Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

How the US And EU Are Tackling Airline Emissions Differently

By Frank HolmesStock MarketsAug 22, 2023 05:36
au.investing.com/analysis/how-the-us-and-eu-are-tackling-airline-emissions-differently-200576369
How the US And EU Are Tackling Airline Emissions Differently
By Frank Holmes   |  Aug 22, 2023 05:36
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
+0.80%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DJI
+0.23%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
EZJ
+2.39%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ASR
-2.15%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DAL
-0.25%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Air travel is seeing an upswing, with the International Air Transport Association (IATA) forecasting 4.35 billion global passengers carried this year alone.

This resurgence, however, presents an ironic twist. As air travel soars, so does the urgency to reduce emissions—not just in airlines but also airports.

Two global powerhouses, the US and European Union (EU), are navigating this challenge, but their compasses point in very different directions. Whereas the former is investing in new airport infrastructure and modernizing facilities to meet ambitious climate goals, the latter is choosing to combat emissions by restricting the number of flights.

The US: Reimagining Infrastructure

The US is staring at a daunting projection: a 158% increase in passenger traffic by 2040 compared to 2019 levels, according to Airports Council International (ACI). This massive influx demands advanced infrastructure to accommodate passengers, ensure seamless operations, stimulate competition, and offer world-class customer experiences. These aren't mere niceties; they're necessities, especially if you consider that airports contributed an impressive 7.2% to the US GDP pre-pandemic.

But beyond bracing for this surge, there's another colossal challenge—the commitment to reducing CO2 and other greenhouse gases.

The Federal Aviation Administration (FAA) recently allocated over $90 million to help 21 US airports achieve zero emissions by 2050. It's a laudable step, aligning with the 2021 Aviation Climate Action Plan, but a gaping financial abyss remains.

Nevertheless, thanks to the Bipartisan Infrastructure Law, signed in 2021, many US airports are being awarded tens of millions of dollars to upgrade terminal buildings and improve energy efficiency. Among the biggest recipients of federal money is the Dallas-Fort Worth International Airport (DFW), which is getting $25 million to replace an aging HVAC system, install dimmable smart glass in terminal windows and reduce nitrogen oxide (NOx) emissions. A further $10 million is set aside for DFW’s new renewable energy plant, which is on track to deliver 100% net-zero carbon power by 2030.

10 Biggest Recipients of the $5 Billion Airport Terminals Program
10 Biggest Recipients of the $5 Billion Airport Terminals Program

These grants don’t include the billions that airports are already investing in themselves. The most notable example by far is Los Angeles International (LAX), the fifth-busiest airport in the US and sixth-busiest in the world, which is spending a staggering $30 billion in anticipation of the 2028 Summer Olympics, to be held in LA. It’s believed to be the largest public works program in the city’s history.

Here in San Antonio, home to US Global Investors, the international airport (SAT) is undergoing a $2.5 billion expansion and improvement plan. In addition to getting a third terminal, the airport has plans for a new ground loading facility, which will bolster its capacity. Last month, SAT saw over 1 million passengers, a new record for July traffic.

The European Strategy: Restriction & Redirection

Europe, in contrast, paints a different narrative. While the US leans into infrastructure enhancement and modernization, the EU is nudging its citizens toward alternative modes of transportation.

France stands out in this respect. In May, the country banned domestic, short-haul flights between cities where train alternatives exist. And yet some critics believe this doesn’t go far enough, with some calling for stricter measures such as eradicating flight tax benefits or progressive taxing of frequent fliers.

The same is taking place in the Netherlands. Last month, the Dutch government won a case to cap the number of flights at Amsterdam Airport Schiphol, the country’s main international airport and Europe’s third-busiest airport, having handled 52.5 million passengers in 2022. As a result of the ruling, aircraft movements—defined as the number of arrivals and departures into and out of the airport—will be reduced to 460,000 annually from the current cap of 500,000, before being reduced further to 440,000.

The decision has been met with resistance, as you might expect. Major airlines, including KLM Royal Dutch Airlines, the largest carrier at Schiphol, Delta Air Lines, and easyJet , have expressed their disappointment and are advocating for sustainability measures similar to those seen in the US.

An Inevitable Crossroads

Both continents aim for the same horizon—a sustainable future for air travel. The difference is that the US is betting on infrastructure improvements and a drive toward modernization, while Europe is gravitating toward shaping traveler habits via regulations and restrictions.

Will the US infrastructure upgrades, with a keen eye on environmental commitments, prove sustainable in the face of rising demand? Conversely, can European restrictions effectively reduce emissions without hampering economic growth and connectivity?

The answers may not be immediate, but as investors, we must remain engaged and informed.

Global Airline Shares 2023
Global Airline Shares 2023

We still like publicly traded airport operator stocks, our favorites being Grupo Aeroportuario del Sureste (NYSE:ASR) and Spain-based Aena SME, mainly because they maintain strong moats or barriers to entry by new competitors. As you can see above, shares of global airlines, as measured by the NYSE Arca Global Airlines Index, and airports, as measured by the 10-member Dow Jones Brookfield Airports Infrastructure Index, are marginally ahead of the market so far this year. Wheels up.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate for every investor. By clicking the link(s) above, you will be directed to a third-party website(s). US Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by US Global Investors as of (06/30/2023): Air France-KLM S.A., EasyJet PLC, Delta Air Lines Inc (NYSE:DAL)., Grupo Aeroportuario del Sureste, S.A.B. de C.V., Aena SME S.A.

The Dow Jones Brookfield Airports Infrastructure Index is a global index that is designed to measure the performance of pure-play infrastructure companies in the airport sector. The NYSE Arca Global Airline Index is a modified equal dollar-weighted index designed to measure the performance of highly capitalized and liquid international airline companies. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in US companies. 

How the US And EU Are Tackling Airline Emissions Differently
 

Related Articles

How the US And EU Are Tackling Airline Emissions Differently

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email