15 Green Facts in 15 Minutes

Transcript

Johnny Thorsen:Thank you, Marco, and thank you, CAPA, for the opportunity to present a different view into the sustainable aviation challenge. I normally talk about new technology coming into the corporate travel space, but I'm also involved in an Australia-based startup called InvestGlobal. And for the last 5 years, we have been consolidating information about the airlines' actual operating performance on the sustainability front. So we're tracking 12 KPIs per airline. Back in 2020, when we started, it was close to impossible to find information. We could only find it for about 30 airlines. We're now up to 150 airlines, and we have introduced automation in the process. So where we started with human hands, It's now about finding any relevant announcement from any airline worldwide, from more than 1,000 news sources and websites every day. And that means we are aiming at the corporate travel buyers who are desperate to get a better understanding on how are airlines performing. They get all these announcements about future SAF buying, about this and that, but there's very little facts and the corporate buyer community are desperate. So inspired by Jonathan Werber and his usual 20 facts in 20 minutes, this is a super fast look into the world of sustainable aviation from a corporate travel buyer perspective. There's data for about 150 airlines, so most of you in this room will be included, and the data comes from you. We have an audit trail right back to the announcement by each airline, so there's no disputing that There's no manipulating of data. It comes from the source that is your environment. And starting out, the bad news is that in 5 years since 2019, nothing has happened when we look at carbon efficiency in flying. The CO2 per RPK industry-wide is exactly the same. That's neither good or bad, it's just a fact. And the whole purpose of this dataset is not to name or shame anyone. It's to put the facts on the table so we have a more informed discussion about what should we do, what can we do. Because under the industry-wide dataset, there is an interesting development happening. The low-cost airlines are actually reducing overall CO2 per RBK. They're literally seeing results. The full-service airlines are going the other way. If I'm a corporate travel buyer, and I suddenly realized that there's a 20% difference on average with lower carbon on an LCC versus a full service, I might now be inspired and motivated to go low cost when they are available rather than go low cost when there's nothing else. The buyers are reacting to this dataset. Furthermore, we are ranking each airline on these data and buyers are able to, of course, if they subscribe to this portal, they can see what each dot represents. We're working closely together with CAPA, and last year they announced that Wizz was the most sustainable airline from their perspective. And the data provided by InvestGlobal were part of that kind of decision-making. And again, if I'm a buyer, it really does matter when I look at this curve. Perhaps my preferred airlines are in the lower third of that curve. If I want to reduce carbon because it is becoming a cost in the corporate travel program, Companies are introducing carbon taxes as part of their procurement process. That means I want to see that number as low as possible. It's no longer an irrelevant number. It really does matter for the corporate buyer. There are some good news. SAF is growing, but it's growing incredibly slowly, right? And the corporate buyers are now realizing that that is not the answer to the problem. if a company wants to go net zero on its travel purchasing, they have to do other things because there's simply not enough SAF around. And furthermore, airlines are incredibly careful about talking about their SAF performance. Of the 150 airlines we track, only 31 are actually sharing anything about SAF consumption. That is really interesting. use SAF, why are they not saying it? The number we have calculated from the airlines' public announcements does not correlate with what IATA is saying is being used. So a number of airlines are not even sharing when they do something good. That makes no sense and it confuses the buyers. Furthermore, 70% of the SAF used that we have found is consumed by European airlines. SAF is not really a global story at present. It is very much a European thing. And if I'm a buyer, again, that does matter because I might want to put pressure on my airlines around the world to do more in other regions. It cannot be true that only European airlines are willing to do something. Of course, the 3 big American airlines are there, but with incredibly small numbers. It really is this kind of metaphorical drop in the tank, right? And it might be one test flight, and that's what they're announcing. We don't know. We just have the data. We've also looked at the ownership structure and tried to see if there is a correlation between kind of privately owned, i.e., not government-owned airlines. And what we have found is that odds are very bad for a government-owned airline to do anything. around SAF. We have only seen 3% of the airlines, kind of 3% of the SAF used being consumed by airlines that are government-owned, fully or partially, doesn't matter. So there's no sign that government ownership for an airline correlates with improved performance on sustainability. It's actually the opposite. So privately owned airlines are more likely to do stuff that the buyer can relate to. But this is the slide that is creating quite a reaction in the bio community. What it's showing is that to remove 1 ton of CO2 from the air with SAF as the solution, it's going to cost $700 per ton being removed because SAF is very expensive, right? We heard that from Willie this morning. Meanwhile, I can remove a ton of carbon with a number of other processes known as pyrolysis or biochar. They're very credible, scientifically working, and the cost is around $100. So in other words, perhaps I should spend my money on other ways of removing carbon than trying to buy this SAF that doesn't exist. Long-term, SAF will have a massive impact, but right now it might be more of a portfolio play where I put some money into SAF and equal amount of money into other ways of removing carbon. and I can get a 7 times bigger return. And an airline can do the same. You don't have to use SAF to reduce your carbon footprint. You can start buying into the biochar carbon removing, carbon storage world. It's there. And there is actually capacity available. And what we are showing with these 2 kind of lines is, of course, how ridiculously expensive it could become to remove 1 ton of carbon if SAF goes up in cost. It's crazy. If we end up with a 10-time multiple, as Willie mentioned, for the eSAF, well, then it would cost $10,000 to remove 1 tonne. It simply doesn't make sense financially to go down that route. And travel buyers, they react to that. And of course, as an industry, there's no way we can afford it. Even to apply 10% of SAF across the global industry on the fuel consumption basis, That would reduce our profit to zero if SAF multiple is 3.8. That's our affordability in terms of getting to 10%. So the numbers are indicating that we are not in a good point, a good state when it comes to applying SAF on a scalable solution. Because where's the production capacity? It's far out in the future. We need to do other things in that between. And if I'm a travel buyer, if I see these numbers, I start thinking, wow, flying might become very expensive much quicker than I thought if the industry is going to react and do something about it. Of course, we can do nothing and then that will not change the pricing level. But based on the data we have found and the operating performance on each airline on the curves you see on the right, average increase of an airfare would be 10% if we could remove carbon at a price of $100 per tonne. If it's the current $700 per tonne, we actually need to increase prices by 60% to get 10% adoption. It, it's quite crazy when you look at these numbers, right? And believe me, the top 5,000 corporate travel buyers, they are making this exercise right now. They are modelling into the future. They are prepared to pay more. but they also want to know what airlines are doing at a detailed level. So therefore, we have also created this kind of classic matrix that shows how carbon intensity, i.e., CO2 per RPK, and cost of flying 1,000 kilometers, they map out. Each dot represents an airline. The red dots are the full-service airlines. The blue-black dots are the low-cost. A buyer looking at this diagram is suddenly getting very motivated to apply more use of low-cost airlines. So we need to get the bigger airlines further to the left when it comes to the CO2 efficiency on an RPK basis. Otherwise, it will become harder and harder to get a buyer to accept paying the kind of the increased price when SAF becomes part of the cost equation and the cost of removing carbon. We also looked at the data on a regional basis, and we're doing this in partnership with CAPA. We're trying to figure out how can we go deeper down and dissect these data in meaningful ways. And to our surprise, South America is by far the best performing region from a carbon efficiency and cost efficiency perspective. So that region will keep on growing rapidly. There's no doubt. Whereas North America and Middle East, partly because of the heavy kind of long-haul volume, they have a tough time. And we will continue to fly long-haul, there's no doubt about it. But when buyers start seeing these comparisons, they start making different decisions. It's no longer based on kind of these warm, fluffy marketing announcements about 40 million gallons of SAF in some unknown future. A buyer cannot relate to that. They need facts. And that leads to an interesting development since COVID Only half of the airlines that announced some form of carbon disclosure in 2020 is doing it now. They have stopped sharing even the most basic data out of fear for being accused of greenwashing, or perhaps because they're not doing anything that's actually quality and documented. So 13% of 150 airlines are disclosing information. That's just staggering. And we are in May right now. Only 50 airlines have announced 24 data when it comes to sustainability-related information. The financial data, they're out, of course, a long time ago. But the actual detailed sustainability report, the information that really matters, it is only there for 50 airlines in the month of May. Quite interesting. We've also looked over a 5-year period of the correlation between load factor and kind of a again, the carbon efficiency. And we did that to even out the kind of the COVID years and the coming out of COVID So what it clearly shows again in a visual is that you do actually have a significant carbon saving when you fly low cost. And part of that is because they fill the planes more. It's very logical. But when you start seeing kind of how this data correlates, you can start making very informed decisions. We also looked at the alliance structure, and it's kind of just, it's a random fact, but it's quite interesting that all 3 alliances as groups are performing worse than the global industry average. In other words, you are emitting more when you fly with an alliance airline. A lot of them have very old planes. Again, it's a reflection of the operating environment. There's no manipulation. The data comes straight from their monthly or quarterly reporting. And the non-alliance airlines in general will give you a better performance on the carbon front when you fly with them. And when it comes to disclosing information like SAF consumed, etc., we're tracking 5 data points from the airline side where we kind of, we weight their willingness and ability to disclose. Only 9% of the airlines we track are disclosing all 5. That's incredible. Because it's a positive if you do something, at least report it, don't hide it. Your competitors are not going to be much better than you, almost guaranteed. So there's no shame. Share that number and get it out there. And as you can see here, almost 10% are not disclosing anything, not a single data point that we can use to rate an airline's quality on disclosure. It's kind of fascinating. And then we have calculated what we call the breakeven carbon price. In other words, what could the industry afford if we had to go net zero, either in total or for a certain part of the business? And right now, if the entire industry wanted to go net zero, we could afford a cost of $92 per tonne of CO2 being removed. Fascinating when SAF costs $700 to remove one tonne, right? Yeah. In other words, we are 15% there, more or less, in terms of ability to afford going breakeven. And that leads to something the investment community is very interested in. We call it the carbon risk matrix. So how is a given airline performing from an ability to afford net zero at some point in the future? And we have a few investment funds who are now subscribing to this dataset and starting to use it when they decide which airline they're going to invest in in the future. It's no longer just about money. It is also about carbon in the entire chain. 2 weeks ago, there was an aviation fuel conference down in Australia, and one of the Invest guys was asked to do a scenario on what if the New Zealand government decided that you must have 10% SAF when you lift off from Auckland to anywhere. It actually led to an interesting side effect that airlines might start going via Sydney and then fuel for the long haul to LA in Sydney to avoid the 10% super expensive SAF. So the well-intended goal of 10% SAF could lead to significantly more carbon emission from people flying from Auckland to Los Angeles if the airlines decide to circumvent and go for the lowest fuel cost. So no country can do this on its own. It really is a coordinated effort if we want to start making changes and implement these kind of country-specific minimum targets. They might lead to very unexpected consequences. And to end it all up, this is how we represent an airline. And Pegasus is our first airline customer subscribing to this, which actually means they can not only see themselves, they can see the 149 other airlines that are in this portal and see how they perform. So they can actually compare themselves to their key competitors whenever they want. All the data comes from the airline. There's no magic source. So this is what your big travel buyers are now consuming on the other side. And therefore, you need to understand that this is happening and you shouldn't hide the data. Make them available. Thank you very much. Thank you.

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