Publications

- September 1, 2021: Vol. 8, Number 8

Time for a supersonic air travel renaissance, as major aviation companies bet big on the technology

by Frank Holmes

Imagine boarding a plane in London’s Heathrow Airport at sunset and landing at JFK International in New York during the day.

This was once possible on the Concorde, the storied supersonic transport (SST) aircraft that screeched across the Atlantic at more than twice the speed of sound, cutting travel time down from close to seven hours to around three and a half.

“Arrive before you leave” was the slogan used by British Airways, one of only two carriers that flew the high-speed civilian passenger jet, the other being Air France. Between 1976 and 2003, millions of people took part in the marvel of flight so fast it punched a hole in the sky.

And then one day it all came to an end. Having never been a commercial success, the Concorde program finally buckled under the weight of two back-to-back incidents: first a deadly crash upon takeoff in July 2000, then 9/11. For the first time in human history, the top transportation speed was greatly reduced.

Now, two decades later, a growing number of manufacturers are betting on SST’s comeback. Some of them are household names (Boeing, Lockheed Martin, Rolls-Royce), while others hope to be coasting into an airport near you in the next five to 10 years. Among them are Denver-based Boom Technology, which unveiled its first prototype aircraft last October, and Boston-based Spike Aerospace.

Founded in 2014, Boom has managed to raise more than $241 million in funding through April of this year, but it may have found its first buyer. In early June, United Airlines announced an agreement with Boom to purchase 15 of its supersonic Overture aircraft, capable of cruising at Mach 1.7, about twice the speed of a Boeing 747, on 100 percent sustainable aviation fuel. The agreement carries the option for United to buy an additional 35 aircraft at a later date. The airline, which also put in orders for a staggering 270 new Boeing and Airbus jets, expects to begin carrying passengers on the Overture by the end of this decade.

Now is an optimal time for airlines to expand, and SST is no exception. Since the Concorde’s demise, global air passenger traffic (as measured by revenue passenger mile) has surged, with growth interrupted only by the pandemic.

Once people are free to start exploring the world again and regulatory hurdles are overcome, supersonic travel could see its first real “boom” years. Investors should pay attention to this space.

MILLIONS OF MILLIONAIRES

If we’re looking just at potential passengers’ finances, there’s really never been a better time than now to launch a new era of supersonic travel. The case certainly makes more sense now than it did in the 1970s, which was mired in high inflation, high unemployment and more than one oil crisis.

Today, consumers are generally in a much better position to afford air travel. Adjusted for inflation, U.S. real disposable personal income in 2019 averaged $14,882, the highest on record up to that point. That figure shot up again in 2020 to $15,770, but the increase was likely a function of stimulus checks. Quarantining families pocketed the savings of not going out to eat and spending on entertainment.

Thanks to a rip-roaring stock market and near-zero interest rates, the number of millionaires in the United States alone has more than doubled over the past decade, from 2.46 million in 2008 to 5.91 in 2019.

Contrary to what some might believe, the pandemic did not seriously hinder the pace of wealth creation. The year 2020, in fact, marked the first time in history when more than 1 percent of the global population could be considered dollar millionaires, according to Credit Suisse. The bank estimates there were 56.1 million millionaires at the end of the year, up 5.2 million from 2019. In the United States, millionaires now make up 8.8 percent of the population.

The uber-wealthy also did very well for themselves during pandemic-stricken 2020. According to Frank Knight’s Wealth Report 2021, the number of ultra-high-net-worth individuals (those with a net worth greater than $30 million) rose 2.4 percent over the past year to more than 520,000 worldwide. The real estate consultancy firm believes this number will grow an additional 27 percent over the next five years.

GREATER ACCESSIBILITY TO AIR TRAVEL

Of course, one need not be a member of the top 1 percent to afford airfare, the cost of which has been falling steadily in real terms for decades. At a time when it feels as if everything is getting more expensive, flying commercial is one of the few things that has actually gotten (dramatically) more affordable, thanks to a combination of deregulation, increased competition and lower fuel costs. Last year, the average price of a plane ticket hit a new inflation-adjusted low of $292, representing the cheapest annual rate since the Bureau of Transportation Statistics began collecting such data in 1995. And that’s even after carriers began introducing fees for non-ticket, à la carte items such as extra legroom and carry-on bags.

As a result, a far greater share of the U.S. population has access to air travel. For years, industry trade group Airlines for America has been keeping tabs on who’s flying and why. In 1971, when the Concorde was still in the development phase, less than half of Americans reported having ever flown at some point in their lives; only one in five had done so in the past year. Fast forward almost 50 years, and the share of people who reported flying at least once has surged to 86 percent. Forty-five percent said they flew in the past 12 months.

REINING IN COSTS

But wait, aren’t we talking about supersonic travel? Wasn’t a ticket to fly on the Concorde prohibitively expensive to all but the highest earners?

That was indeed once the case. In 2003, the last year the Concorde was in service, a roundtrip across the Atlantic cost about $15,475 in 2017 dollars, or about twice the amount of a first-class ticket on a Boeing 747. Because of this, the Concorde often flew at less than half capacity. In their first five years flying the Concorde, British Airways and Air France both saw net losses in the tens of millions of pounds.

With that in mind, manufacturers of next-gen supersonic jetliners are aiming to make sure price is no longer a factor for a good chunk of consumers. On its website, Boom Technology says that while ticket prices are set by carriers, it’s designing the Overture “so that airlines will be able to offer fares similar to today’s long-haul, business-class travel.”

That doesn’t mean seats will be within everyone’s reach — a business-class ticket can often go for three or four times the amount of an economy ticket — but nor should you expect to pay a small fortune.

So, how is Boom planning to do this?

First, recall that the Concorde, for all its elegance and wizardry, was designed using 1960s aeronautical technology. Only 20 of them were ever manufactured (six as prototypes and 14 for service) and with no competition, there was never any incentive to improve fuel efficiency or make other upgrades in its 27 years of operation.

It shouldn’t surprise you to learn that a lot has changed in the intervening decades, including design, materials, propulsion, flight control technology and even production. To cut down on cost and improve efficiency, Boom has partnered with 3D printer company Stratasys, whose printers will be able to produce on-demand thermoplastics, advanced manufacturing tools and other parts that in years past would have burned up precious time and money.

As Boom founder and CEO Blake Scholl put it in a 2017 interview, we now have “optimized aerodynamics, new materials such as carbon-
fiber composites, and significantly quieter and more efficient engines. If you put all these things together, you have the basis for building a new-generation supersonic airplane that costs 75 percent less to fly than the Concorde.”

But, you may ask, is it quieter?

SONIC BOOM GOES ‘THUMP’

The holy grail of supersonic flight is to reach and exceed Mach 1.0 (around 760 miles per hour) without blowing out people’s eardrums 60,000 feet below. If that can’t be achieved, then nothing else matters.

Sonic booms are no joke. Those who have experienced them from the ground describe the sound intensity as equivalent to a bomb going off or volcano erupting. Few today have heard a sonic boom because the Federal Aviation Administration banned supersonic flight over land in 1973, after tens of thousands of claims were filed against the Air Force.

But here’s the fun part: Aircraft noise is regulated not just by the FAA but also the United Nation’s International Civil Aviation Organization, which has 193 member states, 36 of which are on the governing council. Everyone needs to be satisfied, even though there are no agreed-upon standards on noise.

And if regulators aren’t satisfied? Then supersonic jets are once again prohibited from cruising faster than Mach 1.0 over land, and there may be only a handful of routes globally with enough traffic to support operations.

The good news is that quiet jet designs are well within reach. Boom’s Scholl insists the 88-seat Overture’s sonic boom will be “30 times quieter” than that of the Concorde, resulting in a noise that’s closer to a sonic “thump.” (Yes, I know, the name of Scholl’s company seems unfortunate in this context.) In October 2020, Boom rolled out the XB-1, a one-third-scale model of the Overture, which is expected to demonstrate its quieter sound barrier-breaking ability sometime this year or next.

Another startup, Nevada-based Aerion Supersonic, claimed its business jet would be able to reach Mach 1.2 without creating any sonic boom. That was before Aerion abruptly folded in May of this year due to challenges securing capital, a sign of how difficult the industry is. Before shuttering its doors, the company was in talks to go public through a merger with Altitude Acquisition, a special purpose acquisition company (SPAC).

BREAKING THE REGULATORY BARRIER

Besides business travel’s slow recovery, regulatory uncertainty is hands-down the greatest threat to the success of SST. Fortunately, U.S. policymakers appear open to the idea of amending, or at least reconsidering, the 1973 law banning supersonic speeds over land. In November 2018, the White House Office of Science and Technology Policy was asked to assess the potential future of SST and offer policy guidance. Two years later, the FAA issued a final rule that streamlines the process of obtaining a special flight authorization for conducting supersonic flight tests over land.

Make no mistake: The ban remains in place. But the agency is now required to review it every other year and determine whether it needs to be changed.

BUSINESS TRAVEL REMAINS A HEADWIND

Some experts question whether the demand exists to support supersonic flight. A 2011 study conducted by researchers at the German Aerospace Center, for instance, concluded that between only 15 percent and 30 percent of passengers would be willing to upgrade from subsonic to supersonic flight, suggesting jumbo-size SST aircraft might have a hard time filling seats.

Cruising at twice the speed of sound may get you to your destination faster but, as policy experts at the Science and Technology Policy Institute pointed out in 2019, it doesn’t “decrease the time required to travel to and from the airport, wait at the airport, reach supersonic speeds and takeoff/land.”

Fair points. But assuming SST would be used primarily for business travel, the main near- to medium-term risk, is not a lack of consumers with the means to pay premium prices or the wait time at the airport. (The TSA PreCheck program, which many frequent fliers are members of, has eliminated much of the wait time since being introduced in 2011.) Instead, the risk is business travel itself, which has been slow to recover from the pandemic. Tourists, people visiting family members and other leisure travelers have largely returned to airports, but business travelers (historically carriers’ biggest source of passenger revenue) are still stuck in the office or even at home, conducting business over Zoom. With the more aggressive Delta variant driving up new daily cases to the highest level in months and vaccination rates plateauing, we could see a longer-than-expected stall in corporate travel. This would be a major headwind for carriers seeking to offer a premium high-speed option in the next five years.

That said, this is a headwind for all commercial aviation, not just SST manufacturers. Once we’re on the other side of this pandemic, the companies that invested in this space could be rewarded. The sky’s the limit.

 

Frank Holmes is CEO and CIO of U.S. Global Investors.

Forgot your username or password?

We use cookies and other tracking technologies to personalize your user experience on our site and perform site analytics. By clicking on “I accept”, you consent to our Privacy Policy.