Expert Panel Outline

What is the Future of Air Transport?
 
Wednesday, 26 May 2010 - 11.30-13.00 - Hall 3
Panel Summary and Conclusions
 
Slides
 
As air transport recovers from the global economic crisis it faces a number of challenges. It needs to reduce emissions substantially, it needs to make more efficient use of air space and, as both the financial crisis and the volcanic ash emergency underline, regulatory arrangements must incorporate mechanisms for rapid response to unexpected events.

This session considered how air transport can innovate to limit greenhouse gas and noise emissions while allowing for major increases in traffic, and what regulatory innovation might contribute to emissions control, efficiency and economic viability.
 
  • Are the solutions to be found in improvements to aircraft and engine design?
  • How quickly can we improve air navigation systems and integrate regional air space management?
  • What are the business models of the future, and how might these be affected by Open Skies and other changes in the global regime for trade in air services?
  • How do we ensure rapid response to unexpected events in the way aviation is regulated?
 
Chair
 
  • Eric Kroese, Special Advisor on International Aviation Policy to the Minister of Transport of the Netherlands
 
Panellists
 
  • Christian Dumas, Vice President Environmental Affairs, Airbus
  • Angela Gittens, Director General, Airports Council International
  • Dave Knorr, Liaison DFS, US Federal Aviation Administration
  • Johannes Reichmuth, Director, Institute of Air Transport and Airport Research at the German Aerospace Center
  • Bo Redeborn, Director Cooperative Network Design, EUROCONTROL
  • Matthias von Randow, Director, Air Berlin
 
Background
 
Over the last three decades, liberalisation of the sector has been the key driver for growth, alongside rising incomes. Whether the sector sees historical levels of growth continue depends essentially on liberalisation in the emerging markets, especially in Asia. But, whilst open skies agreements and low-cost airlines have made air travel available to more people, competition has made economic viability more of a challenge for airlines. The International Transport Forum Outlook sees scenarios for the development of aviation.

Two Global Economy scenarios plot that the Forum saw as reasonable paths for growth before the economic crisis struck. These baseline scenarios both show significantly lower volumes than industry forecasts. The Adjustment scenarios account for the crisis and assume that globalisation continues in a more moderate way after economic recovery, resulting in slower growth. The Low Response variants assume the elasticity of aviation demand with respect to global GDP is one (1% GDP growth results in 1% aviation growth). The High Response variants assume that the elasticity of aviation demand is considerably higher than one (and driven for example by deregulation).

We see the Adjustment Low Response plot as the most reasonable scenario. However, it ignores the potential for growth in aviation demand from further deregulation in some markets, particularly in northeast Asia, and adaptation to deregulation in others. The Adjustment High Response scenario can be seen as an upper bound of what can be reached with such policy efforts. How much more growth the sector can look forward to will depend on innovation to reduce costs for airlines, airports and air traffic control and innovative business models that create new markets in the way low cost carriers have achieved.

It appears likely that aviation will be included in CO2 emissions trading systems in some regions of the world during the period of this outlook. Research for the Forum suggests that the impact of incorporating aviation in open trading systems will be to increase the price of carbon as aviation becomes a net buyer of permits. For flights to and from busy airports the economic impact of buying permits is expected to be felt in a reduction of landing right rents, rather than being passed through to ticket prices. The impact of emissions trading on aviation activity levels is thus likely to be modest, if CO2 emissions are managed through trading permits. Blunter instruments such as passenger surcharges will see passengers paying higher prices and passenger volumes reduced, but with less effective control of emissions.
 
Slides
 
 
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