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mmKUL
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Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 1:42 pm

The current pandemic has forced economies to trial remote working which is beginning to influence longer term expected behaviours (for example some companies are exploring long term greater home working and office reductions). In parallel to this, a fast growing list of companies globally are setting ambitious carbon reduction targets for themselves (and most importantly their full value chain - including business travel). As an example, yesterday the large global accountancy firm PwC (276,000 employees) announced their ambitions out to 2030 (see https://www.pwc.com/gx/en/news-room/pre ... -2030.html ).
It is worth noting that PwC has assessed aviation as representing 85% of their total emissions. Therefore, their significant reductions in the next 10 years will have to primarily come from reducing aviation emissions through less flying, flying in lower class seats and using more efficient planes.
PwC are not alone - many corporates around the world have or are setting similar significant reduction targets.
What will the impacts be from these changes to corporate aviation demand? Especially as this customer sector includes a lot of the premiums cabin tickets too.
 
MIflyer12
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 2:13 pm

IMHO, this is green-washing -- declaring environmental goals when the real purpose is saving money from reduction in travel or savings from reductions in other energy use.
 
frmrCapCadet
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 2:56 pm

a fast growing list of companies globally are setting ambitious carbon reduction targets for themselves (and most importantly their full value chain


This could use more discussion on this site. It is increasingly going to be a problem for the aviation industry. Solutions are difficult, not intractable. Some sort of bio-fuels, a little more in offsets, more efficient airport/ATC could give the improvements those global companies will be demanding. I suspect a couple percent improvements per year might be possible. As most on this site, I want to see a prosperous aviation industry.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 2:59 pm

I'm not sure it can be classed as greenwashing if it is genuinely materially reducing the impacts of your full value chain. Greenwashing is usually a label for environmental measures that lead to marginal environmental improvements. And, if money saving is also enjoyed - that surely will simply enhance and support the persistence of the change?
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 3:08 pm

Some sort of bio-fuels, a little more in offsets, more efficient airport/ATC could give the improvements those global companies will be demanding. I suspect a couple percent improvements per year might be possible.

Unfortunately, offsetting is not a recognised approach to reducing their emissions for carbon accounting. So the flights taken would have to be evaluated on a fuel burn basis (route distance, class of seat, etc.).
 
TObound
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 4:35 pm

frmrCapCadet wrote:
a fast growing list of companies globally are setting ambitious carbon reduction targets for themselves (and most importantly their full value chain


This could use more discussion on this site. It is increasingly going to be a problem for the aviation industry. Solutions are difficult, not intractable. Some sort of bio-fuels, a little more in offsets, more efficient airport/ATC could give the improvements those global companies will be demanding. I suspect a couple percent improvements per year might be possible. As most on this site, I want to see a prosperous aviation industry.


This site is full of people who will either deny climate change, minimize it or resort to whataboutism to protect their sacred cow (and paycheques in some cases). See the Covid discussions on how this is going to go.

I expect aviation to struggle because of the aforementioned attitudes. I expect governments will be dragging them along perpetually.
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 5:49 pm

TObound wrote:
frmrCapCadet wrote:
a fast growing list of companies globally are setting ambitious carbon reduction targets for themselves (and most importantly their full value chain


This could use more discussion on this site. It is increasingly going to be a problem for the aviation industry. Solutions are difficult, not intractable. Some sort of bio-fuels, a little more in offsets, more efficient airport/ATC could give the improvements those global companies will be demanding. I suspect a couple percent improvements per year might be possible. As most on this site, I want to see a prosperous aviation industry.


This site is full of people who will either deny climate change, minimize it or resort to whataboutism to protect their sacred cow (and paycheques in some cases). See the Covid discussions on how this is going to go.

I expect aviation to struggle because of the aforementioned attitudes. I expect governments will be dragging them along perpetually.



It has always suprised me how this huge disruption coming over the horizon is pretty much ignored on these forum and by the industry. When your biggest (and best) customers are stating publicly they are moving away from your product. And when the scale and pace of decarbonisation being set by governments and corporates is getting steeper and steeper. There are certainly few easy fixes in the short term. But to ignore it and assume all will continue as usual is naive. Perhaps 2020 disruption will have opened some eyes.
 
frmrCapCadet
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 6:12 pm

The off-set I would like to see is the money going for capital costs of EV charging stations. Lack of those is still slowing down EV adaption. Surface transportation electrification is and will be about the fastest way to reduce CO2 (along with LED lighting and heat pumps for residential and commercial) I could see those charging stations as effective advertising for specific airlines.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
ethernal
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 7:31 pm

The cost of offsetting carbon emissions is trivial relative to the cost of travel (at least at today's offset prices... depending on exactly the quality of the offset) - typically on the order of 3-5% of the flight cost.

At least with major airlines (e.g. US4 in North America), PwC will bake this into their corporate pricing agreements to include offsets to the price. At consultancies roughly about 80-90% of expenses are passthrough to clients, so 80-90% of this will be directly borne on the shoulder of their clients when they pass their air travel expenses along. So, doing the math here... to buy offsets for all travel, PWC's direct air travel costs would increase by... about half a percent. I don't think they'll notice.

COVID (which in fairness was highlighted in the commitment) is a much bigger threat to business travel than sustainability - especially in North America/APAC. In Europe, trains may offer an alternative out to businesses looking to reduce their footprint.
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 7:49 pm

ethernal wrote:
The cost of offsetting carbon emissions is trivial relative to the cost of travel (at least at today's offset prices... depending on exactly the quality of the offset) - typically on the order of 3-5% of the flight cost.

At least with major airlines (e.g. US4 in North America), PwC will bake this into their corporate pricing agreements to include offsets to the price. At consultancies roughly about 80-90% of expenses are passthrough to clients, so 80-90% of this will be directly borne on the shoulder of their clients when they pass their air travel expenses along. So, doing the math here... to buy offsets for all travel, PWC's direct air travel costs would increase by... about half a percent. I don't think they'll notice.

COVID (which in fairness was highlighted in the commitment) is a much bigger threat to business travel than sustainability - especially in North America/APAC. In Europe, trains may offer an alternative out to businesses looking to reduce their footprint.


To reiterate - Offsetting CANNOT be used by PwC to reduce their carbon emissions. The targets they have set will require a real reduction in greenhouse gas emissions in their value chain and since 85% of this is through aviation, this will require to less flying and probably lower cabin class for many flights. Their announcements recognise this change to their business. The past 6 months have shown how virtual meetings and project delivery is perfectly adequate.

So this fast emerging trend in corporates across all sector will lead to a drop in demand.

Here is an extract from their notice of intent yesterday
“ Across our network, we commit to reducing our total greenhouse gas emissions by 50% in absolute terms by 2030. This includes a switch to 100% renewable electricity in all territories, as well as energy efficiency improvements in our offices and halving the emissions associated with business travel and accommodation within a decade. In the 2019 financial year, emissions associated with flights alone represented around 85% of PwC’s total carbon footprint. The COVID-19 pandemic has accelerated the shift to remote working and demonstrated the feasibility of new client delivery models, as part of a longer-term transformation of our services.“
Last edited by mmKUL on Wed Sep 16, 2020 7:50 pm, edited 1 time in total.
 
ethernal
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 8:31 pm

mmKUL wrote:
ethernal wrote:
The cost of offsetting carbon emissions is trivial relative to the cost of travel (at least at today's offset prices... depending on exactly the quality of the offset) - typically on the order of 3-5% of the flight cost.

At least with major airlines (e.g. US4 in North America), PwC will bake this into their corporate pricing agreements to include offsets to the price. At consultancies roughly about 80-90% of expenses are passthrough to clients, so 80-90% of this will be directly borne on the shoulder of their clients when they pass their air travel expenses along. So, doing the math here... to buy offsets for all travel, PWC's direct air travel costs would increase by... about half a percent. I don't think they'll notice.

COVID (which in fairness was highlighted in the commitment) is a much bigger threat to business travel than sustainability - especially in North America/APAC. In Europe, trains may offer an alternative out to businesses looking to reduce their footprint.


To reiterate - Offsetting CANNOT be used by PwC to reduce their carbon emissions. The targets they have set will require a real reduction in greenhouse gas emissions in their value chain and since 85% of this is through aviation, this will require to less flying and probably lower cabin class for many flights. Their announcements recognise this change to their business. The past 6 months have shown how virtual meetings and project delivery is perfectly adequate.

So this fast emerging trend in corporates across all sector will lead to a drop in demand.

Here is an extract from their notice of intent yesterday
“ Across our network, we commit to reducing our total greenhouse gas emissions by 50% in absolute terms by 2030. This includes a switch to 100% renewable electricity in all territories, as well as energy efficiency improvements in our offices and halving the emissions associated with business travel and accommodation within a decade. In the 2019 financial year, emissions associated with flights alone represented around 85% of PwC’s total carbon footprint. The COVID-19 pandemic has accelerated the shift to remote working and demonstrated the feasibility of new client delivery models, as part of a longer-term transformation of our services.“



Fair enough, but we'll see. 2030 is a long time away with plenty of time for all of the leaders who committed to this to disappear to walk it back. COVID may fundamentally alter the way consultancies/accountancies do business with their clients, or it may be temporary (temporary as defined on a 10 year horizon... at a minimum impacts will be felt for 5 years).

In short, it's too early to be seen. If clients still demand PwC travels onsite, then PwC will travel onsite. Class of service may go down, but most of PwC's travel is already economy for most staff levels for most flights (domestic/intra-EU).
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 8:36 pm

ethernal wrote:
mmKUL wrote:
ethernal wrote:
The cost of offsetting carbon emissions is trivial relative to the cost of travel (at least at today's offset prices... depending on exactly the quality of the offset) - typically on the order of 3-5% of the flight cost.

At least with major airlines (e.g. US4 in North America), PwC will bake this into their corporate pricing agreements to include offsets to the price. At consultancies roughly about 80-90% of expenses are passthrough to clients, so 80-90% of this will be directly borne on the shoulder of their clients when they pass their air travel expenses along. So, doing the math here... to buy offsets for all travel, PWC's direct air travel costs would increase by... about half a percent. I don't think they'll notice.

COVID (which in fairness was highlighted in the commitment) is a much bigger threat to business travel than sustainability - especially in North America/APAC. In Europe, trains may offer an alternative out to businesses looking to reduce their footprint.


To reiterate - Offsetting CANNOT be used by PwC to reduce their carbon emissions. The targets they have set will require a real reduction in greenhouse gas emissions in their value chain and since 85% of this is through aviation, this will require to less flying and probably lower cabin class for many flights. Their announcements recognise this change to their business. The past 6 months have shown how virtual meetings and project delivery is perfectly adequate.

So this fast emerging trend in corporates across all sector will lead to a drop in demand.

Here is an extract from their notice of intent yesterday
“ Across our network, we commit to reducing our total greenhouse gas emissions by 50% in absolute terms by 2030. This includes a switch to 100% renewable electricity in all territories, as well as energy efficiency improvements in our offices and halving the emissions associated with business travel and accommodation within a decade. In the 2019 financial year, emissions associated with flights alone represented around 85% of PwC’s total carbon footprint. The COVID-19 pandemic has accelerated the shift to remote working and demonstrated the feasibility of new client delivery models, as part of a longer-term transformation of our services.“



Fair enough, but we'll see. 2030 is a long time away with plenty of time for all of the leaders who committed to this to disappear to walk it back. COVID may fundamentally alter the way consultancies/accountancies do business with their clients, or it may be temporary (temporary as defined on a 10 year horizon... at a minimum impacts will be felt for 5 years).

In short, it's too early to be seen. If clients still demand PwC travels onsite, then PwC will travel onsite. Class of service may go down, but most of PwC's travel is already economy for most staff levels for most flights (domestic/intra-EU).


There’s probably a lot doing TATL in business/coach. And their clients won’t only have seen the benefits of remote meetings, but they are also setting ambitious science based targets themselves and these flights by their advisors hit their footprint too.
 
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FLALEFTY
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 8:57 pm

mmKUL wrote:
The current pandemic has forced economies to trial remote working which is beginning to influence longer term expected behaviours (for example some companies are exploring long term greater home working and office reductions). In parallel to this, a fast growing list of companies globally are setting ambitious carbon reduction targets for themselves (and most importantly their full value chain - including business travel). As an example, yesterday the large global accountancy firm PwC (276,000 employees) announced their ambitions out to 2030 (see https://www.pwc.com/gx/en/news-room/pre ... -2030.html ).
It is worth noting that PwC has assessed aviation as representing 85% of their total emissions. Therefore, their significant reductions in the next 10 years will have to primarily come from reducing aviation emissions through less flying, flying in lower class seats and using more efficient planes.
PwC are not alone - many corporates around the world have or are setting similar significant reduction targets.
What will the impacts be from these changes to corporate aviation demand? Especially as this customer sector includes a lot of the premiums cabin tickets too.


One of the paradigm shifts that has occurred as a result of this pandemic has been the much wider acceptance for on-line virtual meetings and the ability to work remotely & virtually from home, rather than have employees travel to an office. These capabilities have been around for over 25 years, but this time there is sufficient network bandwidth available to make such virtual activities reliable. This is now the way forward and corporate air travel will suffer significant collateral damage as a result.

Then there is the looming issue of airlines having to replace large portions of their fleets to meet the 2028 ICAO carbon footprint standards. That deadline is just a little more than 7 years away, yet the most optimistic prediction, that airlines will be able to stem financial losses and stabilize, is at least 2 years away. Will they be able to get the positive cashflows back in time to service the debt required for mass re-fleets?
 
iamlucky13
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Re: Impact on airlines from growing corporate sustainability

Wed Sep 16, 2020 10:46 pm

mmKUL wrote:
To reiterate - Offsetting CANNOT be used by PwC to reduce their carbon emissions.


Just to make sure it is clear, as I think it is possible to misread if not careful:

Offsets are not the way they plan to achieve the 50% actual reduction they state they are planning. They indicate the same 50% ratio applies specifically to travel emissions. That would be, as you say, flight reductions and lower fare classes. Presumably it also includes aviation fuel burn improvements, and it may include biofuel use. They also state it includes "accommodations," so they'll treat the reductions their hotel providers make as counting toward the reduction.

They also state they in the next paragraph that the rest will be from carbon removal. That is a form of offset, but it is a more tangible offset than buying credits that other companies earn by reducing emissions.

So to throw some hypothetical numbers into the discussion, if they expect the industry to reduce fuel burn per ASM by 10% by 2030, and for aviation biofuel to reach 10% (consistent with IEA forecast), then that suggests a ~38% reduction in flying (50% emission reduction / (90% consumption * 90% fossil fuel content)). Actual reduction would be further affected by fare class changes, accommodation improvements, etc.

Since accounting is a paperwork job, Price Waterhouse probably have more flexibility in their travel utilization than a lot of other companies, and some of their socially or politically high profile customers probably make carbon reduction internally and among their service providers a higher priority than most companies.

I'm not disagreeing with the premise of this discussion. Merely noting this specific company is not the benchmark - the industry is probably facing a flattening or decrease in business travel, but not a 50% drop in the next 10 years.

You are probably correct that this is not fully recognized by airlines. Aviation forecasts seem mostly to be based on economic growth forecasts.

frmrCapCadet wrote:
The off-set I would like to see is the money going for capital costs of EV charging stations. Lack of those is still slowing down EV adaption. Surface transportation electrification is and will be about the fastest way to reduce CO2 (along with LED lighting and heat pumps for residential and commercial


It's already happening, and being publicly subsidized. Sometimes they're also poorly located relative to demand. The nearest major airport to me has almost 200 of them, all very close to the door, and probably 90% unused. My local grocery store installed a couple a few months ago, and I have yet to see a single car use them. But I have also noticed locations where the chargers are regularly in use.

Even the owner of the last company I worked for installed EV chargers despite not believing in climate change, because he got a tax break for part of the cost, and because some employees requested it, so he viewed it as an employee retention perk.

A high percentage of the households that can afford EV's are 2-car households anyways, making range and charging away from home minimally relevant, and range anxiety was an exaggerated criticism of EV's anyways. Charging infrastructure is a minor factor in EV adoption at this point

FLALEFTY wrote:
Then there is the looming issue of airlines having to replace large portions of their fleets to meet the 2028 ICAO carbon footprint standards.


The 2028 standard does not require retirement of in service aircraft. It prohibits the sale of new aircraft that don't meet the standard.

mmKUL wrote:
they are also setting ambitious science based targets themselves and these flights by their advisors hit their footprint too.


The decision to make reductions may be based on recognizing the scientific conclusions, but the targets themselves don't really seem to be science based. The Price Waterhouse announcement is the same. It uses the term "science based target," but does not substantiate that any scientific methodology was used to determine the specific target and timeline. This is not a complaint. Just an observation about buzzwords.
 
WA707atMSP
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Re: Impact on airlines from growing corporate sustainability

Thu Sep 17, 2020 9:58 am

Although media attention has been focused on the positive environmental aspects of Covid, such as less automotive and air travel, unfortunately, the media has chosen to ignore one serious environmental consequence of more people working from home: many people working from home have chosen to get dogs, and owning a dog is DREADFUL for the environment.

Academic studies done pre-Covid said that the energy needed to manufacture and deliver the food eaten by America's dogs was equivalent to the energy consumed by 17 million SUVs. The post-Covid increase in dog ownership has made this even worse.

Everything dogs eat has to come out the other end, and pre-Covid, the volume of fecal matter spewed out by America's dogs was the same as the volume of garbage generated by every human in Massachusetts. Some people pick up their dogs' excrement, and it takes energy and landfill space to dispose of what's picked up. Many people, however, leave their dogs' excrement in the grass or on the sidewalk, and when the dog feces gets washed into rivers and lakes, it contributes to water pollution.

Although I'm sure the increase in pollution due to higher dog ownership post-Covid isn't enough to offset the decrease in pollution from less auto and air travel, hopefully, scientific studies about the environmental impact of Covid will start taking the horrific environmental consequences of post-Covid higher dog ownership into account.
 
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lightsaber
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Re: Impact on airlines from growing corporate sustainability

Thu Sep 17, 2020 11:00 am

MIflyer12 wrote:
IMHO, this is green-washing -- declaring environmental goals when the real purpose is saving money from reduction in travel or savings from reductions in other energy use.

This is cutting the travel budget from a moral high ground.

With again audits missing wirecard's fraud, I not sure how not traveling helps. In one year one relative who was an auditor for PWC caught two frauds because on site evidence told her she needed to review certain records and the records on up didn't match the corporate financial statements.

The auditing industry has trust based on action. Companies will have to cut budgets. I'm sure this is because clients need lower cost audits.

I see posts on taxing aviation, as an elastic market that will reduce demand, reduce the fleets, which means job reductions.

Lightsaber
I cannot wait to get vaccinated to live again! Warning: I simulated that it takes 50%+ vaccinated to protect the vaccinated and 75%+ vaccinated to protect the vac-hesitant.
 
mmKUL
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Re: Impact on airlines from growing corporate sustainability

Thu Sep 17, 2020 11:52 am

lightsaber wrote:
MIflyer12 wrote:
IMHO, this is green-washing -- declaring environmental goals when the real purpose is saving money from reduction in travel or savings from reductions in other energy use.

This is cutting the travel budget from a moral high ground.

With again audits missing wirecard's fraud, I not sure how not traveling helps. In one year one relative who was an auditor for PWC caught two frauds because on site evidence told her she needed to review certain records and the records on up didn't match the corporate financial statements.

The auditing industry has trust based on action. Companies will have to cut budgets. I'm sure this is because clients need lower cost audits.

I see posts on taxing aviation, as an elastic market that will reduce demand, reduce the fleets, which means job reductions.

Lightsaber


Yet, jumping on a plane in F/J and flying TATL for a client/partner meeting on a regular basis (when video conferencing suffices), leading to 3-6 tonnes CO2 emissions demonstrates no environmental consideration. I don’t believe these changes happening are financially driven (as others have said - client often picks up the bill). But governments, corporates and investors are now requiring all sectors to set and deliver these major reductions needed as the remaining carbon budgets fast erode.
 
MatthewDB
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Re: Impact on airlines from growing corporate sustainability

Fri Sep 18, 2020 5:09 am

I hope the discussion of seating class results in something more in between present coach and business class. The airlines have been chasing the dollars of the premium seats by making them ever more spacious and expensive. My employer abandoned the business class seats a decade ago, but will do the economy plus seats. They're a little better, but still pretty packed for going half way around the world. If the likes of PwC are asking for less lavish in the business class, we may see movement towards something in between.

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