ESG in the aviation business: case studies

Aviation is paying close attention to ESG indicators, much like many other businesses. With the sector producing as much as 2.5% of total CO2 emissions and aiming for net zero by 2050, environment-aware policies have become a matter of reputation for most operators.

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However, ESG is not only an environmental criterion where social policies and transparent governmental standards are practiced. Let’s examine aviation’s most crucial ESG measures and study the companies demonstrating an ESG-conscious strategy.

SAF: Sustainable Aviation Fuel

The first Air New Zealand flight using sustainable aviation fuel (SAF) took off in 2008. In 2021, IATA announced that over 50 airlines had experience with SAF.

One of the major solutions to reaching zero carbon emissions, SAF is produced from sustainable resources, such as used cooking oil or agricultural and forestry waste. It is a ‘drop-in’ fuel that can be mixed with any fossil jet fuel without significant aircraft customization.

Major aircraft manufacturers Airbus and Boeing plan to replace 100% of their new deliverables with SAF-supported engines by 2030.

SAF case study: Netherlands to lead the SAF innovation

The highest acceptance of SAF is shown in Scandinavian countries and the Netherlands. All Norwegian airports have a mandate of 0.5% of SAF. Amsterdam Schiphol, the hub for KLM, arranged regular supplies from Neste, a Finnish sustainable fuel provider, in December 2020. Shortly after, United Airlines signed a deal with the same provider for 52.5 million gallons for three years to refuel the aircraft returning cross-Atlantic from the Amsterdam airport. Schiphol is also known for taking part in constructing the sustainable kerosene plant built by SkyNRG, another SAF provider.

AI-based technologies for flight operations

Although much of aviation still relies on manually-operated processes, automation of some of them may coin in a sustainable approach and save sufficient costs. There are many examples of AI-powered technologies to automate airport operations, and most of them are tied to high safety requirements and the rising need for throughput.

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Solutions like Zensors monitor the airports’ load, optimize parking slots, manage queues and calculate estimated waiting time, and notify staff when special assistance is needed. A similar solution of Assaia helps control aircraft turnarounds and operations on the apron.

Self-check-in scenarios are also in high demand, allowing to reduce queuing, making the curb-to-gate experience touchless, and generally optimizing the passengers’ experience in the airport. Delta is one of the innovators of this approach: it applied AI face recognition to domestic check-ins in 2021.

Machine learning contributes to that: airlines and aircraft manufacturers benefit from innovative technologies. In the first case, AI helps optimize crew pairings, aircraft effectiveness and maintenance, revenue management, fraud detection, and many others. On the other hand, AI technologies can potentially help aircraft at all phases of the flight, detecting anomalies, offering the best solutions in emergencies, and enhancing awareness of the traffic in the air and on land, not to mention the possibilities of autonomous flight and pilotless air taxies, something even Uber has been investing in.

What does this have to do with ESG? Nearly everything from fuel efficiency to replacing plastic in inflight catering depends on stable systems that are already possible because of data science and machine learning.

AI case study: Alaska Airlines as an innovator of AI-software implementation

In 2021, Alaska Airlines signed a multi-year contract to use Flyways AI, a software helping optimize routes and improve airline traffic’s predictability and flow. A year earlier, when flight operations were slowed due to the pandemic, Alaska Airlines took advantage to test out AI solutions. The program examines the flight plan, current weather, the aircraft’s weight, estimated traffic, and other criteria to calculate the best enhancements for a safer, more fuel-efficient, and sustainable flight. Aerospace Intelligence engineered Flyways, which is said to be the pioneer of creating “Google Maps” for aviation.

Diversity in crews & female pilots

One of the most important steps towards an ESG-valued business is employee diversity and supporting vulnerable minorities in an equal-opportunity environment. Traditionally flown by men, commercial aviation has acknowledged that involving more women to become professional pilots can help reduce a pilot shortage. Studies show that in the U.S., only 9% of the industry’s employed pilots are women. Nevertheless, the number of female student pilots is gradually rising, which shows a good tendency.

There are several reasons why becoming a commercial pilot is not the first choice for women, and harsh on-duty schedules are only one of them. With optimizing crew rostering systems, grants supporting aviation training (like programs encouraging private aviatrices to apply for ATPL), maternity programs, and early employment guarantees, airlines will gain a win-win situation for future operations.

Diversity case study: Air India’s women employment success

India has raised its percentage of women serving as commercial pilots from 0 to 12,5% in the last 30 years. Compared with 5,5% for the U.S., 4,5% for the U.K., or even 1% in solid aviation countries like Russia and China.

According to Air India, 12.7% of their pilot workforce is female. That’s the most impressive number in commercial aviation, followed by the Irish airline Aer Lingus and Hawaiian Airlines.

Leadership in diversity in India was initiated more than half a century ago when the government encouraged aviation studies and provided financial compensation for enrolling in costly flight schools.

India is also known for assigning the first woman CEO in airlines: Harpreet Singh used to be a commercial pilot for Air India and now serves as its CEO. Air India puts effort into diversifying pilot education and creating equal opportunity for the local community.

IndiGo is another airline to announce special conditions for women pilots. It offers to switch to a flexible contract during pregnancy with guaranteed maternity leave and reserves the right to take two weeks off monthly until the child turns five.

Governance initiatives in aviation

Strong decision-making is essential regarding global issues like reducing carbon emissions, and aviation has responded with adequate governance reactions. Here we can also name the Royal Schiphol Group, a pioneer in sustainable operations, who issued a €750 million green bond to build eco-friendly infrastructure around the airport territory.

ESG investing in aviation has become a great deal over the past decade, especially with the significant drop in shares during the pandemic year 2020, and now even more conscious of all the challenges the permacrisis can offer.

Aviation business entities with higher ESG scores are prospected to have better access to capital markets. In 2021, Etihad Airways claimed to raise $1.2 billion with an ESG loan through the Greenliner program.

One of the significant threats for investors to access ESG stocks in the past was a lack of standards and weak legal protection from greenwashing reports. However, major airlines and market players take all risks to issue bonds, not only access them. The same year, ANA Holdings Inc. announced that it would offer sustainability-linked bonds of ten billion yen (more than $80 million) with a five-year maturity supported by SMBC Nikko Securities Inc. as a structuring agent.

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Governance case study: Air New Zealand increases environmental stakeholders

The airline board, recognized for its environmental endeavors, expresses concerns about SAF and other trending initiatives in its 2022 Sustainability Report. Air New Zealand calls on the Sustainability Advisory Panel twice a year. Generally, it shows a gradual and realistic prognosis for ESG measures (like committing to reduce carbon intensity by 28.9% by 2030). The airline is a member of at least 15 corporations or committees settled to action on sustainability, zero carbon, and social and environmental goals, including two aiming to preserve New Zealand’s natural resources and aboriginal culture. The air company is also known for having eight appointed independent non-executive directors.

The future depends on you

ESG is not just a corporate measure and is not limited to investing. As a passenger, choosing airlines with a newer fleet that produces less CO2, or those known for their environmental efforts, is an excellent step towards a healthier future. The CO2 calculator is available from most ticket booking services, like Google Flights and Skyscanner.