United’s Climate Change Challenge (642 Words)

One of the most significant emitters of greenhouse gases, which contributes to climate change, are airplanes. Thus airlines like United Airlines are uniquely exposed to climate change and the broader regulatory effort. Aircrafts generally emit a broad range of greenhouse gases throughout the different stages of flight and they emit gases directly into higher areas in the atmosphere. So despite any potential reduction in emission from increasingly fuel efficient automobiles and factories, growth in air traffic continue to negatively contribute to the overall emission of greenhouse gases. While the growth in air traffic has increasingly contributed to overall emission there has been a lack of international regulation due largely to the negative political and economic ramifications.

Academic studies have indicated that the manifestation of climate change will have substantial effects on airlines like United. There is evidence that suggest that the constant emission of CO2 could lead to the acceleration of jet stream which would increase turbulence and flight quality. This would have huge implications on United’s core business by increasing flight times, airplane maintenance and negatively affects that quality and consistency of air transportation. These developments could compromise one of United’s core competency of providing safe and convenient travel and could lead customers to choose substitutes such as driving or taking the train. This would also likely result in costly additional training for pilots and significant procurement of newer (and denser) planes and technologies. Additionally, climate change also contributes to increasingly unpredictable weather patterns. Increasingly unpredictable weather patterns would introduce additional variability into the scheduling systems and exacerbate many of the scheduling concerns currently experienced by the likes of United. Weather variability would also increase labor cost as United would have increase the number of staff on hand to account for the unpredictable nature of flight schedules. Lastly, while there haven’t been substantial international regulations passed to date, United will likely experience increased regulatory pressure in the future. Earlier this year, the Environmental Protection Agency (EPA) officially declared that jet engine exhaust endagers public health by contributing to climate change. Both the EPA and the International Civil Aviation Organization (ICAO) are working on regulations targeted at reducing overall carbon emission from aircrafts. The contemplated regulations currently supported by US and 22 other countries require a 4% reduction in fuel consumption in new aircraft built after 2028 and from aircraft currently in production delivered in 2013. The implementation of this legislation will increase United’s cost, as their suppliers will likely pass along the additional cost associated with sustainability and efficiency investments.

United is well aware of the overwhelming negative effects of global warming and the ensuing regulations on its business. Thus, it has taken a relatively proactive posture in developing a robust sustainability apparatus and incorporating these initiatives into its core strategy. As part of this initiate United has resolved to: (1) Reduce fuel use and improve fuel efficiency through technology and process innovation (2) Advance and utilize environmentally responsible and cost efficient alternative fuels (3) Improve the sustainability of products and facilities, and responsibly manage wastes generated by business activities (4) Work together with our co-workers and partner with stakeholders — customers, airports, business partners, suppliers, governments and NGOs to promote accountability and protect the environment.

While I believe United is making strong efforts towards addressing the climate change concern, I believe there are a few additional initiatives they could employ to more definitively address the problem. I think United should form a formal partnership with their suppliers to share in the research and development process and share critical learnings across organizations. Additionally, I believe that United should also partner with the governing bodies to help influence the ongoing regulatory discussions. Lastly, I believe that once the suppliers have developed sufficient technologies to satisfy regulatory requirements, United should reinvest in a completely new fleet of new planes to accelerate the sustainability process.



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Student comments on United’s Climate Change Challenge (642 Words)

  1. Interesting analysis of United’s climate change challenges Rashard! I think this is a great way to tie in our TOM case on United Airlines into the climate change debate. I imagine that the cascade of delays that we discussed in the case may also have a cumulative impact on United’s environmental footprint as planes wait and burn gas on the tarmac, efficient passenger connections are missed, and delayed planes encounter unexpected storms/wind that drag on the plane’s fuel efficiency.

    I also found it very interesting that climate change could influence the jet stream. I’ve always enjoyed the faster plane ride along the jet stream to the East Coast, and I never even thought about how climate change may alter this resulting in significant impact on scheduling and fuel efficiency of airplanes. In general, scientists are still debating whether climate change will actually impact the jet stream. However, scientists do expect that melting of the arctic ice caps – with a full ice free summer expected by 2020 – will cause less pronounced differences in temperature between the arctic and middle lateral temperatures, making the jet stream weaker [1]. Indeed, this is another depressing fact on climate change.

    [1] http://www.economist.com/news/science-and-technology/21596920-polar-warming-blame-americas-and-britains-bad-winter-weather-jet-set

  2. The problem, really, is that airlines like United don’t have a lot of incentive to change. Options like carbon offsets increase the price of a ticket, which means that fewer people will want to fly; the same is true of incremental taxes, which would be another way to change behavior.

    Likewise, the average consumer isn’t likely to change. Yes, there are a few (predominantly wealthy) consumers who might care and spend accordingly, but not enough to move the needle. Cars and trains just aren’t viable alternatives, especially for most of the US.

    The difference maker isn’t United so much as it is Boeing and Airbus. The manufacturers themselves own the technology, not the airlines, and they’re the ones that will invest in the engineering that makes using alternative energy viable as a power source for planes. They’ve already started moving down that path, partially to go green but partially because it’s a lot cheaper. Boeing’s newest plane, the 787, is much more fuel efficient than its predecessors.

    Consumers are going to have more luck pressuring the manufacturers, who don’t immediately see that consumers don’t pay a premium for green items, and Boeing and Airbus have incentive to look for whatever option they can find to reduce costs for airlines.

  3. Interesting take on how climate change will impact airlines. A lot of the solutions seem to have an impact on the long-term (R&D, alternative fuels, stakeholder management) – do you see any quick wins here that can move the needle?

    With oil at $45/bbl, and expected to stay there for the medium-term, there are really no incentives for airlines to invest and switch to more efficient engines / alternative energy sources. Oil makes up a significant portion of costs for airlines, and the industry has been doing extremely well with cheap oil.

    Perhaps what is needed is mandatory code-sharing to reduce duplicate flights. However, I don’t think there are any incentives to do this as all airlines want is to grab market share and will hang on to their routes to do so, and customers want competition to keep the airlines honest.

    As such, I do not have high hopes for the airline industry to make a significant difference in the fight against climate change in the near future.

  4. This is a very interesting take on united and the potential implications of climate change in their business. However, I am a little bit skeptical on the effect that they can actually have on the general flying conditions. I have only been able to find one source that supports this fact while keeping a scientific approach (https://www.rt.com/news/climate-change-air-travel-science-transatlantic-541/). Did you find some other supporting evidence?

    Additionally, as you may know, the ICAO has recently reach an agreement signed by over 190 governments. What is United’s expected reaction to the new agreement? Are they going to be part of the first wave? Are they going to delay investments to get a better baseline?

  5. Interesting post on how a key player in the airline industry is approaching climate change. While I agree that United has little incentive to change and climate change is a controversial issue that can inhibit progress, I’m surprised more hasn’t been done in an industry that plays such a large role in the problem. While the cost may be high for companies to become more eco-friendly, many companies have taken greater ownership in seeking innovative solutions to lower their carbon footprint.

    I’m curious to learn if United has received shareholder pressure to change its practices and play a larger role in the conversation. While these changes will likely flow down to the consumer in terms of more expensive ticket prices, I believe United should be more involved in the discussion, particularly if it wants to protect its brand image. I’m also curious to learn more about how other airlines are contributing to the conversation.

  6. Has United commented anything on how route planning and therefore, fleet planning, might change in order to reduce their CO2 emissions? The airline industry seems to be going to point-to-point, high frequency strategy that does not seem to be considering the environmental impact of that kind of operation, particularly in long-haul flights. 2 200-people planes don’t consume the same fuel as 1 400-people plane, although the former option makes more sense for most market from a revenue perspective.

    It is interesting as well how United has publicly advertised its biofuels program to the general public, even painting one of their planes in a special motive [1]. It seems that the company knows climate change and the impact of airliners in the environment is known by their users. However, agreeing with previous comments, there doesn’t seem to be a real incentive for them to change what the current state of business.

    [1] https://www.united.com/web/en-US/content/company/globalcitizenship/environment/alternative-fuels.aspx

  7. Great post Rashard!

    As you mentioned airlines are often considered amongst the foremost culprits for climate change and the pre-conceived notion is to always accuse them of not taking enough steps to remedy this.

    Amongst an overall lack of tangible measures taken by the aviation industry, I do agree that United is at the forefront of leading efforts against climate change. They recently received Highest Rating of Any Airline for Climate Action [1]. The challenge is the constant pressure on cutting costs and low fares by the competition. If the industry makes a conscience effort to work together, they can have great impact by further implementing some of the measures that United has started.

    [1] http://www.sustainablebrands.com/press/united_airlines_receives_highest_rating_any_airline_climate_action_3_other_sustainability_awar

  8. very interesting analysis Rashard – thanks for sharing! I did not realize nearly how much airlines contributed – obviously a great amount but did not quantify until now.

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