Hydrogen, particularly green hydrogen, is emerging as a prominent factor in discussions of the energy transition. Credit Suisse’s global analyst teams have provided insights on the hydrogen industry in Europe and Asia. Here, we discuss the impact on the aerospace end market.

Emergence of hydrogen in 2020: Public funding and environmental pressures pushed hydrogen to the forefront of European aerospace decarbonisation efforts in 2020 and the industry announced plans for a hydrogen aeroplane entering in service in 2035. Given the timeline of development and industry-specific challenges, the main question is what is actually achievable.   

The challenges: Major technological obstacles will need to be overcome before hydrogen could be widely used directly as an aviation fuel. The physical properties of hydrogen have a critical impact on aircraft design and weight, as well as on the safety of operations. The development of a green hydrogen production and distribution infrastructure is also vital to ensure that fuel is available where needed, and the costs become competitive. The recent developments in Europe and Asia are important enablers, but similar plans must be developed in the US for hydrogen propulsion to be viable beyond synthetic fuels (synfuels). 

Initial targets likely to be low risk for the industry: Given all the challenges and risks, we expect the initial industry focus to be on 1/ synfuels (high costs, but low risk and usable by all aircraft types); and 2/ propulsion for regional aircraft and UAVs (essentially opening new markets for the OEMs, with no impact on the core of their business). Fuel cells (which would disrupt the business models for engine makers) may be used to power these and for non-propulsion applications onboard. A 2035 replacement for the A320 is likely to remain conventionally-powered with design improvements and more electrical systems (possibly with auxiliary power fuel cells) to achieve a 30% reduction in fuel burn and emissions.