Analysis: Business travel “carbon budgets” are emerging for airlines
- About 90% of business travel emissions come from the air
- Large companies are increasingly setting reduction targets
- Emissions in business class 3 times higher than in economy class
SYDNEY / BOSTON, Oct. 11 (Reuters) – As big companies seek drastic ways to cut carbon emissions from business travel, airlines brace for a blow to business class travel, a key factor in revenue, according to executives and industry experts.
Several companies, such as HSBC (HSBA.L), Zurich Insurance (ZURN.S), Bain & Company and S&P Global (SPGI.N), have already announced their intention to quickly cut emissions from travel by up to 70%. ‘business.
Some are considering a “carbon budget” because they are under increasing pressure from conservationists and investors to reduce the indirect emissions that contribute to climate change.
Flights represent around 90% of business travel emissions. This makes it the lowest fruit for companies that set reduction targets.
The airline industry pledged last week to achieve “net zero” emissions by 2050 at a meeting in Boston, decades beyond business travel emissions reduction targets. Read more
“This is going to be difficult for the airlines and they are going to have to adapt,” Kit Brennan, co-founder of London-based Thrust Carbon, who advises S&P and other clients on setting carbon budgets.
“I think what we’re going to see, oddly enough, is more of an unbundling of business class where you could get all the benefits of business class without the seat,” he said, referring to the lounges of airport and better meals. “Because at the end of the day it all comes down to the plane area and that takes time.”
Flying in business class emits about three times as much carbon as economy class because the seats take up more space and more of them are empty, according to a World Bank study.
CHANGE ALREADY IN PROGRESS
Before the pandemic, around 5% of international passengers globally traveled in premium class, accounting for 30% of international revenue, according to airline group IATA. Read more
The decline in travel linked to the pandemic and the shift to more virtual meetings has led many companies to save money by resetting travel policies.
Sam Israelit, director of sustainability at consultancy Bain, said his company is assessing carbon budgets for offices or practice areas to reduce travel emissions per employee by 35% over the next five years.
“I think more generally this is something that companies really have to start doing if they are to be successful in achieving the aggressive goals that everyone else sets for themselves,” he said.
Companies and business travel agencies are also investing heavily in tools to measure flight emissions based on factors such as aircraft type, route, and class of service.
“We don’t see a lot of companies taking a very drastic approach like just cutting back on travel because it impacts their bottom line,” said Nora Lovell Marchant, vice president of sustainability at American Express Global Business Travel. “But we are seeing an increased demand for transparency so that these travelers can make decisions.”
Global rating agency S&P, which plans to cut travel-related emissions by 25% by 2025, found that 42% of its business class usage was for internal meetings, said Ann Dery, its manager. world of business travel, at a CAPA Center for Aviation event last month. .
AIRLINES GO GREEN
US carrier JetBlue (JBLU.O) predicts that about 30% of its jet fuel for flights to and from New York will be sustainable within two to three years.
“Businesses, of course, will want to tackle this climate change issue aggressively,” JetBlue chief executive Robin Hayes said on the sidelines of the Boston meeting. “But we think they’re going to be able to do it in a way that still allows business travel to take place.”
The emissions target set by airlines last week is based on increasing the use of sustainable aviation fuel from less than 0.1% today to 65% by 2050 as well as new engine technologies.
“If we get to net zero carbon emissions by 2050, everyone has to play their part here,” said Greg Foran, managing director of Air New Zealand (AIR.NZ). “It’s not just the airlines. It will be the fuel suppliers, it will be the governments. And ultimately, customers will have to buy into it as well.”
Reporting by Jamie Freed in Sydney and Rajesh Kumar Singh in Boston; Editing by Miyoung Kim and Gerry Doyle
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