The Future of Human Mobility and its Impacts on

Aviation 2020-2025, Embraer Corporation, Sao Jose dos

Campos, Brazil, May 13-15 2009
The Future of Transportation:
Driving Forces for the Airline
Industry (2020-25)
Jean-Paul Rodrigue
Associate Professor
Dept. of Global Studies & Geography
Hofstra University
New York, USA
The Future of Mobility: The Views of a Transport
Geographer
Socioeconomic forces
Aggregate demand.
Preferences.
Technological forces
Performance.
Input costs.
Regulatory forces
Competition.
Operations.
Infrastructures
Passengers
Freight Information
An Accessible World With Limited Expected
Changes
Source: Nelson (2008)
ECONOMIC AND BUSINESS CYCLES
Long term trends linked with paradigms shifts and incremental
changes.
How the current phase of mal-investment could unfold.
Cumulative Modal Contribution to Economic
Opportunities
Horses
Maritime shipping
Canal shipping
Railways
Roads
Air
Telecommunications
1750 1775 1800 1825 1850 1875 1900 1925 1950 1975 2000 2025 2050
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Industrial Revolution Mass Production Globalization
Paradigm Shifts and Incremental Changes
Revolutionary changes
Completely new
technology.
Create new markets and
growth opportunities.
Often marks the
obsolescence of an
existing technology:
Modal shift.
Can paradigm shifts be
predicted?
Incremental changes
Improvement of existing
technology and
operations.
Leads to increases in
productivity:
More capacity.
Lower costs.
Better performance.
Possible to extrapolate.
Past Trends and Uncertain Future
Cyclic character of transport innovations
Innovations lead to a wave of development.
A cycles starts with a revolution and evolves incrementally.
Introduction:
Private entrepreneurs and innovators.
Growth:
Fast adoption; Often involves a paradigm shift event.
Maturity:
Maximal spatial coverage.
Government involvement (investment, regulations, etc.)
Rationalization/obsolescence:
Diminishing returns (Segment or system-wide).
Possibility of nationalization.
A mix of regulations (protect public interests) and deregulations
(increase productivity).
Technology Hype Cycle
Visibility
Inflated expectations
Abandonment
Delusion
Introduction
Productivity peak
Learning curve
Utility
Hype Phase Realization Phase
Growth of the US Transport System, 19
th
21
st

Century
Canals
Rail
Roads
Air
Maglev
1836
1800 1850 1900 1950 2000 2050
0%
1%
2%
3%
4%
1891 1946 2001
t= 30 years
t= 55 years t= 65 years t= 70 years
1825
1869
1913 1969
1836
1825 Paradigm shift
Peak year
Blowing Bubbles: From Technology to Commodities
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
NASDAQ (Jan 1998=100)
TOL (Jan 2003=100)
BDI (Jan 2006=100)
Tech / Stock Bubble
Housing Bubble
Commodities / Trade
Bubble
FORECASTING: A LESSON IN
HUMILITY AND FUTILITY
Failure and potential misallocations.
Linear thinking versus economic, social and technological forces.
We have two classes of forecasters:
Those who don't know . . . and those who
don't know they don't know.
John Kenneth Galbraith
Flying Car Concept, 1951
Flying Car (Spinner) in Science Fiction (Blade
Runner, 1982)
World Air Travel and World Air Freight Carried, 1950-
2007; Are We at an Inflexion Point?
0
50
100
150
200
250
300
0
1000
2000
3000
4000
5000
6000
7000
8000
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Passengers
Freight
Monkey Curve
Recession and
regionalization
PEAK OIL OR PEAK MOBILITY?
Are energy issues an overstatement?
Secular inflationary cycle in the price of energy and commodities
Potential for demand destruction
The Peak Oil Debate: A Normal Assumption
World Annual Oil Production (1900-2007) and Peak Oil (2010)
0
5
10
15
20
25
30
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
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2010 Peak
Actual
West Texas Intermediate, Monthly Nominal Spot Oil
Price (1970-2009)
0
20
40
60
80
100
120
140
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First Oil Shock
Second Oil Shock
Third Oil Shock
A
B
C
2
1
D
Major Oil Price Fluctuations
Price Change Event Price Change Time Frame Cause Nominal Price Change
First Oil Shock October 1973 to March 1974
Yom Kippur War / OPEC oil
embargo
From $4.31 to $10.11
(+134.5%)
Second Oil Shock April 1979 to July 1980
Iranian revolution (1978) / Iran-
Iraq war (1980)
From $15.85 to $39.50
(+149.2%)
Oil counter shock (A) November 1985 to July 1986
OPEC oversupply / Lower
demand
From $30.81 to $11.57 (-
62.4%)
First Gulf War (1) July 1990 to November 1990 Iraqi invasion of Kuwait
From $18.63 to $32.30
(+73.4%)
Asian Financial Crisis (B) January 1997 to August 1998
Debt defaults / Non-USD
currency devaluations /
Reduced demand
From $25.17 to $14.08 (-
44.1%)
"Asian Demand
Contagion" (2)
January 1999 to September
2000
Rising demand / OPEC output
cutbacks
From $11.28 to $33.88
(+200.3%)
"September 11 Effect"
(C)
August 2001 to December
2001
Oversupply / American
recession
From $27.47 to $19.33 (-
29.6%)
Third Oil Shock
December 2003 to June
2008
Peak oil / Rising demand /
Monetary debasement /
Speculation
From $32.15 to $133.95
(+316.6%)
Financial Crisis of 2008
(D)
July to December 2008
Collapse of asset bubbles /
Demand destruction / Global
recession
From $133.95 to $41.02 (-
69.4%; Dec 2008)
Air Transportation Has Some Room for Substitution
Trend in Aircraft Fuel Efficiency (Fuel burned per Seat)
20
30
40
50
60
70
80
90
100
1955 1965 1975 1985 1995 2005
Year of Introduction
%

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4
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Strategies Used by Airlines to Save Fuel
Dimension Strategy
Fleet Retiring less fuel efficient aircrafts (e.g. DC-9, DC10, MD-80).
Switching to more fuel efficient aircrafts (e.g. A330, A319).
Operations Less engine idle at gates (electrical systems).
Lower flying speed (-5%).
More frequent plane and engine washing.
On board Lighter seats.
Removal of seat-pocket documents (e.g. magazines).
Less water in bathrooms.
Lighter service carts.
Passengers Weight restrictions for luggage.
Surcharges for first or second check-in luggage.
Passengers weight surcharges (?)
Principle of Demand Destruction
Price
Quantity
P1
P
P2
Q1
Q
Q2
Annual Vehicle-Miles Traveled in the United States
and Year-over-Year Changes, 1971-2009
1,000
1,500
2,000
2,500
3,000
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
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YOY Change in Vehicle-Miles Traveled
Annual Vehicle-Distance Traveled (Billion
Miles)
Recession
End of the motorization cycle
Slow down of suburbanization
Aging of the population
Population 60+, 1950-2005, With Projections to 2050
NETWORK STRUCTURE
Regionalism or globalism?
Modal shift
Thinking outside the aircraft
Worlds Major Gateway Systems, 2006
World Cities, Hubs of Regionalization
Characteristics of Major Air Travel Markets:
Expected Changes
United States Europe Pacific Asia
Deregulation started in 1978 Deregulation started in 1997 Regulated markets with
government ownership
Low population density and
dispersed urban centers
High population density and
concentrated urban centers
Dispersion of urban centers but
high regional concentrations
Relatively open air spaces and
airports
Congested air spaces and
airports
Congested gateway airports
underutilized regional airports
Rail minor competitor; Car
compete for short distances
High speed rail is a direct
competitor; Cars compete for
short distances
Less competition from other
transportation modes (except
Japan, Korea and Taiwan)
Intense competition between
carriers (No loyalty; pricing and
frequent flyers)
Emerging competition
between carriers
Competition between carriers
in its infancy
Limited income growth and
limited leisure time
Limited income growth and
more leisure time
Growing income levels
Deregulation Favored Regionalization: Reemergence
of more Point-to-Point Services
Before Deregulation
After Deregulation
Hub
Hub
Travel Times before and after the Introduction of a
High Speed Train Service (hours)
0 1 2 3 4 5 6 7
Firenze - Rome
Hannover - Wurzburg
Berlin - Hannover
Paris - Bruxelles
London - Paris
Madrid - Seville
Paris - Marseille
Tokyo - Osaka
Seoul - Busan
Taipei - Kaohsiung
After
Before
Low-Cost Carriers are a Wild Card
On-board
operations
Optimum use of seating space.
Minimal crew.
Limited and paying cabin service.
Aircraft
operations
Few (often one) types of aircraft used to minimize maintenance costs.
Stair boarding instead of air bridges.
Maximal usage of runway length (take-off thrust and braking on landing).
Fast turn around to maximize aircraft use.
No freight being carried.
Service
network
Point-to-point services.
Destinations commonly of less than two hours apart.
Usage of secondary airports (lower gate rates).
Booking Online booking to minimize transaction costs.
No travel agent commissions.
Thinking outside the aircraft: Air Travel as an
Intermodal Transport Chain
Terminal / Plane Interactions Airport / City Interactions
Checking in Access to public transit systems (the
location paradox)
Security Access to surface freight systems
Gate access Parking facilities
Boarding Aeotropolis
McNamara Terminal, Detroit
Maglev Exiting Pudong Airport, Shanghai
Aeotropolis Developments
Dubai
Seoul
Denver Beijing
Bangkok
Detroit
Memphis
Ontario
Shanghai
Hong Kong Guangzhou
Singapore
Amsterdam
Kuala Lumpur
Belo Horizonte
Dallas-Ft. Worth
Rudimentary (3)
Planned (3)
In development (8)
Existing (2)
Diffusion of a Pandemic Through a Global
Transportation Network
A - Emergence B - Translocation
C - Diffusion D - Pandemic