Fuel Issues Hamper Aviation's Shaky Restart

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Airlines and their jet fuel suppliers are planning for the safe restart of global air travel after more than 15 months of Covid-19 devastation. Some obstacles still must be cleared, however, including possible problems with jet fuel quality caused by stagnant fuel tanks and unused pipeline and airport hydrant infrastructure. Labor shortages, an exodus of talent from the industry, and issues accessing multifuel pipelines are already hampering some restart efforts. At the Jun. 8-9 International Air Transport Association’s (IATA) Aviation Fuel Forum, Deloitte's global aviation leader Bryan Terry said he was confident that global jet fuel demand would make a full recovery to 2019 levels, even with the deployment of more fuel-efficient aircraft and a ramp-up in the use of low-carbon fuels, but warned it could take several years (PIW Nov.20'20). Global air traffic is still barely a third of pre-pandemic levels, according to IATA Chief Economist Brian Pearce, despite booming domestic markets in the US and China and global air cargo traffic that is already above 2019 levels. Pearce sees the global recovery picking up in the second half of this year when the trans-Atlantic travel corridor between Europe and the US is expected to reopen, with a full recovery following within three years. Energy Intelligence sees global jet demand returning to pre-pandemic levels by 2024. In the US, domestic air travel market is booming but there are acute problems getting jet fuel because of a shortage of truck drivers and "into-wing" airport fueling personnel. Michael AuBuchon, senior director of fuel supply chain management at US domestic carrier Southwest Airlines, said his company's jet fuel demand was already above pre-pandemic levels at some locations thanks to the rapid rollout of Covid-19 vaccines in the US and pent-up demand for leisure travel. Southwest has added 20% more leisure routes since it restarted operations, mainly to smaller US airports close to mountain and beach resorts that are dependent on deliveries of jet fuel by truck. United Airlines' Vice President of Global Fuel Supply Janet Peters also flagged shortfalls in pipeline deliveries to its larger hubs at a time when airlines are adding routes to Europe this summer. Allocations on multiproduct pipelines are based on allotments over the previous 12 months, which plunged during the pandemic with pipeline space filled with road fuels. Europe is still in the depths of Covid-19 jet fuel demand destruction but that should change next month when the EU brings in its digital travel pass for intra-regional travel while it lifts restrictions on travelers from the US. Willie Walsh, IATA's new director general and the former CEO of European airline giant IAG, said the crisis facing aviation is no longer caused by Covid-19 but by government restrictions. IATA is pushing its own global digital travel pass to help streamline vaccination and test data, and it is also lobbying for much cheaper Covid-19 testing. Efforts to decarbonize the airline industry are set to steadily erode jet fuel demand from 2030 onwards (PIW May7'21). Planes may have been grounded for more than a year, but the industry has still seen a flurry of sustainable aviation fuel (SAF) deals and decarbonization promises from cash-strapped airlines. Government support for SAF is ramping up on both sides of the Atlantic. The EU is set to announce its SAF blending mandate on Jul. 14, which is intended to guarantee a certain level of demand (PIW Jun.11'21). The mandate could require a minimum SAF content of 2% from 2025, rising quickly to 10% by 2030. The US, meanwhile, is working on extending its $1.50-$2 per gallon diesel blender's tax credit to SAF to boost production. Both policy approaches and more are required if the aviation industry is to meet its target of at least halving carbon emissions from 2005 levels by 2050. Up to 450 million tons per year of SAF could be needed by 2050, according to global forecasts published late last year by the Air Transport Action Group, up from barely 175,000 tons/yr currently. The head of sustainability at Europe's biggest airline group IAG, Jonathon Counsell, said governments would also need to provide financial guarantees to get the fledgling SAF industry off the ground and scale up to commercial volumes. Current technical blending limits are 50% SAF with conventional jet fuel but work is already under way to allow 100%.

Oil Demand, Oil Supply, Oil Pipelines, Biofuels (incl. SAF)
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