ISTAT Jetrader - Summer 2023 - 40

The Cost
of NET ZERO
by Jeni Stanley and Stuart Hatcher
W
40 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
e may feel that the drive
toward decarbonization is a
relatively new bump in the
road but, in reality, the threat
has been trying to burst
through for decades. In fact,
the International Civil Aviation
Organization (ICAO) has been on the case to stamp out one
form of emission or another since the early 1980s yet kept
CO2 until last. So, we knew it was coming. If that is the case,
why aren't we better prepared? Surprisingly, we have already
been moving as fast as our sector allows us, hence why the
carrot is being removed by those on the outside, leaving us
with just the stick.
Until fairly recently, decarbonization messaging has been
conveyed within our industry with a large focus on appealing
to demands for more consistent airline profitability. OEMs,
lessors, banks, MROs, etc., are there to serve the airlines,
which are striving for optimal operating cost metrics. Engine
and airframe OEMs have for years been pointing the finger
at one another as a reason for not tackling this issue fast
enough, but that is a fundamental problem with a " balanced "
duopoly. R&D is expensive and not always efficient, and when
coupled with pressure coming from the finance side of the
business to maintain steady depreciation, the incentive for
change only really dominates every couple of decades. One
only has to look at the changes across the 737 family since
the late 1960s to visualize this evolution driven by pressure
from the airlines and duopolistic behavior to cut operating
costs while expanding networks. We can call that the carrot in
this scenario.
Helping change along are regulations, which can be
considered the stick. As new technology developments are
driven by market forces, regulatory pressures wade in to
drive out old technology through retirement or maintained
with retrofittable upgrades. Consequently, since the advent
of the Council on Aviation Environmental Protection (CAEP)
standards in the early 1990s, engine OEMs have successfully
complied with mandates to reduce NOx, smoke and other
particulates via technical changes that would appear
invisible to the layman to ensure conformity and maximize
residual value.
I think it's fair to say that many of us (if not most) have
become ever more cynical on what asset technology can do
to address the problems we face. Sure, unit fuel burn has
been steadily declining, but opposing that is the rising cost of
maintenance and decreasing reliability. Those " outside " our
industry have lost patience, too, hence why the stick is out
ISTAT Jetrader - Summer 2023

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