1
00:00:00,160 --> 00:00:03,440
Speaker 1: Hi, Mark, Hey Dina. So today on the podcast we

2
00:00:03,480 --> 00:00:06,760
Speaker 1: interview our colleague David Doherty, who is a oil demand

3
00:00:06,760 --> 00:00:09,559
Speaker 1: analyst here at b NF, and we are talking about

4
00:00:09,560 --> 00:00:12,960
Speaker 1: a note he wrote called jet fuel Turbulence Ahead for

5
00:00:13,039 --> 00:00:16,239
Speaker 1: Demand Growth. And I can't help but fixate on the

6
00:00:16,239 --> 00:00:19,079
Speaker 1: word turbulence. Mark, have you ever been in bad turbulence

7
00:00:19,079 --> 00:00:22,080
Speaker 1: in a nerve plane before? Sure? But just once? Really

8
00:00:22,200 --> 00:00:24,880
Speaker 1: may be nervous. I was coming in from Guatemala into

9
00:00:24,920 --> 00:00:27,680
Speaker 1: Newark in New Jersey, and it was in a rainstorm,

10
00:00:27,760 --> 00:00:29,720
Speaker 1: lightning storm, and it was just bouncing all around, and

11
00:00:29,720 --> 00:00:32,839
Speaker 1: I broke into a cold sweat. Just once, just once? Really? Yeah,

12
00:00:32,880 --> 00:00:35,040
Speaker 1: how about you? Well, apparently once is all it takes.

13
00:00:35,080 --> 00:00:38,760
Speaker 1: So I had some really bad turbulence once, which was

14
00:00:38,840 --> 00:00:41,440
Speaker 1: one of those where the flight attendants took their seats

15
00:00:41,479 --> 00:00:44,440
Speaker 1: and people's bums were coming out of their seats and

16
00:00:44,479 --> 00:00:47,000
Speaker 1: everybody was sitting there praying. The woman next to me

17
00:00:47,159 --> 00:00:49,760
Speaker 1: kept tears in her eyes, asking to see her children again,

18
00:00:50,200 --> 00:00:53,760
Speaker 1: and um. It ended up causing some pretty serious flight

19
00:00:53,800 --> 00:00:57,440
Speaker 1: anxiety for me, and I ended up going to a class.

20
00:00:57,520 --> 00:01:01,200
Speaker 1: I tried to book a hypnotherapist, but unfortunately I was

21
00:01:01,280 --> 00:01:04,959
Speaker 1: unable to get in with the hypnotherapist. Because I was

22
00:01:05,000 --> 00:01:08,240
Speaker 1: flying so often for work, I was unable to get

23
00:01:08,240 --> 00:01:11,200
Speaker 1: our to get our schedules to match up, which actually

24
00:01:11,560 --> 00:01:14,640
Speaker 1: I think it speaks a lot of volume over the

25
00:01:14,680 --> 00:01:18,039
Speaker 1: demand growth. Here we're still flying despite all this, still flying,

26
00:01:18,080 --> 00:01:20,480
Speaker 1: so I was miserable on every flight, but I refused,

27
00:01:20,600 --> 00:01:24,920
Speaker 1: deep down my stubbornness over road the level of anxiety

28
00:01:24,959 --> 00:01:28,080
Speaker 1: I had about flying because I refused to let it

29
00:01:28,160 --> 00:01:30,840
Speaker 1: limit my life. It's pretty common for people not to

30
00:01:30,880 --> 00:01:33,920
Speaker 1: like flying in turbulence, but we do it anyway. And

31
00:01:34,000 --> 00:01:37,320
Speaker 1: so when we say turbulence ahead for demand growth, it's

32
00:01:37,319 --> 00:01:39,800
Speaker 1: actually the demand part of you and me and everybody

33
00:01:39,800 --> 00:01:41,880
Speaker 1: we know wanting to fly. That's not the main issue.

34
00:01:42,400 --> 00:01:44,840
Speaker 1: It's all the other stuff that goes into ramping up

35
00:01:44,840 --> 00:01:48,200
Speaker 1: this industry. So let's jump in today with David Doherty

36
00:01:48,240 --> 00:01:50,920
Speaker 1: and hear what he has to say about airline demand

37
00:01:51,040 --> 00:01:55,160
Speaker 1: going in the future. As a reminder, Bienny Have does

38
00:01:55,240 --> 00:01:57,840
Speaker 1: not provide investment or strategy advice, and you can hear

39
00:01:57,920 --> 00:02:01,040
Speaker 1: the fulldest claimer at the end of the show. Hi David,

40
00:02:01,080 --> 00:02:03,720
Speaker 1: thanks for joining us today. Thanks for having me. You

41
00:02:03,840 --> 00:02:06,000
Speaker 1: might have noticed in the news that there have been

42
00:02:06,080 --> 00:02:09,760
Speaker 1: a recent increase in what's being termed as flight shaming,

43
00:02:09,919 --> 00:02:12,400
Speaker 1: where people are making other people feel guilty for taking

44
00:02:12,440 --> 00:02:14,880
Speaker 1: flights because of their carbon footprint. And that might lead

45
00:02:14,919 --> 00:02:18,760
Speaker 1: you to believe that maybe the overall amount of flight

46
00:02:18,840 --> 00:02:22,320
Speaker 1: that's happening on commercial aircraft is decreasing. But David, you're

47
00:02:22,360 --> 00:02:25,280
Speaker 1: an oil analyst here at be Enough and you have

48
00:02:25,320 --> 00:02:27,440
Speaker 1: a view that's a little bit contrary to that. So

49
00:02:27,600 --> 00:02:29,160
Speaker 1: let us know what you think is actually going to

50
00:02:29,240 --> 00:02:32,440
Speaker 1: be happening with airline demand going forward. Yeah, I mean,

51
00:02:32,919 --> 00:02:35,120
Speaker 1: just by looking at the data, it tells a totally

52
00:02:35,120 --> 00:02:37,960
Speaker 1: opposite story of that. And the interesting part is it's

53
00:02:37,960 --> 00:02:40,000
Speaker 1: a great story for us if we're looking at something

54
00:02:40,040 --> 00:02:43,560
Speaker 1: from our London office or in Europe. But for a

55
00:02:43,560 --> 00:02:46,320
Speaker 1: lot of people flights new they want to go on holiday,

56
00:02:46,639 --> 00:02:49,720
Speaker 1: and are we going to deny them that? We expect

57
00:02:49,760 --> 00:02:52,080
Speaker 1: them most of this also expect that man for flying

58
00:02:52,200 --> 00:02:55,120
Speaker 1: is going to continue to grow. Where's this demand coming from?

59
00:02:55,160 --> 00:02:59,240
Speaker 1: Mostly China and Asia Pacific, and that's from a small base,

60
00:02:59,360 --> 00:03:01,440
Speaker 1: but that was pretty much where the growth is coming from.

61
00:03:01,639 --> 00:03:05,720
Speaker 1: What's interesting has developed Europe also growing. As we changed

62
00:03:05,760 --> 00:03:08,800
Speaker 1: the way Europe is structured, we expanded the EU ten

63
00:03:08,880 --> 00:03:11,000
Speaker 1: years ago, right, So you can now travel to other

64
00:03:11,040 --> 00:03:14,240
Speaker 1: parts of Europe without visas or easier access. And the

65
00:03:14,280 --> 00:03:17,160
Speaker 1: low cost carrier came around and they fly a lot

66
00:03:17,240 --> 00:03:19,280
Speaker 1: and they're super cheap, and that opens up to a

67
00:03:19,280 --> 00:03:22,720
Speaker 1: whole new market people who couldn't afford to fly before

68
00:03:23,040 --> 00:03:25,519
Speaker 1: they can fly net What time horizon are we talking about?

69
00:03:25,919 --> 00:03:28,799
Speaker 1: Choose housands onwards you see a spike up. The only

70
00:03:28,800 --> 00:03:30,640
Speaker 1: place in the world really where you're kind of seeing

71
00:03:30,680 --> 00:03:34,440
Speaker 1: flat demand or steady ish demand is the US, and

72
00:03:34,480 --> 00:03:36,960
Speaker 1: you don't really have the low cost carrier there. You do,

73
00:03:37,040 --> 00:03:38,640
Speaker 1: and you kind of do, but you don't have your

74
00:03:38,960 --> 00:03:40,960
Speaker 1: I mean I moved here, what's six seven years ago,

75
00:03:40,960 --> 00:03:43,120
Speaker 1: and I didn't. We didn't have Ryanair or easy Jet

76
00:03:43,280 --> 00:03:45,760
Speaker 1: or anything like that in the US when I was there. Oh,

77
00:03:45,800 --> 00:03:50,760
Speaker 1: I think we do on the west coast Southwest? Okay, Yeah,

78
00:03:52,120 --> 00:03:55,520
Speaker 1: the biggest domestic airline I guess is that Southwest. Yeah,

79
00:03:55,680 --> 00:03:57,800
Speaker 1: there's a few. It's a different, got a long time,

80
00:03:59,760 --> 00:04:03,680
Speaker 1: it's different. So the European stories a lot of connecting

81
00:04:03,720 --> 00:04:06,360
Speaker 1: the new East to what was western Europe. Right, So

82
00:04:06,400 --> 00:04:09,000
Speaker 1: you've got this expanded wealth in Europe which didn't exist before.

83
00:04:09,440 --> 00:04:12,840
Speaker 1: The US hasn't expanded its wealth to the same extent

84
00:04:13,280 --> 00:04:15,360
Speaker 1: because you don't have brand new markets coming into one

85
00:04:15,440 --> 00:04:17,360
Speaker 1: large market, right, So you're kind of moving the goalpost

86
00:04:17,400 --> 00:04:20,039
Speaker 1: a little bit. In terms of fuel consumption as well,

87
00:04:20,160 --> 00:04:22,880
Speaker 1: the system in the US gets quite efficient, so you've

88
00:04:22,880 --> 00:04:26,919
Speaker 1: got fairly flat oil consumption jet oil consumption, whereas in

89
00:04:26,960 --> 00:04:30,240
Speaker 1: Europe Jeffield demand is growing and growing. It's slowing down now,

90
00:04:30,279 --> 00:04:32,960
Speaker 1: but it's still growing a pack. It's going through the roof.

91
00:04:33,440 --> 00:04:36,280
Speaker 1: You've got lots of new low cost carriers coming in.

92
00:04:36,680 --> 00:04:40,520
Speaker 1: Traditional carriers traveling longer distances. You know, you can connect

93
00:04:40,520 --> 00:04:43,520
Speaker 1: now in China if you're going to Singapore or to Australia.

94
00:04:43,600 --> 00:04:46,640
Speaker 1: Previously that would never happen. So yeah, the whole system

95
00:04:46,720 --> 00:04:49,480
Speaker 1: is changing and the demand profile as a result is changing.

96
00:04:49,920 --> 00:04:52,640
Speaker 1: So flight schaming, whether or not exists, might not actually

97
00:04:52,640 --> 00:04:55,480
Speaker 1: be decreasing demand as much as we might think. It's

98
00:04:55,520 --> 00:04:57,320
Speaker 1: a bit like when I want to eat some candy

99
00:04:57,320 --> 00:04:59,000
Speaker 1: and I don't want my kids to see I'm going

100
00:04:59,080 --> 00:05:01,240
Speaker 1: to go around the corner. Are kind of stand in

101
00:05:01,320 --> 00:05:03,200
Speaker 1: the closet so they don't see me getting the candy.

102
00:05:03,240 --> 00:05:05,960
Speaker 1: But the reality is everybody wants it. You're saying, this

103
00:05:06,040 --> 00:05:09,200
Speaker 1: is growing in Asia. Is there not a lot of

104
00:05:09,240 --> 00:05:11,800
Speaker 1: infrastructure that needs to be added in order to make

105
00:05:11,800 --> 00:05:14,800
Speaker 1: that take place? And what does that look like for

106
00:05:14,839 --> 00:05:18,120
Speaker 1: that market? I mean in terms of fuel supply or

107
00:05:18,320 --> 00:05:21,520
Speaker 1: airports or anything else that you might need and have

108
00:05:21,760 --> 00:05:26,200
Speaker 1: a massively growing industry. Yeah, there's a lot of pipes

109
00:05:26,200 --> 00:05:28,480
Speaker 1: that need to be put together for this to work. Essentially,

110
00:05:29,000 --> 00:05:32,240
Speaker 1: So the biggest growth centers in terms of countries that

111
00:05:32,240 --> 00:05:34,159
Speaker 1: are expected to sort of lead the market in the

112
00:05:34,200 --> 00:05:38,479
Speaker 1: future of China, the US, interesting, it and India. Now,

113
00:05:38,520 --> 00:05:41,000
Speaker 1: India and China are really interesting when you think about it,

114
00:05:41,320 --> 00:05:44,680
Speaker 1: um they're underserved massively. So in the UK and the

115
00:05:44,800 --> 00:05:47,200
Speaker 1: US we travel on average about two times per year

116
00:05:47,240 --> 00:05:50,120
Speaker 1: each right. In Germany, which has a really good rail network,

117
00:05:50,160 --> 00:05:52,320
Speaker 1: it's about once per year. But if you look at

118
00:05:52,320 --> 00:05:54,680
Speaker 1: India and China, you're looking at zero point to zero

119
00:05:54,720 --> 00:05:57,520
Speaker 1: point four trips per year per person, right, So it's

120
00:05:57,560 --> 00:06:01,000
Speaker 1: tiny and it's massively undersaturated. What they don't have is

121
00:06:01,040 --> 00:06:04,520
Speaker 1: the network we have in Europe and in the US

122
00:06:05,040 --> 00:06:08,760
Speaker 1: of airports and connection points and ways to get off

123
00:06:08,760 --> 00:06:11,359
Speaker 1: the ground. Right, you need that runway. So for example,

124
00:06:11,400 --> 00:06:13,320
Speaker 1: in India, it's got a ton of runways that are

125
00:06:13,360 --> 00:06:16,479
Speaker 1: just laying idle. So the government of they have a

126
00:06:16,520 --> 00:06:20,240
Speaker 1: regional connectivity scheme in order to get people flying in

127
00:06:20,320 --> 00:06:24,080
Speaker 1: mobile so they're bringing back runways that were previously essentially derelict.

128
00:06:24,200 --> 00:06:27,600
Speaker 1: Right They're also trying to build new runways, so the

129
00:06:27,640 --> 00:06:31,080
Speaker 1: capacity they have at some of their biggest airports is expanding,

130
00:06:31,680 --> 00:06:33,760
Speaker 1: and they're building new airports. So they want to double

131
00:06:33,800 --> 00:06:38,320
Speaker 1: the amount of airports in India. It's pretty ambitious. India

132
00:06:38,360 --> 00:06:41,040
Speaker 1: hasn't got a great record of building these massive projects

133
00:06:41,040 --> 00:06:43,320
Speaker 1: out on time. But nonetheless, even if that's five ten

134
00:06:43,360 --> 00:06:46,479
Speaker 1: years delayed, doubling the airport numbers is pretty chunky. And

135
00:06:46,560 --> 00:06:48,880
Speaker 1: right now it's somewhere around one. I think it's like

136
00:06:48,920 --> 00:06:52,279
Speaker 1: in and around one in India, yeah, and in and

137
00:06:52,320 --> 00:06:54,960
Speaker 1: around two hundred in China, and they want to increase

138
00:06:55,000 --> 00:06:59,479
Speaker 1: there's to four five. So again doubling over fifteen year

139
00:06:59,520 --> 00:07:01,520
Speaker 1: time period. It now in China, say they want to

140
00:07:01,520 --> 00:07:03,360
Speaker 1: do it, they do it. So it's a slightly different

141
00:07:03,560 --> 00:07:05,839
Speaker 1: way they're gonna they're gonna build out that capacity. And

142
00:07:05,880 --> 00:07:08,719
Speaker 1: actually in China already we're seeing brand new, big, mega

143
00:07:08,839 --> 00:07:11,840
Speaker 1: runways and big mega airports being built, so we're building

144
00:07:11,840 --> 00:07:14,480
Speaker 1: out all these airports. Talked to us about airplanes. Once

145
00:07:14,480 --> 00:07:16,320
Speaker 1: you build all the airports, you actually need airplanes to

146
00:07:16,320 --> 00:07:20,120
Speaker 1: fill them, So who's winning there. Yeah, it's an interesting

147
00:07:20,160 --> 00:07:22,480
Speaker 1: time for the airline sector. What we're seeing is a

148
00:07:23,240 --> 00:07:26,280
Speaker 1: shift in the business model of airplane manufacturers. So we

149
00:07:26,360 --> 00:07:28,680
Speaker 1: used to have really big airplanes and you put everybody

150
00:07:28,720 --> 00:07:30,400
Speaker 1: on it, like the A three a D from Airbus

151
00:07:30,560 --> 00:07:34,120
Speaker 1: right for big engines, a lot of people, which is

152
00:07:34,120 --> 00:07:36,920
Speaker 1: actually quite efficient on a pair passenger mile basis, but

153
00:07:37,000 --> 00:07:40,360
Speaker 1: expensive and it's hard to fill them. The key for

154
00:07:40,400 --> 00:07:43,120
Speaker 1: the airline industry is getting as many people into every

155
00:07:43,160 --> 00:07:46,480
Speaker 1: aircraft so as possible, and the range is pretty chunky, right,

156
00:07:46,520 --> 00:07:49,640
Speaker 1: So on average about two of all seats globally are filled,

157
00:07:50,120 --> 00:07:54,040
Speaker 1: but that varies. So you've got some traditional airlines like

158
00:07:54,120 --> 00:07:56,920
Speaker 1: Air China or BA or American airlines who are in

159
00:07:56,920 --> 00:08:01,040
Speaker 1: and around two. Others on the low end, like Emirates

160
00:08:01,080 --> 00:08:03,800
Speaker 1: are in around seventy seven seventy eight percent, and then

161
00:08:03,800 --> 00:08:07,720
Speaker 1: you've got like Europeans Rhiner, so they're really filling these

162
00:08:08,080 --> 00:08:10,840
Speaker 1: and essentially what you're doing is meeting that demand with

163
00:08:10,920 --> 00:08:14,200
Speaker 1: the same airplane. So it's much much more efficient. And

164
00:08:14,280 --> 00:08:17,800
Speaker 1: airplanes are much more efficient than they were twenty years ago,

165
00:08:18,160 --> 00:08:20,680
Speaker 1: but they have about a twenty five year lifespan. But

166
00:08:20,800 --> 00:08:24,400
Speaker 1: every new generation airplane is about more efficient in the

167
00:08:24,440 --> 00:08:26,920
Speaker 1: previous right, So if we're building this out and you're

168
00:08:26,920 --> 00:08:29,000
Speaker 1: filling them up, you can meet a lot of this

169
00:08:29,160 --> 00:08:33,560
Speaker 1: new demand. And airplanes are happy, you know, airlines are happy.

170
00:08:34,000 --> 00:08:36,360
Speaker 1: The environment's a little bit happier. I guess we're all

171
00:08:36,360 --> 00:08:40,480
Speaker 1: still traveling. But with that is more demand for oil. Right,

172
00:08:40,600 --> 00:08:43,720
Speaker 1: So despite a more efficient airplane, I saw you put

173
00:08:43,760 --> 00:08:47,880
Speaker 1: in forecasting in the note that forecasted roughly between forty

174
00:08:48,679 --> 00:08:52,240
Speaker 1: increase in oil demand for aviation fuels at right. Yeah,

175
00:08:52,320 --> 00:08:57,000
Speaker 1: that's correct. Yeah, it's a hard, hard industry to decarbonize.

176
00:08:57,280 --> 00:08:59,480
Speaker 1: You know, shipping is hard to de carbonized. Trucks are

177
00:08:59,480 --> 00:09:01,880
Speaker 1: hard to dec urbanized. But this is next level. Not

178
00:09:01,960 --> 00:09:03,760
Speaker 1: only is it hard to you know, switch to a

179
00:09:03,760 --> 00:09:07,920
Speaker 1: bio fuel, but the aviation industry is incredibly safety conscious.

180
00:09:08,080 --> 00:09:10,920
Speaker 1: But it's difficult to get a different grade fuel into

181
00:09:10,960 --> 00:09:13,360
Speaker 1: the airplane and ensure that it's safe to take off.

182
00:09:14,000 --> 00:09:17,280
Speaker 1: So we are seeing some small things like biojet, which

183
00:09:17,320 --> 00:09:20,640
Speaker 1: at the moment is very expensive and technologies from the

184
00:09:20,679 --> 00:09:23,560
Speaker 1: likes of Airbus where they want to hybridize existing jet

185
00:09:24,520 --> 00:09:28,040
Speaker 1: jet engines and essentially maybe run auxiliary power off an

186
00:09:28,040 --> 00:09:31,000
Speaker 1: electric motor or aid the systems in some way with

187
00:09:31,080 --> 00:09:34,199
Speaker 1: electric motors or batteries, so that makes it more efficient,

188
00:09:34,240 --> 00:09:37,960
Speaker 1: but ultimately it's a long way away. So we're looking

189
00:09:38,000 --> 00:09:42,360
Speaker 1: at forty Airbus have targeted their hybrid planes to take off,

190
00:09:42,679 --> 00:09:46,319
Speaker 1: so batteries, pure, pure batteries are you know, even further

191
00:09:46,400 --> 00:09:49,000
Speaker 1: away than that. So yeah, it does mean that there's

192
00:09:49,040 --> 00:09:51,640
Speaker 1: more oil in the world because there is no alternative,

193
00:09:52,440 --> 00:09:55,280
Speaker 1: and oil and gas companies are responded by investing right.

194
00:09:55,320 --> 00:09:58,480
Speaker 1: They want to produce petrochemicals and jet fuel. They are

195
00:09:58,480 --> 00:10:00,600
Speaker 1: the two things that are pretty safe to grow over

196
00:10:00,600 --> 00:10:04,199
Speaker 1: the next twenty years, and it saves them from worrying

197
00:10:04,200 --> 00:10:06,360
Speaker 1: about a stranded acid. If you want to produce a

198
00:10:06,360 --> 00:10:08,960
Speaker 1: bunch of gasoline, now you've got to worry if evs

199
00:10:09,000 --> 00:10:10,960
Speaker 1: are going to take your market away. You're less worried

200
00:10:10,960 --> 00:10:12,320
Speaker 1: if there's going to be an airplane and the sky

201
00:10:12,360 --> 00:10:15,040
Speaker 1: with a battery. Slightly different angle, but tell me a

202
00:10:15,080 --> 00:10:17,760
Speaker 1: little bit more about the bio fuels part, because you

203
00:10:17,800 --> 00:10:21,000
Speaker 1: can have some mix in there, and it is it

204
00:10:21,080 --> 00:10:25,120
Speaker 1: is efficient, What are the economics of it? It's um,

205
00:10:25,160 --> 00:10:29,720
Speaker 1: it's expensive, is the answer. And biofuels are not one thing.

206
00:10:29,720 --> 00:10:32,520
Speaker 1: You've got totally different types of biofuels and different generations,

207
00:10:33,120 --> 00:10:35,200
Speaker 1: and they are now being sort of painned as the

208
00:10:35,200 --> 00:10:38,040
Speaker 1: answer to everything. It's hard to do carbonized trucks and ships,

209
00:10:38,080 --> 00:10:40,400
Speaker 1: like I said, but bio fuels are earmarked for that.

210
00:10:40,480 --> 00:10:44,840
Speaker 1: They're also earmarked for fift of fuels that are on

211
00:10:45,320 --> 00:10:48,000
Speaker 1: the roads in the US right that competes to There's

212
00:10:48,000 --> 00:10:50,600
Speaker 1: only so much you can really generate. If you have

213
00:10:50,679 --> 00:10:53,640
Speaker 1: like a natural source to make bio fuels, like say Brazil,

214
00:10:54,040 --> 00:10:57,160
Speaker 1: it makes sense absolutely to turn that into of your

215
00:10:57,240 --> 00:11:00,440
Speaker 1: road fuel. Otherwise you're competing with every but use for

216
00:11:00,480 --> 00:11:03,160
Speaker 1: all of this new biofuel which we've yet which you know,

217
00:11:03,240 --> 00:11:05,559
Speaker 1: we haven't seen, and that's why the prices are high.

218
00:11:05,720 --> 00:11:08,400
Speaker 1: The supply is not there, and it's also not it's

219
00:11:08,920 --> 00:11:12,959
Speaker 1: not as well proven, I guess as jet jet fuel um,

220
00:11:13,000 --> 00:11:15,559
Speaker 1: and there's less of it available, but airlines are turning

221
00:11:15,600 --> 00:11:17,920
Speaker 1: to it. It's almost a I don't want to say

222
00:11:17,920 --> 00:11:20,120
Speaker 1: a marketing campaign in certain ways, but it definitely does

223
00:11:20,160 --> 00:11:22,520
Speaker 1: well for green credentials of airlines if they're running off

224
00:11:22,559 --> 00:11:25,600
Speaker 1: of biojet. So we saw it, for instance at Davos,

225
00:11:25,679 --> 00:11:28,040
Speaker 1: or we've seen some of the corporate flights being fueled

226
00:11:28,040 --> 00:11:30,560
Speaker 1: by biojet. That's great, but they've all flown in on

227
00:11:30,640 --> 00:11:33,400
Speaker 1: private jets. Right, it's not quite the solution that you're

228
00:11:33,440 --> 00:11:36,640
Speaker 1: kind of thinking. So we've all been at the airport

229
00:11:36,760 --> 00:11:38,800
Speaker 1: or maybe an advance gotten the email saying that our

230
00:11:38,840 --> 00:11:41,600
Speaker 1: flight has been canceled, and in some circumstances that flight

231
00:11:41,600 --> 00:11:45,360
Speaker 1: gets canceled because the flight isn't full. One would then

232
00:11:45,440 --> 00:11:50,480
Speaker 1: assume that, at least to some degree, that airlines and

233
00:11:51,080 --> 00:11:53,839
Speaker 1: CEO two emissions might be in some way a line

234
00:11:53,880 --> 00:11:57,640
Speaker 1: because they want to be as efficient as possible because

235
00:11:57,640 --> 00:11:59,400
Speaker 1: that's where their margins come from. And this is a

236
00:11:59,480 --> 00:12:01,600
Speaker 1: pretty petitive space to make money. And is it not

237
00:12:01,760 --> 00:12:05,440
Speaker 1: or is it a robust space? Margins are thin. We

238
00:12:05,520 --> 00:12:09,520
Speaker 1: see airlines go bus quite regularly. I mean we're in Europe.

239
00:12:09,760 --> 00:12:13,160
Speaker 1: There's five six examples in the last decade decade and

240
00:12:13,240 --> 00:12:15,720
Speaker 1: a half, right, So yeah, absolutely, it's in the interest

241
00:12:15,760 --> 00:12:18,600
Speaker 1: of the airline not to have big exposure to oil

242
00:12:18,600 --> 00:12:22,840
Speaker 1: prices essentially, and somewhere between of their margin is down

243
00:12:22,840 --> 00:12:25,240
Speaker 1: to the oil price or the jet fuel price in

244
00:12:25,240 --> 00:12:27,200
Speaker 1: the case of airlines, right, so they want to shift

245
00:12:27,240 --> 00:12:29,600
Speaker 1: away from that. The answer so far has been more

246
00:12:29,640 --> 00:12:33,880
Speaker 1: efficient airplanes or lighter airplanes, or ones that can operate

247
00:12:33,880 --> 00:12:36,960
Speaker 1: in a much more efficient way. So not flying through

248
00:12:37,000 --> 00:12:40,640
Speaker 1: two other cities or through one other city instead flying directly.

249
00:12:40,960 --> 00:12:42,800
Speaker 1: You use less fuel because you've only got to take

250
00:12:42,840 --> 00:12:44,960
Speaker 1: off ones and you've only got a land once, and

251
00:12:45,000 --> 00:12:47,400
Speaker 1: it's much more efficient. A jet is much more efficient

252
00:12:47,480 --> 00:12:50,480
Speaker 1: and cruising altitude then when it's coming down and circling

253
00:12:50,480 --> 00:12:53,040
Speaker 1: an airport waiting for a landing spot, or when it's

254
00:12:53,080 --> 00:12:56,200
Speaker 1: delayed um and trying to get off the ground right

255
00:12:56,320 --> 00:12:58,760
Speaker 1: taking off with all that fuel on board. So yeah,

256
00:12:58,960 --> 00:13:01,600
Speaker 1: there's a lot of ways they could save fuel, operate

257
00:13:01,640 --> 00:13:04,440
Speaker 1: efficiently and have the most efficient engine and fill the

258
00:13:04,440 --> 00:13:06,880
Speaker 1: airplane the highest load factor is the best way to

259
00:13:06,920 --> 00:13:09,960
Speaker 1: do it. Does this have a net benefit for CEO

260
00:13:09,960 --> 00:13:11,800
Speaker 1: two emissions? And then what's the flip side of that?

261
00:13:11,880 --> 00:13:15,800
Speaker 1: If yeah, I mean if you look at the distance

262
00:13:15,920 --> 00:13:19,959
Speaker 1: versus fuel efficiency profile of some flights, it's horrendous. So

263
00:13:20,200 --> 00:13:24,240
Speaker 1: if you fly Washington, d C. To New York, roughly

264
00:13:24,240 --> 00:13:27,000
Speaker 1: ten of the fuel is burned before you even take

265
00:13:27,000 --> 00:13:29,760
Speaker 1: off the ground. So just moving around the A C

266
00:13:30,080 --> 00:13:32,360
Speaker 1: on your you know, getting your safety briefing, the lights

267
00:13:32,360 --> 00:13:34,640
Speaker 1: have to run off of something. You're in a queue,

268
00:13:34,640 --> 00:13:39,079
Speaker 1: your six in line to take off. That's crazy. And

269
00:13:39,120 --> 00:13:42,400
Speaker 1: between that taking off and the landing fuel profile, a

270
00:13:42,440 --> 00:13:45,800
Speaker 1: flight that short can have of its fuel just from

271
00:13:45,800 --> 00:13:48,040
Speaker 1: coming down, not the cruising part of the flight. So

272
00:13:48,400 --> 00:13:51,120
Speaker 1: when you make these things much more efficient, particularly things

273
00:13:51,120 --> 00:13:53,880
Speaker 1: like airplane operations at an airport, you can you can

274
00:13:53,880 --> 00:13:57,840
Speaker 1: cut that number down pretty quickly, and things like digital sensors,

275
00:13:57,880 --> 00:14:00,880
Speaker 1: digitalization can really help this. So we've seen a few

276
00:14:00,880 --> 00:14:04,200
Speaker 1: early indicators that there's low hanging fruit to be had. Right,

277
00:14:04,240 --> 00:14:06,080
Speaker 1: you can you can really make the whole system much

278
00:14:06,080 --> 00:14:08,520
Speaker 1: more efficient and save cash. Right, you're saving cash, you're

279
00:14:08,520 --> 00:14:11,800
Speaker 1: also saving CEO two emissions. It seems that all roads

280
00:14:11,880 --> 00:14:15,720
Speaker 1: lead to the airlines themselves in terms of the attention

281
00:14:15,720 --> 00:14:18,080
Speaker 1: that maybe you know we're talking about now and the

282
00:14:18,200 --> 00:14:20,560
Speaker 1: end consumer. But really the innovation has got to be

283
00:14:20,640 --> 00:14:24,200
Speaker 1: somewhere else, Right, they don't manufacture the airplanes, and they

284
00:14:24,200 --> 00:14:27,640
Speaker 1: don't make the fuels. Where is most of the innovation

285
00:14:27,760 --> 00:14:31,400
Speaker 1: coming from? Aside from the biofuels and electric planes that

286
00:14:31,440 --> 00:14:35,760
Speaker 1: you've already addressed. Where is the other innovation. Yeah, it

287
00:14:35,800 --> 00:14:39,640
Speaker 1: can come from all different angles. Air traffic controllers, for example,

288
00:14:39,680 --> 00:14:41,640
Speaker 1: they can do a much better job if you delay

289
00:14:41,680 --> 00:14:43,920
Speaker 1: a flight and tell them in advance. They can be

290
00:14:43,960 --> 00:14:47,040
Speaker 1: delayed and fly slower at a height when it's much

291
00:14:47,080 --> 00:14:49,880
Speaker 1: more efficient instead of circling around Heathrow Airport. We've all

292
00:14:49,920 --> 00:14:53,320
Speaker 1: been there. You can also have airports that know better

293
00:14:53,520 --> 00:14:56,480
Speaker 1: how to direct their traffic. So we saw study in

294
00:14:56,600 --> 00:14:59,760
Speaker 1: China say, if you can use AI to hit your

295
00:14:59,800 --> 00:15:02,120
Speaker 1: talk because you take off time, so when you hit

296
00:15:02,160 --> 00:15:04,280
Speaker 1: back from the airport and go towards the runway, you

297
00:15:04,320 --> 00:15:07,960
Speaker 1: can save on your fuel bill. I mean fuel bill

298
00:15:08,040 --> 00:15:12,359
Speaker 1: translates into fuel consumption translates into carbon. The airline's happy,

299
00:15:12,760 --> 00:15:16,120
Speaker 1: carbon emissions are happy. The person is not delayed, right,

300
00:15:16,120 --> 00:15:18,000
Speaker 1: you're not sitting on that airplane again. So there's a

301
00:15:18,000 --> 00:15:19,880
Speaker 1: lot of things. It's going to come from all different angles,

302
00:15:20,400 --> 00:15:23,000
Speaker 1: and policy has to play a role. It's a little

303
00:15:23,000 --> 00:15:25,280
Speaker 1: bit more dull, but they're trying to do what the

304
00:15:25,320 --> 00:15:27,400
Speaker 1: shipping industry has done in terms of the I m O.

305
00:15:27,960 --> 00:15:32,400
Speaker 1: It's just not quite having the same execution I guess

306
00:15:32,560 --> 00:15:34,480
Speaker 1: is a fair way to say it without being too critical.

307
00:15:34,600 --> 00:15:36,680
Speaker 1: It's a really weak policy we're seeing in course you're

308
00:15:36,720 --> 00:15:39,920
Speaker 1: coming out who governs it, and it's the United Nations

309
00:15:39,960 --> 00:15:41,720
Speaker 1: essentially the I c A. Oh, it's a it's a

310
00:15:41,720 --> 00:15:43,840
Speaker 1: body of the U n Can you explain what Coursia

311
00:15:43,920 --> 00:15:46,760
Speaker 1: is to us? Yeah, So essentially, the goal of course

312
00:15:46,800 --> 00:15:50,920
Speaker 1: here is that by growth and emissions to will be

313
00:15:50,960 --> 00:15:53,320
Speaker 1: net zero pretty much. And to do that there's a

314
00:15:53,320 --> 00:15:57,680
Speaker 1: few different mechanisms. So you can either offset your carbon emission.

315
00:15:58,160 --> 00:15:59,840
Speaker 1: If you offset your carbon emission, you got to buy

316
00:15:59,880 --> 00:16:02,480
Speaker 1: a credit. Essentially they haven't yet defined what that credit is.

317
00:16:03,200 --> 00:16:05,600
Speaker 1: You can use a Corsio eligible fuel, which is like

318
00:16:05,640 --> 00:16:09,680
Speaker 1: a biofuel or and this is the big or a

319
00:16:09,760 --> 00:16:12,200
Speaker 1: jet fuel at his temper sound cleaner than a benchmark

320
00:16:12,280 --> 00:16:15,160
Speaker 1: jet fuel that they've currently recommended. So if you're a

321
00:16:15,200 --> 00:16:18,920
Speaker 1: clean oil refinery and you get your oil in a

322
00:16:19,000 --> 00:16:21,840
Speaker 1: less carbon intensive way, let's say Saudi Arabian oil which

323
00:16:21,880 --> 00:16:25,120
Speaker 1: is not super carbon intensive, that can be registered as

324
00:16:25,120 --> 00:16:27,240
Speaker 1: of course the eligible fuel and you can use it.

325
00:16:27,520 --> 00:16:30,520
Speaker 1: So there's a lot of potential there for oil jet

326
00:16:30,520 --> 00:16:33,880
Speaker 1: fuel to be used, and some biofuels and then this

327
00:16:34,000 --> 00:16:36,000
Speaker 1: sort of carbon officer that we don't know the price

328
00:16:36,040 --> 00:16:38,760
Speaker 1: of yet, so there's a lot of moving parts. It's

329
00:16:38,800 --> 00:16:42,640
Speaker 1: really limited though, because it's only international flights. It's optional

330
00:16:42,680 --> 00:16:45,280
Speaker 1: pretty much before the end of this decade, and some

331
00:16:45,320 --> 00:16:48,280
Speaker 1: countries have just said no, we're not taking part, crucially India,

332
00:16:48,480 --> 00:16:51,480
Speaker 1: which again third biggest market in terms of growth that's expected.

333
00:16:51,760 --> 00:16:54,880
Speaker 1: Russia have said no, Philippines have said no. You're getting

334
00:16:54,960 --> 00:16:57,480
Speaker 1: quickly into pretty chunky terms. Less than half of all

335
00:16:57,520 --> 00:17:00,400
Speaker 1: the fuel consumed today would be covered under CORSEA. Is

336
00:17:00,400 --> 00:17:04,080
Speaker 1: this something where countries will provide the stick to you know,

337
00:17:04,119 --> 00:17:06,200
Speaker 1: to this to this market, or is something where companies

338
00:17:06,240 --> 00:17:08,560
Speaker 1: will pick up the slack and decide to take this

339
00:17:08,640 --> 00:17:10,800
Speaker 1: on themselves. I know we've heard of Jet Blue having

340
00:17:10,800 --> 00:17:14,840
Speaker 1: a goal for net zero. By it's both sides, I think,

341
00:17:14,960 --> 00:17:16,720
Speaker 1: right for airlines they don't want to pay the bill

342
00:17:17,280 --> 00:17:19,160
Speaker 1: um for countries they have to be seen to moving

343
00:17:19,200 --> 00:17:23,200
Speaker 1: towards this Paris agreement. So we've seen UM Europe for example,

344
00:17:23,680 --> 00:17:26,159
Speaker 1: float the idea of including the airline industry in the

345
00:17:26,200 --> 00:17:28,560
Speaker 1: EU E t S system, so that would be quite

346
00:17:28,560 --> 00:17:31,080
Speaker 1: interesting to see how it works. But also watching that

347
00:17:31,200 --> 00:17:34,280
Speaker 1: or the Chinese, so they have earmarked aviation to fall

348
00:17:34,400 --> 00:17:37,919
Speaker 1: under the emissions trading scheme out there as well. So

349
00:17:38,200 --> 00:17:41,119
Speaker 1: these will essentially have a much bigger impact on the

350
00:17:41,119 --> 00:17:43,920
Speaker 1: emissions profile, particularly EU E t S because they say

351
00:17:43,960 --> 00:17:46,480
Speaker 1: you need to lower emissions, not net zero and keep

352
00:17:46,480 --> 00:17:48,960
Speaker 1: a flat you need to every year lower it. And

353
00:17:48,960 --> 00:17:52,240
Speaker 1: then in the U S they're looking at applying levies

354
00:17:52,560 --> 00:17:56,479
Speaker 1: or equivalent programs. It's sort of TBD to regulate it there. Now,

355
00:17:56,520 --> 00:17:59,480
Speaker 1: if China, Europe and the U S acted even on

356
00:17:59,520 --> 00:18:01,800
Speaker 1: their own, to estic flights, you're talking much much bigger

357
00:18:01,880 --> 00:18:05,800
Speaker 1: numbers and it becomes a thing as opposed to international

358
00:18:05,800 --> 00:18:07,480
Speaker 1: flights if you want to take part in our scheme.

359
00:18:07,880 --> 00:18:09,800
Speaker 1: So what do you see is the one thing having

360
00:18:09,800 --> 00:18:11,960
Speaker 1: the biggest impact in the next decade. There's a few

361
00:18:11,960 --> 00:18:14,119
Speaker 1: secret weapons out there that could really take away from

362
00:18:14,160 --> 00:18:17,440
Speaker 1: jet field demand or travel demand in the next ten years.

363
00:18:17,760 --> 00:18:19,800
Speaker 1: High speed rail, I think is the big one. So

364
00:18:19,880 --> 00:18:23,200
Speaker 1: China built out this gigantic project infrastructure project over the

365
00:18:23,280 --> 00:18:26,000
Speaker 1: last ten years and they're continuing to do so um

366
00:18:26,040 --> 00:18:28,680
Speaker 1: and that could have a big impact, particularly on domestic flights,

367
00:18:29,160 --> 00:18:31,520
Speaker 1: because you can you can change the taxes and that

368
00:18:31,560 --> 00:18:33,560
Speaker 1: you can encourage people to travel there, and we've seen

369
00:18:33,600 --> 00:18:36,280
Speaker 1: that to a certain extent just recently in Germany. But

370
00:18:36,400 --> 00:18:38,120
Speaker 1: we saw a study from the I a while ago

371
00:18:38,200 --> 00:18:43,160
Speaker 1: saying that between nine and two thousand the Eurostar took

372
00:18:43,200 --> 00:18:46,640
Speaker 1: about fifty of the passengermand out of that flight path.

373
00:18:46,920 --> 00:18:50,720
Speaker 1: So if that happens, you're talking about real numbers. But TBD,

374
00:18:50,800 --> 00:18:52,880
Speaker 1: if that actually makes an impact, I think it will.

375
00:18:53,119 --> 00:18:55,880
Speaker 1: I think that's the most important thing in the short term.

376
00:18:56,119 --> 00:18:58,520
Speaker 1: That plus policy, because technology is just a little bit

377
00:18:58,520 --> 00:19:00,320
Speaker 1: too far away right now. It's too bad. I'm just

378
00:19:00,359 --> 00:19:03,840
Speaker 1: looking forward to the hyperloop and the suborbital rockets text

379
00:19:03,880 --> 00:19:08,919
Speaker 1: elon right. Cool. So this was the first in a

380
00:19:09,040 --> 00:19:11,959
Speaker 1: series right on aviation from benf what's next in this

381
00:19:12,040 --> 00:19:14,119
Speaker 1: line of research? Yeah, it is the first in a

382
00:19:14,200 --> 00:19:16,359
Speaker 1: series for us, and it's an exciting new new area

383
00:19:16,440 --> 00:19:18,600
Speaker 1: for us to research. The next few things that we're

384
00:19:18,600 --> 00:19:22,280
Speaker 1: going to take a look at our biojet fuel specifically

385
00:19:22,520 --> 00:19:25,160
Speaker 1: because it's kind of the solution for everything at the moment.

386
00:19:25,200 --> 00:19:27,080
Speaker 1: We want to question is it actually the solution and

387
00:19:27,240 --> 00:19:29,320
Speaker 1: what cost is It's just you know, what kind of solution,

388
00:19:29,359 --> 00:19:32,280
Speaker 1: what cost? And then we're going to look at the

389
00:19:32,280 --> 00:19:35,400
Speaker 1: EU e t S scheme for aviation, what does it mean?

390
00:19:35,800 --> 00:19:38,880
Speaker 1: And then that lets us see is that mechanism one

391
00:19:38,920 --> 00:19:41,440
Speaker 1: that might work elsewhere? And that would be quite interesting,

392
00:19:41,440 --> 00:19:43,679
Speaker 1: I think, because again we're seeing the Chinese looking at

393
00:19:43,680 --> 00:19:46,600
Speaker 1: including aviation and their carbon market and if they do that,

394
00:19:46,800 --> 00:19:49,280
Speaker 1: you're talking big numbers. Again. China can do things overnight

395
00:19:49,320 --> 00:19:52,440
Speaker 1: that we can't quite do in Europe the same speed. David,

396
00:19:52,480 --> 00:19:54,320
Speaker 1: thank you for joining us. Yeah, thanks for having me. Guys.

397
00:19:56,320 --> 00:19:58,600
Speaker 1: Bloomberg an e F is a service provided by Bloomberg

398
00:19:58,600 --> 00:20:01,639
Speaker 1: Finance LP and its affiliates. This recording does not constitute,

399
00:20:01,720 --> 00:20:05,240
Speaker 1: nor it should it be construed as investment advice, investment recommendations,

400
00:20:05,400 --> 00:20:08,240
Speaker 1: or a recommendation as to an investment or other strategy.

401
00:20:08,280 --> 00:20:11,200
Speaker 1: Bloombergin e F should not be considered as information sufficient

402
00:20:11,240 --> 00:20:14,399
Speaker 1: upon which to base an investment decision. Neither Bloomberg Finance

403
00:20:14,520 --> 00:20:17,720
Speaker 1: Lp nor any of its affiliates makes any representation or

404
00:20:17,760 --> 00:20:20,640
Speaker 1: warranty as to the accuracy or completeness of the information

405
00:20:20,760 --> 00:20:23,480
Speaker 1: contained in this recording, and any liability as a result

406
00:20:23,480 --> 00:20:25,240
Speaker 1: of this recording that expressly disclaimed