Aviation Fuel Market

The global aviation fuel market is growing at a rapid rate due to the rising demand for commercial and military aircraft across the globe. Furthermore, an increase in passenger traffic across the globe and subsequent demand for new aircraft and a rise in the demand for alternative fuel are expected to positively impact the growth of the market. However, stringent regulations to minimize CO2 emissions and rising preference for bio-based solvents are expected to hinder the expansion of the market.

On a global scale, air passenger traffic has been increasing at a significant pace during the past couple of years. Decreasing airfares, increasing disposable income, especially in developing countries, and rising standard of living, are some factors influencing the growth of the market. According to the International Air Transport Association (IATA), global air travel is likely to double by 2035. It also estimates that China is likely to surpass the US and become the largest aviation market (in terms of passenger traffic) in the world by 2024.

Increasing air passenger traffic across the globe is projected to boost the demand for new aircraft, thus driving the expansion of commercial aircraft fleets. According to the Federal Aviation Administration (FAA), as of 2018, there were more than 22,000 commercial aircraft across the globe. The existing commercial aircraft are expected to be replaced by more than 40,000 new aircraft over the next 20 years. The overall fleet is likely to reach 45,000 aircraft by 2036. Moreover, the high demand for air travel in developing regions, such as Asia-Pacific, the Middle East, and Latin America, is expected to lead to an increase in the number of aircraft in these regions. However, according to the FAA, over 15,000 aircraft are projected to be delivered in North America and Europe by 2036. The expansion of commercial fleets is expected to result in an increased demand for aviation fuel, which, in turn, is projected to drive market growth.

The pie chart below shows the number of domestic and international aircraft passengers carried by airlines in Asia-Pacific, Europe, North America, the Middle East, Africa, and Latin America regions. Among these, Asia-Pacific accounted for the largest share of 34.50% in 2019.

In 2018, Asia-Pacific emerged as a global leader in the aviation fuel market, accounted for a 11.09% share of the global market. According to the latest edition of International Air Transport Association (IATA)’s 20-Year Air Passenger Forecast, Asia-Pacific will witness significant demand between 2020 to 2035, accounting for more than half of the global passenger traffic. China will replace the US as the world’s largest aviation market around 2024. It is also expected that India will have the third-highest passenger traffic in 2025. It is expected that by the end of 2029 there would be 6,629 new aircraft delivery in Asia-Pacific excluding China. Whereas, alone in China, 7,209 new aircraft delivery is expected. Therefore, there would be a rise in the demand for new aircraft, leading to the demand for aircraft fuel. Rise in the number of commercial and military aircraft in China is attributed to factors such as favorable government policies, increasing preference to travel by air, and growing defense budgets in the past few years. Therefore, it is a prominent country for the market in the region. Moreover, the Indian government is implementing rules to reduce air travel fare and indirectly is expected to create demand for aviation fuel in next few years. Thus, these factors are anticipated to create opportunities for the players operating in the market.

Aircraft use fuel for operation, which increases CO2 emissions. Therefore, government authorities in several countries have implemented several stringent regulations. According to the US Environmental Protection Agency, aircraft account for 12% in the US transportation greenhouse gas emissions. In March 2017, the International Civil Aviation Organization (ICAO) implemented a new aircraft CO2 emissions standard to reduce the impact of aviation greenhouse gas emissions on the global climate. These standards are applicable for new aircraft designs from 2020. By 2028, manufacturers would need to adhere to the design norms before delivery of the aircraft. Moreover, several airports have made it mandatory to switch off the auxiliary power unit (APU) and use fixed ground power and pre-conditioned air when an aircraft is parked. The Barcelona El Prat Airport in Spain mandates the use of its fixed ground power and pre-conditioned air after an aircraft arrives at a terminal gate, which reduces CO2 emissions by 58,000 tons per year. Therefore, stringent government regulations to minimize CO2 emissions are expected to restrain the growth of the global aviation fuel market.