Burning Some Jet Fuel
by Stephen Crowe, MBA ‘14 (7/22/13)
I have been in love with airplanes since I was a child. Now, as an adult working for American Airlines it has given me the opportunity to explore an industry that I'm passionate about, but which challenges my commitment to sustainability.
I've been going through a bit of an existential crisis during my MBA experience. One side of me is a firm believer in the need for sustainable business to face down the challenges of global climate change, resource consumption, and population growth, so I enrolled in Johnson’s Sustainable Global Enterprise Immersion. The other side is a travel and transportation nut that loves fancy cars, luxury hotels, and big airplanes. Car companies have made a fair amount of progress in terms of efficiency and exploring alternative fuels. Hotel companies are in the early stage of the green game. Unfortunately, airlines can barely spell the word sustainability – so for my summer internship I picked American Airlines in all its jet fuel-guzzling glory.
In reality, the airline industries of the world could all benefit from more sustainable practices and most are being forced into adopting some of them whether they want to or not, especially when it concerns hydrocarbons. Surprisingly, few industries are more focused and efficient at reducing petroleum consumption than airlines. Rising or falling oil prices are often the key to whether an airline has a profit or loss making year, so the less that's used, the better.
Right now American is in the midst of a major fleet renewal program. More than 160 MD-80s, 80 Boeing 757s, and 40 Boeing 767s delivered in the 1980s and 1990s will be leaving service in the coming months and years. They will be replaced by hundreds of new aircraft including the 737 Max, Airbus A320 Neo, and Boeing 787. Thanks to advanced materials such as carbon fiber, new engines, improved aerodynamics, and greater automation these new planes can transport passengers using 20-30% less fuel than before. It may seem like a drop in the bucket when thinking about the growth of air travel in particular in the developing world, but airlines in these regions will also be using the same new aircraft. In time this means trillions of kilograms of fuel savings (jet fuel being measured in mass not volume).
The march toward true sustainability of the airline industry is unclear. I'm personally waiting for the first nuclear fusion powered aircraft, but I also wonder how the structure of the industry and its sheer complexity may help. It's said that aviation is the most regulated de-regulated industry in the world. Government oversight exists at every level of operation. Ever wonder why flight attendants are so insistent on getting those overhead bins closed? Because if one is open during taxi and an FAA agent is aboard, the flight attendant may face a personal fine in excess of $1000!! Imagine how much further this oversight can go. The next frontier is likely to be a tax or cap on carbon emissions from aircraft, which is already becoming a reality in Europe. American Airlines is preparing for this eventuality.
I recently asked Kenji Hashimoto, the president of our Cargo division, about the issue and he said carbon is something customers both customers and American Airlines itself are starting to take seriously. American is engaging our engineers, finance employees, and tax people to gain a real understanding of how a carbon tax would impact the company. On the downside, getting a company of American's size with a labor force that is 80% unionized to make fundamental changes is not easy.
For my part, this summer I am a bit removed from the front lines of the sustainability battle. I have been working on customer segmentation and marketing strategy for high value customers (basically the type of traveler I want to be someday). As a diehard Northerner, the Texas summer has been nothing short of tortuous for me, but having my best friend from college around, some cool interns, and a new puppy have kept me sane. And while dreaming of that first class suite on a flight to an Indian Ocean atoll, I've gotten the occasional free seat at the back of an American Airline plane.