Aviation and the Global Atmosphere

Aviation and the Global Atmosphere
The scenarios assume minimal fuel consumption resulting from the use of optimal fight paths and absence of delay. Unlimited development of the aviation
infrastructure projects unconstrained growth of aviation. Chapter 8 addresses current policies, which are expected to diminish the environmental effects of additional
fuel consumption resulting from present air traffic management technology and systems. Unconstrained growth-an assumption that is not representative of conditions
today or in the future-thereby becomes the dominant factor. Because the scenarios assume complete modernization of the air traffic system and no infrastructure
constraints, growth of traffic and emissions are thought to be overstated in the modeling exercises.
10.4.1.1. Deregulation and Subsidies
An important factor for promoting the sustainable development of aviation is ensuring that producers and consumers receive appropriate signals about pollution costs
and natural resource scarcities. The focus of aviation policy over the past 15 years has begun to shift from command-and-control policies to enhancing efficiency and
responding to changing demand patterns. Two broad categories of issues-the operation of markets, and government supports and ownership-bear on environmental
mitigation measures (OECD, 1997b).
Government regulation of competition in international aviation has restricted market entry and exit, fares, and capacity. Internationally, liberalization of bilateral air
service agreements is aimed at increasing competition within "the home market" and promoting greater efficiency. Although aviation remains a quasi-protected industry
in some countries, deregulation is becoming the predominant trend within national markets.
Economic deregulation of the U.S. airline industry began in 1976, and was completed in 1983 when all regulations on domestic fares, entry, and exit were eliminated.
This deregulation resulted in a 33% lower fare structure and higher average industry load factors, which have increased from 52% (1960-69) to more than 70% (1995-
98). Following deregulation, increases in traffic volume, fuel use, airport and air traffic congestion, and noise that some observers consider to be above "normal" have
been attributed to the hub-and-spoke method of operation that ensued. Studies comparing the effect of direct versus hub-and-spoke routing on fuel consumption, traffic
levels, and fleet mix have not been undertaken (Winston, 1998).
When the environmental cost of a supported activity is placed outside the market transaction, many subsidy or tax treatments are thought to have adverse
environmental consequences to the extent that they generate negative effects. The most important examples of explicit government supports to aviation are nonmarket
pricing of infrastructure services, below-market financing, tax and depreciation preferences for oil, and direct government ownership. These and other issues are being
studied (OECD, 1997b). Lack of inclusion of environmental costs is currently thought to be an implicit subsidy to industry and consumers. All of the mitigation
measures discussed below internalize or include external costs to the service provider to some degree. An important issue for further research is whether the full costs
of externalities can be quantified in advance.
10.4.1.2. Cost Structure
After 1976, costs of operation fell rapidly for U.S. operators. In real terms, costs per revenue-tonne-km have
declined more than 25%. Similar declines have been achieved internationally. Lower passenger fares and cargo
rates have paced this reduction in costs. As a result, airline profits have remained low relative to other industries.
For the industry, airline profits are a significant source of funds for purchasing capital assets. Timely acquisition of
new technologies has been viewed as necessary for environmental mitigation. Recent volatility in industry profits is
related primarily to short-term changes in demand and short-term overcapacity of aircraft (Winston, 1998).
Fuel cost and consumption are important to the mitigation measures discussed below. Examination of the historical
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