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airline industry plan to wean 1b ton of carbon
In 1928, one person crossed the Atlantic; in 2018 there were 4.3 billion passenger journeys recorded. Although some people managed to avoid it even before Covid – according to a Gallup poll, about half of Americans don’t fly at all — the rest of the U.S. population flies enough to bring the mean up to about two flights per year.
It takes a lot of energy to get people up into the air and, since the production of energy comes at an environmental cost, air travel is a significant carbon emitter, with a unique challenge compared to other modes of transport when it comes to climate change.
Unlike innovations in electric cars, boats, and trains — where the added mass required to go electric isn’t an insurmountable engineering problem, and the extension cords aren’t 30,000 feet long — combustible fuel remains largely the only way to fly, at least for longer flights.
Eighty percent of emissions are from flights that are roughly 1,000 miles or longer, and for which there is no current viable alternative to fuel.
Each individual has a role to play in bringing down emissions. The average American is responsible for about 15 metric tons of CO2 per year, and more than one-third of Americans say they now are likely to pay a little extra in their airfare for carbon offsets. The rich and famous have an even bigger carbon footprint.
Taylor Swift’s much-maligned private jet produces around 8000 metric tons of CO2 annually. But Taylor has nothing on the airline industry, whose annual CO2 emission is pushing one billion metric tons. If the combined air industry were a country, besides having a killer peanut region, it would also have a larger CO2 emission than Germany.
The industry, though, stresses its small carbon footprint relative to other industries.
U.S. carriers, specifically, transport over 2 million passengers and 68,000 tons of cargo per day while contributing “just” 2 percent of the nation’s greenhouse gas emissions, according to the industry trade group Airlines for America.
The aviation industry has become more efficient in recent decades, with U.S. airlines improving their fuel efficiency (on a revenue ton mile basis) by more than 135% between 1978 and 2021. But a focus on how low that 2% figure seems is part of a growing problem, according to climate analysts who study the aviation sector.
Covid slowed air travel, but it’s still expected to triple
Video conferencing may replace some portion of business travel, but as the aviation sector rebounds, climate analysts say a tripling in global air travel in the decades ahead — although forecast before Covid — is still a safe bet.
Passenger travel will ramp back up more slowly, but analysts note that aviation is also used for cargo, which is not effected by business class. That’s a reason for significant concern about aviation’s carbon reduction plans.
The industry needs to be focused on keeping its share of emissions down, rather than seeing its current share as a reason to move more deliberately, according to climate analysts.
Compared with autos, where there is already a decade of progress on electric vehicles, and in the power generation sector, where there have already been significant investments in renewable energy sources that are cost-competitive versus traditional sources, aviation is still in the experimentation days of new fuel technology.
Electric batteries, at best, have a role to play on shorter, regional routes and urban travel, and airlines are making these investments.
Some critics say the aviation industry has been too slow to seek climate solutions, but concede that aviation is a tough sector when it comes to net-zero goals because of its unique safety and regulatory requirements.
Aviation wasn’t helped by the pandemic, and even its critics say that expecting the past few years to have seen a tidal wave of investment into startup technologies would have been unrealistic given the more pressing financial challenges.
Airlines have completed test flights with sustainable aviation fuels, and the deals with sustainable aviation fuel producers have started to accumulate.
American Airlines finalized a deal over the summer with biofuel company Gevo to purchase 500 million gallons of sustainable airline fuel (SAF) over five years, part of American’s net zero carbon directive. It describes its climate goals as “aggressive,” including achieving net-zero greenhouse gas (GHG) emissions by 2050.
American is the first airline globally to receive validation from the Science Based Targets initiative for its intermediate GHG emissions reduction targets and the only U.S. airline to report using more than 1 million gallons of sustainable aviation fuel in 2021.
Gevo’s process for producing low or zero carbon SAF starts at the farm where feedstock is grown. The company partners with farms that use regenerative agriculture techniques which sequester carbon in the soil. These farms also use precision application of chemicals and fertilizers to reduce the carbon footprint in that process.
The plants that Gevo is designing will take those feedstocks (i.e., field corn) and convert it to ethanol. From ethanol, Gevo then processes further into a product that is chemically identical to standard aviation fuel.
The difference between standard aviation fuel and Gevo’s SAF is the elimination of any fossil fuels being used in that production process for heat, electricity or any power needed.
Instead Gevo’s integrates wind, solar, hydrogen, biogas, and other sources of renewable energy to eliminate fossil fuels from the process. This will provide a replacement fuel for aviation needs that is net zero, or even net negative, in terms of carbon intensity if carbon capture, utilization and storage (CCUS) is integrated as well, according to John Richardson, director of investor relations at Gevo.
SAFs are chemically indistinguishable from standard airline fuel – but their production process is significantly different (and greener) than traditional fuels — though unlike EVs in the auto sector, there is much debate about which SAF approaches will be the ultimate winners, and what tradeoffs need to be made today to support current technologies in development.
The Gevo approach, focused on feedstocks, is a good example.
Today, feedstocks that go into sustainable aviation fuels are not produced at a scale that is anywhere close to global jet fuel, and that scaling issue will remain for years as competing technology approaches are tested by the aviation industry. Using feedstocks from food production, specifically, may become a larger issue from an optics perspective in the future.
Several climate analysts told CNBC they are concerned about too much focus on scaling feedstock-based sustainable jet fuels at a time of growing concerns about global food security in a world facing major climate change impacts on agriculture. Gevo stresses that it uses residual starches from “inedible field corn” as feedstock, which are abundant in supply and low in nutritional value.
Airbus CEO Guillaume Faury conveyed the matter at a panel at Britain’s Farnborough International Airshow – a five-day exhibition where executives and key figures gather to discuss the future of air travel: “Probably in the long run — in many decades — we will find a very optimized way of sustainable energy but in the transition, the fast way is to use the SAF, and they are available now,” he said.
Judged against the standards of its own industry, American remains a leader in carbon reduction efforts. American received a CDP Climate Change score of “A–” in 2021 — the highest score among airlines in North America, and one of only two airlines globally to score that high.
“We recognize that climate change is urgent and imminent” said Jill Blickstein, vice president of sustainability at American Airlines. “As the world’s largest airline, American is committed to developing the tools necessary to decarbonize our operations.”
In addition to Gevo, it has invested in Bill Gates’ Breakthrough Energy Catalyst, “all aimed at bringing forward the technologies that will help reach our ambitious sustainability goals,” Blickstein said.
Decarbonizing airplanes gets boost from Biden
There are multiple technological approaches to sustainable aviation fuels that can decarbonize planes without prolonging the use and dependence on current fossil fuels and green hydrogen technology just got a big boost from the Inflation Reduction Act.
More investor money is expected to flow into green hydrogen as a result of the IRA, with climate analysts describing the tax credits as being a huge driver for sustainable aviation fuels because science aside, the biggest challenge with scaling up these operations and SAF production has been the financial incentive.
Green hydrogen approaches aim to remove C02 from the air and blend it with green hydrogen into a form of kerosene that can be cost competitive with convention jet fuel. In February 2021, KLM first flew a Boeing 737 passenger plane from Amsterdam to Madrid fueled with 500 liters of synthetic kerosene, from energy giant Shell, mixed with traditional jet fuel.
Recently announced deals with startups in the space were already in the works with major air carriers even before the IRA, including Twelve, which recently inked a deal with Alaska Airlines and Microsoft for its approach to create sustainable fuels using carbon captured from the air, water and renewable energy. Alaska, which has used SAF blends since 2011 on specific routes, noted itself there is a long way to go: currently less than 1% of total fuel available is SAF, and its costs is three to five times more than conventional jet fuel.
Delta Air Lines recently signed the largest U.S. aviation deal yet for green hydrogen produced fuels, with Louisiana-based DG Fuels, which uses waste CO2 as a feedstock, and in its announcement measured the scope of the challenge ahead by stating that the existing global SAF supply could operate a fleet Delta’s size for one day.
For the time being, EVs are much father along the innovation curve, with many more years of testing and government policies to support the transport sector’s transformational growth.
But not everyone sees SAFs as the solution, particularly given growth trends in the industry. At the recent Farnborough International Airshow, campaigners and climate activists pushed back against the industry’s emphasis on SAFs, urging them to “get real” and offer more significant climate solutions.
Instead of SAFs, slowed growth and less travel and fewer flights is proposed as a way of addressing the issue, perhaps by reducing domestic flights and encouraging and improving rail travel.
Analysts caution that all of the effort going into aviation’s carbon-free future should not eliminate even more significant replacements for air travel, such as high-speed rail. But for aviation, the goal has to be the same as in other sectors, with its emissions peaking as soon as possible. And the choice that seems clear today is that aviation remains on the fuels pathway, unlike autos, where electric is the future.
Whichever form of fuel production produces the least emissions with the greatest benefit and cost-effectiveness will win, and that’s what no player in aviation knows for certain today. Climate analysts expect it will take at least five years to a decade for the most viable solutions to emerge.
The prospective new owner of Royal Mail has said he will not walk away from the requirement to deliver letters throughout the UK six days a week, as long as he is running the service.
“As long as I’m alive, I completely exclude this,” Czech billionaire Daniel Kretinsky told the BBC.
Mr Kretinsky has had a £3.6bn offer for Royal Mail accepted by its board.
Shareholders are expected to approve the deal in the coming months, but the government also has a say over whether it goes ahead.
Currently the Universal Service Obligation (USO) requires Royal Mail to deliver letters six days a week throughout the country for the same price. But questions have been raised over whether the service could be reduced in the future.
In an exclusive interview with the BBC, Mr Kretinsky also said he would be willing to share profits with employees, if given the go-ahead to buy the group.
However, he appeared to reject the idea of employees having a stake in Royal Mail, which unions have called for in exchange for their support.
The Royal Mail board agreed a £3.6bn takeover offer from Mr Kretinsky in May for the 500-year-old organisation, which employs more than 150,000 people. Including assumed debts, the offer is worth £5bn.
But because Royal Mail is a nationally important company, the government has the power to scrutinise and potentially block the deal.
As well as keeping the new government on side, Mr Kretinsky also faces the task of convincing postal unions that the proposed deal will benefit employees.
The USO is a potential sticking point for both the government and unions.
Royal Mail is required by law to deliver letters six days a week and parcels five days a week to every address in the UK for a fixed price.
How well this has actually been working in practice is a different matter. Ten years ago, 92% of first class post arrived on time. By the end of last year it was down to 74%, according to the regulator Ofcom.
Last year the regulator fined Royal Mail £5.6m for failing to meet its delivery targets.
Royal Mail has been pushing for this obligation to be watered down. It wants to cut second class letter deliveries to every other weekday, saying this will save £300m, and lead to “fewer than 1,000” voluntary redundancies.
‘Unconditional commitment’
Mr Kretinsky has committed in writing to honouring the USO, but only for five years.
And after that, in theory, the new owners could just walk away from it.
However, Mr Kretinsky told the BBC: “As long as I’m alive, I completely exclude this, and I’m sure that anybody that would be my successor would absolutely understand this.
“I say this as an absolutely clear, unconditional commitment: Royal Mail is going to be the provider of Universal Service Obligation in the UK, I would say forever, as long as the service is going to be needed, and as long as we are going to be around.”
Mr Kretinsky added that the written five-year commitment was “the longest commitment that has ever been offered in a situation like this”.
Another potential stumbling block for the deal, however, is how the company will be structured.
Unions would like to see the company renationalised, but Dave Ward, general secretary of the Communication Workers Union (CWU), told the BBC that would be “difficult in the current political and economic environment”.
Instead, what the CWU is pushing for is “a different model of ownership” – that is, where the employees part-own the business.
To get its support for the takeover, the union wants employees to share ownership of the company, along with other concessions including board representation for workers.
It says profit sharing is “not going to be enough to deliver our support and the support of the workforce”.
If the union doesn’t get what it wants, it won’t rule out industrial action, Mr Ward said. Its members went on strike in 2022 and 2023.
Although Mr Kretinsky said he is “very open” to profit sharing, he is not in favour of shared ownership.
“I don’t think the ownership stake is the right model,” he said. “The logic is: share of profit, yes, [but an] ownership structure creates a lot of complexity.
“For instance, what happens if the employee leaves? He has shares, he is leaving, he is not working for the company, he [still] needs remunerating.”
Mr Kretinsky said he didn’t want to create “some anonymous structure” but instead “remunerate the people who are working for the company, and creating value for the company”.
The union is also concerned about job losses and changes to the terms and conditions of postal workers’ contracts.
Mr Kretinsky has guaranteed no compulsory redundancies or changes in terms and conditions but only until 2025.
“If we are more successful, and we have more parcels to be delivered, we need not less people, but we need more people,” he said. “So really, job cuts are not part of our plan at all.”
He said if the management, union and employees work together, “we will be successful”.
Another concern is the potential break-up of the business.
The profit for Royal Mail’s parent company last year was entirely generated by its German and Canadian logistics and parcels business, GLS. Royal Mail itself made a loss.
Mr Kretinsky has promised not to split off GLS or load the parent company with excessive debt, although borrowings will rise if the deal goes through.
But he has a way to go to convince the CWU.
“I can’t think of any other country in the world that would just just hand over its entire postal service to an overseas equity investor,” Mr Ward of the CWU said.
However, Mr Kretinsky said that the postal unions “do understand that we are on the same ship, and that we need this ship to be successful, and that if we are there, we don’t have any real problems to deal with, because the sky is blue, and it’s blue for everybody.”
The union cannot stop this deal but the government can block it under the National Security and Investment Act.
Business Secretary Jonathan Reynolds has said he will scrutinise the assurances and guarantees given and called on Mr Kretinsky to work constructively with the unions.
Mr Kretinsky may say that he and the unions are ultimately on the same ship but, as things stand, they are not on the same page.
Who is Daniel Kretinsky?
Daniel Kretinsky started his career as a lawyer in his hometown of Brno, before moving to Prague.
He then made serious money in Central and Eastern European energy interests.
This includes Eustream, which transports Russian gas via pipelines that run through Ukraine, the Czech Republic and Slovakia.
He then diversified into other investments, including an almost 10% stake in UK supermarket chain Sainsbury’s and a 27% share in Premier League club West Ham United.
The Czech businessman is worth about £6bn, according to reports.
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