A significant volume of literature already exists concerning the inclusion of aviation in the EU-ETS. Most of the research laid its focus on specific industry levels such as the individual airline, the aviation industry in general or macroeconomic aspects. In this context, these studies tried to anticipate market reactions triggered by the EU-ETS by analyzing specific issues such as the financial impact on airlines, changes in competitive behavior or implications for the overall industry development. As a consequence, the existing studies took only a limited market view and made assumptions about expected developments in specific fields of the aviation industry. However, at the time of writing this thesis, conclusions about the scope of impact could hardly be drawn from existing impact assessments because of the wide range of issues that exceeded the scope of most impact studies. Hence, a broader research approach is needed which takes different analytical perspectives to describe the scope of impact of the EU-ETS and depict potential effects for the aviation industry.
Table of Contents
1 Introduction
1.1 Background
1.2 Objective and limitations
1.3 Structure
2 Legal framework for climate change and emission trading
2.1 Demarcation of international and EU law for climate change
2.2 United Nations Framework Convention on Climate Change
2.3 Kyoto Protocol
2.4 European Union Emission Trading Scheme
2.4.1 Motivation and objectives
2.4.2 Scope and extensions
2.4.3 Allocation and cap system
2.4.4 Trading and price mechanisms
2.4.5 Timeline and structural changes
3 International aviation and climate change
3.1 International aviation industry and airline economics
3.1.1 Market evolution and competition
3.1.2 Market players
3.1.3 Price and demand mechanisms
3.1.4 Industry trends
3.2 Environmental policies in civil aviation
3.2.1 Convention on International Civil Aviation
3.2.2 Aviation Directive
3.2.2.1 Motivation and objectives
3.2.2.2 Major design elements
3.2.3 Current issues in climate policy for international aviation
4 Impact analysis of the EU-ETS on the aviation industry
4.1 Focus of analysis and research approach
4.2 Airline profitability
4.2.1 EU-ETS costs
4.2.2 Pricing behavior
4.2.3 Windfall profits
4.3 Industry competition
4.3.1 Distributional effects of allowance allocation
4.3.2 Airline type
4.3.3 European versus non-European airlines
4.4 Industry performance and development
4.4.1 Technological advancement
4.4.2 Operational improvement
4.4.3 Volume measures and modal shift
5 Analysis results and management implications
6 Conclusion and outlook
Objective and Key Themes
This thesis aims to describe the scope of impact of the European Union Emission Trading Scheme (EU-ETS) on the aviation industry and to develop a detailed understanding of the resulting effects. The central research objective is to analyze how the inclusion in the EU-ETS affects airline profitability, industry competition, and overall industry development, while acknowledging the specific legal and economic context of international aviation.
- Potential chances and risks for airlines due to EU-ETS incorporation
- Future market development of the aviation industry under emission trading
- International legal framework for climate change and emission trading
- Industry-specific characteristics and dependencies between legislation and aviation
Excerpt from the Book
3.1.2 Market players
The aviation industry encompasses several market participants. Analyzing the value chain reveals major market players, such as aircraft manufacturers, airlines, ground handlers, airport operators, and air traffic control (ATC), that contribute to the air transportation service. Given the complexity of the aviation industry this thesis limits its scope to the airline market. In the following, traditional types of airlines including their traditional business models are described.
NWCs are characterized by a large route network which is operated by a hub-and-spoke system to serve a wide range of destinations. As to date, NWCs constitute the leading type of airline capturing the largest market share in the aviation industry. Within a hub-and-spoke network, airports at central locations (hubs) are strategically vital in order to collect traffic through so called feeder flights from various origins (spokes). In this way, passengers are accumulated at central locations so that larger airplanes can be used for long-haul flights to transfer passengers to the respective destinations. In order to operate hub-and-spoke networks, NWCs are required to keep diverse fleet compositions consisting of various types of aircraft to operate short- and long-haul flights. Typically, airlines benefit from this network configuration through scale effects such as network extensions, increased utilization of airplanes, and a more efficient use of ground staff and equipment. Moreover, NWCs are distinguished by the comprehensive customer service. In this regard, NWCs generally offer different passenger classes, including economy, business, and first class. These passenger classes provide different service levels as for instance on-board service, in-flight entertainment, ticketing service, and passenger lounges at airports. Consequently, air fares are regularly in the upper price range claiming a premium price whereas most profits are generated from business- and long-haul travel.
Summary of Chapters
1 Introduction: Provides the research background, defines the objective and limitations, and outlines the structure of the thesis.
2 Legal framework for climate change and emission trading: Describes international climate treaties and the structural development of the EU-ETS.
3 International aviation and climate change: Analyzes airline economics, market players, trends, and the environmental policy context of aviation.
4 Impact analysis of the EU-ETS on the aviation industry: Examines the effects of the EU-ETS on airline profitability, competition, and industry performance through three distinct perspectives.
5 Analysis results and management implications: Summarizes the key findings of the impact analysis and discusses managerial implications for airlines.
6 Conclusion and outlook: Recapitulates the core research results and provides a future outlook on developments in climate policy for aviation.
Keywords
EU-ETS, Aviation Industry, Emission Allowances, Airline Profitability, Market Competition, Climate Policy, Kyoto Protocol, Aviation Directive, Carbon Price, Hub-and-Spoke, Low-Cost Carriers, Network Carriers, Emission Mitigation, Air Traffic, Demand Elasticity
Frequently Asked Questions
What is the core subject of this thesis?
The work fundamentally explores the integration of the aviation industry into the European Union Emission Trading Scheme (EU-ETS) and evaluates the scope of impact this inclusion has on the sector.
What are the primary themes analyzed in the research?
The study covers the international legal framework for climate protection, specific airline business models, competition dynamics between different types of carriers, and the industry-wide effects of carbon pricing.
What is the main objective or research question?
The objective is to describe the scope of impact of the EU-ETS on the aviation industry and to develop a detailed understanding of how this regulation affects airline operations and competitiveness.
Which scientific methodology is applied?
The author conducts a comprehensive literature review, screening academic journals, research institution reports, and publications from consultancy firms to build a comparative analysis of the current state of research.
What is addressed in the main part of the work?
The main part encompasses an analysis of EU-ETS costs, pricing behavior, windfall profits, competitive distortions, and industry performance metrics, categorized into individual, intra-industry, and collective industry perspectives.
Which keywords best characterize this work?
Key terms include EU-ETS, Aviation Industry, Emission Allowances, Airline Profitability, Market Competition, and Carbon Price.
How does the business model affect an airline's sensitivity to the EU-ETS?
The thesis highlights that Network Carriers (NWCs) and Low-Cost Carriers (LCCs) are affected differently due to their distinct passenger structures and route networks, with NWCs often having more flexibility to manage costs.
What role does the geographical scope of the EU-ETS play?
The geographical scope is a major point of contention, as it discriminates between European and non-European airlines, particularly regarding the coverage of international long-haul flights versus regional feeder services.
Why is the "green image" mentioned in the thesis?
A "green image" is identified as a potential competitive advantage, helping airlines maintain market legitimacy and appeal to environmentally conscious passengers amidst increasing public and political pressure.
- Quote paper
- Vincent Schade (Author), 2013, The inclusion of aviation in the European Union Emission Trading Scheme, Munich, GRIN Verlag, https://www.grin.com/document/231173
