Qualitative Scenarios
Jagoda Egeland
Strategy & Policy Manager
Airports Commission Briefing
London, 17 March 2014
1
Assessment of Need: How much and
what kind of aviation capacity in the
future?
“The commission will examine the scale and
timing of any requirement for additional capacity
to maintain the UK’s position as Europe’s most
important aviation hub; and it will identify and
evaluate how any need for additional capacity
should be met in the short, medium and long term.”
Terms of Reference
2
Aviation demand is likely to increase
significantly between now and 2050
UK aviation demand, 1980-2050
3
In the “Core Forecast” world, major SE
airports are full by 2041
4
It is clear that the world has moved on significantly
since the UK government last considered airport
capacity in the 2003 White Paper…
… and it is still changing…
• Global Economy and Society – the developed world is now on a
slower-than-before-the-crisis growth path; the centre of economic
gravity is moving eastwards
• Global Politics – environmental and climate change issues are
becoming the focus on the global policy agenda; emerging world is
taking more active part in global politics
• Fuels and Technology – the world keeps on being more dependent on
oil, but credible alternatives are being developed
… so in Phase 1 of our work we also considered the likely long-term
impacts of these changes on airports, airlines and passengers.
5
We organised a workshop for a selection of
experts from our Expert Panel
• Dr Andrew Kempton; Chief Noise Specialist, Rolls-Royce
• Professor Henry Overman; Professor of Economic Geography,
London School of Economics
• Mr David Starkie; Senior Associate, Case Associates
• Professor Callum Thomas; Professor of Sustainable Aviation,
Manchester Metropolitan
• Dr Andrew Sentance, Senior Economic Adviser, PwC
• Michael Burns, Head of Aviation, PwC
Experts had a discussion about the most important drivers of change and
their likely impacts on the aviation sector.
6
The crisis has increased the growth gap
between emerging and advanced economies
Annual Change in GDP (3-yr rolling average)
World, Emerging Markets, and Advanced Economies
% Annual Change in GDP (3 yr rolling
average), constant prices
9
8
7
6
5
4
3
2
1
0
1982
1987
1992
1997
2002
2007
2012
2017
-1
World
Source: IMF WEO
Emerging market and developing economies
Advanced economies
7
Asia-Pacific is growing in economic
importance…
Source: IMF WEO
8
…as a result the Economic Centre of Gravity
is moving eastwards…
9
…and an unprecedented proportion of
megacities is growing in Asia
Source: PwC
10
Rising price of oil due to growing world
population and economic growth…
• Over the last decade,
the world has
experienced rising
energy prices, with world
population rising above
7 billion, and demand
supported by strong
growth in emerging and
developing countries
• New sources of
energy, such as shale
gas, and various lowcarbon technologies
may ease some of these
upward pressure or
even reverse the trend
11
…have been driving aircraft fuel efficiency
measures for a long time…
Historical improvements in aircraft fuel efficiency
12
…but it is unclear there will be significant
fuel-efficiency improvements over the years
to come
Source: CNN
13
The aviation industry is taking voluntary
action to reduce emissions…
• Sustainable Aviation (an alliance of UK airlines, airports, aircraft
manufacturers and air navigation service providers) has set out a
CO2 Road-Map based on improvements in air traffic management,
greater fuel efficiency, use of sustainable fuels, and carbon trading
• The International Air Transport Association (IATA), which represents
about 240 airlines around the world, has adopted a set of targets to
reduce net aviation emissions. These include a cap on aviation CO2
emissions from 2020, an average improvement in fuel efficiency of
1.5% per year from 2009 to 2020, and a reduction in CO2 emissions
of 50% by 2050, relative to 2005 levels
…but can they deliver?
14
Will the rise of Asian consumer change the
face of the aviation industry…
15
…by altering the global route network and
challenging the dominance of the ‘old’ carriers?
16
Will the global price of oil continue to rise?
Source: The Economist
17
Will the low-cost carrier (LCC) model crowd out other
carriers from the short-haul, and possibly other,
markets?
Source: SABRE; PwC Analysis.
18
Will aircraft become greener and quieter?
YES
NO
19
During the workshop, five main drivers of the
aviation sector were identified
20
Four scenarios that emerged…
21
…were used to inform sensitivity tests of our
demand model
Even in scenario D, all London airports except for Stansted are full by 2040
22
Conclusions
• The case for capacity expansion in London
and the South East stands up in all the
scenarios modelled
• The balance of capacity needed in each
scenario is different
– Scenarios A and B point towards hub
capacity, whereas in scenarios C and D
prioritising non-hub capacity would
appear more important
23
Qualitative Scenarios
Jagoda Egeland
Strategy & Policy Manager
Airports Commission Briefing
London, 17 March 2014
24