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www.ecometrica.co.uk
ETS IMPLICATIONS ON ROUTE AND NETWORK
DECISION MAKING
Barry MossSpecial AdvisorECOMETRICA
Gary CrichlowAviation Analyst
ASCEND
www.ecometrica.co.uk 2
Introduction
1. The fleet (Ascend) Traffic analysis Current fleet 2012 and beyond: fleet evolution
2. The science (Ecometrica) CO2 calculation modelling
Scenarios: indicative emissions costs in context
Cost of compliance versus non–compliance
3. The implications
AGENDA
www.ecometrica.co.uk 3
OUR THESIS: ETS IS EFFECTIVELY A FUEL “TAX”
ETS higher costs, in proportion to fuel burnt
“Tax” set by market forces: fluid
Fleet / route planning: already
a dynamic exercise
EUA cost
EUA market demand
CO2 emitted
FUEL BURNT
www.ecometrica.co.uk
AIRCRAFTTECHNOLOGYINVESTMENT
INCREASED OPERATING
COSTS
EUETS
CO2
EMISSIONS
FUEL BURN
EUETS
Price elasticityof demand
Profitability
Monitoring,Reporting &Verification
Fuelefficiency
Science: 1kg Jet A-1
= 3.15 kg CO2
Compliancecosts
EU ETS IN CONTEXT
4
www.ecometrica.co.uk 5
SETTING THE SCENE — ETS-COVERED ROUTES
Long-haul:>3,000nm7% of 2008 mvmts14% of 2008 seats
Medium haul: 1,501–3,000nm4% of 2008 mvmts6% of 2008 seats
Short haul:<1,500nm90% of 2008 mvmts81% of 2008 seats
Frankfurt
EU ETS would have covered 4m scheduled airline movements, 0.5bn seats in 2008
www.ecometrica.co.uk 6
SHORT-HAUL 2008 SCHEDULED AIRLINE MOVEMENTS
90% of 2008 scheduled airline movements
A320 family / 737 types dominate
Average stage length: 800 km (440 nm)
A320 family31%
737 NG14%
CRJ family6%
737 Classics
12%
ATRs6%
146/RJ5%
Embraer RJs5%
MD80/90 family
4%
Fokker 70/100
4%
Dash 84%
Other9%
Source: OAG, Ascend analysis
www.ecometrica.co.uk 7
MEDIUM-HAUL 2008 SCHEDULED AIRLINE MOVEMENTS
4% of 2008 scheduled airline movements
A320, A330, 757 and 737NG dominant types
Average stage length: 3,800 km (2,000nm)
Source: OAG, Ascend analysis
7675%
A3405%
7779%
Other10%
75714% A330
15%
737 NG16%
A320 family26%
www.ecometrica.co.uk 8
LONG-HAUL 2008 SCHEDULED AIRLINES MOVEMENTS
7% of 2008 scheduled airline movements
Widebody twins dominate
Other types include: 757 (mainly
transatlantic sched / charter)
737 / A319 long-haul premium operations
Average stage length: 7,500 km (4,000nm)
Source: OAG, Ascend analysis
77722%
76719%
A33015%
747-40017%
Other 7473%
A34016%
Other8%
www.ecometrica.co.uk
0
1,000
2,000
3,000
4,000
5,000
2004 2009 2014 2019
CSeries
737 NG
A320 family
737 Classics
MD-80/90
28%
20%
30%
0
1,000
2,000
3,000
4,000
5,000
2004 2009 2014 2019
CSeries
737 NG
A320 family
737 Classics
MD-80/90
28%28%
20%20%
30%30%
9
EUROPEAN NARROWBODY FLEET FORECAST
Older generation
virtually nonexistent in
Western Europe by
2014
No A320 / 737 NG
replacement before
2020
Source: Ascend Global Aircraft Forecast 2009-2019
www.ecometrica.co.uk
0
250
500
750
1,000
1,250
2004 2009 2014 2019
MRJ
ARJ
Superjet 100
CRJ700/900/1000
E-Jets
146/RJ
<50 seat RJs
-3%
35%
35%
0
250
500
750
1,000
1,250
2004 2009 2014 2019
MRJ
ARJ
Superjet 100
CRJ700/900/1000
E-Jets
146/RJ
<50 seat RJs
-3%-3%
35%35%
35%35%
10
EUROPEAN REGIONAL JET FLEET FORECAST
Decline in smaller RJs
Balance shifting
towards Embraer E-Jet
family
Superjet expected to
be strong in Eastern
Europe / CIS
Source: Ascend Global Aircraft Forecast 2009-2019
www.ecometrica.co.uk
0
250
500
750
1,000
1,250
1,500
2004 2009 2014 2019
A350
787
A380
777
A330
A340
747
767
A300/310
5%
14%
37%
0
250
500
750
1,000
1,250
1,500
2004 2009 2014 2019
A350
787
A380
777
A330
A340
747
767
A300/310
5%5%
14%14%
37%37%
11
EUROPEAN WIDEBODY JET FLEET FORECAST
Twinjet trend
Conversions extend
life of current-
generation models
Source: Ascend Global Aircraft Forecast 2009-2019
www.ecometrica.co.uk 12
THE FLEET — KEY POINTS
A320 / 737 families’ dominance will continue well into the
foreseeable future
Short-haul flights account for the vast majority of movements
and seats majority of ETS impact
Long-haul flights have a proportionally greater CO2 footprint
than movement data indicates
2004–2006 average baseline: 2012 fleet more fuel-efficient
BUT larger growth in carbon footprint
www.ecometrica.co.uk 1313
.
Aviation greenhouse gas (GHG) emissions come from combustion of jet fuel and
aviation gasoline
Aircraft GHGs : 70% CO2
≤ 30% H2O ≤ 1% each for NOX, CO, SO & particulates
1 kg of jet fuel = 3.15 kg of CO2
CO2 has the same climatic effects at all altitudes
Generally about 10% of emissions occur during LTO phase and 90% during cruise
Except hydrocarbons & CO where emissions are closer to 30% during LTO phase and
70% during cruise
THE SCIENCE
www.ecometrica.co.uk 1414
ALLOCATION OF ALLOWANCES
Cap CO2 emissions to 97% of baseline levels (being
average emissions between 2004 – 2006) in 2012 and 95%
of baseline levels from 2013
3% of allowances to be set aside for new entrants and
operators whose activities have rapidly increased
85% of baseline allowances to be issued free of charge –
This may only be 82%!
15% (or 18%) of allowances to be auctioned
www.ecometrica.co.uk 15
€114 €121
40
50
60
70
80
90
100
110
120
130
Co
st o
f al
low
ance
s re
qu
ired
per
ro
un
d-t
rip
SWISS AVRO 146-RJ100 KLM Cityhopper Fokker 100
REGIONAL: ZRH–AMSGCD: 603 km
Google mapsGoogle maps
LX RJ100
KL F.100
Allowance cost per pax* €2.08 €1.80
Typical round-trip fare €130
CO2 allowance add-on 1.6% 1.4%
Assuming round-trip, 65% load factor, €40 cost per allowance
www.ecometrica.co.uk 16
€3,933
€5,604
0
1000
2000
3000
4000
5000
6000
Co
st o
f al
low
ance
s re
qu
ired
per
ro
un
d-t
rip
Boeing 777-300ER Boeing 747-400
LONG-HAUL: LHR–SINGCD: 10,869 km
SQ 777
SQ 747
Allowance cost per pax* €17.68 €18.68
Typical round-trip fare €500
CO2 allowance add-on 3.5% 3.7%
Google maps
Assuming round-trip, 80% load factor, €40 cost per allowance
www.ecometrica.co.uk 1717
Scenario – EU ETS Compliant, Purchase 18% of Allowances– Short Haul Airbus A320
COMPLIANT
ETS allowance costApprox. €144,000
www.ecometrica.co.uk 1818
Scenario – Non Surrender of Allowances (100%) Airbus A320 No Grandfathering
NON-COMPLIANTETS allowance cost approx. €800,000plus
Fines €2,000,000
www.ecometrica.co.uk 19
Scenario – EU ETS Compliant, Purchase 18% of Allowances - Long Haul Boeing 777
www.ecometrica.co.uk 20
Scenario – Non Surrender of Allowances (100%), No Grandfathering – Long Haul Boeing B777
NON-COMPLIANTETS allowance cost approx. €5,000,000 plus
Fines €12,500,000
www.ecometrica.co.uk 21
SUMMARY AND KEY TAKE-AWAY POINTS
EU ETS: equivalent to fuel tax Allowance costs directly proportional to fuel burnt
Penalties for non-compliance are stiff
Practical implications still far from set in stone
Supply-side costs vs demand elasticity — ability to pass on
costs will vary by market
Technology development incentives e.g., engine tech,
biofuels – weak, but will eventually strengthen as fossil fuel
prices rise