The Money in Flight-Shaming ✈️

by 31 Jan, 2020

The Money in Flight-Shaming

Between two and two and a half-percent of global CO2 emissions come from planes, and the answer could radically re-organize stock prices across the airline industry. Flight-shaming is forcing disruption to happen sooner rather than later. Get ready!

Flight-shaming. Verb. To cause someone (judged to use excessive air travel) to feel humiliated or guilty by making critical comments about their flying habits.

“There is a shame in flying. But sometimes you have to do it” – Greta Thunberg.   

The flight-shame-driven anti-air travel trend took off in Sweden last year. It now threatens to dent airline revenues across Europe, so as expected, a number of blue sky cure-alls have been pitched to keep everyone happy. Finally, a viable commercial market exists for one such scientific solution. It’s origins? Adolf Hitler’s Luftwaffe fooling around with dangerous chemicals in 1925… If there’s a catch, that’s it!

There’s a race on between scientists in the US and Germany to innovate a synthetic jet fuel that can be made from “fractured” water. The various elements of a ‘green kerosene’ would be combined with an unbelievable amount of renewably sourced electric power, the tech dubbed “Power-to-X!” It’s not just an academic experiment. It’s selling!

Germany’s flag carrier, Lufthansa, is switching to green kerosene for 5% of its fuel needs over the next five years. Not at scale yet, the costs of water fuel are three to six times that of normal jet fuel, enough to raise ticket prices by a whopping 60%! 

However, state coffers have agreed to absorb all of that with tax subsidies and incentives in the short-term. Longer-term, investors should expect even faster adoption as the fuel becomes even cheaper.

Hundreds of airlines have gone bankrupt for not hedging fuel prices. Now, airline investors are thinking seriously about waving goodbye Brent Crude and ditching the risk. That will raise the multiple of earnings that their shares can trade at, sending stocks up even if underlying profits are marginally lower for going green before it’s ready. Up, up, and away!

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