Pandemic

2022 Farnborough Airshow Helping Jet Manufacturers Securing Orders

At this week's Farnborough Airshow, Boeing released big order announcements from Delta Airlines and other carriers for its troubled 737 MAX jet. Rival Airbus added to its A320neo order book with orders from EasyJet and a mega-order for almost 300 jets from Chinese airlines.

As the sector recovers from the pandemic, airlines are working hard to get ready for the increase in global traffic that is anticipated projected to happen over the next 20 years compared to 2019.

  • Airlines are swapping out their fleets with more up-to-date, fuel-efficient aircrafts
  • However, supply chain issues, skyrocketing inflation, fuel prices, and increasing pressure to decarbonize the sector pose a large challenge to the industry and could hamper growth

"Sustainable" Jet Fuels To Cut Down Emissions?

Aviation has a substantial environmental impact and is "one of the fastest-growing sources of greenhouse gas emissions driving global climate change." according to the WWF.

IATA anticipates Sustainable Aviation Fuel (SAF) production to reach 7.9 billion liters by 2025, which would only satisfy 2% of the global fuel demand, with "proper government policy support". IATA projects production to increase to 449 billion liters by 2050, or 65% of the sector's requirements.

Although there seems to be some demand for SAF, meeting that need is another matter entirely, and it appears that SAF's path to sector dominance will take some time.

The price of SAF is about two and a half times the price of jet kerosene. The former CEO of International Airlines Group and current IATA Director General, Willie Walsh, admitted that the increase in cost would have to be passed on to customers.

  • “Sustainable fuels are about twice what you’re paying for … the traditional jet kerosene, so it does represent a significant hike in the airline industry’s cost base,”
  • “And ultimately, consumers will have to pay that, that’s far too much for the industry to bear.”

Airport Could Start Limiting Flights To Reduce Emissions

Last month, the Dutch government announced that the number of flights that can land at Schiphol airport would be limited in an effort to reduce pollution.

From 2023, the number of flights at Schiphol, the third-largest airport in Europe after London Heathrow and Charles de Gaulle in Paris, will be capped at 440,000, an 11% reduction from the pre-pandemic numbers in 2019.

  • The decision was welcomed as a "historic breakthrough" by Greenpeace, which had advocated for lower traffic at Schiphol
  • However, according to KLM, it will be "highly detrimental" and will damage the nation's reputation as a trustworthy place to conduct business

The move by the Dutch government, which owns Schiphol, could inspire other governments the follow suit.


Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Kevin Woblick on Unsplash