The Future of Human Mobility and its Impacts on The Future of Human Mobility and its Impacts on Aviation 2020-2025, Embraer Corporation, Sao Jose dos Aviation 2020-2025, Embraer Corporation, Sao Jose dos Campos, Brazil, May 13-15 2009Campos, Brazil, May 13-15 2009

The Future of Transportation: The Future of Transportation: Driving Forces for the Airline Driving Forces for the Airline Industry (2020-25)Industry (2020-25)

Jean-Paul RodrigueAssociate ProfessorDept. of Global Studies & GeographyHofstra UniversityNew York, USA

The Future of Mobility: The Views of a Transport The Future of Mobility: The Views of a Transport GeographerGeographer

■ Socioeconomic forces• Aggregate demand.• Preferences.

■ Technological forces• Performance.• Input costs.

■ Regulatory forces• Competition.• Operations.

Locations (Nodes)

Locations (Nodes) In

tera

ctio

ns (F

lows)

Inte

ract

ions

(Flo

ws)

InfrastructuresInfrastructures

PassengersPassengers

FreightFreight InformationInformation

An Accessible World… With Limited Expected An Accessible World… With Limited Expected ChangesChanges

Source: Nelson (2008)

ECONOMIC AND BUSINESS CYCLESECONOMIC 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 Cumulative Modal Contribution to Economic OpportunitiesOpportunities

HorsesMaritime shipping

Canal shipping

Railways

Roads Air

Telecommunications

1750 1775 1800 1825 1850 1875 1900 1925 1950 1975 2000 2025 2050

Econ

om

ic O

pp

ort

un

itie

s

Industrial RevolutionIndustrial Revolution Mass ProductionMass Production GlobalizationGlobalization

Paradigm Shifts and Incremental ChangesParadigm 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 FuturePast 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” CycleTechnology “Hype” Cycle

Visibility

Inflated expectations

Abandonment

Delusion

Introduction

Productivity peak

Learning curve

Utility

Hype Phase Realization Phase

Growth of the US Transport System, 19Growth of the US Transport System, 19thth – 21 – 21stst CenturyCentury

CanalsCanals

RailRail

RoadsRoadsAirAir

MaglevMaglev

1836

1800 1850 1900 1950 2000 20500%

1%

2%

3%

4%

1891 1946 2001

Δt= 30 years

Δt= 55 years Δt= 65 years Δt= 70 years

1825

18691913 1969

1836

1825 Paradigm shift

Peak year

Blowing Bubbles: From Technology to CommoditiesBlowing Bubbles: From Technology to Commodities

Tech / Stock Bubble Housing BubbleCommodities / Trade

Bubble

FORECASTING: A LESSON IN FORECASTING: A LESSON IN HUMILITY… AND FUTILITYHUMILITY… 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, 1951Flying Car Concept, 1951

Flying Car (Spinner) in Science Fiction (Blade Flying Car (Spinner) in Science Fiction (Blade Runner, 1982)Runner, 1982)

World Air Travel and World Air Freight Carried, 1950-World Air Travel and World Air Freight Carried, 1950-2007; Are We at an Inflexion Point?2007; Are We at an Inflexion Point?

0

50

100

150

200

250

300

0

1000

2000

3000

4000

5000

6000

7000

8000

Bill

ion

s o

f to

ns-

km

Bill

ion

s o

f pa

sse

ng

ers

-km

Passengers

Freight

“Monkey Curve”

Recession and regionalization

PEAK OIL OR PEAK MOBILITY?PEAK OIL OR PEAK MOBILITY?

Are energy issues an overstatement?Secular inflationary cycle in the price of energy and commoditiesPotential for demand destruction

The Peak Oil Debate: A “Normal” AssumptionThe 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

Bill

ions

of b

arre

ls

2010 Peak

Actual

West Texas Intermediate, Monthly Nominal Spot Oil West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2009) Price (1970-2009)

0

20

40

60

80

100

120

140

Jan-

70Ja

n-71

Jan-

72Ja

n-73

Jan-

74Ja

n-75

Jan-

76Ja

n-77

Jan-

78Ja

n-79

Jan-

80Ja

n-81

Jan-

82Ja

n-83

Jan-

84Ja

n-85

Jan-

86Ja

n-87

Jan-

88Ja

n-89

Jan-

90Ja

n-91

Jan-

92Ja

n-93

Jan-

94Ja

n-95

Jan-

96Ja

n-97

Jan-

98Ja

n-99

Jan-

00Ja

n-01

Jan-

02Ja

n-03

Jan-

04Ja

n-05

Jan-

06Ja

n-07

Jan-

08Ja

n-09

First Oil Shock

Second Oil Shock

Third Oil Shock

A B C

21

D

Major Oil Price FluctuationsMajor 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 SubstitutionAir 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

% o

f Bas

e (C

omet

4)

Strategies Used by Airlines to Save FuelStrategies 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”Principle of “Demand Destruction”

PricePrice

QuantityQuantity

P1

ΔP

P2

Q1

ΔQ

Q2

Annual Vehicle-Miles Traveled in the United States Annual Vehicle-Miles Traveled in the United States and Year-over-Year Changes, 1971-2009and Year-over-Year Changes, 1971-2009

Recession

End of the motorization cycleSlow down of suburbanizationAging of the population

Population 60+, 1950-2005, With Projections to 2050Population 60+, 1950-2005, With Projections to 2050

NETWORK STRUCTURENETWORK STRUCTURE

Regionalism or globalism?Modal shiftThinking “outside the aircraft”

World’s Major Gateway Systems, 2006World’s Major Gateway Systems, 2006

World Cities, Hubs of RegionalizationWorld Cities, Hubs of Regionalization

Characteristics of Major Air Travel Markets: Characteristics of Major Air Travel Markets: Expected ChangesExpected 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 Deregulation Favored Regionalization: Reemergence of more Point-to-Point Servicesof more Point-to-Point Services

Before Deregulation

After Deregulation

Hub

Hub

Travel Times before and after the Introduction of a Travel Times before and after the Introduction of a High Speed Train Service (hours)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 CardLow-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 Thinking “outside the aircraft”: Air Travel as an Intermodal Transport ChainIntermodal 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, DetroitMcNamara Terminal, Detroit

Maglev Exiting Pudong Airport, ShanghaiMaglev Exiting Pudong Airport, Shanghai

Aeotropolis DevelopmentsAeotropolis Developments

Dubai

SeoulDenver Beijing

Bangkok

Detroit

MemphisOntario Shanghai

Hong KongGuangzhou

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 Diffusion of a Pandemic Through a Global Transportation NetworkTransportation Network

A - Emergence B - Translocation

C - Diffusion D - Pandemic