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The Future of Air Travel?
Posted by Phil Hart on June 18, 2008 - 3:00pm in TOD: Australia/New Zealand
Topic: Demand/Consumption
Tags: air travel, aviation, peak oil [list all tags]
This is a guest post by Cameron Leckie, of ASPO Australia.
The organisation that I work for depends upon air travel for the movement of several thousand trainees around the country each year. I have been working on some peak oil risk management/mitigation strategies and the future of air travel is a key requirement that needs to be explored. This is a start on identifying the prospects for air travel in the post peak oil world. Ironically, this essay was planned whilst flying from Brisbane to Melbourne for one of this organisation's courses.
Introduction
Over the last couple of decades, the advent of cheap air travel has provided an unprecedented opportunity for large parts of the population in developed economies to travel. Cheap air travel has allowed both business and leisure travel to become an embedded part of the developed world’s culture, something that is currently taken for granted.
In recent years however, the rapid increase in the rise of oil prices, and in particularly jet fuel prices, has resulted in airlines around the world facing a pinch. At least a dozen airlines globally have filed for bankruptcy in the last six months and US airlines faced a collective first quarter 2008 loss of $11 billion according to the International Air Travel Agency (IATA). Since 2000, QANTAS’ fuel costs have increased from 10% to 24% of operating expenses, overtaking labour as the airlines greatest expense. Virgin Blue is also facing the same pressure, with its fuel costs rising from 15% to 35% of operating costs. As reported in the same article, "No airline business model was built for oil prices to be sustained well above $US100. If it continues we will certainly see airlines continue to fail."
The main stream media continues to portray recent spikes in oil prices as being a temporary problem and externalising the blame on speculation, a falling US dollar, OPEC or oil companies. However the underlying fundamentals of stagnant production, increased demand and falling exports lead to the conclusion that higher oil prices are here to stay and will most likely only increase in the future.
Those aware of peak oil have oft claimed that airlines would be the first victim of peak oil, as stated by the late Dr Samsam Bakhtiari. The peak oil e-mail group Running on Empty Australia (or ROEOZ) almost daily has posts titled ‘airline deathwatch.’ The recent attention paid in the media to higher oil prices and the actions of airlines in raising surcharges and reducing capacity leads to the question of how sustainable is air travel and airlines in a post peak oil future. This will be the first in a series of posts on the future of air travel and will focus on fuel economy.
Fuel Economy
The fuel economy of an aircraft is dependent upon a number of factors. These include the aircrafts aerodynamic efficiency, weight efficiency, the number of passengers carried and the fuel efficiency of the engines. As oil prices have risen, airlines have attempted to increase the fuel economy of their fleets in a number of ways. These include:
- Under fuelling aircraft to reduce the weight carried and hence reduce fuel consumption.
- Charging customers higher rates on baggage to encourage smaller luggage loads.
- Grounding older and less fuel efficient aircraft.
- Reducing route capacity to increase the Revenue Seat Factor (basically a percentage describing how much of the available seat capacity has been used).
Increasing fuel economy will no doubt be an important part of the airlines responses to higher oil prices. The chart included below is an attempt to compare the raw fuel economy of the current fleet of QANTAS Group (including Jetstar and QANTAS Link) and Virgin Blue, against the economy of these aircraft per passenger.
Chart One: Comparison of fuel economy and fuel economy per passenger of the current QANTAS and Virgin Blue aircraft fleets.
The process used to derive this chart used data sourced from Wikipedia and Virgin Blue’s website on each of the aircraft used by QANTAS and Virgin Blue. The fuel economy was calculated by dividing maximum fuel payload by the range of the aircraft to give a fuel economy figure in litres per kilometre. Whilst this may not be a technically accurate measurement of an aircrafts fuel economy, it provides an approximation against which to compare aircraft. As you can see and would expect, the smaller aircraft, such as the Dash 8, Embraer 170 and Boeing 717, use several times less fuel than the larger aircraft, such as the Boeing 747 and Airbus A380 to travel the same distance.
The next step was to calculate the fuel economy per passenger (this figure has been multiplied by 100 passengers to allow the data to be displayed at the same scale) for each of the aircraft. This was calculated by dividing the fuel economy figure by the maximum number of passengers the aircraft can carry. This provides a useful reference point against which to compare the relative efficiency of each aircraft type in moving passengers. What is clear is that the larger aircraft are more economical on a fuel economy per passenger basis than the smaller aircraft. For example the Airbus A380 was 28% more economical on a per passenger basis than the average figure for all of the aircraft sampled. This economy would be even greater on a seat kilometre basis. This is due to the disproportionate quantity of fuel consumed during take off and whilst gaining cruising altitude. Short haul aircraft are exposed to this requirement more regularly than long haul aircraft, thus increasing the fuel consumption of these aircraft. Unfortunately finding useable data on the seat kilometre fuel consumption of the sampled aircraft was difficult.
Comparing the fleet composition of both QANTAS and Virgin Blue, to the fuel economy per passenger of each aircraft type, results in some interesting findings. Whilst exact aircraft number by type for Virgin were unavailable, its Boeing 737-800 aircraft are the second most economical of those examined, whilst the Embraer 190 and 170 aircraft are amongst the least economical on a per passenger basis. QANTAS has both a far larger number of aircraft and a larger number of different aircraft types in service. Of note is that the Dash 8 fleet and Boeing 767 aircraft make up some 67 of QANTAS’ 213 aircraft, or 31%. These aircraft also happen to be amongst the least economical on a fuel consumption per passenger basis.
Fuel economy of aircraft is only one factor that needs to be considered in the context of future air travel. The next factor is the revenue seat factor.
Revenue Seat Factor
In many instances, an aircraft is not loaded to 100% of its passenger capacity. In an era of ever increasing fuel prices, this is not a good thing for airlines. Airlines regularly report their capacity statistics. Both QANTAS and Virgin Blue report on their Revenue Passenger Kilometres (RPK) and Available Seat Kilometres (ASK) which are used to determine their Revenue Seat Factor. The RPK is the number of paying passengers carried multiplied by the number of kilometres flown whilst the ASK is the number of seats available for sale multiplied by the number of kilometres flown. When the RPK is divided by the ASK, the result is the Revenue Seat Factor.
The latest data available from QANTAS and Virgin Blue is from March 2008. The Revenue Seat Factor for March 2008 and the current financial year to date are detailed in Table 1.
All airlines will obviously try to maximise their Revenue Seat Factor as close as possible to 100%. QANTAS Link, which provides regional air services throughout Australia, has a significantly lower Revenue Seat Factor than the remainder of the QANTAS Group whilst also using aircraft (Dash 8) that are the least economical on a per passenger basis. We can expect to see further capacity reduction as both airlines attempt to increase their Revenue Seat Factor, if oil prices stay high. It is interesting to note that the Revenue Seat Factor for March is less than the year to date figure. There could be a number of reasons for this, such as seasonal variations or the recent rounds of fare increases.
Chart Two: The RPK and ASK for QANTAS Group over the period 1999 – 2007
Chart Two details the ASK and RPK for QANTAS from 1999 -2007. Figures for Virgin Blue were unavailable. As can be seen, the increase in both RPK and ASK has held a close relationship with a slight increase in the Revenue Seat Factor over this time from 73% to 80%. The last data point in this chart was from 30 June 2007 when Singapore Jet fuel was 199c/gal compared to 377c/gal in May 2008. With the recent measures that QANTAS and Virgin Blue have instituted, it will be interesting to see over the coming months whether the Revenue Seat Factor will rise, fall or remain constant.
How this plays out will largely determine the future of these airlines in the post peak oil era. Some indicators could be:
If capacity (ASK) is reduced and the Revenue Seat Factor increases, the airlines maybe OK.
If capacity (ASK) is reduced and the Revenue Seat Factor falls or remains relatively constant, then the airlines are in trouble.
This will be something that I will be watching with some interest over the coming months.
Conclusions
A few key conclusions can be drawn from this analysis. Firstly, the smaller the aircraft, the more economical it is to fly on a fuel economy basis, however the larger (and newer) aircraft are more economical on a per passenger basis.
Secondly, that many of the aircraft in the QANTAS and Virgin Blue fleet are at the lower end of the fuel economy per passenger scale. It is likely that routes using these aircraft would be the first to be reduced, particularly if the Revenue Seat Factor is lower on these routes. No doubt, considerations such as this were key elements in Virgin Blue’s recent decision to cut the Sydney – Proserpine and Melbourne Darwin routes.2
Thirdly, the Revenue Seat Factor is highest in the long distance international travel area and lowest for regional travel. Regional services also have a generally lower fuel economy per passenger than the other services. It can be safely assumed that airlines will do whatever it takes to remain profitable. This implies that those routes that are not as economical to operate on either a fuel economy or capacity basis, will be reduced and if the oil price continues to increase, possibly removed altogether. It is likely that regional Australia, and industries such as tourism that are reliant upon air travel, will be the first to feel the impacts.
Fourthly, as the airlines struggle with the impact of higher fuel prices, we have a couple of indicators, particularly the relationship between Available Seat Kilometres and the Revenue Seat Factor, that will provide some guidance on the future prosperity or otherwise of our airlines.
Admittedly this post has only covered one element of the airlines operating considerations, however it poses an interesting dilemma for the airlines and industries reliant on air travel such as tourism. I would be interested in hearing from airline industry insiders and their comments on this post. One area that I have not explored is the maintenance costs by aircraft type and how this may sway the balance in total operating cost of an aircraft type.
I will follow this post up over the next few weeks with another perspective on the future of air travel. I can be contacted at Cameron.Leckie@aspo-australia.org.au. You can also download this post as a PDF.
airlines are dead, as in toastada. no combination of palm oil and fuel efficiency will save them.
Say, what about oil from French fries, and maybe we can capture bovine gases and reduce global warming at the same time? :)
Well done Cameron,
This is a very informative post and the data for the graphics must have taken some effort to assemble. Thanks so much.
Airlines provide a transport service which has several distinguishing features:
- Speed. The time-saving for lengthy journeys is considerable compared to all other alternatives.
- Range. Having out-competed long-distance passenger shipping, air travel now moves the vast bulk of long-distance passengers.
- Flexibliity. Airliners can fly wherever there is demand. They can establish new routes and capacity very quickly compared to road/rail. They can hop over unpleasant or dangerous regions altogether. Airliners can still make money on "thin" routes - one plane a week, carrying a few dozen passengers, etc. Services can also be reduced rapidly and the airliners moved elsewhere without tears, compared to say rail.
So for these reasons there'll always be *some* demand for airlines - unless society collapes completely. (Back in the 1930s the cost of a flight from Australia to Britain was the equivalent of around 10 times the 2008 Economy Class fare, but government mandarins, business leaders and the rich valued their time enough to make it worthwhile.)
Up until now, cheap jet fuel has allowed an exponential expansion in mass tourism and has also enabled easy business travel/commuting, family visitation, overseas education and migration, etc. While there appears to be no future for a large proportion of this demand once fuel costs increase sufficiently (and telecommuting, SKYPE etc. are waiting in the wings as serious competitors), remember that airlines can respond to this demand reduction by quickly reducing their capacity. (Sacking workers, scrapping planes; it's harsh but effective.)
So airlines as an industry will survive unless they take their eye off their revenues and costs. They'll be leaner, probably with more emphasis on efficiency, less choice of schedules and a lot of company mergers, but while liquid fuels are still being produced, there'll still be at least some air transport.
On the other hand, the latest Super-jumbo aircraft such as the Airbus A380 may ironically become extinct despite their low fuel consumption per passenger. They may prove too big for the thinning demand for air travel as fuel prices increase.
You're the first comment to mention videoconferencing. I know with humans being a social animal, nothing will ever replace a personal visit, but videoconferencing and distance learning will have to pick up the slack as air travel becomes less and less affordable.
Irony : my company (a big European IT service company) just won a contract to manage videoconferencing for ... Air France!
Shhh! Don't tell the clients. Might give them ideas.
I really don't understand your reasoning here. On the intercontinental hub routes (e.g. London<>Bangkok) the A380 will rule. OK, the seat price may have to rise to all-business class fare levels and above and they will be packed in like sardines and only fly once a month but the very efficiency of the beast will ensure it is the cheapest option for these routes...
Nick.
I'm not a finance person, but given the huge capital costs of that beast, who could afford to fly it once a week? Just imagine the interest payments on a $330M plane. Maybe if it were sold at a steep discount in a bankruptcy auction.
I predict a total collapse of domestic flights on all continents, since these could be replaced by high speed electric rail - journeys would take longer, but should cost considerably less (why is Amtrak the international exception), also trains should be much more comfortable than cramped airline seats.
With regard to inter-continental flights; the number of carriers is likely to fall to just one per nation, with some countries not bothering if a boat to the nearest continent is practicable.
I agree that a jet like the A380 needs to spend 99% of its time in the air, and that, for example, one flight a month between London and New York is not going to be sustainable. However, one flight a month (or week, or whatever interval) for the route does not also mean only one flight a month for the jet.
I am much more interested in the relationship between the price of oil and the level of personal disposable income. As the price of oil rises, one would expect a fall in the number of passengers able/willing to buy tickets.
Also, what is the split between ticket revenue that is business and non-business. Is it reasonable to assume that businesses will be tightening their belts just as much as individuals?
At what price point do people start, en masse, to abandon SUV's and privately owned light aircraft. I read yesterday that some SUV's have depreciated more than 25% in the first quarter of this year, and in some cases the depreciation has been more than is expected in an entire year. Is the same true of light aircraft and small speedboats?
There is a dividing point between the truly wealthy and the rest of us. My guess is that the majority of people that can afford a light aircraft or luxury boat, are not that worried about the price of gas, and will only vacation 4 times a year instead of 6. Unless there is a real depression and their source of revenue bites the dust.
This is a time-honored way of taking debt off the books. The companies that put the satellites for satellite phones up went bankrupt; the companies that took over were relieved of the debt and thus had a lower cost structure. I haven't checked on this story in a while but the replacement companies were better set up to make a profitable business of it than the original company.
Giddaye Nick,
Surely (and I keep going back to this) the people that begged, borrowed and stole to get these things into production are not idiots. Surely someone along the line must have placed PO (or at the very least made some effort to estimate fuel prices in 20008 and beyond) in the "against" box.
It's so difficult for someone like myself to believe that the investors loaning out the trillions are that naive.
Regards, Matt B
Oh, believe it, Joe Average. Perhaps not so much naive as incredulous that oil could ever get really scarce. You don't believe they could be ignorant and they don't believe that no-one will fix this.
I don't think many businesses plan for contraction; most look for ways to grow. maybe an A380 represents a way to get costs down, if they can fill them. Now they have to figure out how to fill them. Frequently.
Just heard the President's comment to urgently grab two and a half years crude supply (for the US) in sensitive coastal areas - if ten years to actually get it out can be called "urgent". Two and half years worth... Then what?
Here's an everyday question for Todsters that sums up my predicament as a fence-sitter; just a Yes/No answer will suffice... My 13yo daughter needs braces, cost (AU)$3000 out-of-pocket - checked around, compares to other quotes. Though any problem is barely noticeable, Doc says it will be "better in the long run" (of course, the "Long Run" is why I visit here!). So, go ahead with the non-critical op or risk the wife divorcing me? (Kidding, but there'd be friction!)
Thanks in advance, Matt B
I wore braces; lots of stigma associated with 'em. Didn't have much choice either. Did what I could to get 'em off as fast as I could--2 years+2 years retainer. Created later enamel and cavity trouble costing more than braces. My advice is to leave the choice to your daughter, provided the money's not an issue.
What other things might she need with the $3000 given the economy we're heading into? On the other hand, we're vain creatures and I'm glad my parents got me braces way back when.
It depends on how bad her teeth are, braces might not be "just vanity" but a medical necessity. She shouldn't have (for example) physical discomfort while eating, or be unable to clean her teeth properly so she loses them to gum disease, etc.
I'd go ahead and do it. The only reason not to is that you think the caca will hit the fan sometime soon. But if the caca hits the fan then we'd have hyperinflation and bank failures and you wouldn't have the three grand spare anyway! Use it or lose it :)
Thanks, not that I had any say to start with (never ask sisters, sister-in-laws, school mums - in fact any woman! - for their opinion on such matters). Guess we'll just have to be another three grand behind the eight ball if current trends continue.
Further, never ever seek a second opinion and let your wife find out about it!!!
Ahh, to be out of debt...
Regards, Matt B
Still crossing fingers and toes, coz there's two other kids with teeth in this family.
Actually it only says the existing model is dead. Change the model (say cost plus basis) and some form of charter airline is still possible. As the low cost airlines have shown, different models ARE possible - its just a question of who jumps when.
I saw we make the move back to zepplins!!
I think you meant "say" not "saw".
Zepplins can't stage a comeback. The problem is the gas used to fill them. Helium is very expensive and helium is a by-product of natural gas production. We're facing "peak helium" sooner or later. Here's a list of lighter-than-air gases which could be used to fill airships - you'll see that they are all either toxic, flammable, or rare.
Hydrogen (H2)
Helium (He)
Methane (CH4)
Ammonia (NH3)
Hydrogen fluoride (HF)
Neon (Ne)
Acetylene (C2H2)
Hydrogen cyanide (HCN)
Diborane (B2H6)
Ethylene (C2H4)
Carbon monoxide (CO)
Nitrogen (N2)
The cheap option for overland travel will become the train; and the cheap option for over-sea travel will be by ship again. Apparently you can run ships on wind power ;-)
The last I heard kerosene was flammable too, and toxic.
Some of the alleged 'show-stoppers' that are suggested against virtually everything beggar belief.
In addition I believe that nitrogen is neither toxic, flammable nor rare.
Helium shortage may not be much of a show stopper, but airships have some other problems which are hard to tackle. Two of the worst disasters with airships, the USS Shenandoah crash and the USS Akron crash, involved helium filled airships.
Airships are much less capable of dealing with difficult weather such as thunderstorms than aircraft. They can hardly fly 'above the weather' like jet airplanes can and controlling them near the ground in any wind conditions over 5 beaufort is very difficult. So they have to operate in conditions that minimize the chance of this happening. Airships may be able to replace cruise ships, especially now that weather forecasting is much better than in the 1920's and '30's, but their potential in long distance point-to point travel like on the North Atlantic is somewhat limited.
There are a lot of things against air ships, as you say.
Lack of buoyancy agents would not be the biggie though.
no they aren't. people will always fly. the companies may not look like they do today, but we'll always fly.
People WILL always fly but they won't be the same people that are flying today...
At the current rate it's more likely 'the masses' will be more concerned with putting food on the table than cheap weekender flights to Vegas.
You have to put air flight into the context of a real squeeze on disposable income. Mass air travel has been the fortuitous confluence of cheap energy (enabling current air business model) driving a massive increase in disposable income (enabling usage of the business model). These trends are now turning.
Nick.
Always? Always?
John, If God had wanted humans to say 'always', she would have made us immortal.
Keep on believing, john15.
There'll always be a John15. Even centuries after he's bored all the other tod-ers to death.
--Ok, I'll waste a little time with a reply. Firstly for there "always" to be air travel there has to be a functioning kerosene-production system (or some John15s-may-fly new alternative discovered). I personally wouldn't bet on that being around in 30 years time.
More fundamentally there has also to be "always" some rich people willing to pay what it takes. But the present glut of rich people is itself a product of ultra-cheap oil and the resulting globalisation of markets etc. In the small local world of the future, xillionaires in MegaMansions are going to find (a) that their pre-existing xillions don't cut any mustard any more, and (b) that opportunities for gaining new xillions do not exist.
So there'll be no demand and also no-one rich enough to indulge in the insane speculative venture of satisfying that non-demand.
It always amazes me how people here can so accurately predict what will happen in 30 years time.
I would be very happy if I knew for certain what would happen in the 3.30 today.
They must have wonderful crystal balls.
An alternative scenario would see nuclear, solar and perhaps geothermal powering society successfully after a difficult transition, and some of that power being used to produce hydrogen to fuel aircraft, so that after a low point in 10-15 years air travel gradually resumes at some level.
Will this happen, or the scenario you present? I don't know - and neither do you.
Dave,
This is spooky. I could have said that.
Though I favor windmills producing ammonia and using some chemically modified version of that to make jetfuel....
Dave, you misrepresent my words there. I made no claim to "accurately predict". I merely said I wouldn't bet on it, in other words I reckon it's well below 50% chance there'll be planes in 30 years time.
As for the notion of there being functioning nuclear power "after a low point", I wouldn't bet on that either. Absent some miraculous turn of events, within a few years the entire human race is going to be struggling merely with the basics of food and shelter, and the prospect of a restart of industrial society is remote. Please take a history lesson from James Watt. Even with his ideas and vision and in an age of abundant fuel, he had a daunting struggle to see his vision actually manufactured because they did not then have the machines to make the machines. This is a most important principle in this field.
Fair enough - I thought you were being more absolute than was the case.
I see civilisation as a one-shot deal though, as high grade resources are too depleted to allow even civilisation at the level of the ancient world or the middle ages, which were dependant on exploiting these resources.
The people who I believe are entirely unrealistic (I am not arguing that you are one of them) are those who think we can get through to some kind of Woodstock society, with organic farming and windmills doing the job at anything like present populations.
If we screw up I would see a population at 4 million or so, call it one in a thousand for convenience, operating at stone age levels - after recovery, that is.
On the upside I find it difficult to see precisely why French or Chinese society should break down, even if breakdown occurs in many other areas.
I don't think it will be quite that bad. We do have a lot of metal that has already been refined, and charcoal will work perfectly fine for running basic forges. On the other hand, I'm not sure we could build back up from there. It may be impossible for us to get specialty materials like platinum to build more advanced devices.
Anything remotely like a large die off would lead to endemic warfare.
The resources like wood for charcoal would be pretty thoroughly trashed.
Rust would have won the race with mined metals before anyone was in a condition to utilise them.
On the topic of both warfare and jet fuel, the US Air Force is preparing for Coal-to-Liquids...
http://www.redorbit.com/news/business/1308384/air_force_eyes_coaltoliqui...
Took the words right out of my mouth Cretaceous.
The uber-rich and the military will be flying for quite a while still.
The rest of us... better take that European trip before the commercial airlines go belly-up.
Mash
--------
Father, Farmer, Doomer, Engineer, Drummer
I'd agree that people on this thread are underestimating how much people will pay to fly, especially across oceans. I think they'll be flying long after they give up driving or buy electric cars.
When I looked at the charts above my first thought was that the A380 will be a very successful plane!
People may fly for a while, but it probably won't be via airlines. The defining feature of a "line" be it airline or tramline or shipline is scheduled service. I suspect that businesses will turn to charter flying over airlines in the not too distant future. Charters fly out of smaller, closer airports, use smaller, cheaper, more fuel efficient planes, and leave on the customer's schedule. As airlines become less and less convenient, charter convenience will improve by comparison. Many larger companies already own their own private jets; these aren't generally used to send the office staff to training seminars, but they will be. There are "fractional ownership" companies that allow companies to share private jets so you don't have to pay full price for something you only use 20 times a year. Charter companies are the next step down but they will be convenient and cost-effective longer than the airlines.
--
JimFive