Electric Dreams

Four ways electric aircraft could turn aviation economics on its head.

The biggest story to emerge from easyJet’s Innovation Day last month was the announcement that the low cost giant is teaming up with US firm Wright Electric with the ambition of bringing to market an all-electric aircraft capable of carrying upwards of 120 passengers in the next decade.

“It is now more a matter of when, not if, a short haul electric plane will fly,” said easyJet’s Chief Executive Carolyn McCall.

Wright Electric is not the only contestant in the race for electric flight. Small hybrid, battery operated and even solar powered aircraft have all successfully completed flights. All of the major aircraft manufacturers and propulsion suppliers, as well as challengers from emerging markets and Silicon Valley start-ups are targeting the ultimate prize, a commercial airliner.

The challenge remains immense – not least because passengers are unlikely to rush to embrace the technology. The introduction into service of electric aircraft is therefore likely to be slower than the manufacturers’ ambitious timetables.

This is significant because not only the uses of electricity, but also the means by which it is generated are likely to change radically in the interim. In his excellent book Burn Out: The Endgame for Fossil Fuels, energy economist Dieter Helm argues that the ultimate direction of travel is away from positive variable energy costs and towards zero marginal cost electricity.

“One crucial economic fact stands out”, writes Helm. “Almost all of these new electricity generation technologies do not have an energy cost once they are built and installed... it has zero marginal cost.”

“Getting to grips with this idea means turning everything we know about (energy markets) on its head.”

“A zero marginal cost world is one where the growth of demand does not matter much,” Helm goes onto argue. “In a zero marginal cost world, electricity could be even ‘too cheap to measure’.”

Prof. Helm’s book presents a compelling argument and got the writers thinking about a future with battery powered aircraft AND, potentially, also zero marginal cost electricity. Here are four ways in which this scenario would change aviation economics as we know it. (Of course, we cannot know other costs associated with electric aircraft, so the following statements are based all other things being equal.)

1. Lower costs: The largest operating cost centre for airlines is jet fuel and associated expenditure. Currently fuel accounts for approximately 20% of airline costs, but with a higher oil price it can be upwards of one third, so as the oil price rises, so would operator savings.

2. Fuel is equalised: Another consequence of the move away from jet fuel would be to remove the relative strength or weakness of airlines’ hedging positions, as well as their fleets’ fuel economy.

3. But only on short haul: All of the electric aircraft under development have a limited range, typically of one to two hours. The airlines that stand to gain most from the emergence of electric aircraft are therefore those with the largest short haul operations.

4. And then only for the shortest flights: Electric aircraft are slower than conventional jet engines. Consequently, aircraft utilisation is lower. As the sector length increases, this differential could open up 10-15%. The greatest efficiencies would therefore be available to the airlines flying the shortest sectors.

For these reasons, the advent of electric aircraft is most significant in the regional market. For an airline such as the Flybe (although its survival to an era of electric aircraft is far from assured), replacing a fleet of turboprops with electric aircraft would make it vastly more competitive. Traditionally, operators of regional aircraft can expect to have a cost premium of 8-10% per seat compared to those of larger jets. Electric planes would level the playing field, or even reserve the advantage.

What are the implications for airports?

The dawn of electric flight is likely to be a positive for airports, particularly at smaller city and regional airports with more short flights. The adoption of electric aircraft could reduce the volatility in the finances of regional carriers and, by lowering fares, boost passenger demand.

The dawn of electric flight is likely to be a positive for airports.

Electric aircraft will also be able to take off from and land on shorter runways. The old adage goes "A mile of highway will take you a mile, but a mile of runway will take you anywhere”. Currently, this is not strictly speaking true – most commercial jets require at least 2km. Electric aircraft could offer a boon to smaller airports, expanding the number of markets and allowing airlines to diversify away from larger ones.

However, the development of an electric aircraft capable of all but the shortest flights is still many decades away. Radical changes to airport infrastructure or business models due to electrification are therefore probably beyond the horizon of even the most farsighted airport developer.

Indeed, with a myriad of radical ideas for the future of long distance travel – including Elon Musk’s rocket-propelled promise of “anywhere on Earth in under an hour”, the future could look very different yet.

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