Aviation accounts for between 2% and 2.5% of the world's greenhouse gas emissions and has a reputation as a carbon-intensive industry with few readily available options to decarbonize. While there are many sources of airline emissions across the value chain — everything from ground support and catering to maintenance and aircraft production — the burning of jet fuel for propulsion is by far the largest and most problematic.

While the goal of replacing kerosene-based fuels or cutting their consumption is clear, airlines face significant hurdles to decarbonization that must be overcome. Many carriers are working on a range of activities, but often lack cohesive strategies and the organizational mechanisms needed for real-time governance to effectively steer these nearer-term priorities. This fragmentation leads to individual groups optimizing their segments, potentially leaving value or risk unaddressed. Consequently, organizations find it difficult or fall behind to adapt as projects, markets, and regulations change.

Currently, there is no direct route map towards net zero. However, by curating a mix of activities airlines can better manage in the short term while preparing for the longer-term changes required.  This is especially true as regulatory uncertainty remains high and meaningful change usually remains prohibitively expensive at this stage (or still out of reach in many geographies right now). At the same time risks of snowballing carbon emissions driven liabilities or reputational damage are mounting.

How airlines can find common ground on sustainability efforts

Other industries, such as energy and construction, are able to employ technology enhancement solutions at speed. This makes airlines appear like laggards in comparison, despite a flurry of improvement activities pursued to reduce emissions. But collectively, these changes are projected to play just a supporting role when it comes to reducing global aviation emissions.

Meanwhile, expectations from a range of stakeholders — investors, the travelling public, corporate travel clients, and financiers — are growing, but differ in requirements. The regulation of aviation’s global carbon emissions is equally diverse, with no single governing body enforcing alignment or offering support. While most international travel is somewhat regulated through Carbon Offsetting And Reduction Scheme For International Aviation, regulation of domestic emissions varies widely in scope, approach, and ambition. To further compound matters, any existing regulation tends to feel somewhat up in the air, with details and structure prone to change at a moment’s notice.

Furthermore, knowledge about carbon emissions and regulation is often limited within airlines, typically concentrated in small sustainability teams. These teams, in turn, are often relegated to a compliance role, without sitting directly at the table of commercial and operational decision-making. 

Eight steps for airlines to take charge of their carbon strategy

Each business’ sustainability pathway needs to balance stakeholder expectations, regulatory environments, price-sensitive commercial and operational realities, and a sufficiently ambitious industry-wide response. We explore ways airlines can align on these myriad priorities to battle strong crosswinds of uncertainty in the industry.

1. Establishing a single source of truth for all carbon data

By creating a central fact base which collates all carbon-related analysis and data, and tailors it for different internal audiences, airlines and related stakeholders can be on equal and proactive footing. This fact base must have the capability to assess and compare all mandated and voluntary targets, better allowing users to understand how they are interlinked and monitored. 

2. Mapping out commercial ramifications of carbon emissions and expectations

Work to create a centralized understanding of crucial stakeholder groups and their objectives. This will allow airlines to better understand where expectations overlap, where they clash, and how well they align with hard requirements, such as regulation.  

For example, drawing a clear map of the emissions landscape, which also charts the financial implications of favoring certain stakeholder objectives, will offer clearer business decision-making guidance.  The implications of this can be stark. For one airline we've served recently, a thorough analysis of the various compliance mechanisms they were subject to revealed potential for carbon costs to account for more than 5% of earnings before interest and taxes by 2030.

3. Identifying fit-for-purpose emissions reduction levers

By aligning a comprehensive list of initiatives to reduce carbon with business decisions and strategy, airlines can better understand how to effectively prioritize win-win. In many cases, outcomes are well-aligned, such as the decision to reduce fuel burn. In some cases, however, trade-offs between financial and sustainability goals will occur, such as the use of (still) costly sustainable aviation fuel (SAF).

Some measures are well understood, while others, like seat load factor or network route redesign, are less frequently seen as sustainability measures but can meaningfully improve emissions intensity and absolute emissions, thereby reducing exposure to different compliance mechanisms. For example, for one airline we've worked with, a two-percentage-point shift in emissions intensity would lead to approximately a 50% decrease in total compliance costs by 2030.

4. Defining the north star for carbon reduction across the organization

By drawing up a business-wide accord to set priorities, balances, and trade-offs, better aligned decision-making will help progress the carbon agenda in an effective way. Without this, a business may unknowingly maintain pockets of misalignment that often lead to inconsistent or contradictory decisions that can slow down carbon emissions improvements or make achievements more costly.

5. Coordinating priorities as part of a clearly defined program of integrated initiatives

Based on emission reduction targets and a broad understanding of the levers available, plot a fully resourced roadmap to reduce emissions as far as practical and commercially doable. In our experience, the important levers include:

• A detailed program of ‘micro’ operational improvements such as pilot behaviors, flight planning, dispatch, ground handling equipment electrification, or ground energy supply.
• A considered mix of larger-ticket items such as fleet renewal, aircraft modifications, and SAF usage.
• Indirect emissions intensity driving levers such as business decisions on load factor improvement.

6. Building the capabilities for an effective carbon offset program 

It is critical that businesses develop a clear offset strategy that balances costs, environmental impact, and reputational credibility. This strategy needs a clear understanding of how many offsets are needed for the business, what the corresponding liabilities would be and how firm the requirement is that is driving it (for example, regulatory obligations, corporate customer pressures, or voluntary commitments), and which offsets the airline believes can meet each source of need.

For some, there may be a business case to strike longer-term offtakes or directly invest upstream in project origination, which gives airlines a strong narrative about their offset actions and can drive savings of 40% to 60% compared to simple over-the-counter purchasing. However, going upstream introduces project delivery risks.

7. Encouraging aviation customers to make carbon-conscious decisions

Customer might value the ability to directly pay for SAF or choose a particular high co-benefit offset over a more generic option. Airlines should give customers more choice when it comes to taking control of their own emissions. Airlines should also consider when and how to offer these options to customers within the booking flow, aiming to optimize uptake, as well as better communicating to customers the impact of their choices.

8. Integrating sustainability into stakeholder engagement

Airlines must invest time in educating everybody on the payroll, from Board directors and executives down, on emissions in general, as well as business targets, plans, and outcomes. To govern decision making airlines should establish clear ‘carbon control tower’ with clarity on roles and responsibilities, decision rights (including ownership of inputs), and cadences for review and challenge. Finally, airlines must develop an advocacy position and engage broadly with external stakeholders.

By taking control of the eight priorities outlined above, airlines should no longer feel like they are flying blind on carbon. How many controls has your business mastered already?