The last several months have seen a flurry of activity in the aviation sector, as fuel price volatility and impending greenhouse gas regulations have goaded major airlines to ink deals for renewable jet fuel.
The latest involves British Airways, which struck a deal with Solena Group for 16 million gallons of jet fuel from waste.
The moves highlight the tremendous pressure airlines are under to keep costs low in an increasingly oil constrained world and regulated marketplace. During the last oil spike, fuel expenses, which historically ranged from 10 to 15 percent of US passenger airline operating costs, averaged more than 35 percent in the third quarter of 2008. According to news coming out of the International Air Transport Association, the marketplace for cheap fuel is about to get much more crowded.
Speaking in Singapore earlier this month, IATA director general and CEO Giovanni Bisignani reports that Asia-Pacific region has overtaken the US to become the world’s largest aviation market. According to AirCargo World, during the last decade, China replaced Japan as Asia-Pacific’s largest player. Today the country has an airline fleet of 1,400 aircraft compared to Japan’s 540.
Giovanni Bisignani notes, “The global air transport industry will triple in size when Asians travel as much as those in the U.S.”
The figure below from Boeing shows projected growth in the Asian-Pacific region:
As more of the world’s oil production is snapped up to meet growing Chinese and Indian oil demand as well as the needs of a growing Asia-Pacific aviation industry, the race is on for U.S.-based airlines to find alternative sources of jet fuel to offset petroleum price increases.
While feedstocks like algae, camelina, and jatropha derived renewable jet fuel show promise as a drop-in replacement, the industry finds itself having to compete with an EPA-mandated 36 billion gallons of biofuels by 2022 (see RFS2) for producers’ attention. With aviation accounting for only 12 percent of transportation fuel demand in the U.S., the auto transportation sector will maintain a distinct market advantage over aviation.
photo: Gary Hayes