Airlines regularly report their fuel consumption. Good. Airline CO2 emissions models are improving and becoming more accessible. Good. Companies assess their travel-related carbon emissions. Good.
Buyers are using the wrong KPIs to judge airlines on CO2 emissions. Not good. Travelers are using the wrong metric to choose the least dangerous flight route. Not good.
There is no doubt that it is necessary to measure the absolute amount, say 2,000 metric tons, of CO2 emissions related to travel. This absolute measure is essential because it captures what needs to be reduced to protect the climate.
The relative problem
The problem lies with relative measures, those designed to compare the CO2 emissions of one airline or travel program to another. Examples of current relative measures are CO2 per passenger or CO2 per mile travelled. These current metrics seem well-suited for comparing airlines, comparing travel schedules, and assessing the climate impact of different flight options in a pair of cities.
It seems obvious that a smaller number, for example 200 kilograms of CO2 per passenger, is better than a larger number. If that were true (it isn’t), then we should support anything that helps bring that relative KPI down. Let’s think about this more.
Consider the consequences
How can an airline reduce its CO2 indicator per passenger or per mile flown? One way is to put more economy seats on its planes. The more seats, the larger the denominator and the smaller the value of the metric. How does an airline fill these extra seats? By reducing its prices, which increases the demand for travel. The higher the demand, the more passengers, the higher the fuel consumption.
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Note that this airline does not need to improve fuel efficiency or reduce CO2 emissions. This airline will get good marks on the KPI per passenger only because of its low cost and seat density business model. Worse still, the low fares leave little room for the airline to invest in sustainable aircraft technology.
Corporate travel programs using the current CO2 per passenger or per mile KPI risk steering their travelers to airlines with a low cost business model. Travelers looking at the measurement of CO2 per passenger in a shopping tool will think that the low-cost, high-density carrier is the better choice, climate-wise.
But cheaper tickets mean more trips taken from the business travel budget. Low travel costs make it easier to approve travel for low value meetings. The result is more low value travel, not less, and less profit margin for airlines.
Are these the results we want from a climate perspective?
What is the point ?
Achieving any important climate goal requires aligning the actions of airlines, businesses and their travellers. The crucial question is, which objective are we aligning ourselves with?
Reducing the amount of CO2 emissions from airlines is a very different goal from improving the CO2 efficiency of the airline industry. The reduction target reduces the impact of the airline industry on the climate, period. The CO2 efficiency target can be achieved while increasing an airline’s absolute emissions.
These are radically different goals. One reduces airline emissions. The other lets them grow as long as they grow at a slower rate than the growth in passengers or miles flown. These lenses are not compatible. Which should we choose?
Reducing emissions is better
The only way to significantly reduce airline CO2 in the short term is to travel less. It should be the North Star of any eco-friendly travel program. The questions are how to achieve this goal and how to judge its progress.
One option is to reduce the travel budget. This will reduce travel, but it will hurt the airline industry’s ability to fund investments in sustainable aviation.
Another option is to make flights more expensive by adding a substantial carbon tax to each flight. This will reduce demand for low-value travel (good) and help airlines fund their sustainable aviation efforts (good). But it does nothing to improve travel, nor does it provide a better KPI for making climate-aligned travel decisions.
The key is to decarbonize our spending on air travel. The KPI to track this is CO2 per airline ticket dollar. For example, a ticket with 500 kilograms of CO2 and a price of $500 contains 1.00 kg of CO2 per dollar of airfare. This “CO2 per $” KPI creates a powerful alignment of actions and consequences for all parties working to reduce airline emissions.
Airlines can reduce this KPI by decarbonizing their flight operations and, importantly, raising prices. Higher airfares will reduce the value of the KPI while reducing travel demand. Higher airfares will make it harder to justify low-value trips and eat into travel budgets faster, so fewer low-value trips will be made. Airlines will have more profit margin, not less to invest in sustainable aircraft technology.
How do travelers benefit from the reduction in this KPI? By displaying this metric in the booking tool, the traveler can be guided to purchase a more expensive but less charred ticket. The higher fare may qualify the traveler for better service from the airline in the event of a disruption. These higher fares will allow the frequent flyer to achieve higher status and better privileges more quickly.
Companies committed to a “less travel, better results” travel strategy can offer first and business class seats to their travelers, subject to finding fares that present an acceptable combination of low carbon emissions and justifiable price. . Think of the “lowest carbonized airfare” as a new travel policy.
What really matters
This new KPI reveals each airline’s progress in decarbonizing their flight revenue, an important factor for today’s procurement teams. A recent analysis of US airline data by Flight BI shows that Delta had the lowest amount of CO2 per dollar of flight revenue. Still, Delta ranked near the worst using CO2 metrics per passenger and per mile flown. Procurement teams need to choose their metrics wisely.
The idea of voluntarily paying higher prices for airfare will not sit well with managers stuck in a cost-driven travel strategy. They should ask senior management if low prices still take priority over reducing emissions from travel. For many companies the answer is no, the highest priorities are fewer but more successful trips by healthy, productive and willing travelers. See Clara’s white paper »how we meet” for the evidence supporting this claim.
Low fares and cheaper travel are not compatible with sustainable business travel. It’s time to reap the strategic benefits of making fewer trips at higher prices with less carbon. This new KPI reveals our commitment to these actions. Adopt it now.