Delivering on sustainability will become ‘a cost of doing business’ for the airline industry

JetBlue Airways recently drew a line in the sand in its efforts to combat global warming by declaring that its domestic flights in 2020 would be carbon neutral as it steps up its carbon offset scheme. But now it is fielding questions about how it intends to offset the cost of those efforts.

The airline has calculated that the expansion of the carbon offsetting scheme that it began in 2008 would offset an additional 15 to 17 billion pounds (7 to 8 million metric tons) of emissions per year, which the airline explained is the annual equivalent of removing more than 1.5 million passenger vehicles from the road.

After JetBlue outlined its carbon neutrality pledge, an article in Quartz stated that “to be credibly carbon-neutral, airlines need to be prepared for a significant financial outlay, and be extremely transparent about every step of the process”.

In a recent earnings discussion with analysts and investors, JetBlue executives were quizzed about the potential cost of becoming carbon neutral as the airline maintains it will achieve an earnings per share (EPS) of USD2.50 to USD3 in 2020.

“We look at sustainability through a lens of long-term shareholder value creation,” said JetBlue CEO Robin Hayes. “And I think that, but for the airline industry this issue presents a clear and present danger if we don’t get on top of it. And I seem to be out ahead of it.”

Mr Hayes did acknowledge: “I do think it’s going to become a cost of doing business for the industry.” He declined to state the costs of the offsets, but stressed the expense was “fully factored into our EPS guide”. With respect to how the airline will account for the offsets, Mr Hayes explained that “it’s treated as part of our fuel costs, so it won’t be in the ex-fuel CASM (unit costs excluding fuel line”.

JetBlue says its plans prepare its business “for a new climate reality, ”but Mr Hayes notes carbon offsetting “is a bridge to, not a silver bullet” for, a lower carbon future. The airline’s offsetting will kick-off in Jul-2020, and around the same time it will also start flying with sustainable aviation fuel on its services from San Francisco International airport.

“Air travel connects people and cultures, and supports a global economy, yet we must act to limit this critical industry’s contributions to climate change,” explains Mr Hayes. “We reduce where we can and offset where we can’t. By offsetting all of our domestic flying, we’re preparing our business for the lower-carbon economy that aviation – and all sectors – must plan for.”

One airline that has put a price on its carbon offsetting is easyJet in Europe. The carrier plans to become the first major airline to operate net zero carbon flights across its entire network, confirming last year that it will begin offseting the carbon emissions from the fuel used for all of its flights. This will cost the airline an estimated GBP25 million a year, but just like JetBlue in the US, taking the lead in responding to growing flight shame movement in Europe may ultimately be worth even more to the carrier.

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