Transportation Deployment Casebook/2019/Civil Passenger Aviation (World Wide)

Overview

Passenger air travel comprises of airborne travel in a number of different aircraft, including airplanes, helicopters and blimps. While there are a number of different vehicles captured under the umbrella of air travel, the vast majority of air travel is on modern jet aircraft, including both international and domestic travel. Air travel in modern jet aircraft is currently the fastest mode of long-distance travel available, however smaller aircraft are still used to service shorter distance routes and remote locations.

Advantages

Air travel has a number of advantages over other modes of long-distance transport, these include;

• Speed – modern jet aircraft have a cruising speed of around Mach 0.85 (~1000 km/hr), which is significantly higher than the next best mode (HSR @ 300 – 400 km/hr). Although the time required for boarding/disembarking at airports means that for very short trips air travel is not economical.
• No right of way cost - Unlike other transport modes, such as cars and rail, there is no cost to establishing right-of-way as aircraft can fly in almost all parts of the sky, however current regulation and controls prescribe ‘air corridors’ through which civil aircraft are routed. This enables air travel to expand rapidly to new markets/destinations.
• Not limited by physical barriers – Air travel is not limited by natural barriers to travel that other modes are impacted by, such as mountainous terrain, rivers, ect. The only requirement is a runway, which for light aircraft such as the Cessna 152 can be as little as 250 m long, and in some cases composed of grass, dirt or ice/snow. This allows air transport to access remote destinations that may not be able to be economically serviced by other modes.
• Low barriers to entry for competitors – As there are not the large infrastructure costs to create a transport network (as for rail), new competitors are easily able to enter the market, often using second-hand aircraft. This reduces monopolistic behavior in the airline industry, creating more completion which drives down prices.

Main Markets

Within the United States, current trends in air travel show that on average 2.1 air travel trips are taken annually, with the majority of trips taken for personal purposes (69%) including leisure purposes (48% of all travel), with air travel for business purposes filling the remaining 31%. In recent years the share of trips taken for business purposes has been declining, from 47% in 1997 to 31% in 2015, indicating a shift in the market.

Air travel was initially very expensive with the cost of a return ticket from Boston to Los Angeles costing $4,810 in 1941 adjusted for inflation, meaning that air travel was mostly limited to business purposes or the very wealthy. Today that same ticket costs just $427 on average, which has driven the higher growth seen in the leisure markets compared with business as air travel has become more accessible to the average consumer in the United States.

However, while air travel has become more affordable and accessible in most developed countries, it is still out of reach of most of the world’s population especially those living in developing nations. In 2017 a total of 3.979 billion trips were taken in aircraft, however the majority of these were taken by the minority of the world population with Low and Middle-income countries accounting for approximately 40% of all trips taken while representing 83% of the world’s population. This represents a large potential for growth in these developing markets in the future.

Other competing modes

When air travel was emerging as a potential transportation technology, there were 2 major competing modes, that being the maritime and rail modes. While these 2 modes both compete with air travel for longer distance transit, they often did not compete directly with one another. For example, Trans-Atlantic travel was solely the realm of the maritime modes for obvious reasons.

Both of these modes were limited by their speed in comparison to air travel, with the time savings possible due to air travel being the main driving factor behind the development of air travel technology.

Maritime modes

The history of the maritime modes of transport goes back centuries to use of basic sailing ships. However, in the early 20th century as air transport was first being realized large steam ocean liners dominated long distance travel between remote countries, especially the trans-Atlantic route between North America and western Europe. In addition to these long trans-continental journeys, the maritime modes also made use of travel by canals and rivers, especially in the US and throughout Europe. Maritime transport was limited by its slow speed, with a trans-Atlantic journey taking over 4 days and as communication between continents and countries was becoming quicker with the advent of the telegraph and telephone, demand was growing for a fast, long distance transport option.

Rail

The history of rail goes back to the humble beginnings of the Stockton-Darlington railway in the early 19th century, By the beginning of the 20th century as aircraft technology was being first developed, the rail transport system had developed extensively, with the management of the system becoming more important to the creation of new lines. However, the expansion/construction of rail is limited by the costs of establishing right of way, both in terms of land acquisition costs and construction of the physical rail.  Travel by air was not restricted by this, traveling with free movement through the air, similar to the movement of ships through the water, which created significant interest in the development of the technologies required for flight.

Invention of Air Transport

Travel by air was initially thought to be only possible in lighter than air vehicles (i.e hot air balloons or air ships) and initial development in this area preceded that of the Wright Brothers with their first manned flight of a heavier than air propelled aircraft on December 17, 1903. However airships could not match traditional planes in terms of speed, with a trans-Atlantic crossing taking 3 –4 days. Adding to this was the concerns regarding safety in the wake of the Hindenburg disaster. Ultimately airplanes proved to be faster, safer and easier to control, becoming the predominate technology for travel by air.

The development of the first aircraft's required technological innovation from a number of areas. Firstly, expertise related to aerodynamics in relation to drag and lift was required, which came from the previous development of un-powered gliders with ongoing development as the mechanics of flight came to be understood. Secondly, propulsion technology came from the development of the internal combustion engine, which was adapted with chains and sprockets design from bicycles to turn the propellers. Additionally, construction techniques were adapted and developed for use in aircraft, initially using wood and fabric before move to more advanced aluminium construction as the technology advanced.

In addition to the physical design and construction of the aircraft, communication and air traffic control technologies were required as the use of aircraft increased. Initial control systems were rudimentary as there was no direct communication with pilots, with early route controllers relying on blackboards and maps, moving markers (called shrimp boats) to indicate the approximate location of aircraft. which was a technique borrowed from the maritime modes.

Early Market Development

The early use of aircraft technology was primarily for cargo transport, especially mail, with the creation of a new express airmail service with the first trans-continental airmail service in 1920. It wasn’t until 1927 that the first plane developed for the commercial transportation of people, the Ford Trimotor, was developed.

These early passenger services were supported by the carriage of airmail in the cargo holds, providing additional revenue. This was an idea that was borrowed from the other modes of the time, which also carried cargo in addition to passengers. Due to the expense of air travel at this time it was reserved for the ultra-wealthy and was considered an extreme luxury. Air transport was initially provided a functional enhancement within existing transport markets. Most if not all of the routes served had existing connections by either rail or sea, as such it was only those who valued the time savings that made use of these services.

After the Second World War, gas turbine technology was adapted from military to civil aviation uses, with the creation of the De Haviland Comet and other jet-aircraft in the early 1950’s.

Birthing

A number of government policies were implemented during the birthing stage of the technology that were aimed at increasing technological development and regulating safety. One of the earliest policy initiatives implemented in the civil aviation space was the subsidy of flying clubs at the end of WWI in the UK as the government realized the military significance in having trained pilots. This policy was adopted by other countries in the following years with subsidy payments being introducing in the US on the basis of national defense and the support of infant industries through the Civil Aeronautics Act of 1938. These payments extended to manufactures/suppliers as well as airports and airlines and by 1960 these payments were to the tune of $60 million annually.

Individual governments also began implementing official air traffic control procedures and regulating bodies, which in the US was captured by the Civil Aeronautics Act of 1938, with the creation of the Civil Aeronautics Authority, which “expanded its authority over the airways to also include takeoffs and landings at airports, uniting airport towers with air route traffic control centers.”

As air travel moved from domestic to international transit, it was clear that an international approach to aviation was required to aircraft management. This occurred on the 7th of December 1944 with the signing of the Convention on International Civil Aviation by 52 states, which established the International Civil Aviation Organisation on the 4th of April 1947. The convention has become the basis of international aviation and has been revised eight times since it was originally signed.

The policies contained in the convention were wide ranging, with key articles including;

·        Sovereignty and Territory of airspace (Article 1 & 2)

·        Weapon use against civil aircraft is to be refrained from (Article 3)

·        Customs and airport requirements (Article 10)

·        Rules of the air (both over sovereign territory and international waters) (Article 12)

·        Responsibility of airworthiness and document requirements for international travel (Article 24)

·        Requirement to carry radios (Article 30)

Growth

Air travel began to grow quickly from the 1960’s on-wards, with strong growth still occurring today. Much of this growth has been spurred by greater market liberalization throughout the 1970’s -1990’s, which “Increased airline competition and borne fruit in the form of lower overall fares and enhanced choice of air travel options in many market”. The result of this is that a number of airlines that were nationalized during the 40’s and early 50’s, were now being privatized (QANTAS 1997 & BOAC (which was known as British Airways by this point) 1987).  This was especially prevalent in the western world, with many middle eastern and Asian carriers remaining state owned up to today.

Further technological developments and greater standardization decreased the costs associated with air travel. With fuel costs being a large part of costs associated with air travel, gains in fuel efficiency has driven these cost savings. Between 1968 and 2014 the average fuel burn for new aircraft has fallen by approximately 45%. Additionally, over this growth period the size of aircraft has been increasing, with the development of the Boeing 747 in 1969 and the Airbus A380 in 2005. These larger aircraft enabled airlines to take advantage of greater economies of scale, further driving down costs and opening the market to a larger pool of the population as costs deceased and incomes around the world increased.

Quantitative Analysis

Data

Data for the quantitative analysis was sourced from 2 locations to capture the greatest possible range to allow for a complete analysis of the total lifespan, from 1947 when the technology was in its birthing phase to 2017. The table below shows this data in column 2.

Year	Passengers Carried (billions)	Predicted Passengers (Billions)
1947	0.021	0.043
1948	0.024	0.047
1949	0.027	0.050
1950	0.031	0.054
1951	0.039	0.058
1955	0.070	0.077
1960	0.110	0.110
1965	0.180	0.157
1970	0.310	0.224
1971	0.332	0.241
1973	0.402	0.277
1974	0.421	0.298
1975	0.432	0.319
1976	0.472	0.343
1977	0.513	0.367
1978	0.576	0.394
1979	0.648	0.422
1980	0.642	0.453
1981	0.641	0.485
1982	0.654	0.520
1983	0.685	0.557
1984	0.732	0.597
1985	0.783	0.639
1986	0.843	0.684
1987	0.905	0.732
1988	0.954	0.783
1989	0.983	0.838
1990	1.025	0.896
1991	1.133	0.957
1992	1.145	1.023
1993	1.142	1.092
1994	1.233	1.166
1995	1.303	1.244
1996	1.391	1.327
1997	1.455	1.414
1998	1.467	1.507
1999	1.562	1.605
2000	1.674	1.707
2001	1.655	1.816
2002	1.627	1.930
2003	1.665	2.049
2004	1.889	2.175
2005	1.970	2.306
2006	2.072	2.444
2007	2.209	2.587
2008	2.208	2.736
2009	2.250	2.892
2010	2.628	3.053
2011	2.787	3.220
2012	2.894	3.393
2013	3.048	3.571
2014	3.227	3.754
2015	3.466	3.943
2016	3.705	4.136
2017	3.979	4.334
2018		4.535
2019		4.741
2020		4.949
2021		5.160
2022		5.373
2023		5.588
2024		5.803
2025		6.020
2026		6.236
2027		6.452
2028		6.666
2029		6.879
2030		7.089
2031		7.297
2032		7.502
2033		7.703
2034		7.899
2035		8.092
2036		8.279
2037		8.462
2038		8.639
2039		8.811
2040		8.977
2041		9.137
2042		9.291
2043		9.440
2044		9.582
2045		9.718
2046		9.848
2047		9.973
2048		10.091
2049		10.204
2050		10.312
2051		10.414
2052		10.510
2053		10.602
2054		10.689
2055		10.771
2056		10.848
2057		10.921
2058		10.990
2059		11.054
2060		11.115
2061		11.173
2062		11.226
2063		11.277
2064		11.325
2065		11.369
2066		11.411
2067		11.450
2068		11.487
2069		11.521
2070		11.553
2071		11.583
2072		11.611
2073		11.637
2074		11.662
2075		11.685
2076		11.706
2077		11.726
2078		11.745
2079		11.762
2080		11.778
2081		11.794
2082		11.808
2083		11.821
2084		11.833
2085		11.845
2086		11.855
2087		11.865
2088		11.875
2089		11.883

Equation

The following three parameter logistic function was used to model the data as an S-Curve, identifying the birthing, growth and maturity stages of the technology.

$S(t)={\frac {K}{1+e^{(}-b(t-t_{0}))}}$

where:

·        S(t) is the number of passenger trips per year

·        t is the year

·        t₀ is the inflection year (year in which 1/2 K is achieved),

·        K is saturation status level

·        b is a coefficient.

Modelling

In order to estimate the parameter K, a range of values were considered, from 5 to 32 billion, with the K – value that best fit the obtained data being selected.

K = 12 billion was found to best fit the data with R² = 0.9854, with parameter b = 0.0721. Additionally, the inflection year, t₀, was found to be 2025. The figure below plots both the actual and estimated data.

Analysis

The S-curve model predicts that the number of passengers carried by air transportation will peak at 12 billion per year, with growth slowing after 2025, reaching the mature phase by 2070. While air transportation exhibits many of the characteristics of a mature system, with standardization, market segmentation and the tailoring of products to markets, the analysis shows that the technology is still in its growth phase. This can be largely contributed to the global consideration of the technology, as while the technology may be largely mature in developed markets (i.e United States) there is considerable growth to come from developing markets as discussed earlier.

However, any of these future predictions should be taken with a grain of salt as technological innovation or international regulatory changes have the potential to impact the growth of the technology. One potential issue that has the potential to limit growth is the large carbon footprint air travel has, with anti-flying campaigns gaining traction in countries around the world. Additionally, with the small margins of profit currently within the industry, the price of travel is closely tied to the price of fuel/oil. Future oil price increases have the potential to raise prices, potentially reducing the demand for air travel, especially from those on lower incomes.

While the accuracy of long term future projections are hard to analyse in terms of accuracy, nearer term estimations can be compared to gain an determination of accuracy. The International Air Transport Association predicts that by 2037 there will be 8.2 billion air transport trips per year. With this model predicting 8.46 annual trips in the same year it can be said that this prediction is reasonable likely to be accurate in the near term, beyond that is anyone’s guess.