{"id":25922,"date":"2017-11-15T21:23:12","date_gmt":"2017-11-16T02:23:12","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-the-leading-latin-american-airline-affects-and-is-affected-by-climate-change\/"},"modified":"2017-11-15T21:23:12","modified_gmt":"2017-11-16T02:23:12","slug":"how-the-leading-latin-american-airline-affects-and-is-affected-by-climate-change","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-the-leading-latin-american-airline-affects-and-is-affected-by-climate-change\/","title":{"rendered":"How the leading Latin American airline affects and is affected by climate change"},"content":{"rendered":"<p>The aviation industry produced 815 million tons of CO<sub>2<\/sub> in 2016, contributing to 2% of manmade CO<sub>2<\/sub> emissions \u2013 greenhouse gases emissions \u2013 worldwide<sup>1<\/sup>. This percentage is not expected to increase to more than 3% by 2050, but since it is driven mainly by growing passenger demand, emerging markets play a key role in this trend<sup>1<\/sup>.<\/p>\n<p>LATAM Airlines is Latin America\u2019s leading airline, present in six domestic markets in the region and flying to 140 destinations in 25 countries<sup>2<\/sup>. The company employs 43.000 people worldwide and operates 1.200 flights per day with its 322-aircraft fleet<sup>2<\/sup>. How would you think the growing concern of the climate change produced by the aviation industry CO<sub>2<\/sub> emissions affects such a large company?<br \/>\nIndustry regulations, social responsibility, and the fact that CO<sub>2<\/sub> emissions are directly linked to fuel consumption \u2013 fuel is the most important element in the company\u2019s supply chain (see Exhibit) -, among others, are things that must be in all annual board meetings and affect short and long-term investment decisions of LATAM Airlines.<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Latam-Fuel.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-25822 size-medium\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Latam-Fuel-300x295.jpg\" alt=\"Exhibit: LATAM Airlines supply chain purchases in 2016.\" width=\"300\" height=\"295\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Latam-Fuel-300x295.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Latam-Fuel.jpg 398w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p style=\"text-align: center\">Exhibit: LATAM Airlines purchases in 2016<sup>4<\/sup>.<\/p>\n<p>As seen in the company\u2019s annual report for 2016 and its Sustainability Report for the same year, several actions either have already been taken or are planned to address the described impact of climate change<sup>3 4<\/sup>.<\/p>\n<ul>\n<li>Implementation of <strong>\u201cLean\u201d and \u201cSmart Fuel<\/strong>\u201d fuel efficiency programs. Consisting of at least 20 initiatives, these programs include investments in fleet renewal, efficiency gains in routes and flight times thanks to the use of new satellite navigational technologies, use of platform for partial disembarkation, control of air conditioning, and optimization of the cargo capacity of passenger and cargo services<sup>5<\/sup>. The initiatives allowed fuel savings of more than 41 million gallons in 2016, that consequently meant ceasing to emit 440 thousand tons of CO<sub>2<\/sub>. The target for the company is a 1.5% annual increase in fuel efficiency by 2020.<\/li>\n<li>Public commitment to align with<strong> Carbon Neutral Growth 2020<\/strong>, initiative led by the International Air Transport Association (IATA). By doing this the company committed to offset all flight operation emissions above the 2018-2020 average from 2020. The target is to achieve carbon neutral growth by 2020 and to halve carbon footprint by 2050 against base-year 2005.<\/li>\n<li>Participation and support in the design, implementation and certification of the <strong>IATA Environmental Assessment<sup>6<\/sup>.<\/strong> This program is a voluntary environmental management and evaluation system designed to independently assess and improve the environmental performance of an airline. The company is the first in Latin America and the third worldwide to obtain the certification \u2013 for its Chilean operations.<\/li>\n<li>Implementation of <strong>ground operations initiatives, <\/strong>including fuel efficiency programs and offsetting ground operation emissions in Peru and Colombia through local reforestation actions. Between 2012 and 2016 the company has already reduced its on-land emissions by 27%.<\/li>\n<\/ul>\n<p>These actions among others allowed LATAM Airlines to be acknowledged as Climate Strategy leader in the Dow Jones Sustainability Index<sup>3<\/sup>.<\/p>\n<p>In spite of the above described clearly strong efforts towards the climate change cause, there are still possible steps for the company to take in order to replicate industry leaders\u2019 actions.<\/p>\n<ul>\n<li><strong>Direct investment on alternative fuels development.<\/strong> Given that according to IATA sustainable alternative fuels will be the only real energy solution to mitigate the emissions growth of the industry, the company should take a proactive action in the matter and follow airlines like KLM that has partnered with biojet fuel suppliers, airports, and the Dutch government to start a regular supply of biofuel in the coming years<sup>7<\/sup>.<\/li>\n<li><strong>Increasing investments on fleet renewal.<\/strong> The average age of the fleet of an airline correlates to a certain extent to how efficient its fuel consumption can be. Currently the average age of the company\u2019s fleet is 7 years, a number that even though is relatively good compared to other companies, still falls behind major world airlines such as Emirates, Etihad, and Qatar Airways for example<sup>4 8<\/sup>.<\/li>\n<li>Additional <strong>in-flight measures <\/strong>that can reduce aircraft weight and consequently CO<sub>2 <\/sub>emissions &#8211; for 10kg weight reduction, about 4 tons of CO<sub>2<\/sub> can be avoided in one year<sup>9<\/sup>. There are still possible simple improvements that some airlines have already implemented and could be useful for the company\u2019s CO<sub>2<\/sub> reductions targets, such as replacing paper manuals with tablets and using lightweight trolleys<sup>9<\/sup>.<\/li>\n<\/ul>\n<p>We have seen how LATAM Airlines affects and is affected by climate change, with several steps already taken by the company and some additional that could be addressed in the upcoming years. The question to ask ourselves now is, would the company be willing to invest substantial money in improving its CO<sub>2<\/sub> emissions if it did not gain in fuel consumption efficiencies?<\/p>\n<p>&nbsp;<\/p>\n<p>(Word count = 770)<\/p>\n<p><strong>Citations:<\/strong><\/p>\n<ol>\n<li>IATA; \u201cFact Sheet Climate Change &amp; CORSIA\u201d; <a href=\"http:\/\/www.iata.org\/pressroom\/facts_figures\/fact_sheets\/Documents\/fact-sheet-climate-change.pdf\">http:\/\/www.iata.org\/pressroom\/facts_figures\/fact_sheets\/Documents\/fact-sheet-climate-change.pdf<\/a><\/li>\n<li>LATAM Airlines Group; Company Information; <a href=\"http:\/\/www.latamairlinesgroup.net\/phoenix.zhtml?c=81136&amp;p=irol-homeProfile2\">http:\/\/www.latamairlinesgroup.net\/phoenix.zhtml?c=81136&amp;p=irol-homeProfile2<\/a><\/li>\n<li>LATAM Airlines Group; Annual Report; <a href=\"http:\/\/memoria2016.marketinglatam.net\/sostenibilidad\/cambio-climatico\/?lang=en\">http:\/\/memoria2016.marketinglatam.net\/sostenibilidad\/cambio-climatico\/?lang=en<\/a><\/li>\n<li>LATAM Airlines Group; \u201cSustainability Report 2016\u201d; <a href=\"https:\/\/www.latam.com\/content\/dam\/LATAM\/latam-marca-unica\/footer\/sostenibilidad\/LATAM-Sustainability-report-2016-EN.pdf\">https:\/\/www.latam.com\/content\/dam\/LATAM\/latam-marca-unica\/footer\/sostenibilidad\/LATAM-Sustainability-report-2016-EN.pdf<\/a><\/li>\n<li>LATAM Airlines Group; \u201cSustainability Report 2014\u201d; <a href=\"http:\/\/memoria2014.marketinglatam.net\/english\/mobile\/sostenibilidad.php\">http:\/\/memoria2014.marketinglatam.net\/english\/mobile\/sostenibilidad.php<\/a><\/li>\n<li>IATA; \u201cEnvironmental Assessment\u201d; <a href=\"http:\/\/www.iata.org\/whatwedo\/environment\/Pages\/environmental-assessment.aspx\">http:\/\/www.iata.org\/whatwedo\/environment\/Pages\/environmental-assessment.aspx<\/a><\/li>\n<li>IATA; \u201cFact Sheet Alternative Fuels\u201d; <a href=\"https:\/\/www.iata.org\/pressroom\/facts_figures\/fact_sheets\/Documents\/fact-sheet-alternative-fuels.pdf\">https:\/\/www.iata.org\/pressroom\/facts_figures\/fact_sheets\/Documents\/fact-sheet-alternative-fuels.pdf<\/a><\/li>\n<li>Traveller Newsletter; \u201cMajor airlines with the oldest fleet: Are older planes less reliable to fly?\u201d; <a href=\"http:\/\/www.traveller.com.au\/major-airlines-with-the-oldest-fleet-are-older-planes-less-reliable-to-fly-gxnsmn\">http:\/\/www.traveller.com.au\/major-airlines-with-the-oldest-fleet-are-older-planes-less-reliable-to-fly-gxnsmn<\/a><\/li>\n<li>IATA; \u201cClimate change\u201d; <a href=\"http:\/\/www.iata.org\/policy\/environment\/Pages\/climate-change.aspx\">http:\/\/www.iata.org\/policy\/environment\/Pages\/climate-change.aspx<\/a><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>The aviation industry contributed to 2% of manmade CO2 emissions in 2016. LATAM Airlines, the leading Latin American airline company, plays a key role and should have significant responsability on how this situation could evolve.<\/p>\n","protected":false},"author":9702,"featured_media":25923,"comment_status":"open","ping_status":"closed","template":"","categories":[1218,1574],"class_list":["post-25922","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-climate-change","category-greenhouse-gas-emissions","hck-taxonomy-organization-latam-airlines","hck-taxonomy-industry-air-transportation","hck-taxonomy-country-chile"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How the leading Latin American airline affects and is affected by climate change - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-the-leading-latin-american-airline-affects-and-is-affected-by-climate-change\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How the leading Latin American airline affects and is affected by climate change - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"The aviation industry contributed to 2% of manmade CO2 emissions in 2016. 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