ATA Chair Tilton Says There "Clearly Is A Market"

In a speech to the Commercial Aviation Alternative Fuels (CAAFI) Annual Meeting Thursday, Air Transport Association Chair Glen Tilton, who also serves as Chairman, President and CEO of UAL Corporation and United Airlines, said there is "clearly a market" for alternative aviation fuels, but that a healthy investment environment for the capitalization and commercial deployment of aviation alternative fuels is still lacking, and cash-strapped airlines are not in a position to make that investment.

The airlines need alternative fuels for three good reasons, Tilton said.  An alternative would provide competition to petroleum-based fuels to help limit price volatility, increase security of supply, and reduce environmental impact.

"Fuel is by far our largest expense," Tilton said. "The volatility that we have seen in the oil market driven by uncertainty and speculation -- makes this expense one that is virtually unpredictable. And, that unpredictability will exist as long as there continues to be the possibility of unconstrained speculation."

Tilton (pictured, right)  said the industry used about the same amount of fuel in 2008 as in 2003, but the collective bill was some $42 billion higher.  "It is impossible to offset a $16 billion increase, let alone a $42 billion increase, with nonfuel cost reductions or new revenues. Volatile increases in fuel costs devastate the industry’s bottom line," he said.

But equally important are the other two factors, he said. "We know very well the significant issues caused by our reliance on oil from unstable regions of the world. With fuel supply lines in the U.S. located in gulf and coastal regions, we also contend with the impact of weather related supply disruptions. Alternative fuels would help bring needed diversity of physical supply."

"While aviation only accounts for 2 percent of U.S. or 3 percent of global manmade greenhouse gas emissions, we are committed to reducing the impact associated with aviation. Aviation alternative fuels are a critical part of this commitment – they must produce an environmental benefit on a lifecycle basis relative to traditional fuels." he added.

Tilton pointed out that airlines are not the only potential buyers of alternative fuels. The military uses large quantities of jet fuel, and would be a major consumer of alternatives as well.

But the principal factors standing in the way of viable alternative fuels, in Tilton's view are lack of funding for potential producers, the fragile financial state of the airlines, and a government focus on punishment in environmental matters rather than assisting in developing the alternatives.

"The airline industry is organized, committed and unified as buyers of alternative fuels. We consume between 18 and 20 billion gallons of jet fuel annually, creating a great market opportunity for these products," Tilton said. But "We need leadership from government to make the needed investment attractive to those who can and will invest. We need alternative fuels, want alternative fuels, and we’ve flown aircraft with them. There is a significant market for such products. The country has a great opportunity and together we can meet this challenge – or we can continue to flounder around. Not what I would call a tough decision."

FMI: www.airlines.org