I have recently established a Centre for Air Transport Research at the School of Business in the University of Otago.

The Centre will be home to a recent FRST grant received by myself (as Principal Investigator), Dr. Niven Winchester from the Department of Economics at Otago and a leading consultancy firm, Covec, based out of Auckland. The Centre will also be home to graduate students studying toward higher degrees in air transport management, economics and policy.

Several notable consultants have already become affiliated with the Centre, including Shane Vuletich and Aaron Schiff of Covec as well as Mike Swiatek of Swiatek Advisory Services. Also attached to the Centre is Mr John Macilree, who is Principal Adviser, Air Services with the Air Services and Security Team at the New Zealand Ministry of Transport.

Much has been written in the international media re: the UK’s decision to a) retain the APD (Air Passenger Duty) and b) increase the amount progressively and incorporate a distance factor.  Put simply, longer distance trips will attract a higher duty.  New Zealand and Australia are obviously concerned.

John Macilree has done some ‘back-of-the-envelope’ calculations which I more-or-less replicate below.  I then expanded on these and include estimates relating to CO2-e (radiative forcing) and the relationship to the (potential) price of carbon.

The following assumptions can be made:

1. A distance of 18355km for LHR to AKL, resulting in 1,342 Kg of CO2 (from the ICAO carbon emissions calculator)

2. A price of carbon at £13.36 (or €15.70) per tonne of CO2

The result is a liability to the passenger of £17.93.  This is significantly less than even the current APD of £40 (which is the reduced rate for carriage in a lower class), let alone the proposed levy of £55 from 1 November 2009 and £85 from 2010.

The ICAO calculator only covers CO2 and does not take into account the radiative forcing (RF) aircraft emissions.  Although not known exactly, work by Sausen et al (2005) indicated that a RF factor range of 1.9 – 5.1 is possible.  For our immediate purposes, a (reasonable?) factor of 3 can be used.  The resulting CO2-e footprint becomes 4.03 tonnes and the passenger liability rises to £54.  This is closer to what is proposed for the APD as of 1 November 2009.

Another issue worthy of consideration is the price of carbon.  In order to justify the APD rise to £85 in 2010, there would need to be at least a 60% increase in the price of carbon on the global market if a radiative forcing factor of 3 is used.  If a radiative forcing factor is not used (i.e., if just CO2 emissions are calculated), the price of carbon will need to at least treble over the next 11 months to match the APD rise to £55 on 1 November 2009.

Not surprisingly, this issue is generating quite a bit of attention in the aviation community.  IATA has called the decision a mistake, the European Low Fares Airline Association (ELFAA) deplores the decision to reverse earlier considerations of a per-flight tax, and the US Air Transport Association has noted its strong opposition.

Cabinda, Angola (26 September 2008)

I have long told students (and government officials and bureaucrats) that tourism to and from any destination (especially rather peripheral destinations such as New Zealand) relies heavily on air access.  Thai Airways International recently announced a (tentative?) end to its BKK-AKL flights, effective October 2008. My colleague and friend John Macilree has found subsequent comments issued by Hon. Damien O’Connor, New Zealand’s Tourism Minister, in the Bangkok Post that show the concern this raises:

”To stop this service would be a big blow to the flourishing relationship between New Zealand and Thailand,” said Mr O’Connor. He said that since the inception of THAI’s non-stop flights to Auckland in 2005, visitors from Thailand using the air route had increased by 95%. ”The flights have also been very popular with New Zealanders holidaying in Thailand with more than 37,000 New Zealand citizens using these flights last year, fuelling healthy growth for the tourism sector in Thailand,” he said. The non-stop flight has also helped build traffic to New Zealand from other key points on the Thai Airways network. ”Europeans passing through Bangkok on their way to New Zealand have increased by a phenomenal 110% since 2005. There is also a high potential for growth in traffic from India to New Zealand via Bangkok,” the minister said.

Like most airlines, Thai has been saddled with mounting fuel costs, which undoubtedly would have been a factor in the decision.  If there is a silver lining in all this, it is that both Airbus and Boeing, as the largest manufacturers of commercial aircraft, see significant growth potential in the Asia Pacific region in the coming years.

An interesting piece from the Environmental Capital blog at the Wall Street Journal on the oil supply problem and what that may mean for prices in the future.