Delta Air Lines navigating headwinds on path to low-carbon future

Delta Air Lines faces operating decisions in response to growing industry adoption of a carbon-neutral future.

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 [1]. 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 [2]. 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 [3]. 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 [4]. 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.

pic-1

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) [5]. A consideration of the technology and operational enhancements will demonstrate the challenges inherent in making the proper business decisions.

pic-2

Exhibit 2: Potential relative impact of each of Delta’s pillars through 2050

 

Technology

The primary considerations in technology center on replacing old aircraft with new, more efficient aircraft and exploring biofuels as an alternative fuel source [5]. 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 [6].  However, biofuels are limited in supply and require preparation and infrastructure not presently built into today’s airports [7]. Both factors contribute directly to a third primary issue – biofuels are extremely expensive today [5].

 

Operational Efficiency

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 [5]. 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 [8].

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 [5]. 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 [9]. Maturity in these systems could lead to a 12% reduction due to efficiency gains in logistics [10].

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 [11]. 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.

(800 words)

 

 

 

 

 

 

Exhibit Sources:

(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/

 

Citation:

[1] The Jet Stream. (n.d.). Retrieved from http://www.srh.noaa.gov/jetstream/global/jet.html

[2] Williams, Paul D. (Feb 10, 2016). Transatlantic Flight Times and Climate Change. Retrieved from http://iopscience.iop.org/article/10.1088/1748-9326/11/2/024008#

[3] Reducing Carbon Dioxide Emissions from Aircraft. (n.d.). Retrieved from http://www.c2es.org/federal/executive/epa/reducing-aircraft-carbon-emissions

[4] 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

[5] 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/

[6] 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

[7] 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

[8] 2015 Corporate Responsibility Report. (n.d.) Retrieved from http://www.delta.com/content/dam/delta-www/about-delta/corporate-responsibility/2015DeltaAirLines_CorporateResponsibilityReport.pdf

[9] State of Harmonisation Document. (n.d.). Retrieved from https://www.faa.gov/nextgen/media/nextgen_sesar_harmonization.pdf

[10] Air Traffic Management. (n.d.) Retrieved from http://www.iata.org/Pages/air-traffic-management.aspx

[11] What is CORSIA and how does it work? (n.d.). Retrieved from http://www.icao.int/environmental-protection/Pages/A39_CORSIA_FAQ2.aspx

Previous:

Negotiating your own demise

Next:

Can Avery Dennison Deliver the Full Sustainability Package?

4 thoughts on “Delta Air Lines navigating headwinds on path to low-carbon future

  1. Fascinating post, and what an interesting example at the start! This post really makes me think about two things. The first is the huge impact aviation has on global carbon emissions. The second is the number of constraints involved in improving how airlines such as Delta operate their business such that they mitigate their overall emissions. The technology question you explore is complicated, but, at least looking at your exhibits, seems to have the greatest potential impact. However, I’m most interested in improvements to operations. I’d wager that there are several tactics that haven’t been fully explored that would lead to serious carbon emissions reductions. For example, is there a way to plan routes such that planes are flying most optimally most of the time? Additionally, is there a way to market a more eco-friendly flight? Is there a way to convince a customer to arrive a bit later if it means having less of an impact on the environment?

  2. Echoing the prior comment, this is a fascinating issue and challenge for the airline to address. There are two issues that in particular stick out – the first, your mention of “NextGen”, and the second around the deployment of new technology. On “NextGen”, I recall from prior work in the airline industry that one of the most absurd and unnecessary wastes of fuel (and thus increase in emissions) was around air traffic congestion (and thus flights circling over an airport waiting for landing clearance). How “NextGen” evolves / gets implemented will be key to hopefully reducing this in the US. On biofuels, and the wider question of engine and airline efficiency, how much is Delta working with the manufacturers? I assume almost all of this likely comes from manufacturer work, but I wonder if there is more of a role Delta (and other major airlines) could play in support here?

  3. This is a great read – I like how you explained Delta’s four pillars. I also wrote my blog post about an airline, and was surprised how small technological changes could make a big difference. For example, Southwest claims that adding small winglets to its 737-800s saved one million gallons of gas in 2015 alone: https://www.southwest.com/html/southwest-difference/southwest-citizenship/environmental-initiatives/

    I would be interested to know what, specifically, Delta is planning in terms of technological improvements to their fleets. I agree with you that replacing entire planes is a long and expensive process, but there may be some small yet impactful changes they could make in the interim.

  4. Thank you so much for the article. I was fascinated to see the direct effect climate change can have on Delta, not just through regulations but the real tangible effects climate change can have on flight times.

    The Delta story reminds me of the trade-offs that IKEA faces. The vast majority of their environmental footprint comes from burning jetfuel (in IKEA it was from consumption of wood), and as such their greatest opportunity to improve the sustainability of their business comes from substituting jetfuels with more sustainable alternatives such as biofuels (in IKEA this was FSC certified forestry), as shown in Exhibit 2. The question then becomes whether Delta can achieve the trajectory identified in Exhibit 2. In order to do so, as touched on in a previous comment, Delta will likely have to begin working with their suppliers. There are several options through which Delta could do so, from light touch to heavy touch: i) signal to suppliers through target biofuel input quantities that Delta will be shifting towards biofuels, thereby encouraging investment; ii) commit to purchase certain quantities of biofuels at a given price from select suppliers to guarantee investment; iii) finally, Delta could invest upstream in the biofuel supply chain, thereby taking control of production and ensuring that they meet their targets for share of biofuels as an input, in addition to hedging against future fluctuations in price as other airlines catch on. In this context, it will be interesting to see how Delta develops its business model to ensure that they achieve their targets.

Leave a comment