Regional Market Middle East
The aviation sector has developed tremendously in the Middle East and is a key region for our company. We have provided management consultancy services to significant players in the area and contributed to their success. We see the Middle East aviation industry as an important driver of economic growth. The challenges facing airlines, airports and authorities in the different countries are as diverse as the different nations in the region.
Due to its favorable geographic position the Middle East offers exciting opportunities for your future business ventures and developments. I would be happy hear from you and discuss your plans.
The UN’s aviation body formally committed this October to achieving net decarbonization of the aviation sector by 2050. This ambitious resolution is supposed to mirror the Paris Agreement on climate change targets from 2015 and is a historic milestone towards making the skies “green”. This pledge and others aim at reaching CO2-neutrality through a well-orchestrated transition to eco-friendly technologies and fuels, enhanced operations and offsetting regulations.
This article discusses the different pillars of decarbonization strategies and identifies the merits and limitations of each one. It sheds light on the upcoming difficulties and offers a perspective of how the crucial CO2 Net Zero goals could be achieved.
Legitimate concerns about the growing adverse impact of fossil fuels on the environment urge all industry sectors to evolve and reduce the impact of anthropogenic activities on the environment. According to The International Council on Clean Transportation, the aviation sector contributes 2,5% of the global CO2 emissions. This is a relatively small percentage to global CO2 emissions. However, aviation is one of the fastest growing CO2 emitters and arguably the hardest to decarbonize due to the cost and scale of the industry. Hence, its anthropogenic impact will disproportionally grow larger should the industry’s decision makers not change course now. IATA and other entities responded decisively by opting for a tangible roadmap aligned with the Paris Agreement.
The set targets are necessary to ensure a sustainable future for our planet. The feasibility of these targets and the credibility of the roadmap are essential to gain public trust and support. Let’s try to examine that: Is the transition towards aviation CO2-neutrality feasible by 2050?
The four pillars for CO2-neutrality in the aviation industry
Sustainable Aviation Fuel
Sustainable Aviation Fuel, known as SAF, refers to bio-fuels produced environmentally friendly. Bio-fuels produced through unsustainable practices are not considered SAF. This type of fuel will play without doubt an important role in limiting carbon emission in the short and medium term. It can drop straight into existing infrastructure and engines, causing minimum operational and financial disruption and an immediate and tangible effect on CO2 reduction. Its use leads to a carbon reduction of up to 80% compared to fossil jet fuels according to IATA. Assuming further research and development in its production will make the required amounts available and reduce its cost (currently three times more expensive), SAF in itself is a great alternative to fossil jet fuels.
Currently, 0,01% of global aviation fuel is SAF as per sources IEA (2020), Renewables 2020, IEA, Paris. IATA’s roadmap foresees at least 7 billion liters of SAF production in 2025 and approximately 500 billion liters available in the market by 2050. That means production will need to at least triple every five years for thirty years straight. Such a steep ramp-up in producing anything is unheard of. Making SAF available at industrial levels in the short- to medium-term is therefore improbable.
Shift to new generation aircraft/engines
IATA’s plan foresees a wide entry-into-service of novel environmentally-friendly technologies by 2035. The first technologies to be introduced into the market would be incremental changes to the current most-advanced propulsion systems. These have already demonstrated 20% lower CO2emissions. Manufacturers are already working on additional incremental improvements such as open-rotor engines, increasing turbine entry temperatures by introducing new materials and further increasing by-pass ratios. Thanks to leaps in technological development, it is nowadays possible to mature technologies within years rather than decades. Thus, it is perceivable that incremental changes will amount to the set goal of 30% less CO2 by 2035. Another upside of incremental changes is their implementability with relatively low financial burden to the airlines: It is possible to mate new technologies with older ones through retrofitting campaigns without major capital investment (e.g.: SAF certification of existing engines through minor fuel system adjustments). Hence, the short- to medium-term goals seem within reach. Airlines should embrace these new technologies to accelerate decarbonization.
The 30-year technological horizon is where the outlook becomes blurry: IATA is planning with having revolutionary technologies available at an industrial level starting 2040. The key technological advances would be in electric and hydrogen propulsion systems. While short-haul electricity-powered flights are a viable option, flying hundreds of passengers for thousands of kilometers with electricity is simply not. Large-scale electric flights as we know them today are not feasible for one simple reason: The most advanced battery today has an energy density of 1% of Jet-A fuel: An aircraft would need 100 times more weight for energy storage to compensate for the low energy density, hence rendering the whole idea obsolete (flying without a payload). Hydrogen on the other hand has a much higher energy-density and is the most abundant element in nature allowing it to be sustainably sourced. It is an excellent replacement for SAF on the long run. However, it too comes with a catch: its storage and delivery are arguably the most challenging aspect both technically and economically. Extremely high capital investments would be required. Countries would need to re-design their entire energy infrastructure from scratch (pipelines, road transportation, maritime transportation, etc.).
The aviation industry puts safety beyond any commercial aspects, and rightfully so. This gave the aviation its reputation as the safest means of transportation. While prioritizing safety is legitimate and no concessions in this area should be allowed, it is also necessary to allow for new technologies to penetrate the aviation sector in due course. Sticking to proven technologies and processes over decades meant inefficiencies piled up across all aspects of aviation. For example, ATC systems still being used even in some developed countries are from the eighties (half a century old technology). The equipment available today and the ability to communicate and optimize routes can greatly enhance the way we fly, leading to lower carbon emissions.
Operational excellence in aviation can and should be pursued to minimize carbon emissions. The best practices for fuel consumption reduction have reached their limits. State-of-the-art techniques and innovative approaches offer new leverage towards fuel efficiency, thus carbon emission reduction. The untapped potential is substantial and can be set free quickly and cheaply. Nearly all operational aspects of aviation, from planning, steering to performance management are areas to be fine-tuned for this purpose.
Carbon Offsetting is the practice of counteracting anthropogenic emissions by exercising an opposite activity. In the case of aviation carbon offsetting, the different aviation actors would be driving carbon emission reduction in other fields, for example by sponsoring forestation or carbon sequestration projects. The United Nations has a dedicated scheme, namely “CORSIA”, which aims at ensuring any rise in international aviation emissions above 2019 levels are offset elsewhere. Up to 2026, voluntary states are subject to offsetting requirements. Starting from 2027, all international flights will be subject to mandatory offsetting requirements. Airlines wanting to expand their operations will be subject to offsetting fees as their CO2 footprint will increase beyond 2020-levels. Through this measure, the growth within the aviation sector is set to become carbon-neutral. This approach gives the airlines a strong incentive to invest in fuel efficient aircraft, transition towards sustainable fuels and optimize their operations.
The offsetting requirements will financially strain airlines still recovering from the COVID-pandemic aftermath. The additional costs will not be swallowed by airlines due to the competitive nature of the business. They will probably be passed to the customer, leading to an increase in fare prices and in return in a slow-down across the industry. This outcome is obviously undesirable and should be avoided through smart and business-sensitive regulations.
Forecasting future emissions will become an important part of budgeting for mandatory CO2 offsetting fees and establishing financial reserves. The EU is due to make ESG (Environmental, Social and Governance) disclosures mandatory by 2024. Airlines should start putting processes and staff in place to ensure a timely compliance with the new requirements.
How to make the skies green by 2050 from the Lufthansa Consulting perspective
The IATA 2021 roadmap sets ambitious targets for the decarbonization of the aviation industry. The agreement on such a resolution within the aviation community is a first great achievement. This crucial topic has gained momentum within the aviation community and is being considered the biggest challenge facing an industry still recovering. The IATA plan, while conservative in some aspects, is in Lufthansa Consulting’s view overly-optimistic and requires fine-tuning.
The resolution is often labelled as an alignment of aviation to the Paris agreement. This statement however lacks context. The Paris agreement has set temperature-rise limits, hence adopting a symptomatic approach to global warming (1,5 degrees Celsius by 2050). The IATA resolution on the other hand has set decarbonization goals (Carbon-neutral by 2050), hence adopting a causal-approach. CO2 is one important element amongst other anthropogenic emissions. The IATA plan should reflect this fact by adding contrails and other emissions to its reduction aims. Otherwise, the plan can be perceived as not conducive to the end-goal of limiting global warming and be undermined.
Furthermore, the plan’s strong belief in the scalability of the SAF production makes it vulnerable to criticism. The estimates of future SAF production are extremely optimistic and are just not substantiated by the facts on the ground. The point is, as already mentioned, less than 0,01% of total annual jet fuel consumption in 2020 was SAF. An increase of to up to 65% by 2050, while possible, is improbable.
New technologies are estimated to contribute with 13% to decarbonization by 2050. The short to medium term goals seem reasonable: New field-tested technologies (higher by-pass rations, gearbox systems, etc.) delivered promising results in terms of fuel consumption and emissions. The propulsion industry, while facing supply chain issues in the short run, is more vibrant than ever. Talent and capital are available within this sector. The mandatory offsetting requirements will provide tailwind for airlines to purchase greener aircraft, hence incentivizing manufacturers to further fund R&D work in the field.
Optimizing the operations does not receive nearly enough emphasis within the resolution although it is the area with the quickest and easiest possible wins. The potential for improvement is substantial and should be looked into. Pursuing operational excellence should be mandated by law to give airlines the incentive to cut CO 2 emissions. This area does not require large investment and wouldn’t strain airlines financially.
Carbon offsetting is the only credible option to neutralize the aviation’s carbon emissions in the short and medium term. This approach can also serve as a fallback plan in case SAF scalability or new technologies faced headwinds. Offsetting, however, comes with an additional financial burden to airlines, which they would pass to the customers, hence slowing down the industry growth in the medium term and making aviation accessible to fewer people. It is therefore indispensable for airlines and governments to work together on environmentally friendly and financially sound policies.
The four pillars of decarbonization will be the main contributors towards an environmentally friendly aviation sector, however with different weights. The IATA resolution should be tweaked to reflect reasonable expectations regarding SAF projections. When reviewing predictions from independent entities, it becomes obvious that offsetting measures will have to compensate for emissions on a larger scale and for a longer period of time. Operational excellence can also play a role in softening the over-estimated carbon emission cuts from predicted SAF consumption. We cannot stress the importance and potential of this area enough. Lufthansa Consulting has dedicated experts pursuing operational excellence solutions for their customers and is constantly looking to assist airlines to optimize their operations for more sustainable flying.
Lufthansa Consulting due to constant interaction with various players in the aviation industry, has a unique perspective into the topic of aviation sustainability. This enables the aviation experts to support and link all parties involved in transitioning towards sustainability and brings more stakeholders together.
Together, we can make flying greener.
Author: Ramzi Ben Abdallah, Consultant, Aero-engines technologist and member of the Solution Group Maintenance and Engineering.
To learn more and discuss how your organization could benefit from Lufthansa Consulting’s expertise in sustainability, please contact us.
Further insights from Lufthansa Consulting’s aviation experts are available at https://www.lhconsulting.com/insights/news/
Lufthansa Consulting’s Associate Partner Michael Kunz, Partner Catrin Drawer and Senior Consultant Sascha Vogel look forward to meet the airport community at the GAD World Global Airport Development Conference from 2 - 4 November 2022 in Amsterdam, Netherlands. This year, Lufthansa Consulting is an Associate Sponsor of GAD and will be ready with its team of experts for a lively personal exchange on site.
On 3 November 2022 Michael Kunz will moderate the panel discussion “Considering new approaches to agile airport operations to enhance cost management & ROI”. In the session the panelists David Dowling (Managing Director Airport, AMP Capital), Eugene Gan (CEO, Changi Airports International) and Serkan Kaptan (CEO, TAV Airports) will focus on
More than 350 of the world’s leading airport operators, major investors, financiers, regulators and renowned industry advisors will attend the airport privatization and finance forum GAD World to examine the latest opportunities, challenges and expectations for the airport business in 2023 and beyond.
The 2022 ACI Africa / World Annual General Assembly, Conference and Exhibition (WAGA 2022) is the most important global gathering of airport leaders. It brings together senior executives of the airport industry from all over the world, and features discussion topics that shape the way in which the aviation industry is quickly evolving.
Enjoy a series of innovative sessions on strategic topics and grasp a wealth of opportunities during this global conference.
Lufthansa Consulting will hold Workshop No. 1 : Agile airports: Re-imagining airport organizations to strengthen the ecosystem’s performance Rigid airport organizations are a remnant of the past, requiring operators to adapt to the everchanging competitive landscape. This workshop will discuss concepts of agile management within airport organizations and their ecosystem to strengthen airport performance. Effective examples will showcase how airport operators may incorporate agility to airport management and operations to create lean, powerful and competitive organizations, while focusing to build strong relationships.
Meet our experts Catrin Drawer, Partner, Head of Market Africa and Indian Ocean and Sascha Vogel, Senior Consultant, Senior Expert Airport Management and Operations.
Lufthansa Consulting’s Associate Partners Georg Baust and Arvind Chandrasekhar with consultants Luisa Grasshoff and Ainesh Advani are ready to meet the aviation community at the 27th World Route Development Forum from 16 - 18 October 2022 in Las Vegas, U.S.A. The team of experts looks forward to welcoming visitors to its on-site exhibition stand G12 to discuss the current state of the industry, measures to continue the recovery and opportunities for growth.
At the event, the aviation consultants will present their range of services tailored to a variety of industry stakeholders:
For airports, they present Lufthansa Consulting’s robust Air Service Development product that enables robust, data-driven discussions with airline network planners to drive route decisions. The service also factors in the increased importance of Air Cargo to the industry. Separately, they would like to present and discuss different performance simulation tools to assess a new route’s potential.
For airlines, the experts look forward to discussing their comprehensive suite of network planning services. The aviation industry is heading into a post-pandemic era of growth and opportunity, although there are some drivers of uncertainty. It is more important than ever to ensure an airline has a robust traffic forecast, the right network and partnership strategy, the optimal choice of aircraft, productive asset deployment and rigorous performance tracking.
For tourism stakeholders, the team addresses how to turn challenges into opportunities for a sustainable regrowth to the benefit of the entire tourism ecosystem of a destination in a post-COVID world.
Looking forward to a lively exchange with you in Vegas! Feel free to contact our expert team via the Routes App!
Aviation Strategy 2022 conference, representatives from airlines, airports, travel companies, air cargo providers, IT companies, leasing companies and financial institutions, insurance companies and aircraft manufacturers will discuss the changes taking place in the vast regional passenger and cargo market in Asia and neighboring countries, assess the long-term opportunities and risks, receive up-to-date information on aircraft financing and trends in the leasing market.
We’re excited to be Asia Connect: Aviation Strategy’s partner this year! Meet Partner and Head of Market CIS and Baltic States Stanislav Solomko as a speaker and moderator, as well as permanent representative CIS, Askhat Torshin as a delegate at the conference.
Significant savings in airline maintenance costs achieved through identification of shortcomings in maintenance processes and identification of key cost drivers. The project management provided on-site support to develop cost saving initiatives and successfully implement the cost reduction measures.
Development of a business strategy aiming to create a commercially sustainable aviation group and to drive added macroeconomi c value and local prosperity. Comprehensiv e business plan addressing weaknesses and risks and giving access to funding. Expansion opportunities into as yet unexplored sectors of the aviation industry.
Performed technical and economic analysis forecasting the investment and maintenance cost over the engine life time. Recommended most efficient engine solution for the carrier’s operational profile. Identified areas to improve terms and conditions offered by the OEMs resulting in >20% CAPEX and OPEX reduction over the entire life cycle in comparison to initial OEM proposal.