Environmentalism is not a new cause. Greenpeace activists climbed atop a Boeing (US:BOE) jet at Heathrow Airport in 2008, long before Extinction Rebellion was conceived – Greenpeace has been around since 1971. Schoolgirl Severn Cullis-Suzuki addressed a United Nations climate summit in Rio de Janeiro in 1992. “Losing my future is not like losing an election, or a few points on the stock market,” she told delegates, 11 years before Greta Thunberg was born.
But the latest generation of protagonists has undeniably shifted environmentalist momentum into a higher gear. Concern for the environment is at a record high among the UK public, according to polling company YouGov. Nearly half of 18 to 24 year olds cite it as their second biggest worry for the nation, behind Brexit. Travel and transport engineering businesses are taking action, recognising that a failure to respond to climate change and changing consumer behaviour could cost them more than a few points on the stock market.
Airline easyJet (EZY) announced this year that it will become the world’s first major airline to operate net-zero-carbon flights across its whole network. Aerospace engineer Rolls-Royce (RR.) revealed a hybrid electric flight demonstrator, paving the way for test flights after 2021. Chemicals specialist Johnson Matthey (JMAT) secured its first plant for the commercialisation of its eLNO battery material, which will be used in electric cars.
There’s scant evidence yet that consumers are abandoning their petrol cars for environmental reasons, though. Most aeroplane emissions, meanwhile, arise from long-haul journeys for which there is no practical alternative. But we have already passed the point of no return. While the fate of the planet may remain salvageable, environmental, social and governance (ESG) factors will dominate the strategies of transport and travel businesses for the foreseeable future.
ESG takes off
The global aviation industry contributes 2 per cent of all human-induced carbon dioxide (CO2) emissions, according to the Air Transport Action Group (ATAG). Aviation is responsible for 12 per cent of all transport emissions. The industry actually fares pretty well compared with road cars, which produce 74 per cent of all transport CO2. Around 80 per cent of aviation emissions are linked to flights of over 1,500km, which don’t have a practical transport substitute.
This hasn’t stopped airlines seeking improvements on fuel efficiency, which provide economic gains as well as improving their brand perception. Taxes on emissions have also driven airlines’ bids to become more fuel-efficient. In 2019, easyJet’s carbon emissions per passenger kilometre measured 77.07 grams, down from 78.46 grams in 2018. This has come down by over a third since 2000.
Wizz-Air (WIZZ) says that it is conducting more than 65 fuel-saving initiatives.These include improvements made to economic flying speed, descent and the use of zonal drying, the last of which reduces excess moisture and therefore the weight of the aircraft. A key initiative has been the adoption of Airbus (FRA:AIR) ‘sharklets’, a type of winglet (devices that are fitted to aircraft wings in order to reduce drag), on nearly 70 per cent of Wizz-Air’s aircraft. These sharklets can reduce fuel burn by up to 4 per cent when compared with wingtip fences, which could lead to an annual saving of 900 tonnes of CO2, according to Airbus.
These measures have helped to bring the airline’s emissions below those of peers easyJet, Ryanair (RYA) and International Consolidated Airlines (IAG). Wizz-Air’s initiatives have helped to drive its CO2 emissions per passenger down to 58.5 grams in its 2019 financial year, down from 59.9 grams. IAG, meanwhile, has also identified ways to cut its carbon footprint, such as taxiing aircraft without having to use their engines.
Airlines are also buying more fuel-efficient aircraft. While these are much more expensive, according to Peel Hunt transport analyst Alex Paterson, these jets can offer unit fuel savings of 25 to 40 per cent, which he calls “very significant”.
Mr Paterson expects IAG’s decision to replace “very fuel-inefficient” long-haul aircraft such as the Boeing 747-400 with the Airbus A350 to make a significant difference to its fuel efficiency over the next four to five years. There will be smaller but steady improvements in the short term, with Peel Hunt expecting IAG’s grams of CO2 per kilometre to fall to around 90 for 2019, then 87.3 grams in 2020.
Engineering sustainability
Airframe improvements are demonstrably supporting fuel efficiency improvements for airlines. Engines are are being refined in a bid to make them more efficient. Electric flight is still a few years away, in part owing to an insufficient power-to-weight ratio – the batteries are exceptionally heavy. Engineers and airlines are tinkering with existing engines and alternative fuels.
ATAG identifies the adoption of biofuels as a path to achieving sustainability targets within the airline industry. It says that biofuel-derived sources, such as algae and jatropha, have been shown to reduce the carbon footprint of aviation fuel by up to 80 per cent over their full lifecycle. But Doug Parr, chief scientist and policy director at Greenpeace, is unconvinced by their potential. “Our experience on biofuels so far shows that that isn’t going to be a particularly good route, because biofuels have so many implications of their own,” he says. This year, Greenpeace called for a ban on biofuels for transport, including aviation, which are derived from food crops.
Rolls-Royce engines can be found in the bellies of IAG’s jets. The aerospace manufacturer, which spent £1.4bn on research and development in 2018, is investing in improving its gas turbines as well as deepening the integration of engines into airframes. Its latest Trent and business jet engines are compatible with sustainable aviation fuel, which only accounts for 0.01 per cent of global jet fuel use. “The issue is scaling it up and getting it produced in big quantities,” says Phil Curnock, chief engineer Civil Future Programmes at Rolls-Royce.
The company is weighing up integrating electric motors into its existing turbines, to create hybrid electric engines. Small planes are suitable for full electric power. But as we move up to larger planes, “the amount of electrification as a percentage of the overall power starts to reduce”, Mr Curnock says. He adds that for larger engines, it’s impractical to replace them with an electric motor. However, electricity could be used to augment jet fuel. The engineer suggests that 5 to 10 per cent of the engine’s power could be produced electrically. It may be some time, then, before travellers are flying from London to New York in a fully-electric plane.
Driving on fumes
Engine emissions became a highly contentious issue on the ground, in the wake of Volkswagen’s (Ger:VOW) diesel scandal in 2015, when the German car manufacturer was found to have tampered with its emissions tests. New emissions standards were adopted across Europe in the aftermath, which proved disruptive for both automotive manufacturers and their suppliers. It may therefore have been a tad galling for some observers to note Volkswagen’s recent commitment to invest more than €30bn (£25bn) in electric vehicles by the end of 2022.
The groundwork is slowly being laid for infrastructure that can support electric vehicles in the UK. There are now more than 25,000 electric charging points here, which is more than Germany’s 20,000 terminals (last month, chancellor Angela Merkel stated her wish for 1m stations by 2030). Energy company Centrica (CNA) announced a tie-up with Ford (US:F) this year to provide charging stations and energy tariffs for Ford vehicles for UK consumers.
There has also been a favourable pricing environment for car battery materials this year. Lithium prices declined 12 per cent in the year to November, according to Benchmark Minerals, despite demand increasing by 18 per cent.
It’s difficult to prove that rising concerns about ESG have had any effect on car usage, though. “I think there’s very, very little evidence that consumers are moving from cars and private vehicles, which are very highly polluting, into public passenger transport, which is much less polluting,” Peel Hunt’s Alex Paterson says. In the year to March 2018, 4.36bn passenger journeys were made by local bus in England, according to the government, down 1.9 per cent on the prior period.
Car companies are nevertheless being forced by regulation to bring their emissions down. Even luxury sports car manufacturer Aston Martin (AML) has produced an electric vehicle – the Rapide E, which debuted earlier this year. Since 2015, the European Union (EU) has imposed a target of 130 grams of CO2 per kilometre for fleet-wide average emissions of new passenger cars. This is coming down to 95 grams from 2021.
Car manufacturers will therefore need demand to meet their efforts in ramping up their volumes of hybrid and fully electric cars. “If consumers don’t start purchasing those cars, that becomes a problem for them,” says Mike Bell, chief innovation officer at Ricardo (RCDO). “Your manufacturing complexity is also higher [and] more expensive, so profit margins are also eroded on those hybrid vehicles.”
