While many companies feel the impact of climate change on their income statements, few also literally feel the impact in the Earth’s stratosphere. Cruising at 36,000 feet above the Earth’s surface, a Delta Air Lines aircraft routinely encounters high-altitude jet streams located at the junction of hot and cold air zones . These currents serve to propel or resist the motion of an aircraft, impacting overall fuel consumption over a flightpath. A recent study suggests that the intensity of such jet streams will grow with rising CO2 levels, effectively increasing the flight time for a sample transatlantic flight . We see here an illustrative example of climate change impacting an airplane in the sky; it also directly impacts the underlying business.
Aviation in the headlights
Atmospheric concentration of CO2, a well-known greenhouse gas and contributor to global warming, is increasing past historically high levels (Exhibit 1). The aviation industry accounts for approximately 3% of global carbon emissions today and is one of the fastest growing sources of emissions . At a recent meeting of the International Civil Aviation Organization, an agency within the United Nations, over 190 countries committed voluntarily to a plan to curb emissions growth in the airline industry . This international agreement builds support around existing industry goals to achieve carbon neutral growth beyond 2020. Consistent with this directive, airlines across the world are getting serious about immediately reducing their carbon emissions through any means available.
Exhibit 1: Historical CO2 Levels Compared to Today
Pillars of progress
In a September 2016 presentation at a Spark16 conference, the GM of Environmental Sustainability at Delta, Steve Tochilin, outlined four pillars Delta has adopted to adjust its operating model to tackle emissions competitively: technology enhancements, operational efficiencies, infrastructure improvements, and positive economic measures (Exhibit 2) . A consideration of the technology and operational enhancements will demonstrate the challenges inherent in making the proper business decisions.
Exhibit 2: Potential relative impact of each of Delta’s pillars through 2050
The primary considerations in technology center on replacing old aircraft with new, more efficient aircraft and exploring biofuels as an alternative fuel source . While it is true that new aircraft can improve fuel efficiency, it is not a simple replacement process. New aircraft cannot be purchased on a whim and often have lead times of multiple years. In addition, a replacement at scale would be highly expensive. Alternatively, Delta could explore cleaner fuel technology in the form of biofuels. Biofuels are widely considered to be the most effective means to reduce greenhouse gas emissions in aviation . However, biofuels are limited in supply and require preparation and infrastructure not presently built into today’s airports . Both factors contribute directly to a third primary issue – biofuels are extremely expensive today .
Delta must also address operational efficiencies to achieve less fuel per customer. Some areas that can be manipulated include cruise speed and seat density, for example. However, these adjustments tend to be marginal improvements and, more challengingly, tend to be at odds with customer service initiatives . While a slower flight may be more fuel efficient, it is contrary to the customer’s goal of a fast flight. A lie-flat seat may be an attractive upsell for a customer, but will reduce the headcount per flight. These tradeoff decisions present challenges in balancing competitive advantage with sustainability.
First steps and future view
Delta has been taking steps to ensure achievement of more sustainable operations long term. Delta has officially expressed short-, medium-, and long-term goals. In the short term, Delta is seeking an average 1.5% improvement in fuel efficiency from 2009-2020; in the medium term, Delta will cap net CO2 international emissions in 2020; and in the long term, Delta seeks to reduce emissions levels by 50% in 2050 relative to 2005 .
Delta is focusing on technology, deploying low-carbon fuels and investing in more efficient aircraft. They are currently investing in 300 new aircraft, their largest order to date and a replacement of one-third of their fleet . Delta is also investing in improvements in its air traffic control system as it anticipates future advantageous developments in logistics management at the government level. One example is the FAA’s “NextGen” which purposes to implement satellite control systems, which would allow for finer management of air routes . Maturity in these systems could lead to a 12% reduction due to efficiency gains in logistics .
Additionally, I would recommend Delta pay close attention to developments following the ICAO’s emission reduction agreement. An anticipated market-based measure for carbon offsetting in 2021 and beyond is yet to be finalized because of this agreement . It is important for Delta to track the nature of the MBM, its regulation, and how much Delta anticipates needing carbon offsets. Though projections can be difficult, they are important due to the delicate tradeoff between wanting to maintain a low carbon footprint and wanting to expand business, which can only be done by putting more planes in the air regardless of their efficiency.
(1) Carbon Dioxide. (Sep 2016). Retrieved from http://climate.nasa.gov/vital-signs/carbon-dioxide/
(2) Tochilin, Steve. (Sep 15, 2016). Balancing Financial and Environmental Sustainability at Delta Air Lines. Retrieved from http://urjanetspark.com/portfolio-item/balancing-financial-and-environmental-sustainability-at-delta-air-lines/
 The Jet Stream. (n.d.). Retrieved from http://www.srh.noaa.gov/jetstream/global/jet.html
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 Reducing Carbon Dioxide Emissions from Aircraft. (n.d.). Retrieved from http://www.c2es.org/federal/executive/epa/reducing-aircraft-carbon-emissions
 Philbin, Anthony. (Oct 6, 2016). Historic Agreement Reached to Mitigate International Aviation Emissions. Retrieved from http://www.icao.int/Newsroom/Pages/Historic-agreement-reached-to-mitigate-international-aviation-emissions.aspx
 Tochilin, Steve. (Sep 15, 2016). Balancing Financial and Environmental Sustainability at Delta Air Lines. Retrieved from http://urjanetspark.com/portfolio-item/balancing-financial-and-environmental-sustainability-at-delta-air-lines/
 Benn, A. (2016). A biofuel tipping point? Aviation Week & Space Technology,178(9), 66. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1804472292?accountid=11311
 Ryan, Joe. (Oct 4, 2016). Airline Low-Carbon Future Needs Fuel Nobody Makes in Volume. Retrieved from http://www.bloomberg.com/news/articles/2016-10-03/airlines-pin-low-carbon-future-on-fuels-nobody-has-mass-produced
 2015 Corporate Responsibility Report. (n.d.) Retrieved from http://www.delta.com/content/dam/delta-www/about-delta/corporate-responsibility/2015DeltaAirLines_CorporateResponsibilityReport.pdf
 State of Harmonisation Document. (n.d.). Retrieved from https://www.faa.gov/nextgen/media/nextgen_sesar_harmonization.pdf
 Air Traffic Management. (n.d.) Retrieved from http://www.iata.org/Pages/air-traffic-management.aspx
 What is CORSIA and how does it work? (n.d.). Retrieved from http://www.icao.int/environmental-protection/Pages/A39_CORSIA_FAQ2.aspx