Burghouwt, G. and De Wit, J. (2006) The challenges of high-priced oil for aviation, Airneth report 2., 24 October 2006

Not the resources of oil as such, but much more the insecurity of supply due to geopolitical instability in combination with a tight oil market makes a scenario with much higher oil prices than the world is currently experiencing not unlikely. Aviation is completely dependent upon oil as its fuel source.

Since no practical energy substitute is readily available for commercial aviation, a scarcity of petroleum relative to demand will present a major challenge for the air transport industry and aviation policy. In addition, efficiency gains due to operational measures and new aircraft technology are limited for the short-and medium term. In particular, it has been demonstrated that the annual reduction rate in fuel consumption per traffic unit is not a constant but is itself also falling, in contrast to past estimates. A high-priced oil scenario will therefore have severe consequences for demand, airline revenues, the competitive position of airports and eventually airline network strategies and fleet development. In particular, transfer demand, short-haul and leisure traffic can be expected to be heavily affected by high oil prices due to their relative high price sensitivity.

Currently, little research has been done that investigates the potential impacts of high oil prices on the aviation industry. Hence, Airneth argues that more research in this field is needed. In this respect, the large-scale, international 2006 initiatives of the French Académie Nationale de l'Air et de l'Espace (ANAE) on air transport and the energy challenge have to be appreciated . According to Airneth, important research themes include:

• The extent to which airlines pass on high fuel prices to their clients in both the passenger and cargo market
• The potential impacts of high oil prices on: o demand in various market segments airline revenues; o the competitive position of hub airports; o environmental impacts.
• Potential second order effects of a high-priced oil scenario in terms of network and fleet development.

• Assess to what extent current aviation scenarios sufficiently include a future with high-priced oil.
• Assess the risks of a high-priced oil scenario for the various stakeholders in the industry.
• Study the options that governments and other stakeholders in the industry have to anticipate a high-priced oil scenario.
• Ensure ongoing involvement by policy makers in the international debate on the energy challenge for the aviation industry.