The aviation industry produced 815 million tons of CO2 in 2016, contributing to 2% of manmade CO2 emissions – greenhouse gases emissions – worldwide1. This percentage is not expected to increase to more than 3% by 2050, but since it is driven mainly by growing passenger demand, emerging markets play a key role in this trend1.
LATAM Airlines is Latin America’s leading airline, present in six domestic markets in the region and flying to 140 destinations in 25 countries2. The company employs 43.000 people worldwide and operates 1.200 flights per day with its 322-aircraft fleet2. How would you think the growing concern of the climate change produced by the aviation industry CO2 emissions affects such a large company?
Industry regulations, social responsibility, and the fact that CO2 emissions are directly linked to fuel consumption – fuel is the most important element in the company’s supply chain (see Exhibit) -, among others, are things that must be in all annual board meetings and affect short and long-term investment decisions of LATAM Airlines.
Exhibit: LATAM Airlines purchases in 20164.
As seen in the company’s annual report for 2016 and its Sustainability Report for the same year, several actions either have already been taken or are planned to address the described impact of climate change3 4.
- Implementation of “Lean” and “Smart Fuel” fuel efficiency programs. Consisting of at least 20 initiatives, these programs include investments in fleet renewal, efficiency gains in routes and flight times thanks to the use of new satellite navigational technologies, use of platform for partial disembarkation, control of air conditioning, and optimization of the cargo capacity of passenger and cargo services5. The initiatives allowed fuel savings of more than 41 million gallons in 2016, that consequently meant ceasing to emit 440 thousand tons of CO2. The target for the company is a 1.5% annual increase in fuel efficiency by 2020.
- Public commitment to align with Carbon Neutral Growth 2020, initiative led by the International Air Transport Association (IATA). By doing this the company committed to offset all flight operation emissions above the 2018-2020 average from 2020. The target is to achieve carbon neutral growth by 2020 and to halve carbon footprint by 2050 against base-year 2005.
- Participation and support in the design, implementation and certification of the IATA Environmental Assessment6. This program is a voluntary environmental management and evaluation system designed to independently assess and improve the environmental performance of an airline. The company is the first in Latin America and the third worldwide to obtain the certification – for its Chilean operations.
- Implementation of ground operations initiatives, including fuel efficiency programs and offsetting ground operation emissions in Peru and Colombia through local reforestation actions. Between 2012 and 2016 the company has already reduced its on-land emissions by 27%.
These actions among others allowed LATAM Airlines to be acknowledged as Climate Strategy leader in the Dow Jones Sustainability Index3.
In spite of the above described clearly strong efforts towards the climate change cause, there are still possible steps for the company to take in order to replicate industry leaders’ actions.
- Direct investment on alternative fuels development. Given that according to IATA sustainable alternative fuels will be the only real energy solution to mitigate the emissions growth of the industry, the company should take a proactive action in the matter and follow airlines like KLM that has partnered with biojet fuel suppliers, airports, and the Dutch government to start a regular supply of biofuel in the coming years7.
- Increasing investments on fleet renewal. The average age of the fleet of an airline correlates to a certain extent to how efficient its fuel consumption can be. Currently the average age of the company’s fleet is 7 years, a number that even though is relatively good compared to other companies, still falls behind major world airlines such as Emirates, Etihad, and Qatar Airways for example4 8.
- Additional in-flight measures that can reduce aircraft weight and consequently CO2 emissions – for 10kg weight reduction, about 4 tons of CO2 can be avoided in one year9. There are still possible simple improvements that some airlines have already implemented and could be useful for the company’s CO2 reductions targets, such as replacing paper manuals with tablets and using lightweight trolleys9.
We have seen how LATAM Airlines affects and is affected by climate change, with several steps already taken by the company and some additional that could be addressed in the upcoming years. The question to ask ourselves now is, would the company be willing to invest substantial money in improving its CO2 emissions if it did not gain in fuel consumption efficiencies?
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- IATA; “Fact Sheet Climate Change & CORSIA”; http://www.iata.org/pressroom/facts_figures/fact_sheets/Documents/fact-sheet-climate-change.pdf
- LATAM Airlines Group; Company Information; http://www.latamairlinesgroup.net/phoenix.zhtml?c=81136&p=irol-homeProfile2
- LATAM Airlines Group; Annual Report; http://memoria2016.marketinglatam.net/sostenibilidad/cambio-climatico/?lang=en
- LATAM Airlines Group; “Sustainability Report 2016”; https://www.latam.com/content/dam/LATAM/latam-marca-unica/footer/sostenibilidad/LATAM-Sustainability-report-2016-EN.pdf
- LATAM Airlines Group; “Sustainability Report 2014”; http://memoria2014.marketinglatam.net/english/mobile/sostenibilidad.php
- IATA; “Environmental Assessment”; http://www.iata.org/whatwedo/environment/Pages/environmental-assessment.aspx
- IATA; “Fact Sheet Alternative Fuels”; https://www.iata.org/pressroom/facts_figures/fact_sheets/Documents/fact-sheet-alternative-fuels.pdf
- Traveller Newsletter; “Major airlines with the oldest fleet: Are older planes less reliable to fly?”; http://www.traveller.com.au/major-airlines-with-the-oldest-fleet-are-older-planes-less-reliable-to-fly-gxnsmn
- IATA; “Climate change”; http://www.iata.org/policy/environment/Pages/climate-change.aspx