Www.ecometrica.co.uk ETS IMPLICATIONS ON ROUTE AND NETWORK DECISION MAKING Barry Moss Special Advisor ECOMETRICA Gary Crichlow Aviation Analyst ASCEND.

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


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


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


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


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


MEDIUM-HAUL 2008 SCHEDULED AIRLINE MOVEMENTS


A320, A330, 757 and 737NG dominant types

Average stage length: 3,800 km (2,000nm)


7675%

A3405%

7779%

Other10%

75714% A330

15%

737 NG16%

A320 family26%


LONG-HAUL 2008 SCHEDULED AIRLINES 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)


77722%

76719%

A33015%

747-40017%

Other 7473%

A34016%

Other8%


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


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



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



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


.

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


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


€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


€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


Scenario – EU ETS Compliant, Purchase 18% of Allowances– Short Haul Airbus A320

COMPLIANT

ETS allowance costApprox. €144,000


Scenario – Non Surrender of Allowances (100%) Airbus A320 No Grandfathering

NON-COMPLIANTETS allowance cost approx. €800,000plus

Fines €2,000,000


Scenario – EU ETS Compliant, Purchase 18% of Allowances - Long Haul Boeing 777


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


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

Www.ecometrica.co.uk ETS IMPLICATIONS ON ROUTE AND NETWORK DECISION MAKING Barry Moss Special Advisor ECOMETRICA Gary Crichlow Aviation Analyst ASCEND.

Documents

ets implications

compliance costs eu

fuel tax ets higher

implications agenda

fleet evolution

context cost of compliance

science ecometrica

fluid fleet route planning