Flying High? More Ambitious Targets Needed to Meet 2030 Alignment

05/03/2019

Key Messages
  • The airline sector makes a significant and fast-growing contribution to climate change: currently it accounts for 2% of global CO2 emissions and 12% of transport-related CO2 emissions. In addition, aviation has climate impacts beyond CO2 emissions, such as the formation of contrails and clouds, which are likely to be significant. 
  • Most of the 20 airlines we assess demonstrate awareness of climate change as a business issue and are building capacity by disclosing their operational emissions and setting emissions targets.
  • Four airline companies are taking a strategic approach to climate change: ANA Group, Delta, Lufthansa and United.
  • Compared with other sectors in the TPI database, airlines are about mid-table on Management Quality. Relatively many companies in this sector have set quantified emissions targets, but relatively few align executive remuneration with ESG issues, incorporate climate risks and opportunities in their strategy, or undertake and disclose climate scenario planning.
  • Further progress needs to be made on understanding airlines’ overall impact on the climate, as non-CO2 effects are thought to be significant. If they were taken into account, the benchmarks would almost certainly be tighter.
  • Most large publicly owned airlines have a CO2 emissions intensity that is below the TPI benchmarks at present. Up to 2020, this is set to remain the case. Three quarters of airlines have an emissions or fuel efficiency target for 2020 and most of those airlines will have a CO2 emissions intensity below the benchmarks in 2020.
  • In the longer term, the airline sector performs poorly, with none of the 20 airlines providing a 2030 target that would clearly reduce flight emissions. Some airlines have no long-term target and most others have adopted the industry-wide approach of controlling net emissions through offsetting. More ambitious targets are needed, as is more transparency about how much airlines will rely on offsets to meet their targets. According to IEA and others, the airline sector will have to reduce its own emissions significantly.
Non CO2 Climate Impacts of Aviation
The airline sector’s contribution to climate change is more than just its CO2 emissions. Aircraft flying at altitude affect warming through emissions of Nitrogen Oxides and water vapour, and the formation of contrails and cirrus clouds.There is high uncertainty about the contribution of these non-CO2 effects to global warming, but they are thought to be significant. Currently non-CO2 effects are not incorporated in company disclosures, or in the models used to benchmark them. Therefore TPI’s analysis is necessarily restricted to CO2 emissions at this stage. Taking non-CO2 effects fully into account would almost certainly result in tighter benchmarks.

Management Quality Level
  • Airlines’ average Management Quality score is 2.4, putting the average company in this sector just short of halfway between “Building capacity” (Level 2) and “Integrating into operational decision making” (Level 3). 
  • Six out of 20 airline companies are on Levels 0 and 1, while 10 out of 20 companies are on Levels 3 and 4.
  • Compared with other sectors in the TPI database, airlines’ Management Quality is about mid-table, with several other sectors, such as autos and electricity, outperforming it.
  • No company satisfies all Management Quality criteria: there are not yet any 4* airlines.
  • There is no clear relationship between Management Quality and Carbon Performance in this sector.
  • Most airlines do the basics; fewer take the more advanced steps. We see this general pattern in all TPI sectors.
  • Two thirds of airlines have set quantified emissions targets, a larger share than average. Some other airlines have set fuel efficiency targets instead.
  • Half of the airlines disclose some form of long-term, quantified emissions target (either including or excluding carbon offsetting).
  • Compared with all companies in the TPI database, relatively few airlines have incorporated ESG issues into executive remuneration, climate risks and opportunities in company strategy, or undertake and disclose climate scenario planning.
  • At the date of assessment, no airline had disclosed an internal carbon price. However, a few airlines have done so in their latest recent CDP responses. 
Airlines' Carbon Performance
  • Most large publicly owned airlines have a CO2 emissions intensity that is below the TPI benchmarks at present. Up to 2020, this is set to remain the case. 
  • Three quarters of airlines have an emissions or fuel efficiency target for 2020 and most of those airlines will have a CO2 emissions intensity below the benchmarks in 2020.
  • In the longer term, none of the 20 airlines provides a 2030 target that would clearly reduce its emissions from flight operations. Instead, many airlines use an industry-wide longterm target based on net emissions reductions, which relies on the purchase of carbon offsets from other sectors.
  • Top Carbon Performers are Easyjet and Alaska Air. Easyjet is the only airline with a CO2 emissions intensity below the TPI 2C benchmarks after 2020. Wizz Air discloses a very low emissions intensity, but we are currently unable to verify it.
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Key Factors Affecting Flight Emissions Intensity
  • Age of fleet: Fuel efficiency of new commercial jet aircraft improved by around 10% between 2000 and 2014 (ICCT, 2015). Airlines that have invested in newer aircraft will have lower carbon emissions intensities than airlines with older fleets (other things equal).
  • Aircraft seat density/ passenger load factor: The greater the number of passengers transported on a flight, the lower will be the fuel burn and carbon emissions per passenger kilometre. Thus airlines with a high proportion of premium class seating or low passenger load factors will have poorer Carbon Performance than average. In contrast, low-cost carriers tend to have lower emissions intensity than full service airlines.
  • Freight transported: TPI’s measure of airline activity is passenger kilometres, which effectively allocates all carbon emissions to passenger transport rather than freight. Consequently, in our analysis, airlines with larger-than-average freight businesses will have relatively higher carbon intensities. 
  • Mix of long haul and short haul operations: Fuel burn per passenger kilometre is determined by distance flown. The most fuel-intensive stages of a flight are landing and take-off. Thus, while the total fuel burn will be greater for long haul than for short haul, the fuel (and emissions) per passenger kilometre will be greater for short haul. As our analysis is based on an airline’s total flight emissions per passenger kilometre, airlines with relatively more short haul operations may have relatively higher CO2 intensities.