JetBlue: Clearing the Air
As climate change regulations for the aviation industry take form and consumer demand for air travel continue to increase, can airlines find a way to grow in a sustainable way?
As students here at the Harvard Business School rush to sign up for treks all over the world, I think it would be apt to think about the carbon footprint of our air travels and consider how airlines are adapting to growing demand for air travel and to increasing concern for climate change while operating businesses whose margins are heavily impacted by the cost of energy. This post will be specifically focused on JetBlue, a favorite among value carriers for today’s globetrotting millennials (though to be exact, JetBlue’s routes currently only span the Americas).
Airplanes have long been fueled by fossil fuels, which emit greenhouse gases into the atmosphere. One person’s roundtrip flight from New York to San Francisco creates the equivalent of 2 or 3 tonnes of carbon dioxide [1]. In 2015 alone, worldwide flights produced 781 million tonnes of carbon dioxide, accounting for 2% of all human-induced carbon dioxide emissions [2]. This share is projected to grow to a quarter of all emissions by 2050 as demand for flights continue to grow [3].
But not only are airlines contributors to climate change, they are also victims of changing wind patterns that have led to longer flight routes and increasing atmospheric turbulences that wear down their fleets [4]. Last month, 191 nations in the United Nations reached the world’s first agreement to limit greenhouse gas pollution by the aviation industry via an offsetting scheme [3]. Suffice it to say that airlines are feeling increasing pressure to make changes in their business and operations.
JetBlue has long recognized the need to invest in various sustainability efforts, some of which are highlighted below:
- Fuel supply diversification. In September 2016, JetBlue announced a ten-year deal with SG Preston, a biofuel company, to purchase jet fuel made from bio-based feedstocks [5]. This deal, which commits JetBlue to buying over 330 gallons of renewable fuel, is one of the largest agreements of such kind yet [6].
- Fuel efficiency improvement. JetBlue has partnered with Airbus to retrofit its A320 fleet with “Sharklets”, curved extensions to airplane wings that improve aerodynamics such that fuel efficiency is improved by 3% on long-hauls. The company also ordered 70 Airbus new engine option (NEO) aircrafts, which are expected to increase fuel efficiency per flight by more than 15 percent. JetBlue has also replaced its navigation technology to use satellite instead of radar information. The new technology, NextGen, enables the communication of more accurate position information, which in turn leads to more direct flight routes as well as more optimized descending patterns and speeds. JetBlue cites a per-flight savings of 18 gallons of fuel and 21 pounds of carbon as a direct result of using NextGen6 [7].
- Carbon offsetting. Since 2008, JetBlue has partnered with Carbonfun.org on carbon-reduction projects. To date, it has offset more than 350 million pounds of CO2 equivalents by funding projects such as the conversion of methane from the Seneca Meadows Landfills and the Granger South Trans-Jordan Landfill into electricity that can be added to the grid [7].
Below are additional ideas of varying degrees of immediate feasibility which JetBlue could consider implementing.
- Invest in alternative modes of transportation. JetBlue can avoid being disrupted by investing in alternative modes of transportation to replace short-haul flights, such as the Hyperloop. However, because the transportation by magnetic levitation is yet an unproven technology, an alternative is to buy and privatize Amtrak. Amtrak is not only proven to be a more fuel-efficient method of transportation than both domestic air and car travel [9], it will also allow JetBlue to focus on long-hauls which have higher stage length (and therefore lower cost per mile).
- Diversify fuel types and suppliers. As renewable fuel producers are still relatively new entrants to the market and continue to compete with cheap oil, JetBlue should keep in mind that these suppliers may not be in business for the duration of its contracts with them. For example, British Airways had signed a five-year agreement with Solena Fuels, a company that promised to convert municipal waste to jet fuel. However, that was dissolved when Solena was unable to raise the necessary capital [6].
- Improve upon operational metrics. JetBlue may consider setting internal KPIs which align employee incentives to improving fuel efficiency. For example, an improved load factor can be impactful in saving fuel wasted on unfilled seats. In 2015, JetBlue’s load factor trailed behind the load factors of domestic American, United, and Delta flights [10]. Another operational metric which may be effective if implemented as an internal KPI is miles flown per route. By monitoring this metric, cross-functional teams (ground crew, pilots, operations) can work together to ensure that they are achieving the most efficient routes.
What are your thoughts about how airlines can continue to satisfy our growing appetite for air travel in a sustainable way?
Sources:
- The New York Times. 2016. Your Biggest Carbon Sin May Be Air Travel. [ONLINE] Available at: http://www.nytimes.com/2013/01/27/sunday-review/the-biggest-carbon-sin-air-travel.html. [Accessed 3 November 2016].
- Air Transport Action Group. 2016. Facts & Figures. [ONLINE] Available at: http://www.atag.org/facts-and-figures.html. [Accessed 3 November 2016].
- The Guardian. 2016. First deal to curb aviation emissions agreed in landmark UN accord. [ONLINE] Available at: https://www.theguardian.com/environment/2016/oct/06/aviation-emissions-agreement-united-nations. [Accessed 3 November 2016].
- The Guardian. 2015. Climate change costing airlines millions of dollars in extra fuel and flying time. [ONLINE] Available at: https://www.theguardian.com/environment/2015/jul/15/climate-change-costing-airlines-millions-of-dollars-in-extra-fuel-and-flying-time. [Accessed 3 November 2016].
- SG Preston: News & Events. 2016. JetBlue Announces One of the Largest Renewable Jet Fuel Purchase Agreements in Aviation History. [ONLINE] Available at: https://sgpreston.com/news-detail/25. [Accessed 3 November 2016].
- The New York Times. 2016. JetBlue Makes Biofuels Deal to Curtail Greenhouse Gases. [ONLINE] Available at: http://www.nytimes.com/2016/09/20/business/energy-environment/jetblue-makes-biofuels-deal-to-curtail-greenhouse-gases.html. [Accessed 3 November 2016].
- JetBlue. 2016. The Blue Review. [ONLINE] Available at: http://www.jetblue.com/p/JetBlueResponsibilityReport2014.pdf. [Accessed 3 November 2016].
- JetBlue. 2016. Sustainability. [ONLINE] Available at: http://www.jetblue.com/green/offsetting/. [Accessed 3 November 2016].
- Amtrak. 2016. Travel Green with Amtrak. [ONLINE] Available at: https://www.amtrak.com/travel-green-with-amtrak. [Accessed 3 November 2016].
- MIT Global Airline Industry Program. 2015. Airline Data Project. [ONLINE] Available at: http://web.mit.edu/airlinedata/www/2015%2012%20Month%20Documents/Traffic%20and%20Capacity/Domestic/Domestic%20Load%20Factor%20.htm. [Accessed 3 November 2016].
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Great article Ann. It seems to me that moving to biofuels/renewable fuels is one of the most effective ways to hedge against both climate change and fluctuating fuels stocks and sources. What is the current status of implementing alternative fuels for these engines?
As I understand it, these engines are HIGHLY tuned to optimize for the burn rates of the fuels for which they are designed. Is this problem as easy as putting new gas in the tank or does JetBlue need to buy new engines? Are there other companies/research organizations which are tackling this issue?
Thank you for sharing your thoughts on JetBlue’s initiatives! As an avid traveler and guilty of contributing to the carbon footprint created by HBS students, it was heartening and commendable to learn about Jetblue’s long-term and short-term initiatives to address the climate change impact.
I am curious to see how the shift to renewable fuel through its 10-year deal with SG Preston will impact the company’s pricing model given JetBlue’s customer value proposition of affordable travel. Will this hamper its low cost operating model or result in higher ticket prices to value conscious travelers? Moreover, how would this impact the competitive intensity with Southwest Airlines, another low cost carrier that has actively embarked on environmental initiatives. Will JetBlue have to change its positioning and appeal to a new eco-friendly target audience?
I am also curious to understand if JetBlue has the domain expertise and appetite to expand beyond air travel to ground travel. Amtrak has been struggling to settle derailment claims and implement necessary safety measures recently which will likely put additional responsibility on JetBlue. Would a focus on fleet modernization and continued weight reduction measures such as JetBlue’s replacement of cow hide leather with e-leather made from leather scrap in 2013 be more effective?
Airline is one of the industry that consume most energy and seeing how JetBlue solve this problem is really interesting! Your suggestions on Invest in alternative modes of transportation is something I have nerver thought of before. This kind of measure might help alleviate the problem as the short-haul flight also consume lots of energy. Are there any airline already taking this kind of measures? Thank you for your sharing!
Thanks for sharing Ann! It’s great to see that Jetblue is taking the initiative to upgrade its Airbus aircrafts to make them more fuel efficient. Do you know if any similar initiatives exist with Boeing? When I researched Boeing, the research showed that Boeing is struggling to convince airlines to upgrade to their latest, most fuel efficient models due to cheap oil. I wonder if this is the case for Jetblue as well?
Thanks for asking a question at the end of your post, Ann! It made this comment easier! I definitely think that improving utilization of planes, especially the large ones on longer routes that take up a lot of fuel, is the most low-hanging fruit. Additionally, this is simply efficient from a profit standpoint. As far as mitigating the effect of climate change on its operations goes, I like the idea of investing in alternative transportation, but I wonder if that is too far off from JetBlue’s core business capabilities. I think your idea about diversifying fuel types is great. To deal with air patterns, maybe they should invest in building predictive technology and/or aircrafts that can deal with turbulence in a more stable manner.
Thanks for writing about this relatable and interesting topic!
The hyper loop technology is really interesting to me, and I love the idea of an air compression chamber pushing customers at bullet train speeds. I really hope I am wrong, but all my research tells me this technology is far away, as you referenced, and I think it may be difficult for this to be attainable anytime in the near future. I also wonder if this technology will ever be bought or is even possible to be bought, since Elon Musk and SpaceX made this open source so other scientists can work on it going forward. I would love to hear more of your thoughts on the matter, and also really liked your recommendation on becoming more fuel efficient, as this is a happy medium between increasing their business model and also saving the environment. Tremendous post, really made me think!