Fuel Efficiency Dictates Profitability
Waiting to go through security last week at LAX, I found myself quickly losing my patience.
But not for the reasons you may think.
Sure, most of the security hassles we go through today are for show. I can’t pack a regular tube of toothpaste in my overnight bag . . . but I can bring my razor?
Yes, it’s unbelievably frustrating at times.
But what’s even more frustrating is the guy who always has to tell you how inconvenient flying has become.
OK, yes, flying is certainly stressful. But inconvenient?
Despite having to get to the airport an hour and a half before my flight, and having to deal with security mazes and overzealous ticket agents, the ability to get from LA to Baltimore in less than five hours is hardly inconvenient.
In fact, good luck finding a quicker way to travel 3,000 miles across the country.
I just hope future generations have it as easy as we do when it comes to flying.
Because let’s face it: the way things are going, the “inconvenience” of flying may not even be an option unless the airlines find a way to decrease fuel consumption and find new sources of fuel . . . fast!
Fuel Efficiency Dictates Profitability
Five years ago, 10 percent of the airline industry’s operating costs went for fuel.
Today, fuel accounts for 30 percent!
So it’s no surprise to see airline execs scrambling to integrate new energy efficiency measures, as well as seeking new sources of fuel altogether.
We’re already starting to see newer fleets, single-engine taxiing, lower cruise speeds, onboard weight reduction and a number of other efficiency measures that have helped fuel efficiency jump 18 percent in the past six years.
But while the airlines are doing everything they can to make their fleets more fuel efficient, the market is closely following the manufacturing companies operating in this sector to see which one will figure out the efficiency and alternative fuel angles first.Certainly we are.
Because in about a decade, fuel efficiency will dictate profitability.
Yesterday afternoon, Boeing Co. (BA:NYSE) announced the final assembly of its new 787 Dreamliner.
The Dreamliner burns around 27% less fuel per passenger than the Airbus A340-300. And it is now the fastest-selling new airplane in aviation history.
By using composite materials to build over half the aircraft, fuel burn and carbon emissions are reduced significantly. The noise level of the new 787 is also 60% lower than that of the A340-300.
To date, Boeing has received 568 firm orders from 44 different airlines . . . including the greenest, Virgin Atlantic.
That company ordered 15 of the new aircraft and purchase rights on an additional 20.
Virgin is also in the process of putting together a joint biofuel demonstration with Boeing and GE Aviation next year.
Of course, there are a number of biofuel issues when it comes to replacing jet fuel. Energy density being the biggest.
But with very little hope of jet fuel coming down in price, I think we could end up being impressed by the technological innovation that often comes as a result of crisis situations.
In fact, just recently engineers at North Carolina State University developed a new biofuel technology that has the potential to turn virtually any fat source (even oils from algae) into fuel to power jet airplanes.
The technology is called Centia, and uses no petroleum-derived products whatsoever.
It has already been licensed by Diversified Energy Corp., a privately-held Arizona company.
Incidentally, Diversified Energy Corp. was awarded a Defense Department subcontract for an aviation biofuels program a few months back.
Because, like commercial airliners, the US military is also scrambling to find alternatives.
The fact is, the US military is actually the largest fuel customer in the world, consuming 8 billion gallons per year.
The US Air Force alone spent $5 billion on fuel in 2006.
As Green Chip investors, we have the opportunity to exploit a number of different markets when it comes to alternative energy integration. And that certainly includes military applications.
In fact, one company that’s certainly profited handsomely from the military’s fuel crisis is Arotech Corporation (ARTX:NASDAQ).
Arotech has long been known as a manufacturer and supplier of defense and security products for the military.
But Arotech’s alternative energy divisions are getting a lot of investor attention these days.
The company manufactures rechargeable batteries, lithium-ion power packs, and even electric vehicles using our favorite solution--zinc air fuel cell technology.
Granted, this is not a pure play in the alternative energy market. So for long-term investors, we follow Arotech’s progress to see which pure-play manufacturing companies they’re utilizing.
This gives us an indirect way to play Arotech’s alternative energy technology.
Of course, for traders, this also represents a number of opportunities.
In fact, after getting word that the US Marine Corps was about to award Arotech with a $9 million contract yesterday, Alternative Energy Trader put out a trade on Arotech Corp.
This morning the position was closed out, delivering a gain of 11.11% in less than 24 hours.
Take a look:
This, my friends, is how fortunes are made.
You invest in the safe ones for long-term growth and sustainability, while picking up those quick and profitable trades along the way.
The Green market is overwhelmed with both. And you better believe we’re getting every last drop of this action!
Until next time . . .