Covid-19 turbocharges the greening of aviation
Expert view by Yann Sonnalier
The global pandemic tipped the aviation industry into crisis, but has revitalised the drive to significantly reduce commercial aircraft CO2 emissions.
It’s well known that the global pandemic virtually shut down international aviation, tipping the industry into crisis. What’s less recognised is the fact that the global downturn has revitalised the drive to significantly reduce commercial aircraft carbon dioxide (CO2) emissions.
For now, the reduction in flights globally resulting from the closure of national borders has cut the industry’s emissions dramatically. With flight numbers likely to take two to three years to recover, aviation seems already set on a more sustainable path.
But the crisis has also accelerated the longer term greening of aviation. The pace of fleet renewal has picked up as airlines hasten the retirement of their oldest, most fuel-hungry aircraft. And policymakers have been prompted to place the development of zero-emission planes at the heart of the industry’s support packages. Indeed, aircraft manufacturers could produce prototypes in little more than a decade.
This acceleration towards more sustainable aviation is welcome, as the global industry produces around 2% of human-induced (CO2) emissions. Aviation is responsible for approximately 12% of CO2 emissions from all transports sources, compared to 74% from road transport.
Researching a sustainable future
The industry has already made significant progress in cutting emissions over several decades. In fact, the newest aircraft in service today are over 80% more fuel efficient per seat and kilometre than the first jets in the 1960’s, thanks to massive investments in research and development. But far more needs to be done for the industry to meet its pledge of cutting greenhouse gas emissions by half by 2050, compared with a baseline of 2005’s levels.
Recognising the industry’s important role in its economy, the French government has announced a €15 billion support plan for the aerospace industry, which specifically includes €1.5 billion for research over three years into greener aircraft.
This will speed up the development of a new generation of aircraft and engines, helping the sector to fulfil its goal of building a zero-emission plane by 2035, possibly as a successor to the Airbus A320, the world’s best-selling aircraft.
At the present time, airlines are cutting fleet capacity and aligning it with lower levels of passenger demand. As they withdraw older planes such as the Boeing 747 jumbo jetand the Airbus A380, they’re renewing their fleets with greener planes, notably the Airbus A320neo, A350 and Boeing B787 Dreamliner.
Sustaining 65 million jobs
The importance of maintaining a viable aviation industry cannot be overstated. In 2019, almost 30,000 aircraft carried 4.5 billion passengers from around the world. The industry’s value chain – including airlines, lessors, manufacturers, their supply chains and connected businesses such as tourism – employed 65 million people, equivalent to the entire population of France or the UK.
Commercial aviation generated US$876 billion of revenues (including taxes) in 2019, and its contribution to the global economy is amounted to 3% to 4% of global GDP. The industry paid on average US$111 billion per year in taxes to countries around the world, a similar amount to the US$123 billion that governments worldwide have provided in support packages during this year’s crisis.
It’s little wonder that aviation has been prioritised for government support. In France alone, it’s a critical industry as the third biggest exporter, with 1,300 SMEs in the supply chain and 300,000 employees, some 35,000 of them in research and development.
Financing renewal
Banks are playing a key role in sustaining aviation in these difficult times. Strongly committed to our clients, at Societe Generale we’re helping them to weather the crisis and prepare for the future. For a start, we were one of the banks taking part in the €7 billion loan to Air France-KLM Group, guaranteed by the French state. Additionally, we have managed several financings, including those for Airbus and Safran. These include a €15 billion bridge financing in March, as well as raising a total of €12.3 billion since then in bond and convertible bond issues.
We have also continued to finance the rejuvenation of fleets with the latest fuel-efficient, greener planes. For instance, we financed Pegasus Airlines’ recent purchase of Airbus A321neo aircraft and Air France’s acquisition of Airbus A350s.
Looking ahead, we expect to help the major airlines and aerospace manufacturers to refinance themselves as economies and passenger numbers recover. Many of these companies will need to revisit their capital structures, reducing the levels of debt taken on to help withstand the industry’s first ever global crisis.
While the industry did not choose this crisis, it’s a dark cloud with a silver lining. Out of it may come a rebirth of aviation, as hydrogen technology is trialled to develop the first zero-emission planes little more than 10 years from now.
