Investment Institute
Technology

As tech shapes the future of flight, here’s how investors can get on board

  • 13 December 2023 (5 min read)

The aviation industry is changing, and quickly – meaning there’s plenty of room for investors.

The airline industry is taking flight once again. Between 2004 and 2019, flights increased steadily, rising from 23.8 million to 38.9 million annual global flights. Although flights dropped to ​​16.9 million during the pandemic, these levels could double by the end of 2023.1

In the U.S., the airline industry’s recovery is well underway. Domestic leisure travel has a projected 2% growth rate in 2023 and 2024, while international inbound travel volume could yet reach 31% growth in 2023 and 18% in 2024. 2  In 2023, American Airlines’ flying capacity was up 5.3% year-over-year, leading to a Q2 revenue of $14.06 billion, 3  while Delta Air Lines reported record September quarter operating revenue of $14.6 billion. 4

Amid this demand, the U.S. airline industry is changing. Customer pressure, government incentives, and a growing awareness of environmental issues have led many in the airline industry to make carbon commitments. Meanwhile, advanced technology and robotics enhance traveler safety, security, and efficiency. These dual trends signal intriguing investment opportunities for today’s investors. 

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Sustainable aviation offers investment potential

Aviation has long contributed to global warming, as it is responsible for 2.4% of global carbon dioxide emissions, 5  contributes roughly 3.5% to overall climate change, 6 and represents 11% of U.S. transportation-related emissions. 7  But the industry could reduce its impact even as it grows.

The Biden administration’s recent executive actions aim to cut aviation emissions by 20% and urge the production of at least 3 billion gallons of sustainable aviation fuels annually by 2030. 8  It’s not just governments pushing for sustainability: 40% of travelers say they will pay 2% extra for carbon-neutral flights. 9

Airlines are optimizing flight routes and turning to sustainable fuels. Notably, United Airlines created the Sustainable Flight Fund and invested over $100 million in start-ups working on sustainable aviation fuel (SAF) research, 10  such as Alder Renewables. This company develops technology that uses non-food biomass sources to create Alder Renewable Crude, which can be converted into SAF. 11  World Energy, the first producer of SAF, is investing $4 billion to scale manufacturing until they can supply one billion gallons of SAF each year by 2030, 12  while Netherlands-based SkyNRG has provided SAF solutions to over 30 airlines.13

Terminal infrastructure is becoming increasingly energy efficient. For instance, San Francisco International Airport receives 4.9 million kWh of renewable electricity annually from its solar photovoltaic installations,14 has recycled over 90% of its construction and demolition waste, 15  and has shifted to all-electric fleet vehicles.16  They have achieved a 14% reduction in energy use since 2013, reduced landfill waste by 61% compared to 2017, and lowered water use by 30% and emissions by 41% from a 1990 baseline. 17

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Aircraft manufacturers push for innovation and investment

Airplane development and design could change in the near future, driven by technological advancements, environmental concerns, and market demands - and their promising innovations could offer significant ROI for today’s investors.

One prominent trend is the use of new aircraft materials. Carbon-fiber-reinforced plastics are gaining popularity, as their lighter weight results in lower fuel consumption. 18  Airbus is exploring using natural fibers, biomass carbon fibers, and bio-sourced resins, 19  while Lufthansa Technik is developing AeroFLAX, a renewable material for aircraft interiors that can reduce components’ weight by 20%.20

Companies are also developing new aircraft models. For example, Boom Supersonic hopes to make supersonic travel faster and more accessible and is developing and testing the Overture aircraft, which will be twice as fast as today’s Boeing and Airbus models. 21  There has also been a push for electric and hybrid-electric aircraft, resulting in Airbus working with the Renault Group to advance energy storage and management research to improve batteries for use in hybrid aircraft. 22

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Investment in airport security technology is rising

New technology is making securing airports and eliminating threats easier. The TSA has already spent over $1.3 billion on baggage scanners that rely on CT technology to create 3D, rotatable images of luggage, meaning travelers can leave larger electronics and liquids in their bags. 23  Notable examples of modern luggage scanners include Smiths Detection’s HI-SCAN 6040 CTiX and Halo X-ray Technologies’ cutting-edge HXT132, HXT264, HXT364, and HXT464.24

Facial recognition tools are also on the rise and present potential investment opportunities, as they enable airports to streamline security procedures, cut wait times, and reduce identity fraud. CLEAR allows airports to scan passengers’ boarding passes, eyes, or fingerprints in seconds and is used in over 50 airports in the U.S. 25  On the other hand, Corsight’s facial recognition technology can quickly and accurately identify individuals, even if they’re wearing a face mask, in low lighting, or standing at an extreme angle.26

These innovations go beyond security lines. Multilingual translation is becoming increasingly relevant in airport security and customer service. With solutions like Google Assistant’s Interpreter Mode (tested by American Airlines),27  Pocketalk (deployed in Edinburgh),28  and Google Cloud Speech API (installed by KLM at Schiphol Airport),29  airports improve communication  while investors have another potential area where they could see ROI. 

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Robotics and automation are revolutionizing aviation

Automation and robotics are increasingly popular in all industries. In 2022, 41% of executives wanted to maintain their automation spend and 52% planned to increase it,30  while the number of industrial robots in the North American automotive industry grew by 30% between 2021 and 202231 and the aviation industry is following suit.

Not only has Dubai installed Sara, a multilingual check-in robot,32 but many airlines are also automating in-flight services. We may also see robots maintaining aircraft, handling baggage, and more in the future.

Robot pilots are also on the rise. Notably, the Korea Advanced Institute of Science and Technology is working on developing PIBOT, an AI-powered robot capable of flying unmodified airplanes.33  Additionally, the Air Force is working with Reliable Robotics to completely automate flights, enabling the USAF to improve cargo missions without needing to train additional pilots.34  Reliable Robotics’ flight control system can automate everything from takeoff to landing, uses satellite communications, high-performance computing, and precision mechanisms to allow for continuous remote operation, and features automatic braking, global voice link, and airborne detection.35

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Traveling toward a more efficient and sustainable future

Travel technology is bringing exciting changes to the industry for travelers and investors alike thanks to the introduction and adoption of SAF, new construction materials, advanced luggage scanners, robot pilots, and more. Not only are these technologies reshaping the future of planes, airports, and aviation, but they’re also presenting investors with potential investment opportunities.

By staying informed of emerging trends, investors can navigate these uncharted skies and reap the potential rewards of this transformative era in aviation.

 

References to companies are for illustrative purposes only and should not be viewed as investment recommendations.

Risk Warning: Investment involves risk including the loss of capital.

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