Flying Economy – The Economic Impact of New Propulsion Technology: A Cost-Benefit Analysis of the Geared Turbo Fan Engine on the London Heathrow and Frankfurt Route

Chikage Miyoshi and Patricia Prieto Torrell

A chapter in Airline Economics in Europe, 2019, vol. 8, pp 201-228 from Emerald Group Publishing Limited

Abstract: This chapter assesses the economic impact of geared turbofan (GTF) engines on the London Heathrow Airport (LHR)–Frankfurt Airport (FRA) route using cost–benefit analysis (CBA). An aircraft appraisal model is created to answer the two key questions of whether the A320neos aircraft with GTF engines could replace the conventional A320 aircraft through an operating lease (acquisition) or whether it would be better for society if the LHR–FRA sector is operated with a leased 737-800 aircraft. The scope of the CBA analysis is from 2015 until 2027. The outcomes of the aircraft appraisal model indicate that switching to A320neos on lease (Option 2) might be beneficial. The fuel consumption of the A320neo aircraft is lower than that of the current A320-200 aircraft (2,234 kg vs 2,988 kg per sector). As a result, this option could offer a large benefit (NPV of USD 31 million) through lower fuel consumption and thus lower fuel costs. At the same time, a fuel reduction means a lower emissions impact (about USD 2 million benefit). It can be concluded that keeping the current A320-200 (NPV of USD 8.9 million) is less profitable than replacing it with a leased A320neo (NPV of USD 31 million) for Airline A, but better than a B737-800 (NPV USD 4.3 million). The option to lease the A320neos appears to be preferred in most cases, considering the impact of noise and NOxcost, due to the large benefit of NPV USD 25 million compared to the A320 and an approximately 29 million difference compared with the B737-800.

Keywords: Cost-Benefit Analysis; geared turbofan (GTF) engine; new technology; environmental impact; CO2; noise; NOx (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aiaezz:s2212-160920190000008009

DOI: 10.1108/S2212-160920190000008009

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