Industry Insights - The Decarbonisation of Aviation

By: Martin Maloney


The unprecedented and rapid spread of COVID-19 resulted in the implementation of global travel restrictions and social distancing measures. This has negatively impacted the economy and significantly reduced demand for many services, including air travel. However, the lonely clouds may have a silver lining, with declines in demand for energy expected to result in a fall in global CO2 emissions by 8% in 2020, according to the International Energy Agency (IEA). Global emissions are predicted to fall to the lowest level since 2010, with a reduction six times larger than the previous record in 2009 and twice as large as the combined total of all previous reductions since World War II. Nonetheless, this respite is likely to be only temporary with easing lockdown restrictions signalling a return to normal.

Aviation is a carbon intensive industry, and although it accounts for just over 2% of all global CO2 emissions, that proportion is expected to grow significantly, as other sectors, including energy and automotive, make better progress in decarbonising in the coming years. Growth in air travel will also continue, boosted by emerging markets, with International Air Transport Association (IATA) forecasts suggesting passenger numbers could double to 8.2 billion in 2037. Quite simply, more people flying means more pollution. For example, as much as 4% of European CO2 emissions are generated by the aviation sector and that is as high as 7% in the UK. It is therefore not surprising that the sector has become a key focus for policymakers, particularly in Europe.


Recent coronavirus-related government support packages require that airlines reduce emissions. Air France received €7bn in aid from the French government as part of its rescue package, with certain “climate conditions” attached. By 2030, the airline is expected to cut emissions, measured in CO2 per passenger km, by 50% compared to 2005 levels. Domestic flights within France must reach the same target by 2024. How will they achieve this? We believe that policy, technology, and changing consumer behaviour will all combine to help decarbonise the industry.

Policymakers have multiple tools at their disposal, including increased taxation on tickets. If increased taxation is passed on to consumers in the form of higher ticket prices, this is likely to curb demand for air travel, with the IATA estimating that for every 10% increase in fares, demand falls by 7% in the US and 9% in Europe. Jet fuel is currently exempt from taxation in the EU, however there are signs that the European Commission is willing to use it as a policy tool. Fuel costs account for a significant proportion of operating costs for airlines so if they want to maintain profitability, air fares again need to be increased. Other global initiatives include the UN’s Carbon Offsetting and Reduction Scheme (CORSIA), a market-based mechanism, which aims to ensure any rise in international aviation emissions are offset by reducing emissions in other sectors. However, with the tourism industry accounting for over 10% of global GDP, and responsible for 330 million jobs worldwide, it is clear that any policy measures will need to be considered alongside the potential negative economic impact of curbing demand. We think this is where technology can play a big part.


An alternative way to reduce the carbon footprint of the aviation industry is to replace older aircraft with newer, more fuel-efficient planes. New generation aircraft, like the Airbus A320neo narrow-body jet, which was first introduced by Lufthansa in 2016, burn 15% less fuel than the previous generation. Changes to the layout and density of seats within the newer planes mean that some airlines have been able to realise fuel burn savings of up to 20%. However, the savings do not stop there, as replacing even older generations has the potential to save up to 40% on fuel costs. We see Airbus as a key beneficiary of the shift, as only 7% of the company’s single aisle fleet in Europe are from the latest generation, which suggests there is a long runway for growth through increased penetration.

Longer term, we believe that sustainable aviation fuel (SAF) has the potential to cut emissions even further. Rather than being refined from petroleum, SAF is produced by blending conventional fossil-based kerosene with a variation of sustainable feedstocks such as cooking oil, plant oils, municipal waste, and agricultural residues. Neste, the world’s largest producer of renewable jet fuel, has developed a type of SAF that reduces CO2 emissions by up to 80% compared to fossil jet fuel. One drawback is the prohibitive production cost, with even the cheapest SAF costing twice as much as conventional fuel.

Revolutionary technology, however, is even further into the future, with the possibility of electric or even hydrogen-based flights unlikely to happen any time soon. The problem with both technologies is that neither compressed hydrogen nor batteries have the required energy density to power a commercial flight. Space and weight constraints are also key hurdles that need to be overcome, as well as concerns over the safety of the technologies at high altitude. Put together, it is unlikely we will see any real progress this decade.

We have also seen rising awareness among consumers about the environmental impact of flying, which could see a change in behaviour post the current crisis. Flygskam or “flight-shaming” is an environmental movement across Europe which is encouraging people to travel less by plane and seemed to be gaining some traction before the pandemic. Corporates are also making changes, with business travel the largest source of emissions for certain types of companies, including those in finance, technology, and professional services. For PWC, a professional services company, 85% of its emissions are generated from air travel, which the company has committed to reducing by 33% per employee by the end of 2022. In addition, lockdown measures mean that virtual meetings have become a necessity and it remains to be seen how many in-person meetings will be replaced by video conferencing in a more normalised environment.

Ultimately, we believe the increased attention from policymakers, technology providers, and consumers, will mean that aviation will play a key part in efforts to decarbonise the planet.

Should you have any questions about anything raised in this article, please don’t hesitate to contact us via email, or on 0207 337 0777.

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