Aviation Energy Economics Reshape Flight

Air carriers invest to improve profitability and expand share in the markets they choose to serve.  Selecting the right aircraft and engines are vitally important to financial success.  The process requires input from marketing, maintenance, engineering, finance, and the flight operations teams.  There are numerous factors to consider, beginning with the composition of the carrier’s existing fleet.  While newer aircraft are more fuel efficient, the issue is whether advanced technologies will give enough of a bottom line boost to supersede what is being enjoyed with the current fleet or available market alternatives.  

The answer to that question has been the price of a barrel of oil.  How much fuel does an aircraft burn in relation to the number of passengers, or ton of freight, for the distance flown?  A review of air carrier earnings performance compared to fuel cost volatility shows an inverse correlation.  Jet fuel pricing peaked in 2008 (fuel was 36% of total operating expense).  Fuel prices then dropped significantly.  The global airline industry’s fuel bill was $133 billion in 2016 (accounting for approximately 19% of operating expenses [Brent oil averaging $43.55 per barrel]).  The forecast for 2017 anticipates an average oil price of $54.0/barrel for Brent Crude reflecting a balance between OPEC supply cuts and new supply from U.S. shale oil producers.  Fuel burn per available seat mile (fuel productivity) and gallons consumed per block hour are part of the solution to this business management puzzle.  Technology, load factors, and flight operations are other critical variables that can  maximize flight segment earnings.

Since the first jet airliners in the 1950s, little has changed in basic designs.  Gas turbines were conceptualized at the turn of the twentieth century though practical designs did not emerge until the late 1930s (too late for WWII).  Rapid development followed.  With their high ‘thrust to weight’ the deployment of gas turbines made affordable intercontinental flight possible.  They have become so reliable that two-engine aircraft now fly not only across the Atlantic but also on many transpacific routes.  Added fuel efficiency gains have been made with improvements in airframe aerodynamics, materials, and engine designs.  Lighter planes burn less fuel, alternative fuels reduce carbon emissions, new carbon fiber materials weigh less (and withstand higher heat, allowing more efficient fuel combustion), new engine gear systems for the fan and turbine enable more thrust with less fuel, winglets reduce drag (and cut a plane’s fuel emissions).  The global market for jet engines is dominated by four makers.  Rolls Royce first in 1953, followed by General Electric and Pratt & Whitney, and CFM International, a joint company established by GE and French Snecma Moteurs in 1974.  Pratt & Whitney’s ‘Geared Turbofan’ engine is expected to cut operating cost 20% (about $1.7 million per plane per year), dampen noise, and reduce CO2 emissions.  By using lightweight composite materials, such as carbon fiber fan blades to achieve energy efficiency gains, the CFM International ‘Leap’ engine achieves many of the same benefits (while using tested conventional turbofan architecture, and without the added weight of a gear box).