Ambraer2009_JPR

8/11/2019 Ambraer2009_JPR

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The Future of Human Mobility and its Impacts on

Aviation 2020-2025, Embraer Corporation, Sao Jose dos

Campos, Brazil, May 13-15 2009

The Future of Transportation:

Driving Forces for the Airline

Industry (2020-25)

Jean-Paul RodrigueAssociate Professor

Dept. of Global Studies & Geography

Hofstra UniversityNew York, USA


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The Future of Mobility: The Views of a Transport

Geographer

Socioeconomic forces Aggregate demand. Preferences.

Technological forces Performance. Input costs.

Regulatory forces Competition.

Operations.

Infrastructures

Passengers

Freight Information


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An Accessible World With Limited Expected

Changes

Source: Nelson (2008)


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ECONOMIC AND BUSINESS CYCLES

Long term trends linked with paradigms shifts and incrementalchanges.

How the current phase of mal-investment could unfold.


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Paradigm Shifts and Incremental Changes

Revolutionary changes Completely new

technology. Create new markets and

growth opportunities. Often marks the

obsolescence of anexisting technology:

Modal shift.

Can paradigm shifts bepredicted?

Incremental changes Improvement of existing

technology andoperations.

Leads to increases inproductivity:

More capacity. Lower costs. Better performance.

Possible to extrapolate.


7/35


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Technology Hype Cycle

Visibility

Inflated expectations

Abandonment

Delusion

Introduction

Productivity peak

Learning curve

Utility

Hype Phase Realization Phase


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Growth of the US Transport System, 19th21st

Century

Canals

Rail

RoadsAir

Maglev

1836

1800 1850 1900 1950 2000 20500%

1%

2%

3%

4%

1891 1946 2001

t= 30 years

t= 55 years t= 65 years t= 70 years

1825

1869

1913 1969

1836

1825 Paradigm shift

Peak year


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Blowing Bubbles: From Technology to Commodities

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

NASDAQ (Jan 1998=100)

TOL (Jan 2003=100)

BDI (Jan 2006=100)

Tech / Stock Bubble Housing BubbleCommodities / Trade

Bubble


11/35

FORECASTING: A LESSON IN

HUMILITY AND FUTILITY

Failure and potential misallocations.

Linear thinking versus economic, social and technological forces.

We have two classes of forecasters:

Those who don't know . . . and those who

don't know they don't know.

John Kenneth Galbraith


12/35

Flying Car Concept, 1951


13/35

Flying Car (Spinner) in Science Fiction (Blade

Runner, 1982)


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World Air Travel and World Air Freight Carried, 1950-

2007; Are We at an Inflexion Point?

0

50

100

150

200

250

300

0

1000

2000

3000

4000

5000

6000

7000

8000

Billionsoftons-

km

Billionsofpassengers-km

Passengers

Freight

Monkey Curve

Recession and

regionalization


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PEAK OIL OR PEAK MOBILITY?

Are energy issues an overstatement?Secular inflationary cycle in the price of energy and commodities

Potential for demand destruction


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The Peak Oil Debate: A Normal Assumption

World Annual Oil Production (1900-2007) and Peak Oil (2010)

0

5

10

15

20

25

30

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Billionsofbarrels

2010 Peak

Actual


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West Texas Intermediate, Monthly Nominal Spot Oil

Price (1970-2009)

0

20

40

60

80

100

120

140

Jan-70

Jan-71

Jan-72

Jan-73

Jan-74

Jan-75

Jan-76

Jan-77

Jan-78

Jan-79

Jan-80

Jan-81

Jan-82

Jan-83

Jan-84

Jan-85

Jan-86

Jan-87

Jan-88

Jan-89

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

First Oil Shock

Second Oil Shock

Third Oil Shock

A B C

21

D


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Major Oil Price Fluctuations

Price Change Event Price Change Time Frame Cause Nominal Price Change

First Oil Shock October 1973 to March 1974Yom Kippur War / OPEC oilembargo

From $4.31 to $10.11(+134.5%)

Second Oil Shock April 1979 to July 1980Iranian revolution (1978) / Iran-Iraq war (1980)

From $15.85 to $39.50(+149.2%)

Oil counter shock (A) November 1985 to July 1986OPEC oversupply / Lowerdemand

From $30.81 to $11.57 (-62.4%)

First Gulf War (1) July 1990 to November 1990 Iraqi invasion of KuwaitFrom $18.63 to $32.30(+73.4%)

Asian Financial Crisis (B) January 1997 to August 1998Debt defaults / Non-USDcurrency devaluations /Reduced demand

From $25.17 to $14.08 (-44.1%)

"Asian DemandContagion" (2)

January 1999 to September2000

Rising demand / OPEC outputcutbacks

From $11.28 to $33.88(+200.3%)

"September 11 Effect"(C)

August 2001 to December2001

Oversupply / Americanrecession

From $27.47 to $19.33 (-29.6%)

Third Oil ShockDecember 2003 to June2008

Peak oil / Rising demand /Monetary debasement /Speculation

From $32.15 to $133.95(+316.6%)

Financial Crisis of 2008

(D)

July to December 2008Collapse of asset bubbles /Demand destruction / Global

recession

From $133.95 to $41.02 (-

69.4%; Dec 2008)


19/35

Air Transportation Has Some Room for Substitution

Trend in Aircraft Fuel Efficiency (Fuel burned per Seat)

20

30

40

50

60

70

80

90

100

1955 1965 1975 1985 1995 2005

Year of Introduction

%ofBase(Comet4)


20/35

Strategies Used by Airlines to Save Fuel

Dimension Strategy

Fleet Retiring less fuel efficient aircrafts (e.g. DC-9, DC10, MD-80).Switching to more fuel efficient aircrafts (e.g. A330, A319).

Operations Less engine idle at gates (electrical systems).Lower flying speed (-5%).

More frequent plane and engine washing.On board Lighter seats.

Removal of seat-pocket documents (e.g. magazines).Less water in bathrooms.Lighter service carts.

Passengers Weight restrictions for luggage.Surcharges for first or second check-in luggage.Passengers weight surcharges (?)


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Principle of Demand Destruction

Price

Quantity

P1

P

P2

Q1

Q

Q2


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Annual Vehicle-Miles Traveled in the United States

and Year-over-Year Changes, 1971-2009

1,000

1,500

2,000

2,500

3,000

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Jan-

71

Jan-

72

Jan-

73

Jan-

74

Jan-

75

Jan-

76

Jan-

77

Jan-

78

Jan-

79

Jan-

80

Jan-

81

Jan-

82

Jan-

83

Jan-

84

Jan-

85

Jan-

86

Jan-

87

Jan-

88

Jan-

89

Jan-

90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

YOY Change in Vehicle-Miles Traveled

Annual Vehicle-Distance Traveled (BillionMiles)

Recession

End of the motorization cycleSlow down of suburbanization

Aging of the population


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Population 60+, 1950-2005, With Projections to 2050


24/35

NETWORK STRUCTURE

Regionalism or globalism?Modal shift

Thinking outside the aircraft


25/35

Worlds Major Gateway Systems, 2006


26/35

World Cities, Hubs of Regionalization

C f


27/35

Characteristics of Major Air Travel Markets:

Expected Changes

United States Europe Pacific Asia

Deregulation started in 1978 Deregulation started in 1997 Regulated markets withgovernment ownership

Low population density anddispersed urban centers

High population density andconcentrated urban centers

Dispersion of urban centers buthigh regional concentrations

Relatively open air spaces andairports

Congested air spaces andairports

Congested gateway airportsunderutilized regional airports

Rail minor competitor; Carcompete for short distances

High speed rail is a directcompetitor; Cars compete forshort distances

Less competition from othertransportation modes (exceptJapan, Korea and Taiwan)

Intense competition betweencarriers (No loyalty; pricing andfrequent flyers)

Emerging competitionbetween carriers

Competition between carriersin its infancy

Limited income growth andlimited leisure time

Limited income growth andmore leisure time

Growing income levels

D l ti F d R i li ti R


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Deregulation Favored Regionalization: Reemergence

of more Point-to-Point Services

Before Deregulation

After Deregulation

Hub

Hub

T l Ti b f d ft th I t d ti f


29/35

Travel Times before and after the Introduction of a

High Speed Train Service (hours)

0 1 2 3 4 5 6 7

Firenze - Rome

Hannover - Wurzburg

Berlin - Hannover

Paris - Bruxelles

London - Paris

Madrid - Seville

Paris - Marseille

Tokyo - Osaka

Seoul - Busan

Taipei - Kaohsiung

After

Before


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Low-Cost Carriers are a Wild Card

On-boardoperations

Optimum use of seating space.Minimal crew.Limited and paying cabin service.

Aircraft

operations

Few (often one) types of aircraft used to minimize maintenance costs.Stair boarding instead of air bridges.Maximal usage of runway length (take-off thrust and braking on landing).Fast turn around to maximize aircraft use.No freight being carried.

Service

network

Point-to-point services.Destinations commonly of less than two hours apart.Usage of secondary airports (lower gate rates).

Booking Online booking to minimize transaction costs.No travel agent commissions.

Thi ki t id th i ft Ai T l


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Thinking outside the aircraft: Air Travel as an

Intermodal Transport Chain

Terminal / Plane Interactions Airport / City InteractionsChecking in Access to public transit systems (the

location paradox)

Security Access to surface freight systems

Gate access Parking facilities

Boarding Aeotropolis


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McNamara Terminal, Detroit


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Maglev Exiting Pudong Airport, Shanghai


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Aeotropolis Developments

Dubai

SeoulDenver Beijing

Bangkok

Detroit

MemphisOntarioShanghai

Hong KongGuangzhou

Singapore

Amsterdam

Kuala Lumpur

Belo Horizonte

Dallas-Ft. Worth

Rudimentary (3)

Planned (3)

In development (8)

Existing (2)

Diff sion of a Pandemic Thro gh a Global


35/35

Diffusion of a Pandemic Through a Global

Transportation Network

A - Emergence B - Translocation

C - Diffusion D - Pandemic

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