Jetrader - Winter 2016 - 28

It's Not Easy

By Don Mitchell, Partner, Smith, Gambrell & Russell, LLP and Managing Director, SGR Aviation Consulting, LLC

The windfall from cheap fuel may have met
its match. On 21 September 2016, the UN's
International Civil Aviation Organization
(ICAO) formally proposed a global marketbased aviation industry emissions measuring plan. ICAO picks up where the EU left
off and sets the framework to implement
global standards to measure, and ultimately
reduce, airline CO2 emissions. Bloomberg
and the Air Transport Action Group report
this new plan could eventually cost the
industry $24 billion USD annually.
All EU and 16 non-EU countries (42 in
total), through the European Civil Aviation
Conference (ECAC), pledged to implement
the ICAO plan from inception; the U.S. has
also pledged its support. China, Russia
and India jointly proposed changes to
key elements.
The plan aims to cap emissions at 2020
levels. Participation would be voluntary
from 2021 through 2026 and mandatory
thereafter for most operators. The program establishes metrics and provides
for offsets for increases in CO2 emissions
above each operator's baseline during the
program's term.
This program ultimately addresses the
major impediment to universal adoption
of the prior EU plan. Through ICAO, this

program would implement a global, rather
than regional, framework. According to
former airline executive and noted industry analyst and consultant Robert Mann,
certain operators and their home countries
resisted the EU plan because, given its
regional application, it didn't represent a
single framework for regulation. "They were
opposed to it unless everyone was subject
to it," he said. As was done with noise,
ICAO was tasked to bring order and balance
from chaos. The ICAO plan aims to satisfy
both EU and U.S. EPA goals for industry CO2
emissions reductions, Mann said, thereby
potentially gaining the important buy-in
from U.S. and European operators.
Earlier resistance was also due to the
industry's desire to be treated fairly, Mann
said. Any emissions reduction program
must properly account for aviation's place
in overall worldwide emissions and take
a balanced approach in goal-setting.
Aviation "gets a black eye for conspicuous consumption, but it has actually done
quite well," according to Mann. Aviation
represents just about two percent of
global CO2 emissions and remains among
the most efficient forms of transportation;
ground and maritime transportation fall
far behind. "Aviation is overwhelmingly

28 The official publication of the International Society of Transport Aircraft Trading

more efficient than surface modes - even
electric," Mann said.
There have been terrific advancements
in airframe and propulsion technologies -
even in just the past 10-15 years, a point
that ISTAT manufacturer members would
undoubtedly confirm. "[The aviation industry] makes committed improvements to
efficiency more than the surface transportation industries," Mann stated. After
all, efficiency exponentially improves an
operator's bottom line and helps manufacturers sell airplanes.
It's this established efficiency that could
hamper global buy-in to the ICAO plan,
however. The state of current technology
from which to improve is already relatively
high, especially when compared to other
transport industries.
Because of this, Mann explains, legacy
airlines in the U.S., Europe and elsewhere
with large and comparably less efficient
fleets operating in mature markets may
find it easier to meet reduction goals
than their competitors flying newer, more
efficient aircraft, particularly in higher
growth markets.
Baseline emissions (based on per-operator
total emissions) will be established in 2020
under the ICAO plan. Mann believes that

Jetrader - Winter 2016

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