Financing the Transition to Hydrogen Aircraft

The aviation industry is on the brink of a transformation, with hydrogen-powered aircraft offering a sustainable path towards zero emissions. However, the transition poses significant financial, operational, and regulatory challenges for operators. Cranfield Aerospace Solutions recently hosted the webinar How to Finance Your Transition to Hydrogen Aircraft, bringing together industry leaders to explore practical solutions for financing, risk management, and collaboration. This blog summarises the key discussions, answers audience questions, and provides actionable advice for stakeholders.

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The Financial Landscape: Challenges and Solutions

Transitioning to hydrogen-powered fleets involves overcoming considerable financial hurdles, particularly for smaller operators. Tim Eyre, COO of MONTE, highlighted the high upfront costs of retrofitting aircraft and establishing the necessary infrastructure. However, innovative financing models are emerging to address these challenges:

• Operating Leases for Retrofitted Aircraft: MONTE collaborates with companies like Cranfield Aerospace finance the retrofit of aircraft such as the Britten-Norman Islander with hydrogen propulsion systems. Operators can lease these retrofitted aircraft, reducing the financial burden of upfront purchase.

• Sale-and-Leaseback Arrangements: Operators can sell existing aircraft to lessors, who finance the retrofitting process and lease the aircraft back. This provides operators with capital to support the transition while retaining operational continuity.

• Infrastructure Bundling: A comprehensive solution bundling aircraft leases with hydrogen infrastructure ensures operators are ready for hydrogen operations without needing separate investments in storage and refuelling facilities.

Florian Kruse, CEO of EVIA Aero, emphasised a two-stage revenue strategy for smaller regional airports. Airports can use photovoltaic (solar) systems to generate early revenue streams by producing electricity using land available at airports for hydrogen electrolysis. This not only supports infrastructure development but also reduces long-term operational costs.

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Insurance and Risk Management: A Critical Enabler

Hydrogen-powered aviation introduces unique risks, necessitating a tailored approach to insurance. Alistair Blundy, CEO of Skyrisks, discussed the challenges insurers face when underwriting hydrogen technologies:

1. Repairability is Key: Ground incidents, not in-flight risks, account for 70% of aviation insurance claims. Ensuring that hydrogen systems can be repaired efficiently, rather than replaced entirely, is critical to managing costs.

1. Tailored Policies: Skyrisks has already developed bespoke insurance policies for battery-powered aircraft and is working closely with companies like Cranfield Aerospace to understand and address the specific risks associated with hydrogen fuel cell systems and infrastructure.

1. Proactive Engagement: Operators should engage insurers early to assess risks and ensure appropriate coverage. Blundy stressed: “You don’t need to wait until you need insurance to start the conversation. Early engagement helps address potential gaps and refine risk strategies.”

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Collaboration: The Foundation for Progress

The transition to hydrogen-powered aviation requires unprecedented collaboration across the industry. As Eyre noted, no single entity whether operator, airport, or OEM can succeed in isolation. Key points from the discussion included:

• Airport Modernisation: Airports are central to the hydrogen ecosystem. Kruse highlighted the need for airports to modernise their infrastructure to accommodate hydrogen storage and refuelling systems. Joint ventures between airports, operators, and financiers can unlock investment and accelerate readiness.

• Cross-Industry Lessons: Insights from other sectors, such as maritime zero-emission projects, demonstrate the importance of scalable, ecosystem-wide solutions.

• Government Involvement: Both Eyre and Kruse emphasised the importance of government support to get things started through subsidies, public service obligation routes favouring zero-emissions aircraft, and export financing.

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Answers to Key Audience Questions

The webinar sparked numerous insightful questions, some of which we address here:

What are the expected costs of transitioning to hydrogen-powered aircraft? Costs vary widely depending on fleet size and geography. Retrofitting aircraft is capital-intensive, but operators can expect significant savings in maintenance and fuel costs over time. Hydrogen systems have fewer moving parts than traditional combustion engines, leading to reduced maintenance requirements and longer times between service intervals.

What are the operational cost differences between hydrogen and traditional aircraft? Hydrogen fuel costs depend on the price of the electricity used to produce the hydrogen and the distance from production to use location. Kruse’s model of photovoltaic-powered electrolysis provides a cost-effective, localised solution. Over time, increased production and standardisation are expected to drive hydrogen fuel costs down. Learn more about the opportunities and challenges of hydrogen aircraft for airlines & operators here.

How mature is the technology for hydrogen propulsion? While hydrogen-powered Unmanned Aerial Vehicles (UAVs) and small aircraft are only a few years away from commercialisation, larger passenger aircraft will take longer to develop. Cranfield Aerospace aims to demonstrate its first zero-emissions flight of the 9-seater Britten-Norman Islander by the end of 2025, marking a significant milestone for the technology.

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Advice from the Experts

We concluded the webinar by asking our panellists for their top advice to operators and stakeholders preparing for the hydrogen transition:

• Florian Kruse: “Secure strong partnerships early, especially with airports and energy providers. Collaboration is essential to building a viable hydrogen ecosystem.”

• Tim Eyre: “View new technologies as opportunities, not just challenges. Hydrogen propulsion can reduce operating costs, open new routes, and drive growth.” The Competitive Advantages of Adopting Hydrogen Aircraft

• Alistair Blundy: “Start the conversation with insurers early. Understanding risks and addressing them proactively will make the transition smoother.”

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Webinar Experts

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What’s Next?

Hydrogen-powered aviation is no longer a distant vision, it is a necessity. Cranfield Aerospace Solutions is dedicated to supporting operators and stakeholders as they navigate this transition. Stay tuned for our upcoming blogs and webinars, where we will explore more topics including more detail on airports and infrastructure, certification pathways, and much more!

If you have further questions, are interested in collaborating or see a place for zero-emissions aircraft in your operation please contact us here. Together, we can lead the way towards a zero-emissions future.