The airline industry has made huge strides in terms of fuel efficiency. One reason is to reduce costs—fuel is expensive—but sustainability is a factor as well, as concern grows about the industry’s environmental performance. According to a McKinsey analysis, carriers reduced their fuel consumption per passenger-kilometer by approximately 39 percent between 2005 and 2019 (pre-COVID-19), a compound annual growth rate of about 3.4 percent per year (Exhibit). That’s the good news.
The challenge moving forward is that the easy gains have already been captured, and airlines are starting to bump up against the natural limit of some of the improvement levers they used to achieve those gains. As a result, future improvements will be harder to come by—and the industry must be more ambitious, use different levers, and pursue more transformational changes.
To understand why future progress may not match past performance, McKinsey analyzed the underlying factors behind fuel efficiency gains between 2005 and 2019. About half of the improvements in that period came from fleet upgrades (43 percent). A latest-generation aircraft is about 15 to 20 percent more fuel-efficient than the previous generation, and new developments can be expected to continue this trajectory, including more fuel-efficient engines, lighter materials, improved aerodynamics, and similar measures.
Another 7 percent has come from fuel-efficiency programs, such as those involving reduced engine taxi, continuous descent approaches, and optimized routes; there are more opportunities in those areas to enable further gains.
The other half of the efficiency improvement has come from two levers related to the use of real estate inside the aircraft cabin—seat density and load factor. Seat density, defined as the percentage of actual seats in an aircraft cabin compared to the maximum potential number of seats the aircraft is certified for, increased from 82 percent in 2005 to 88 percent in 2019. Low-cost carriers (LCCs) have always had higher seat density, and their growth in market share over the past two decades meant that overall seat density for the industry increased. Full-service carriers have responded to the growth of LCCs by increasing seat density in their economy class and shrinking their business and first classes. At the same time, the second improvement lever—the industry’s load factor, or the share of seats sold on a given flight—has increased from 75 percent to 83 percent.
Those are impressive gains, but they are approaching their limits, and the industry will not be able to count on a similar trajectory over the coming 15 years. There is not that much more opportunity on those two levers. Seat pitch in most economy class cabins cannot shrink much more, and some airlines will want to retain business and first class cabins for economic reasons. Likewise, seasonal demand variation, along with the fact that airlines want to keep some last minute availability for high paying corporate customers, will limit how much further load factor can increase.
As a result, we project that overall fuel efficiency gains for the industry will decline from approximately 3.4 percent a year to 1.5 to 2 percent unless carriers take more ambitious actions, such as accelerated fleet replacement, transformative infrastructure improvements, or other similarly bold measures.
Over the longer term, replacing fossil fuel as an energy source will be a critical part of the industry’s journey and could involve measures such as sustainable aviation fuels and novel propulsion. But anything the industry can do to increase fuel efficiency now will make the transition that much easier.