It's an exciting time to be involved in the aviation industry. There are new ways of powering aircraft emerging that are forcing a rethink of aircraft design; supersonic flight is back on the agenda; and electric vertical take-off and landing (eVTOL) aircraft are expected to make their debut shortly.
The level of available technology, as well as changing environmental expectations, are going to have a significant influence on the commercial aviation industry over the next couple of decades, and each development will need the support of the insurance sector.
Science points to the need to move away from fossil fuels, but there is not yet a consensus around what the aviation industry should use as an alternative. Sustainable aviation fuel (SAF), which we discuss in more detail here, is a drop-in alternative to traditional aviation fuels, enabling airlines to reduce their reliance on fossil fuels without having to change aviation infrastructure.
However, there are two major challenges associated with SAF. Firstly, the production capacity currently doesn’t exist so the migration to 100% SAF remains an unrealistic short-term goal.[1] The World Economic Forum recently cited a European Parliament study estimating that a meagre 0.1% of aviation flights are currently powered by SAF. With SAF costing up to four times more than traditional aviation fuels, it seems that we are some way from SAF replacing traditional aviation fuel in meaningful amounts.[2] The aviation industry is lobbying for more intervention by governments around the world to encourage SAF production, but there is a significant gap between where we are and where we want to be.[3]
The second challenge is that it still releases greenhouse gasses, so even if the aviation industry could move to 100% SAF tomorrow, it would still continue to contribute to human-induced CO2 emissions[4].
Irrespective of the hurdles, from an insurance point of view, the way that SAF is being developed means that the switch from traditional jet fuel can be made with relatively few issues, assuming that the fuel is assessed and approved by the appropriate authorities. While the performance is slightly different to the performance of traditional jet fuels, there are no particular insurance barriers to adopting SAF.
Meanwhile, hydrogen or battery, the front runners to replace traditional jet fuel in the longer term, do not offer a simple, low-cost transition. Moving to either will require significant investment on the part of the aviation industry and, in most cases, the governments that stand behind it.
The discussions are likely to continue for the next few years driven by three main factors:
Firstly, airframe manufacturers are developing and exhibiting hydrogen or battery-powered aircraft. Tests are currently being conducted on aircraft that can carry around 100 people over relatively short distances, so there needs to be a massive step change in terms of both size and range before the aviation industry as a whole can follow either route to move away from fossil fuels.
Secondly, there will need to be a better understanding of the infrastructure implications of switching power trains. If the first generation of battery or hydrogen aircraft are unlikely to have anything like the size or range of the current generation of superjumbos, the ramifications for routes will need to be closely examined, particularly given the continued recovery in demand for air travel witnessed in 2023.[5]
Finally, there needs to be a better understanding of both the science and economics of change within the industry. The aviation sector works on very tight margins and airlines are likely to need clear leadership and support at both a national and supranational level to commit to change over the next few decades.
The insurance implications of moving to battery or hydrogen would be more significant than the switch to SAF, because it is likely to involve a fundamental change in aircraft and airport design as we covered in this recent article.
That said, the insurance sector is adept at adapting to new-generation aircraft as they are being prepared for service. Assuming that manufacturers continue to work transparently with regulators and experts across the aviation insurance sector to assess performance and quantify and manage risk, the process should be gradual enough as the industry evolves over the next 25 years.
If the aircraft of the future are powered by hydrogen or batteries, the likelihood is that aircraft design will have to change significantly.
Without getting too technical, traditional fuel (or SAF for that matter) can be poured into a tank of any shape or size. In the case of most modern aircraft, this means that the wings are used to store fuel (where its weight improves balance, reduces wing flutter and counters stress). If airlines go down the battery route, the housing is likely to have to be a uniform shape and size and will also be relatively heavy, so aircraft designers will need to take that into account when designing future long-range passenger or cargo aircraft because it may not be as simple to house batteries in the wing.[6]
In the case of hydrogen, it currently has to be stored in liquid form, but cooled to -253°C (-423°F). This means that the technical and hardware requirements for an aircraft will be significantly different to the current demands of liquid jet fuel. Beyond the need for extra cooling, extensive additional sensors will be required too, necessitating significant aircraft redesign. As a result, there is a lot of fascinating work being done to investigate the potential of, for example, delta, canard or truss-braced winged aircraft.
Material sciences, technology and the understanding of aerodynamics have progressed massively over the last half century, making it possible to create lighter, stronger materials that can both generate lift and withstand the rigours of long-haul flight.
This has changed the definition of what is both possible and economically viable from an aircraft design perspective. It is also creating interest in reintroducing commercial airships[7] and supersonic flights, with some airframe producers hoping to commence supersonic test flights within the next three years, announcing commercial partnerships and taking advance orders.[8]
The next few years could see a myriad of changes as the aviation industry moves into a new technological age while simultaneously reducing its contribution to human-induced CO2 emissions.
The insurance sector is ready to support this evolution, and is adept at helping airline and aerospace companies define, quantify and manage changing risk profiles. The aviation industry has a long history of ensuring that advances in technology are rigorously tested before entering the mainstream, and strong regulatory oversight ensures trust and provides insurers with comfort to support change.
At the other end of the scale but equally exciting, there are several electric vertical take-off and landing (eVTOL) aircraft preparing for commercial launch, with one having completed an exhibition flight in New York in November 2023[9] and another potentially making its public debut at the Paris Olympic Games in the summer of 2024.[10]
eVTOL is an intriguing development, potentially bringing a whole new dimension to the hub and spoke versus point-to-point debate that has raged in the aviation sector over recent years. It was one of the topics that came up at the recent Airport Risk Community’s annual conference hosted by WTW in London, which included a fascinating discussion around the placement of eVTOL infrastructure within existing aviation infrastructure as well as the challenges of delivering entirely new sites within existing cities.
The initial generation of eVTOL aircraft have ranges from around 20 miles to around 150 miles, so their introduction could have implications for the aviation industry as well as being potentially disruptive for trains and private road transport.
Specialist insurers have long been supportive of innovation so over the medium-term there should be sufficient momentum to support the nascent eVTOL industry. In the short-term insurance backers of new technology are likely to be relatively few and far between, but confidence in the concept will grow as it becomes more proven. Rigorous, open testing and sensible regulation is likely to make the process of adoption more rapid.
There is also a great deal of experience of accommodating temporary air corridors as people travel to and from major sporting events in helicopters for example, and while the potential scale of eVTOL usage could be more significant if a way can be found to make it commercially viable, it will be some time before these vehicles reach the mainstream and there is an appetite for an eVTOL landing pad on every street. This means that the insurance sector has time to evolve and innovate to support this new form of transport as it develops.
An area that might prove interesting – and has been seen in the field of autonomous cars – is the question of liability. With driverless vehicles does the manufacturer assume responsibility in the event of an accident? This may create a different structure to insurance-buying as we look to the future and could be a subject that will need to be explored from an aviation insurance perspective over the next few years.
As we approach the mid-point in the 2020s, there is change afoot at virtually every level of the aviation industry, and the next few years are likely to be fascinating. Whether the industry evolves along its current trajectory or whether it takes an entirely different route to the future, the insurance sector will be there to enable it; hopefully adopting technology itself to make the consumer experience as frictionless and competitive as possible.
The broking team at WTW is ready to discuss the future of flight with support manufacturers, air and land operators and novel air technology industry stakeholders. You can find out more here.
