Global Aviation fuel market was valued at US$178.560 billion in 2019 and is expected to grow at a CAGR of 6.00% over the forecast period to reach a total market size of US$253.261 billion in 2025. Aviation fuel is a type of kerosene-based fuel which is used to operate an aircraft. Aviation fuels reduce the risk of icing or explosion due to high temperature and is primarily used by military aircrafts as well as commercial airlines in order to maximize fuel efficiency while lowering down the operational cost.
Growing global travel and tourism industry
Booming travel and tourism industry is one of the major drivers of global aviation fuel market. According to the United Nations World Tourism Organization (UNWTO), international tourist arrivals grew 5 per cent in 2018, reaching the figure to 1.4 billion which was reached two years ahead of the UNWTO forecast. This high growth in the number of international tourists is significantly driven by a relatively strong global economy with expanding middle class population base in emerging economies, new business models, technological advances, and affordable travel costs and visa facilitation. In conjunction to this, export earnings generated by tourism also increased to US$1.7 trillion in 2018, thus making the sector a true global force for economic growth and development by way of creating more and more employment. With growing number of air travel passengers worldwide, the demand for commercial aircrafts is also rising among different airlines. According to the World Bank Group, the number of air passenger carried globally has surged from 2.787 billion in 2011 to 4.233 billion in 2018. With rising number of aircrafts on duty, the demand for aviation fuel is also escalating which is fuelling the market growth at a substantial rate. New flight routes and heavy flow of investments in new airports worldwide is also a contributing factor to the global aviation fuel market growth. In September 2018, for instance, the Russian government announced its plans to invest US$24 billion on the country’s infrastructure including new airports and highways over the next three years. In October 2019, India announced its plans to start with 100 additional airports by 2024 which also include 1,000 new routes connecting smaller villages and towns. The construction of the second airport in Sydney, Australia began in 2018 and is planned to be completed by 2026.
Rise in military budget across different countries
Rising focus of governments on military sector is another factor that is spurring the growth of aviation fuel market. These continuous increase in military and defense budget is majorly attributed to political tensions among different nations and rising cases of terrorist attacks worldwide. According to the latest report of Stockholm International Peace Research Institute (SIPRI), global military expenditure was totalled to $1,917 billion in 2019 which is the highest level since 1988. Also, the global military burden (global military expenditure as a share of GDP) increased from $243 in 2018 to $249 in 2019. This rise in military expenditure also includes heavy investments in new military aircrafts by different nations. Recently in July 2020, the Government of India has approved Rs. 38,000 crore deal with Russia to purchase MiG-29 fighter jets while upgrading over 50 MiG-29s amid political tensions with China at the Line of Actual Control (LAC). The Pentagon asked for $56.9 billion in the fiscal budget 2021 to be invested in the military’s air domain out of which the Defense Department planned to buy 79 F-35 Joint Strike Fighters of worth US$11.4 billion. In November 2019, the United Arab Emirates (UAE) Ministry of Defense signed a $618 million contract to purchase 24 of B-250 light-attack aircraft from domestic manufacturer Calidus.
Continuous focus on reducing carbon footprint
As the global aircraft industry is expanding at a decent pace, competition among aircraft fuel production in all sectors is also getting intense. Stringent regulations regarding sustainability of aviation fuel is further boosting the competition among aviation fuel manufacturers which is also positively impacting the overall growth of the global aviation fuel market. As such, biofuels that can significantly reduce carbon emissions and sustainable aviation fuel (SAF) which are still under research and development offers lucrative opportunities for the growth of aviation fuel industry in the near future. Recently in July 2020, the operator of the Gazprom Neft aviation refuelling business, Gazpromneft-Aero, has launched an integrated laboratory information system (LIS) for analysing both qualitative and quantitative characteristics of aviation fuel. Commercial aviation industry is also moving towards sustainable environmental practices and gradually increasing the use of sustainable aviation biofuel (SAF). United Airlines was the first U.S. airline to begin the use of sustainable aviation fuel (SAF) for regularly scheduled flights with the departure of United Flight 708 from Los Angeles International Airport. In March 2019, airplane manufacturer Boeing announced that the company will be offering airlines and operators the option of powering their new commercial jet with biofuel for return flights. This initiative of Boeing aims to drive down emissions by up to 80 per cent and protect the environment. Governments across nations are also focusing on the use of sustainable aviation fuel (SAF) which will also offer a great potential for the overall market growth during the next five years. Although SAF is not widely available in Canada at present, continuous rise in demand across the airline industry to reduce its carbon footprint is encouraging the Canadian government to increase its supply. In November 2019, SKyNRG, the Green Aviation Research and Development Network (GARDN), Waterfall Group, and Vancouver Airport Authority launched BioPortYVR project in Canada. This project aims to ramp up the supply of sustainable aviation fuel (SAF) in the country.
Asia Pacific accounts for a significant share in the global aviation fuel market
By geography, the global aviation fuel market has been segmented as major regional markets- North America, South America, Europe, Middle East and Africa (MEA), and Asia Pacific (APAC).
North America accounts for a substantial share in the global aviation fuel market owing to the continuous rise in demand for different type of aircrafts including military, commercial, and private. Europe is also a leading aviation fuel market on account of well-established aviation industry coupled with the presence of major aircraft manufacturers in the region. However, Asia Pacific (APAC) is projected to witness a substantial compound annual growth rate during the forecast period. This growth is majorly attributed to the rapidly growing travel and tourism industry across the APAC countries. There has been a rise in investments in the tourism sector by India, China, and South-east Asian economies in the past few years. The number of both international and domestic tourists is continuously rising in this region. Increasing disposable incomes and living standards with hectic work lifestyle is encouraging people to regularly take vacations. Furthermore, increased rate of globalization has also led to a rise in business air travel trips across the region as well as globe. Thus, burgeoning rise in air travel passengers, both international and domestic, is supporting the growth of aviation fuel market in Asia Pacific. Supportive government policies to construct new airports in order to manage this rising influx of tourists is also a driving factor for the growth of this regional market.
Severe impact of COVID-19 on global aviation industry
The recent pandemic outbreak caused by COVID-19 has negatively impacted almost each and every industry including automotive and construction. However, the global travel and tourism industry has been hit the hardest by this pandemic. The novel coronavirus disease, which broke out in Wuhan, China, in the beginning of 2020, and then continued to spread like a wild fire throughout the globe, pushed governments to impose nationwide lockdowns and close national borders in order to contain the spread of the pandemic. The duration of the pandemic is still uncertain, and since inability of governments to contain the spread can increase the burden of this disease significantly, air travel remains restricted. A steep decline in the number of commercial flights across the globe has been driving down the demand for aviation fuel. Although some airline carriers continue to operate while ensuring compliance to strict guidelines from governments, it is not enough to recoup the slump. Reluctance of people towards air travel, on account of high degree of fear of contracting the disease, is also limiting the number of flights per month. This trend is expected to continue till the time the world has at least one reliable vaccine or cure for the virus. The market growth is expected to remain restricted till then. Some recovery is expected from 2021 and beyond.
Prominent key market players in the global Aviation fuel market include Shell, Neste, Total, BP, Chevron Corporation, Exxon Mobil Corporation, Gazprom Neft PJSC, Mabanaft GmbH & Co. KG, Lukoil, Uniper SE, VARO, and Global Partners LP. These companies hold a noteworthy share in the market on account of their good brand image and product offerings. Major players in the global Aviation fuel market have been covered along with their relative competitive position and strategies. The report also mentions recent deals and investments of different market players over the last two years.