Aviation Policy News: Commercial Airlines’ Turbulent and More Competitive Future
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Aviation Policy Newsletter

Aviation Policy News: Commercial Airlines’ Turbulent and More Competitive Future

Plus: Environmental groups blast planned supersonic aircraft, could hydrogen be the answer for greener aviation, long-term P3 back in play in St. Louis, and more.

In this issue:

Environmental Groups Blast Planned Supersonic Aircraft

A coalition of 62 environmental groups has called for FAA to give up its current effort to develop new noise standards for takeoff and landing of next-generation supersonic aircraft (at least three of which are pretty far along in development). In their July 13 letter to FAA, in response to its Notice of Proposed Rule Making (NPRM), the groups wrote:

“Given our limited carbon budget, limited time to act, and urgent need to slash greenhouse pollution from the aviation sector overall, allowing super-polluting aircraft to enter the U.S. sky would be madness.”

The allegation that next-generation supersonic transports (SSTs) would be “super-polluting” comes from a group called the International Council for Clean Transportation, which has been attacking the return of supersonic flight for several years. Its noise and emissions figures appear to be based on first-generation SSTs such as the Anglo-French Concorde, which was a huge fuel-burner and very, very noisy.

Needless to say, the companies developing next-generation SSTs are not living under a rock. They are well aware of the need to minimize noise over land and to be far-lower CO2 emitters than ancient SSTs. Both Aerion and Boom Supersonic are working with sustainable fuel developers to minimize their carbon footprints. Aireon Supersonic has partnered with Carbon Engineering, a Canadian company, to evaluate the use of its sustainable synthetic jet fuel produced from CO2. Carbon Engineering has demonstrated CO2 extraction from the atmosphere via a process dubbed Direct Air Capture (DAC). It developed a pilot DAC facility in 2015, and added a fuel-synthesis process in 2017; it is working to complete a commercial-scale facility by 2021. (“Aerion Teams with Carbon Engineering on Sustainable Fuel,” Aviation Daily, July 9, 2020)

Boom Supersonic is working with Prometheus Fuels on a project to capture CO2 from the air and convert it to synthetic jet fuel using renewable electricity. One of the Prometheus investors is the i-Ventures division of BMW. Last year Boom announced that Prometheus’s synthetic aviation fuel will be used in flight-testing its XB-1 supersonic demonstrator, planned for 2021. (“Carbon-Capture Sustainable Fuel Developer Prometheus Gets BMW Backing.” Aviation Daily, June 22, 2020)

Just in case technology-literate readers get past its allegations of “super-polluting aircraft,” the environmental coalition also plays the egalitarian card:

“Because of its high costs, travel via a rebooted supersonic aviation industry would not be accessible to the vast majority of people in the [U.S.], but it would have catastrophic climate change impacts for everyone.”

This is silly. Almost every new technology—electric light, telephones, automobiles, airliners, cell phones—starts out as costly and affordable only to those with higher-than-average incomes. As technology improves and costs come down, more and more of us can afford it—as with air travel in the post-deregulation era since 1978. The start-up SST companies are focusing on high-end business travelers as the obvious initial market for next-generation supersonic travel. If their innovations work, and they produce planes for which a realistic business model exists, that will encourage investment to expand the market further. And obviously, this will have to be within whatever sensible noise and emission standards allow.

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Long-Term P3 Lease of St. Louis Lambert Airport Back in Play

Supporters of leasing St. Louis Lambert International Airport, (STL) submitted 38,000 signatures—twice the required number—last month, calling for a November ballot measure that would change the city charter to authorize a long-term public-private partnership (P3) lease of the airport. If passed by the required 60 percent of those voting, it would require leasing the airport to private operators if they commit to at least $1.7 billion: $700 million to pay off current airport bonds and the remaining billion to be spent on infrastructure improvements in the city.

A separate charter amendment along similar lines was proposed by the president of the Board of Aldermen, Lewis Reed. It had the same dollar figures but differed in some specifics. It received preliminary approval via a 14-11 vote on June 29, but to pass it required 15 out of the 28 members, and that 15th vote did not materialize before the two-month summer recess. There are conflicting legal opinions over whether a positive vote in November would or would not have to be followed by a second election; in 2007 only one election was required to approve a charter amendment that was put on the ballot by petition, like this one was.

Supporters of the lease include a number of business groups working with nonprofits Grow Missouri and Rebuild St. Louis, Inc, the St. Louis NAACP, and the Carpenters Union. Opponents include four other unions: local chapters of the Communications Workers of America, American Federation of Teachers, American Postal Workers Union, and UNITE Here.

Another contentious issue is that Grow Missouri paid for the consulting work that was done on behalf of the city government to develop the process to seek proposals from private-sector teams. The city government had no expertise in procuring a billion-dollar-scale P3 lease, and hence knowledgeable legal and financial advice was critically important. The advisors delivered a first-class procurement process that led to detailed presentations last December by 11 world-class teams of global airports and infrastructure investment funds. Grow Missouri paid for all this in exchange for the city government’s agreement to reimburse it, if and when the lease was successfully accomplished. The estimated cost involved is $40 million. Predictably this has led to populist blather about special interests, etc.

My one concern about the ballot measure is the requirement of at least $1.7 billion gross. That’s a plausible number, given long-term airport P3 transactions that were taking place in the last several years, prior to the near-collapse of air travel due to the pandemic. To be sure, air travel will recover, and a lease in the vicinity of 50 years is a long-term investment. So St. Louis might actually get a $1.7 billion bid. But it would be a shame if the top bid turned out to be $1.6 billion and the city was required to turn it down.

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Commercial Airlines’ Turbulent Future
By Marc Scribner

The COVID-19 pandemic continues to devastate the global airline industry, and its near-term outlook looks grim. Recovery forecasts have been flying around, with the International Air Transportation Association (IATA) projecting that global air travel will not return to 2019 levels until 2023. And even IATA’s dismal forecast may be overly optimistic given the unprecedented decline in global air travel, which in April at its worst was down 94 percent year-over-year on a revenue passenger mile basis.

Before getting to the bad news, there are a few positives worth noting. The collapse of air travel coincided with a crash in jet fuel prices, which are still down more than 40 percent from the same time last year. The International Civil Aviation Organization’s (ICAO) governing council announced on June 30 it would exclude 2020 aviation carbon dioxide emissions from its baseline for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which originally was to be set by an average of 2019 and 2020 emissions. Both of these events will provide significant energy-related relief to carriers as they recover.

Compared to past recessions, airlines were also generally in a much better financial position going into the pandemic, with lower debt loads and more cash on hand. Unprecedented government bailouts also bolster these positions for now, although strings attached—particularly mandated service and employment requirements—may unduly reduce cost-cutting flexibility going forward.

But on the whole, the situation airlines around the world find themselves in is the darkest they’ve ever seen. Unlike the Great Recession a decade ago, interest rates were already at rock bottom going into this crisis, taking that government monetary tool off the table. Emerging markets, particularly China, are also not the fast-growth markets they were in 2009, so the overall recovery will be slower. Taxpayer bailouts of the global airline industry already exceed $100 billion and are likely to merely pull some travel demand forward and reduce the slope of the recovery.

Realistically, we cannot expect a recovery to pre-COVID-19 travel until at least a year after an effective vaccine is introduced. IATA hopes this traffic recovery is sometime in 2023, but it could be 2024 or even 2025. Social distancing is fundamentally incompatible with basic airline economics, if government caps load factors well below capacity. So even if passenger demand recovers, airlines would be burning the cash they ought to conserve.

In response, airlines are likely to continue delaying or forgoing new aircraft purchases, a market that was already upended last year due to the grounding of new Boeing MAX jetliners, which still have not been recertified by the FAA and other aviation safety regulators. Aircraft manufacturers are responding by trimming research and development budgets, including reducing or shelving urban air mobility and other speculative projects. Aviation aftermarket businesses will also be severely disrupted, with the majority of global jets being parked and the remaining in-service aircraft being utilized at much lower levels.

In the aircraft market, twin-aisle jetliners face the biggest near-term risks. These tend to serve high-value international routes, which are anticipated to be the slowest to recover as governments limit foreign entry and impose quarantines on the few travelers who choose and are able to make these trips. The airline industry had already been trending away from these “superjumbo” jets prior to the pandemic, but the pandemic certainly hastened the decline of the Boeing 747 and Airbus A380.

Given all this bad news, what is the path forward for the airlines? The unfortunate answer is there is likely little that can be done until an effective vaccine is developed and customers feel comfortable enough to fly again. The good news is the development of effective coronavirus treatments and vaccines is proceeding at breakneck speed. A number of vaccine candidates are currently in advanced clinical trials, and developers believe a breakthrough could yield sufficient vaccine supplies for wide distribution as early as the first half of 2021.

However, even once an effective vaccine is made available worldwide, it will likely take at least another year for airlines to recover their 2019 traffic volumes. During this time there will be calls for continued government bailouts, but these interventions will do little other than lock in pre-pandemic industry structures, with current and future taxpayers footing the bill for this temporary reprieve until the money eventually runs out. The looming market correction will transform the global airline industry in profound ways for years to come. We just don’t know how.

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But the Future Airline Industry Will Be More Competitive

Marc Scribner’s prognosis for the global airline industry is correct, but there is a likely silver lining hiding behind these storm clouds. The airline industry that emerges in both North America and Europe is likely to be more competitive—and that will be good news for air travelers.

All available data about the recovery of passenger air travel reveals that leisure travel is what is mostly returning. And most U.S. leisure travel is domestic, not international. That is bad news for the legacy carriers, which generated 40 to 50 percent of their pre-pandemic ticket revenue from business travelers, especially international business travelers.

For low-cost and ultra-low-cost (ULCC) airlines, the opposite is the case.  ULCCs Allegiant, Frontier, and Spirit get only 3-4 percent of their revenue from business travel, with Hawaiian a bit higher. JetBlue and Alaska get about 12 percent, and mighty Southwest gets about 25 percent from business travel. That puts these airlines in the best position to rebuild their service during the pre-vaccine period, however long that turns out to be. And that is what they are doing.

Allegiant was already back to 77 percent of its normal service in May and increased it further in June. Frontier and Spirit added service more cautiously, but both also see a chance to gain market share. The surge in new COVID-19 cases in July has led Allegiant to scale back its expansion plans somewhat, with 75 percent of pre-pandemic service on offer during July and August. The company is also in the market for used Airbus A320s (which are plentiful) to expand its fleet.

Southwest is in a good position to expand its market share, as it did following both 9/11 and the Great Recession a decade ago. It is the only major U.S. airline that has an investment-grade rating, and with $13 billion on hand, it is poised for further expansion. There is solid empirical data that when Southwest or ULCCs enter routes served by legacy carriers, airfares decrease and passenger miles increase. That’s not so good for the legacies, but it’s great for air travelers.

It’s also good news that another low-cost carrier will be entering the U.S. domestic market early next year. Its name is Breeze, and its founder is the legendary David Neeleman, whose best-known start-up is JetBlue (in addition to several others, including Azul in Brazil). Breeze plans to begin with north-south routes between under-served cities east of the Mississippi, using Embraer E190/195 jets. It will subsequently add the new, larger Airbus A220-300 jets. This is more good news for air travelers.

A similar pattern is emerging in Europe, with Wizz Air taking the lead in adding new planes and expanding service, opening new bases in Cyprus, Germany, Romania, and Russia. Ryanair and easyJet are also ramping up service. One obstacle is the French government’s new policy of discouraging air travel on French routes served by passenger rail lines, but thus far that policy has not been adopted elsewhere.

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Is Hydrogen the Answer for Greener Aviation?

Several months ago Airbus and Rolls-Royce pulled the plug on their E-Fan X program, which was getting close to the first flight of their prototype battery-electric/turbine hybrid regional jet. The move came as hydrogen received a boost from a new round of studies and prognostications as the better way forward for greener aircraft propulsion. New European research programs are being announced, and both Roland Berger and McKinsey have released studies on the subject.

The biggest problem is the low energy density of a hydrogen (H2) propulsion system, whether used to fuel turbine engines or to power fuel cells to drive electric-motor propulsion. Liquid H2 by weight provides 33 kWh/kg of energy, 100 times more than current lithium-ion batteries (and about three times more than kerosene jet fuel). But once you add the weight of insulated cryogenic storage tanks and associated hardware, the energy density decreases to between 10 and 21 kWh/kg. And those tanks take up a huge amount of volume. The first fuel-cell-powered Piper Malibu being readied for flight-test by startup ZeroAvia uses the space of four of its six seats for the tanks and fuel cells. MIT’s Alan Epstein points out that for large airliners to be hydrogen-powered, they would have to be larger and heavier, with more drag, which might lead to a higher carbon footprint due to the additional energy needed to propel them.

The Berger study identified five barriers to H2 airliner propulsion:

  1. Additional volume (4 to 5 times more than for the equivalent jet fuel);
  2. Redesigned engines to burn H2 or redesigned aircraft for H2 fuel-cell power;
  3. Sustainable H2 production (which is energy-intensive);
  4. Fueling infrastructure, including converting natural gas pipelines; and,
  5. Higher cost.

I don’t have space to go into these points in detail, but Graham Warwick provided a good summary in “Hydrogen In, Carbon Out,” Aviation Week, April 6-19, 2020.

The McKinsey study, carried out for the EU Clean Sky 2 effort, covers some of the same ground as Berger, but has more of a focus on possible aircraft configurations. Near-term, it assumes H2 projects will focus on the existing tube-and-wing configuration, with the additional space needed for H2 tanks accommodated by a significantly longer fuselage. For example, a successor to an A320/737 aircraft flying routes up to 1,100 nm might use H2-burning turbine engines for takeoff and H2 fuel cells for cruise. It would have about 25 percent less range and a cost per seat-mile about 20 percent higher—but also have a 70-80 percent lower carbon footprint. In the longer term, with new configurations such as a blended wing body (studied extensively by Boeing), there would be more space for H2 tanks and the potential for larger, longer-range hybrid and/or pure H2 powered airliners.

Even for the near term, McKinsey found that fuel tank technology is a critical pacing factor in the timeline to getting to any practical H2 hybrids, let alone pure H2 power. A 50 percent reduction in overall liquid H2 tank mass will be necessary for 737-size H2 airliners to be feasible. (More details in Guy Norris’s “Revisiting Hydrogen Fuel—Why It Might Work This Time Around,” Aviation Daily, July 16, 2020)

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Space Launch/Airlines Conflict Still Unresolved

On July 20, a SpaceX Falcon 9 launched into orbit the ANASIS-II satellite. Like nearly all such launches, the rocket blasted off from Cape Canaveral, and as increasingly happens, the first stage booster was safely landed on a recovery barge several hundred miles off the coast.

Because of extensive north-south air traffic off the Florida coast, these launches and booster recoveries interfere with air traffic, which must be kept out of a large safety zone during the launch window, the launch itself, and booster recovery. As the volume of space launches continues to increase, the impact on aircraft operations will likewise grow.

For years the FAA Tech Center in Atlantic City has been working on a Space Data Integrator (SDI) to keep track of launches and provide usable information to controllers responsible for the affected airspace. The first time live data from a space vehicle was merged and displayed using a prototype of the system was in May 2016 for the return of a SpaceX Dragon capsule from the International Space Station (ISS).

Four years later, SDI is still not operational. It was used in “shadow mode” for the historic May 30 launch of two astronauts to ISS in a Crew Dragon capsule. Data from the SDI at the Tech Center was sent to the FAA’s Command Center in Warrenton, VA, during that launch. Back in January, FAA Administrator Steve Dickson had said SDI would be deployed, for real, this August. But due to staffing impacts of COVID-19, deployment is now expected no sooner than the end of the year.

Unfortunately, that will not solve the problem plaguing airlines using the offshore oceanic airspace that is frequently impacted by space launch and recovery operations. As I explained in the January 2020 issue of this newsletter, SDI only provides telemetry data to the Command Center. It does not prescribe the dimensions of the airspace that must be restricted, which must be estimated, with large safety margins. Controllers of that airspace are counting on timely deployment of a Hazard Risk Assessment Management (HRAM) tool that will enable airspace restrictions to be defined in real-time. As NATCA Safety Director Jim Ulmann told a conference on this subject last fall, “SDI is nice; it’s certainly better than what we’ve had in the past, which is next to nothing. But it’s still just an awareness tool. I’m talking about a decision support tool—something that goes on the controller’s scope.”

In addition to HRAM or equivalent, two other steps have been recommended by the Air Line Pilots Association. Launch vehicles should be equipped with ADS-B, like all aircraft in controlled airspace, so their real-time location, speed, direction, and altitude would be fed into SDI and HRAM. Second, FAA should be using Aireon’s spaced-base ADS-B system to report real-time position, speed, altitude, etc. of aircraft on those offshore oceanic tracks.

Folks, this is not rocket science. These ingredients exist; it’s time FAA made better use of them

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News Notes

FCC Needs Spectrum Reform  
At a June 24 hearing of the Senate Commerce Committee, Sen. Mike Lee (R, UT) suggested that in the wake of its Ligado decision, FCC should consider reforms in how it manages the spectrum. Commissioner Rebecca Rosenworcel proposed reforming the National Telecommunications & Information Administration (NTIA) Interdepartmental Radio Advisory Committee, conducting a full evaluation of current federal spectrum holdings, and providing financial incentives for agencies to reallocate spectrum for other uses. Commissioner Michael O’Reilly concurred on the need for NTIA to take a larger role to prevent conflicts among spectrum users. But Chairman Ajit Pai defended FCC’s unanimous decision in the Ligado case.

Manchester Airport Group Expands in the United States
The U.S. subsidiary of Manchester Airport Group, MAG USA, has acquired three California companies dealing with airport-related businesses. They are AirportParkingReservations.com, ParkSleepFly.com, and ShuttleFinder.com, all based in Santa Monica. Since 2015, MAG USA has opened 12 of its new Escape Lounges at U.S. airports and opened a division called MAGO, offering various commercial services to airports. Manchester Airports Group owns both Manchester and London Stansted airports, and is the world’s 29th largest airport operator by revenue.

Micromanagement of Kansas City International’s New Terminal Project
Several city council members are attempting to interfere with Kansas City International’s subcontractor selection process, arguing that out-of-state contractors should not be hired by prime terminal contractor Edgemoor Infrastructure & Real Estate. The council members are responding to calls from local businesses and trade unions that only local firms should be allowed to bid. This kind of political interference is generally avoided when airports are run either by independent airport authorities or long-term public-private partnerships.

Two EU Airspace Blocks Join Forces
The adjacent Functional Airspace Blocks—FAB CE and FABEC—last month signed a Joint Declaration for enhanced collaboration. In addition to ongoing joint efforts, the agreement calls for increased cooperation on Single European Sky projects, free route airspace, ATC capacity management, aeronautical information management, training, and safety. FABEC’s six members are the ANSPs of the three Benelux countries plus France, Germany, and Switzerland. And FAB CE’s members are the ANSPs of Hungary, Czech Republic, Slovakia, and four other central European countries.

Inmarsat and Altitude Angel to Offer UAS Traffic Management
Aviation communications firm Inmarsat and UAS traffic management firm Altitude Angel last month announced a collaboration to deliver flight tracking and management for unmanned aerial systems (UASs). They plan to offer a “pop-up UAS traffic management capability” that can be used wherever drones operate beyond visual line of sight, without the need for ground-based communications infrastructure. Communications will make use of Inmarsat’s global satellite network. The initial market is to be emergency responders who need surveillance with little advance notice.

FAA to Release Secondary Cockpit Barriers Rule
The FAA has announced that a preliminary rule on secondary cockpit security barriers will be published in April 2021. The requirement was included in the 2018 FAA reauthorization bill. The requirement would apply to new aircraft entering service three years after the rule’s effective date. The April release will be a Notice of Proposed Rulemaking, which will be open for comment for a defined time period.

PASSUR and Aireon Agreement on Global ADS-B Data
Aireon’s real-time global flight tracking data will be used to improve the effectiveness of the AR\VA platform developed by PASSUR to improve airline, air traffic control, and airport awareness of likely arrival times during flights. AR\VA aims to increase the efficiency of airlines, business aviation, ATC, and airports via more-accurate trajectory forecasting.

Investor-Developed UK Cargo Airport Approved
Developer RiverOak Strategic Partners has won approval to redevelop the closed Manston airport in Kent as an air cargo hub. The UK government approved the proposal on July 9th. RiverOak plans to invest $379 million to transform the airport into “one of the most modern, efficient, and environmentally freight hubs in the world.” Work on the project is set to begin in 2021, with an opening to flights in first-quarter 2023.

Atlanta Plans Privately Developed Air Cargo Facility
The Atlanta Department of Aviation has released a Request for Information for an airport cargo facility public-private partnership (P3) at Hartsfield-Jackson International Airport (ATL); responses were due by July 9th. The Modern Air Cargo Terminal facility would be developed as a design-build-finance-operate-maintain (DBFOM) P3 project under a long-term concession. It will be located in the South Cargo area at ATL.

Drone Threat Detector for UK’s Bristol Airport
Bristol Airport has contracted with Digital Global Systems to install its Clearsky drone detection system. It can detect a range of drone types operating within the airport’s flight restriction zone. The airport company agreed to buy the system after a three-month test in cooperation with local police and other security agencies.

COVID-19 Risk in Airliner Boarding
Airlines that switch their boarding process to seat passengers from the rear forward will increase their exposure to COVID-19. That’s the finding of a simulation developed by a team from Embry-Riddle Aeronautical University, ASU, FSU, and the University of West Florida. The simulation showed that this boarding process leads to high-density clusters of people forming in the aisles. The 16,000 simulations of various boarding processes found that a one-zone, random boarding process yielded the lowest number of close contacts in the aisles.

Correction re CORSIA
Reader Tom Windmuller corrected last month’s article on the CORSIA plan to offset emissions of international airline flights. Instead of the first seven years of the program being voluntary for airlines, it is mandatory for those based in countries which have signed up, which total 83 thus far (but Brazil, China, India, and Russia are not among them). And the first batch of offsets is due in 2023, not 2027. I appreciate these corrections.

Correction re ALPA and GPS
Matt Thurber emailed to modify what I reported about ALPA’s petition to the FCC regarding potential GPS interference. Its concern was not about FAA-certified ADS-B installations on general aviation aircraft, but to the GPS receivers in non-certified tablets used by many general aviation pilots. Thanks for this correction.

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Quotable Quotes

“[A]sk yourself why dirigisme is a word derived from the French? Could it be because France is the undisputed world champion of its dark art? France poured €15 billion into its aerospace industry, including both Airbus and Air France, but, she said, with her stern face on, that this was to include strict obligations to lower emissions and green blah, blah, blah. How much blah blah became obvious on a close look at the conditions. There were to be no flights to cities that could be accessed by rail, unless that airport feeds Air France’s hub, Charles de Gaulle. All of them, in other words, apart from those that are served primarily by low-cost carriers.”
—Andrew Charlton, “A Study in Market Distortion,” Aviation International Reporter, July 2020

“[GPS users] can and will be protected with simple regulatory/liability rules that make Ligado liable for harmful interference. But that is not what the opponents want—they want access to bandwidth without paying for it. The problem in economic terms is that GPS radios have been constructed on the assumption that the adjacent bands are unused (even though they have not been allocated to GPS) and so the radios have been accessing those bands to triangulate locational data. It’s like complaining that the vacant lot next door to you, which you have long used to park the cars of friends and family, is now to be used for a house. You oppose the building permit because you’re receiving some benefit from the vacant land. . . . The problem is that we don’t have ownership rights. GPS is effectively an unlicensed band, and there are no claimants that can negotiate ‘Coasian bargains’ about the next-door property. We’ve produced (combining FCC policy, GPS rent-seeking, and DoD intransigence) a no-man’s land, sometimes called ‘tragedy of the anti-commons.’”
—Thomas Hazlett, former FCC Chief Economist, author of The Political Spectrum (Yale University Press, 2017), email to Robert Poole, June 19, 2020

“I have yet to see an airliner design with liquid hydrogen in which the passengers have any chance of survival in an accident, both from contact with the liquid cryogen and the fact that the flammability range of hydrogen makes it very easy to ignite compared to Jet A.”
—Alan Epstein, professor emeritus, MIT, in Graham Warwick, “Hydrogen In, Carbon Out,” Aviation Week, April 6-19, 2020