SPARK16 Presentation: Balancing Financial and Environmental Sustainability at Delta Air Lines
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Delta Air Lines seeks to balance financial and environmental sustainability through initiatives that reduce fuel usage and emissions. In 2015, Delta spent over $11.6 billion on energy costs including jet fuel, electricity, and ground vehicles. Delta aims to improve aircraft and operational efficiency, invest in sustainable aviation fuels and new aircraft, and support an international agreement for the aviation industry to reduce its carbon emissions. Case studies examine initiatives like winglets, electric vehicles, and optimized passenger loading that can improve efficiency and reduce costs.
SPARK16 Presentation: Balancing Financial and Environmental Sustainability at Delta Air Lines
- 1. Balancing Financial and Environmental Sustainability at Delta Air Lines Steve Tochilin General Manager, Environmental Sustainability Delta Air Lines
- 2. Steve Tochilin General Manager, Environmental Sustainability Balancing Financial & Environmental Sustainability
- 3. 3 Company Snapshot • Delta and Delta Connection carriers offer service to 337 destinations in 62 countries and serve 180 million customers each year. • Including its SkyTeam and worldwide codeshare partners, Delta offers more than 15,000 daily flights to over 1,000 worldwide destinations in 175 countries. • 820 mainline aircraft, 9 aircraft types • 3,300 daily flights serving 435,000 customers • 84,000 employees • Hubs/key markets in Atlanta, New York, Boston, Minneapolis-St. Paul, Detroit, Salt Lake City, Los Angeles, Seattle, Amsterdam, Paris, and Tokyo • 68th on the Fortune 500 with annual revenues of $41B
- 4. 4 Annual Energy Usage 2015 Usage Energy (kWh) CO2e (MT) Est Cost Aircraft 3,980M gal 149,409,200,000 39.3M $7,579,000,000 Ground Equipment 10.1M gal 362,474,000 0.0986M $20,200,000 Facility Electricity 383.5M kwh 383,500,000 0.216M $23,010,000 Airport Electricity 203.4M kwh 203,400,000 0.116M $13,627,800 Stationary Combustion 1.23M BTU 361,389,000 0.0687M $7,527,000 Jet fuel Everything else
- 5. 5 2015* Salaries and related costs 8,776 Aircraft fuel and related taxes 6,544 Regional carrier expense Fuel 1,035 Other 3,206 Contracted services 1,848 Depreciation and amortization 1,848 Aircraft maintenance materials and outside repairs 1,835 Passenger commissions and other selling expenses 1,672 Landing fees and other rents 1,493 Profit sharing 1,490 Passenger service 872 Aircraft rent 250 Other 2,033 Total operating expense 32,902 *$000,000 (includes $13.6M in electricity-related lease fees) (includes $23M in billed electricity, $7.5M in stationary combustion fuel, and $20.2M in ground vehicle fuel) Operating Costs Energy-related costs highlighted in yellow (11,668 in 2014) (1,844 in 2014)
- 6. 6 Customer Service Initiatives often incur a fuel penalty Delta strives to be thoughtful, reliable, and innovative: • Excellent operational performance • Service & hospitality • Extensive network • New aircraft & interior refurbishments • Facility upgrades: terminals, Sky Clubs • Amenities: entertainment, larger overhead bins, drinks & snacks • Technology: website, wifi, apps
- 7. 7 Sustainability Sustainability is a natural evolution from Delta’s corporate culture, history, and existing policies and programs: • Delta’s Rules of the Road • Delta Force for Global Good • SkyTeam Corporate Social Responsibility Statement • Delta Environment and Carbon Emissions Policies In addition, there is increasing pressure from external stakeholders, including investors, customers, partners, and external ratings agencies, for transparency and beyond-compliance performance. Goals • Be a positive force for local and global change • Improve external reporting • Implement Climate Change Work Plan • Engage employees, customers, and supply chain Governance • Corporate Leadership Team • Executive Environmental Leadership Council
- 8. 8 Reducing GHG Emissions a global sectoral solution under ICAO The industry has coalesced around three industry-wide aircraft emission mitigation goals: • 1.5% annual fuel efficiency improvements through 2020 • Carbon neutral growth at 2020 (CNG 2020) • 50% reduction in CO2 emissions by 2050, relative to 2005 levels And a four-pillar approach to achieve the goals: • Technology enhancements • Operational efficiency improvements • Infrastructure improvements • Positive economic measures Commercial aviation needs to address: • criticism of its contribution to climate change • economic threat of duplicative emissions charges Commercial aviation generates ~2% of global CO2 emissions
- 9. 9 Aircraft retirement and fleet renewal • 300 aircraft on order. Newer aircraft are up to 25% more fuel efficient than the older aircraft that they replace • Challenges: expensive and limited by technology available Investment in existing fleet • Winglets • Removal of unnecessary weight Maintenance • Engine compressor washes • Increased vigilance of pressure leaks & flight control rigging Biofuels • Delta adheres to 7 biofuel principles that address sustainability, performance, and economics. Our Trainer, PA refinery allows us to explore biofuel opportunities, although price remains a major hurdle. To carry an item on a commercial flight requires about 4% of its weight in fuel each hour. Commercial Aviation’s 4-Pillar Approach technology enhancements
- 10. 10 • Flight planning • Taxi procedures • Take-off procedures • Slower cruise speeds • High-speed tractors • Reduced APU usage • Continuous descent arrivals (OPDs) • Schedule adjustments Delta’s Fuel Council tracks the impact of these initiatives. Commercial Aviation’s 4-Pillar Approach operational efficiency improvements
- 11. 11 Antiquated air traffic management systems increase flight times and fuel burn • NextGen • Single European Sky Funding for these initiatives has lagged • Budgetary politics • Airlines reluctant to invest without government commitment Commercial Aviation’s 4-Pillar Approach infrastructure improvements
- 12. 12 • Global market-based measure administered by ICAO • Carbon management strategy to: access carbon markets address carbon constraints • Reinvest in aviation and the environment Commercial Aviation’s 4-Pillar Approach positive economic instruments Overlapping carbon taxes, surcharges, and trading schemes can result in multiple payments on the same emissions.
- 13. 13 GHG Emissions • 98.7% from aircraft, with the remainder from: Delta “owned” facilities: 0.7% Airports: 0.3% GSE: 0.3% • Emissions have declined over 6 million tonnes (14%) since 2005 Lower capacity Improved fuel efficiency Higher load factors • Carbon-neutral growth since 2012 through purchase of voluntary offsets 33,000,000 35,000,000 37,000,000 39,000,000 41,000,000 43,000,000 45,000,000 47,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CO2eEmissions (MetricTons) Delta’s Performance Aircraft Fuel Efficiency • Efficiency per revenue ton mile has improved 6.0% since 2009; projected to improve 12.6% for 2009-2020 period • Efficiency per available seat mile has improved 4.4% since 2009; projected to improve 12.1% for 2009-2020 period Factors affecting aircraft fuel efficiency: • Gauge • Stage length • Seat density • Amenities & fuel-savings initiatives
- 14. 14 3.55 3.07 2.61 4.61 3.92 0.84 0.84 0.67 0.84 0.67 1.16 1.16 1.88 1.16 1.88 5.55¢ 5.07¢ 5.17¢ 6.61¢ 6.47¢ Core Cost per Available Seat Mile Fuel Maintenance Ownership Fleet Planning Case Study Fleet decisions involve a trade-off between fixed and variable costs: • Fixed (ownership): rentals, interest and depreciation • Variable (operations): maintenance and fuel A 15% savings in fuel burn represents ~0.46¢/ASM at $2/gal and ~0.69¢/ASM at $3/gal 2015 actual (system average) $2/gal Scenario $3/gal Scenario keep existing aircraft buy new aircraft keep existing aircraft buy new aircraft Regardless of fuel price, improving aircraft fuel efficiency (and reducing emissions) is a key driver.
- 15. 15 Winglets Case Study • Winglets improve fuel efficiency by 3-5% • ~$1M for new winglets, $200-400k for upgrades or harvesting • 3-6 year payback at $2/gallon; 2-4 year payback at $3/gallon • Aircraft with greater stage lengths have shorter ROIs • May require modifications to ramp procedures and equipment Winglets increase lift generated at the wingtip and reduce drag caused by wingtip vortices.
- 16. 16 Center-of-gravity on Regional Jets Case Study Concept: Work with Marketing to create “Green Seats” at rear of regional aircraft • An aft CG is more fuel efficient than a forward CG: incremental weight in the rear of the aircraft is essentially free, the reduction in trim drag offsetting the induced drag of the increased weight. • Additional weight in the front of the airplane costs about twice as much as cost-to-carry numbers indicate. It’s more challenging to achieve “in limits” CG on shorter aircraft. Advantages: • Fuel savings • On-time performance • Increased passenger confidence • Reduced need for ballast Possible incentives include: • Pricing • Carbon offsets • First class or Comfort+ seats Main challenge is policing compliance
- 17. 17 Does an electric bag tug pay for itself in fuel savings? 180 seats Equipment cost = $54k Cost avoidance: 9 gallons at $2 x 365 days = $6.6k/yr 8.2-year payback Eventually. Case Study Electric tugs improve air quality on the ramp and in the bagroom. $42k (varies with battery) Charging station ($90k + installation) handles 8 tugs = $12k/tug Average diesel bag tug burns 9 gallons/day Diesel: Cost and reliability may be adversely impacted by federal and state environmental regulations. Electric: Potential infrastructure, availability and performance concerns. Batteries may incur reporting and disposal requirements.