Only profitable European airlines will be able to absorb the rising costs, of SAF and other green aviation measures, leading to reduced competition and potential fare increases for passengers in the short term.
This is one f the conclusions of a paper by Ana Magdalina and John Caslin titled “Drivers of Change in the Environmental Impact of the Aviation Industry,” which discusses various pressures on the airline industry to reduce its carbon footprint. The paper ecxplored EU initiatives for decarbonising the aviation sector and provides an outlook on greenhouse gas emissions in the industry.
It concluded that while Aviation is a challenging sector to decarbonize, various pressures are driving the industry towards sustainability.
The pressures on aviation can be categorised into consumers and stakeholders seeking greater sustainability and increasing costs faced by EU airlines.
In the short term, only profitable European airlines may sustain rising costs, leading to reduced competition and potential fare increases for passengers.
Investment in sustainable aviation fuel (SAF) production and infrastructure may help lower costs over time and decrease the cost of debt and equity capital for the industry.
Airlines outside the EU face similar pressures, but the pace of implementing carbon taxes and SAF requirements is currently slower.
Decarbonizing the aviation industry requires complex engineering innovation, safety regulations, and global political cooperation.
SAF is likely the preferred option for reducing greenhouse gas emissions from long-haul flights, while both hydrogen-powered flights and SAF are potential solutions for short-haul flights.
- John Caslin is the chair of the actuarial society’s Banking and Aviation Finance Committee and a director of Formidion Aviation Capital Limited. He has expertise in engineering, aviation leasing, and finance. His previous work includes writing briefing notes on the aviation industry and presenting a paper on selling aviation debt securities to EU insurance undertakings.
- Ana Magdalina is the Vice President of Research and Analysis at FPG Amentum. She has a background in academia and joined the aircraft leasing sector in 2013. Ana focuses on exploring sustainability themes in aviation from the perspective of lessors and financiers. She has published papers on European airline business models and sustainability in aviation. Ana is also involved in Aircraft Leasing Ireland, a group representing aircraft leasing in Ireland.
See paper here:
