Case Study: Will e-flight take off in LAC?

Transcript

Mick Werson:Good afternoon, everyone. My name is Mick Werson. As introduced, I work for NACO, Netherlands Airport Consultants. Our company, which has been around for 75 years, is specialized in supporting mainly airport clients with the development of airport facilities and infrastructure, so technological feasibility, financial feasibility. But we also get questions around sustainability concepts nowadays, including e-aviation. So I'm happy and honored to have the opportunity to speak to you today about this exciting topic and share with you some of the insights that we have accumulated over the last few years already on this topic, work that we have mainly have done in the LAC region, actually. So after an introduction to set the stage, I will focus in the core of my presentation about, first of all, the technical and operational perspectives or the practicalities of e-flight. And after that, about the market and financial perspective. So let's say the, the business side of e-aviation. And I will conclude with some reflections on how to make electric aviation happen. So electric aircraft is one of the 3 technological concepts that the sector is betting on. We already have nowadays sustainable aircraft fuels, which as you know is not a new aircraft technology. It's a different way of producing jet fuel in a more environmentally friendly way. And then secondly, in a few years we will see the introduction of electric and hybrid electric aircraft. And then in a further future, some of us might, might already be retired by then, we will see the introduction of hydrogen-powered aircraft. But electric aircraft and electric aviation will actually be the first opportunity for the aviation sector to operate aircraft in a sustainable, friendly way. Because assuming that the power, the electricity is produced in a green way. There will be no emissions, and so that will be very welcome for the aviation sector, that where there is a lot of focus on the environmental impact of our growing sector. So that would be a step forward. The development of electric aircraft is in full swing. Already quite some years. Reportedly, there are over 50 companies working diligently to develop and mature this and certify this technology. So what we see on the screen is a brief overview and some highlights just to illustrate. A few comments on it: it's a very dynamic landscape, it changes. Some companies or initiatives disappear, new ones come up. Um, one remark is the color coding. So it actually highlights the 2 different technologies. We have the full electric aircraft that operate with a battery or with a hydrogen fuel cell that powers the electric engine. Uh, those are highlighted in dark green, and we see the light green, the, the development of hybrid electric aircraft, which is similar to electric vehicles. Secondly, we see on the screen some names that are familiar— Embraer, Boeing— but we also see new entrants in this space, for instance, Eviation, Ellis, and Heart Aerospace, which are new companies, but by now they actually have gained quite some traction. For instance, Eviation Alice, which is developing an aircraft for 9 passengers, supposedly to come into operation in 2027. They have over $4 billion in orders, among which DHL, surprisingly, and Air New Zealand. And Heart Aerospace has orders from has 250 orders in total, including from Canadian Air and from United Airlines. So either directly or indirectly, reputable companies in our sector have a vested interest in this new technology. And finally, from left to right, further into the future, electric aircraft will be larger in terms of seating capacity. And the range that they can fly. However, it's generally accepted that due to the limits of what batteries can do, that electric aircraft will never really surpass much more than a range of 1,000 kilometers and 100 passengers in seat capacity. So that means that a lot of airlines, given their route network and their business model, will probably never even fly with electric aircraft. So where we will see them, first of all, the example on the right, they can be operating existing short routes. In the example, in the Dutch Caribbean, where we have been working as part of a working group of the Dutch government to introduce the first generation of electric electric aircraft in the ABC Islands— Aruba, Bonaire, Curaçao— where the largest distance is less than 200 kilometers and where electric aircraft can be a sustainable alternative. On the left, that example of Colombia with new routes under 300 kilometers represents a more far-fetched and a more visionary idea of e-aviation Where the concept is that e-aircraft, given to superior route economics, can actually be implemented to develop new short-distance regional networks, a concept which is called regional air mobility, and where airlines can use them to generate new routes. unserved markets and actually compete in the 200 to 400 kilometer distance with car travel and with trains. So in the next part, in the part after that, I will take a deeper dive in the various aspects and considerations with regard to the practicality of e-aviation. This is done mostly by the work that we have done, based on the work that we have done in the Dutch Caribbean, but also an assignment that we did last year in a particular LAC region. Ideally, I would have been able to show you the specific case and the results from that case. However, our client more or less at the late, late last moment has denied us the, the right to share that with you, so I have to work around that a little bit. And I made the, the outcome, and I will— what I will show you a little bit unrecognizable, but hopefully showing you the way that we approached the assignment to assess the feasibility of implementing e-aviation in a regional network. Hopefully that's interesting, and I can use the results to, uh, to give you an idea of that. Um, so the first consideration obviously is the fact that electric aircraft use batteries, which by definition have a limited capacity. But the practicality is it— of it is that like any battery that we have in our laptop or in our mobile phones, you cannot use all the capacity. On the lower end, for technical reasons, it's not good to fully deploy your battery below 20% because the battery degrades faster. So it doesn't help to extend the battery's life as long as possible. So you do not want to use— also using electric aircraft, the battery below 20%. And then in aviation, obviously for safety, we have to have reserves, uh, 30-minute flight at cruising altitude speeds. So we think that in practice we cannot use the battery below 30 to 40% even. And on the top range, while charging— and we have to consider that for aircraft it will be all fast charging. For instance, overnight charging as you do with an electric vehicle is not an option for safety reasons. So it will all be fast charging, and with fast charging the thing is that above 80%, charging the last 20% takes just as long as the first 80%. So in practice, with aiming at as low as possible turnaround times, the net percentages between which you can use the battery will be before— between 40 and 80%. So we translated that net capacity of the battery to what that means for the range of the aircraft. And in our study, we have compared the Eviation Ellis aircraft, which is a 9-seater, and we compared it to the incumbent aircraft that is used in the network that we studied, which is a Cessna Caravan with 10 seating capacity, 10 passengers. So this net capacity meant that the range will be shortened to just under 300 kilometers. So using that information, we looked at the possible city pairs in a network which is represented here in a matrix. So each combination in color is a city pair, and in green we assessed the feasible routes that can be flown when charging only at origin, and in blue-gray, those are the feasible routes that can be flown when charged at the origin and destination, and the reddish combinations are out of reach for the first generation of electric aircraft. The second reality is that obviously due to the battery, electric aircraft Much heavier. If you compare the maximum takeoff weight between the Cessna Caravan and the Eviation Ellis aircraft, the MTOW is twice as large, twice as big. So that obviously has repercussions for the landing and takeoff distance. And so the second requirement that we looked at, at selecting routes, was the runway length of the airports, and due to that, there were 4 airports that were excluded because the runway is not long enough. Thirdly, aircraft have to be— electric aircraft have to be charged. As I said, it will need to be fast charging, and you will have to deal with peak aircraft arrivals and departures, so you will need quite some capacity. And that has to be installed, and that also has to be sourced, the electricity. So you have to look at a map, and that's what we did, at where in the proximity of the airport is production of green electricity. If not, you will have to look at the airport and build solar farm and produce your own green electricity. You'll have to look at the required peak loads and have to see see how you can deal with that in terms of optimizing what you can store in larger batteries and what the peak capacity is, what you can offer at the charging infrastructure. So that's an optimization task in itself which can be quite complicated. And based on the 3 requirements, so route distance, runway length, and the proximity of green electricity in the, in the proximity of the airport. We mapped the airports and categorized them and created buckets in terms of short-term opportunities where there is traffic and the route can be reached and is within the range, and there is little to no investment required. The second bucket was the medium-term opportunities where you would have to invest more in the infrastructure on the ground. And the third bucket to the right in the red zone, those were the city pairs that for the longer term not seem to be attractive. So a few reflections on the market and financial perspective. Obviously, when we look at the investments that need to be made, we have to also take a forward step— forward-looking stance and take a longer perspective. So over time, hopefully the battery capacity will increase. Apparently lithium battery capacity grows each year with 3%. So over time, the, the range of aircraft will increase, due to which city pairs will come into reach almost automatically without doing nothing. And the second thing, obviously, the second factor that will drive the uptake of electric aviation is the investments that you make in the ground, on the ground infrastructure. So in our case, we, um, we mapped that all out and we saw that over time more and more city pairs, which we see a selection here are coming into play and can be serviced with these electric aircraft, leading to a growth of the share of electric aviation in that particular network from 28% to 53%. So it's— I think it's notable that already in the early years you can reach quite a large percentage, 28, almost 30%. Focusing on the, on the routes that are within range, obviously, but that have the most traffic volume. So you can actually reach quite a number of flights with this new technology. So this is all how to, you know, the operational and technical requirements to make it happen. But that will happen obviously only if it's attractive for the airlines. So what we did here was we compared the route economics between the 2 aircraft, the Cessna Caravan and the Aviation Alice. On the left, in the starting year, the first year of operation of the Aviation Alice, and what we see, there's a few differences between the route economics and the route cost, the cost per available seat kilometre. First of all, that electric aircraft with the electric engine that they have, they require less maintenance and maintenance overhaul, less cost on that end. And the electric aircraft have lower energy costs because electricity is cheaper than jet fuel. However, the big ticket for electric aircraft is the replacement of the battery, the green, the green area. And that is typically what in a lot of almost advertising-like publicity is almost forgotten, but which is a very big cost item. Now, over time, on the right, we see the same picture, but then in 2050, with the development of battery capacity and the improvement of the technology, that cost will become lower. And so over time, and we estimated that will happen, the tipping point is between 2030 and 2040, there will there will be a moment when electric aviation, electric aircraft will have favorable route economics compared to traditional aircraft. In the short term, they are in that sense not competitive. However, then it's up to regulators and governments obviously to, to yes or no develop policies. Obviously we don't have an opinion, but they have the instruments in terms of giving discounts on airport charges or taxing fossil fuels. In the EU, for instance, there is the discussion on whether there should be VAT on jet fuel, and the European Union is also contemplating giving incentives on airport charges. So those, I think, that can happen, and in that scenario, actually, electric aviation and electric aircraft could be competitive from the beginning, and in the longer term, be much more competitive. For aircraft— for airports, obviously, that have to make investments in infrastructure, it will be a balancing act between investments that will have to be made in the ground infrastructure, so either runway extension or electric infrastructure, and how that is compensated by additional traffic and also induced demand because new routes will be opened and there will not be only the typical normal growth but an additional growth due to better accessibility and more routes routes that will be serviced. Of course, there's the benefits of the reduction of emissions. We have made calculations for that, in principle non-financial, although it depends on which regime and what emissions might cost in the future, so that also has to be taken into account. 2 short slides on how to make it happen. First of all, it's much— a little bit of a stereotype, but obviously there will be a lot of stakeholders involved: airlines, airports, regulators, governments. So no one can make this happen individually, so all these actors need to come together and work together to, to work towards implementation. And to make it work, develop a joint vision, organize the exchange of information, and also to even in a project way to allocate activities and make sure that the proper conditions get into place. With regard to the LAC region, I think there will be opportunities like in any other region. There are island connections, There are larger islands that also have connections on the island. There are large countries that have remote regions. And so I think there are many opportunities here also. But again, also here, it will mainly in the beginning may depend on regulators and governments how they want to stimulate and incentivize this new technology. Route economics will be in a shorter not competitive, but can, with the help of these parties, be helped to get going. And last but not least, actors and stakeholders need to come together to make this happen and to help aviation grow towards a more sustainable future. Thank you.

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