Green Horizons: Transforming Aviation Sustainability Across Latin America

Transcript

Alex de Gunten:Good afternoon, everyone. Thank you for joining us in this, uh, the best slot of the day, uh, and there's a reason for that. So we're gonna try to, to make it, uh, short and sweet, uh, so short that it already says that the Panel is concluded. And talk a little bit about following up on Simon's very, very interesting presentation. And to his credit, able to get some of the numbers. As you said, it's not easy to get data, fair data, for— on sustainability. I'm going to ask Simon, you already had your 3 minutes, your 15 minutes of glory.

Marco Andres Larson:Yeah.

Alex de Gunten:So I'm going to give the other 2 panelists a little bit of time to introduce themselves and tell us a little bit about their companies and some of their, you know, challenges and goals on the sustainability. And then I'll start getting into the body of the discussion. So starting on that, Felipe, do you want to start?

Felipe Gómez:Sure. Good afternoon. Thank you so much for the opportunity and the invitation to be here with you today after lunch, last panel of the day. Well, I represent Avianca. As you might know, Avianca is the 2nd oldest airline in the world. It was founded in Barranquilla, Colombia, 106 years ago. And that basically happened because Colombia is an aeronautical country. We— our development in the last 100 years has been done alongside airplanes. That's the best way we can move around. My first thought regarding sustainability and what it means to be sustainable when you are an airline in Latin America first is that you have to make sure that, that people get access to your service. Airplanes here play a fundamental role, and if people have access to the service, they are going to be able to develop faster, better, and in a more equitable way. Second, we obviously also need to have more efficient and less pollutant operations. So we have also a plan for that, and I'll let you know about that in in a bit. And third, you cannot be an airline in Latin America without considering a strategy to have social impact. And our social impact is not just about paying taxes and generating employment, but we need to have a social impact strategy that aligns with the necessities and needs that certain vulnerable communities have around our countries. So my first take would be to say to you guys that if you're an airline in Latin America, it's a lot more complex to be an airline here than in other parts of the world. But still, we have to align ourselves to the challenges that the sustainability conversation presents to the air sector on a global basis. So that's— that would be like my first take. on what we mean by sustainability when you're an airline in Latin America. And maybe in the next question, Alex, I can go a little bit deeper in what we are doing in Avianca to tackle those challenges that we have.

Alex de Gunten:Absolutely. And we'll have a little bit of time to talk about your individual actions, etc. Marco?

Marco Andres Larson:Yes, well, thank you. My name is Marco Larson. I'm Sustainability Officer in SKY. I joined the industry about 3 years ago. I come from a whole different sector, so it's been quite a ride so far.

Alex de Gunten:Do you regret it yet?

Marco Andres Larson:No, no, I don't regret it. So yeah, I represent SKY Airline. It's a Chilean-based company. We became the first low-cost airline in Chile back in 2015, and we really changed the rules of the game. We had a a whole different purpose, redefine our purpose, which is to put the sky within everyone's reach, which is exactly in line with Felipe was saying about the social role that airlines play in the region. So from 2015 to 2025, it's been already 10 years. In that length, we became the first airline in the world to operate a 100% neo fleet. So far we have 36 planes, all of them are neo. So we got to reduce our intensity emissions about 30% comparing to 2018 and about 60% comparing to 2010. And following the, the numbers that Simon was projecting back in his presentation, at the moment we're at 66 grams of CO2 per kilometre, which is a really big effort from part of the airline in renewing our fleet and implementing fuel efficiency programmes. But of course, sustainability is not just environment. We also have a lot of programmes that involve our culture, access in women— of women in the industry. So far, we have— 2. Between 11 and 12% of female pilots, which is double the amount of women pilots in the world. So sustainability is far more complex than just environment. And of course, providing access in a region that don't have trains, don't have robust roads, it's essential for a sustainability strategy.

Álvaro Covarrubias:Perfect.

Alex de Gunten:Well, Simon, you mentioned and you showed a lot of the statistics. I'd be curious to hear from our 2 panelists from the airlines right now. How did you— when you saw the graphs, were you happy with the numbers? How are your airlines comparing? Because Simon always— he always— Simon needs to show things in a neutral way without showing too much good or too Did you feel you were on the good side of the graph or on the bad side of the graph in terms of your own emissions?

Marco Andres Larson:Well, in terms of emissions, we're definitely on the good side. The company has made a tremendous effort in renewing our fleet. We have spent hundreds of thousands of millions in the new airplanes, and we have different projects that increase the fuel usage, and we try to minimize the fuel that we burn in every single flight. And that has allowed us to probably be one of the most efficient airlines in the region, if not the most efficient airline in the region. So I'm happy to say that we can compare ourselves with the best of the world, which is Wizz Air, Ryanair, and that's—

Alex de Gunten:So you're gonna ask Simon to give you that graph with your airline?

Marco Andres Larson:Yeah, I'm gonna put the logo in there.

Simon Elsegood:You can get it with a CAPA membership.

Alex de Gunten:Exactly. Felipe?

Felipe Gómez:Well, Simon's presentation focused basically on environmental issues, right? And answering your question, Avianca is doing quite good regarding those, those numbers. Still, we have a lot of challenges. I mean, this sector is very hard to evade, and, and, and, and we, we will pollute in the upcoming years. But for example, Avianca is right— is today emitting 20% less per passenger transported compared to 2019. And we are transporting way more passengers than we were transporting back in 2019. So, and we have done this without a single drop of SAF.

Simon Elsegood:Yeah.

Felipe Gómez:There's a lot of conversation about SAF in the region and in the world, and everybody's trying to set up that new industry and trying to understand what it means. Some think that that's like the silver bullet that is going to save the sector and maybe make us net zero as we are all trying to be. But the truth is that today we have a lot of tools. that can actually help us reduce the emissions per passenger. So I think that Avianca is a very good case study to see how to invest in, in a legacy carrier that has transformed completely its business model and how that has resulted in lower emissions per passenger, transporting more passengers than we did back in 2019. And, and another take that I would like to to point out regarding Simon's presentation is the cost of SAF. The cost of fuel obviously in our sector is very relevant for everyone, but for Latin American carriers that specific cost is more painful. Fuel in the region, it represents more or less 40% of our cost base. And logistically moving fuel around in the region is quite hard. So when you see that SAF costs 3, 4, or 5 times more than regular jet fuel, we have a problem. Not just because of the basic cost that it represents, but the spending capabilities that our population has. As, as the CEOs mentioned early this morning, in our region people stop flying if you increase the price of a ticket by 3, 4, or 5 euros. If you move the price that bit, people will go— some people will go to the bus. So we need to understand what the environmental cost, not just of SAF but of other schemes— for example, in Colombia we have a carbon tax that airlines have to pay for local flights— what those costs mean when you're trying to spread access to all corners of the population. That's a very, very difficult challenge to tackle.

Simon Elsegood:Thank you.

Alex de Gunten:And I, I don't want to make the whole conversation about SAF because there's other, other ways to ensure we have sustainability in the industry. But before I get off the fuel and the SAF discussion, we heard so far what, there's no airline in the region really using, I mean, You've used it for tests, right? Correct? You've done tests, but no airline is using SAF on any kind of regular basis, correct?

Felipe Gómez:If you fly to the UK or Europe, as we do, you— we are using SAF on a regular basis given the mandate that those regions have today.

Alex de Gunten:I see. So you, your flights from Avianca that go to Europe—

Felipe Gómez:And the UK.

Alex de Gunten:And the UK.

Felipe Gómez:Yes.

Alex de Gunten:But apart from that, in the region, and you showed, I think your numbers was very limited in terms—

Simon Elsegood:As far as I know, there's been maybe 30,000 tonnes consumed in the region in the last 5 years of SAF, which is, you know, very, very small.

Alex de Gunten:So, and I know the question I'm going to ask is very hard to answer, but in view of those realities today, when do you think— what needs to happen for SAF to be available in the region? Is it going to happen? Because I mean, there's a mandate over there to reduce emissions. I guess, what was it, 5% net emissions by 2030? And Simon's graphs doesn't show— forget about Latin America in general, we're nowhere going in that direction today. Yeah. Um, what is— as experts on environment, and Simon, fill in.

Simon Elsegood:And I think the— for me, the big thing in the region is going to be piggybacking off other biofuel production, particularly bioethanol and things for motor transport. It's a substantially larger market than sustainable— than aviation fuel. And if the industry can piggyback off some of that production and take a fraction of that for its own needs, that's a good first step.

Marco Andres Larson:That's—

Simon Elsegood:Sounds simple. It's not. There's a lot of technical stuff. There's a lot of partnerships and a lot of discussions that need to go in there. But it is the toe in the water for Latin America.

Marco Andres Larson:Yeah, well, it's a little bit like the problem of the chicken and the egg. But what we are doing as an industry in the region is that we're analyzing what are the real capacities of our region to decarbonize all the way to 2050. We have a lot of natural capacity to sink carbon. We're nowhere near paying $700 a tonne to use SAF to abate a tonne of CO2. You might as well just direct air capture it and store it underground, which is $200 a tonne. And we're conducting this this study with IATA and ALTA to develop a specific roadmap for the region in terms of our real capabilities to decarbonize and considering what are the advantages that we have as a region. We have the Amazon rainforest. We have huge forests in Chile. We have the capacity to become exporters of SAF. If we do the things right. But we need to work in a collaborative way if we want to make 2050 net zero. And I think that the only way that we can do it is getting together all the stakeholders and move towards a common goal, which is something that Europe is used to do. But for some reason in South America, it's really hard. for countries to work together, for governments to work together, and even for airlines to work together. And the challenges that we face if we want to get to net zero, we'll need the cooperation of every stakeholder.

Felipe Gómez:I would start by saying that Latin America has a legitimate interest of being part of the SAF industry. Our countries, most of our countries, see the SAF industry as an option, as an opportunity to create an industry that we do not have, and that's legitimate. But the thing is that we are a poor region. We don't have lots of resources. So whatever bet we do on this new industry, it has to be very, very smart because we don't have Lots of chances. If we get this wrong, given our— the scarcity of our resources, we might end out of the game. So I would say first, we need a pathway that is scalable. It needs scale. And each country needs to understand what are its best resources, technologies, and investments in order to decide what pathway it's going to prioritize in order to produce SAF. That's my first take. The second, regulation. We need smart regulation around SAF with incentives, trying to get investment in, trying to coordinate all actors of the industry and other industries in order to make this happen. For example, we as an industry and Avianca particularly, we reject a mandate for SAF in the region. We understand that mandates would not work here as Maybe it could work in other regions of the world. And this is not because we are against change, but we feel that our reality is way different from other countries that are using mandates. So regulation. Third, we need to get investment flowing. And this is very hard because when you have a— when you don't have clear regulation and you don't have those bets clearly stated, Well, the investment doesn't come. And we need to get that aligned in order to get money flowing into this new industry. And maybe more important from all of the prior things that I said is that whatever SAF our country produces, our countries produce, that SAF needs to be exported. I mean, we feel that the region needs to understand and create this new industry Looking to a global need. So whatever SAF we manage to produce in our region needs to be accepted not just by certifications of sustainability, but commercially and reputationally by airlines that are high consumers of this fuel. We need European carriers, US carriers, Middle Eastern carriers feeling free and secure of buying a SAF that is going to be recognized as a solution. to the environmental challenge that we have. So that's something we need, SAF, that it is easily commercialized around the world. And book and claim is also very important in that part of the equation. But that's part of the challenges we face as a region to be part of this party.

Alex de Gunten:And of course, at a cost that can—

Felipe Gómez:And the cost, of course.

Alex de Gunten:It's affordable for the industry. There's a question from the audience on this point. So if we can pass a microphone or speak very loud, we might hear you.

Álvaro Covarrubias:Hi, my name is Álvaro Covarrubias from AECOM Concessions. We operate airports in Bermuda, and we're taking over 2 airports in the U.S. Virgin Islands. My question is the following: do these numbers that you show, Simon, do they consider also the impact of the access mode to airport, or is only from takeoff until landing?

Simon Elsegood:It includes some of the transition costs that airports will need with their infrastructure changeover. So those are sort of baked into the broader number and into the price of sustainable aviation fuel itself, which is one of the reasons why it is so high and then is expected to stay so persistently high is that there's an infrastructure changeover that will come. SAF is generally— you can blend it, but there's still some things that will need to be changed in fuel farms and delivery and suppliers and all these sorts of things, and that costs money.

Álvaro Covarrubias:Because obviously the, the total impact of aviation also includes the fact that people take their cars to go to airports, and there is an impact on that. And then the obvious question for all of you is, uh, is SAF the most cost-effective way to reduce the overall emission of aviation, or probably we should look at how people get to airports and Probably it's more effective to offer electric buses or electric taxis, which are solutions that are already on the table and that are easily available and cost-effective.

Simon Elsegood:If you take like wheel-to-well sort of emissions calculations, jet fuel as a percentage of the sector's emissions is somewhere between about 85% And 95% of total emissions. When you add climate change and things like radiative forcing and contrail formation and things, aviation's contribution goes from about 2.5% of what warming we've had to somewhere between 4% and 5%. So effectively doubles. The direct impact of aviation on global GDP is about 1%. But for every dollar spent with airlines and with airports, you get about $6 or $7 spent elsewhere. So globally, when you include tourism and all the other supply chain impacts, aviation could contribute somewhere around 6 or 7% of global GDP, which is huge, particularly when you consider air cargo and things as well there. So we need governments to stop just looking at this as, all right, it's the little bit of revenue that airlines and airports make, and think about the broader contribution that aviation makes to connectivity and making, you know, getting businesses and people together and in places and making things more efficient. Because particularly in a region like Latin America, You can't replace aircraft. You can't replace it on short and medium haul. You cannot replace it on long haul. You know, it's getting from one side of the continent to the other on a bus is difficult. It's impossible by rail. So you need aircraft.

Alex de Gunten:So since we've already opened to the audience, I'm going to use the opportunity and make sure you're still awake before we finish. I'm going to do a little bit of audience participation and it'll be— it's related to actually to my next point. So just out of curiosity, of everybody here, how many believe that global warming is an important reality? I would say a fairly high majority except a few people that I assume they're still texting. Second, how many believe of those that sustainability is important for the aviation industry? A few less hands I saw in there. And how many of you look at environmental track record or efficiency of an airline while booking a flight? 1. Did I—

Felipe Gómez:2.

Alex de Gunten:Do I have 3? 3.

Marco Andres Larson:Okay.

Alex de Gunten:And the last one, how many clicked on an option to cover your footprint in the last 6 months? 1, 2, 3, 4, 5, 6. So the reason I ask these questions is I think it brings A little bit of the reality of the industry. We all think it's important, but when— and having an account that most of the people that came here or travel here travel on corporate accounts, so it's not even coming out of your own pocket, it's coming out of your corporation's pocket. When it's time to pay for that X cost, of the CO2 emissions, it seems to be my impression very hard to get the passenger to do so. You mentioned what, $2, $3 that shifts a passenger's decision? IATA, I think, has the numbers that for the industry was $7 that they made last year per passenger carried. In the region, it was $3.

Felipe Gómez:$2.

Alex de Gunten:$2 in the region. So Really, really low numbers. So I guess that brings my next question to the panel. Say, okay, is that something then governments need to get involved? If the public is not going to be willing to take that cost, is this something that should be handled through regulation and governments, or should we go on a voluntary basis?

Marco Andres Larson:That's a good question. Yeah, like everyone wants to be green until you have to pay for it, right? But the thing is that aviation in the region is critical to create access and opportunities. I was looking at Google Maps before joining the panel and driving from Santiago, which is where I live, to the southern part of Chile. Takes 30 hours in a car. 30 hours. So there's no way anyone's driving that far. So he's taking a plane. And if you add to the ticket a tax, a carbon tax for example, less people will be able to travel from Punta Arenas to Santiago. In a country that is heavily centralized like Santiago, like Chile, A lot of the very good hospitals are in the capital, so people need to go there for treatment. And when you put prices up, these people will not be able to afford the plane ticket. So if government needs to be involved, yes, of course they need to be involved, but probably not in, in the way of a mandate, but in creative— creating the incentives to so that the investors are interested in creating and developing the industry of SAF, which is probably the main lever that we can activate to decarbonize the industry. So it's affordable for airlines to buy the SAF and this does not impact on their fares. And the only way to do that is to actively collaborate with governments so they can understand what's the significance of paying 2, 3 times the price of jet fuel by buying SAF. And make them understand that if you have a higher fare, this will not only affect people flying but will affect the whole economy and tourism and people going for medical treatments and And people flying for business. And so there's a whole lot more consequences than just reduce the amount of people that flies.

Alex de Gunten:Are some of these conversations taking place now? Are you working with your governments to— or your government in Chile, in Peru, in Colombia— to look at these things or not? Is this discussion taking place?

Marco Andres Larson:Yeah, yeah, we're currently engaging governments in Chile, in Colombia. We're working together together with IATA, with ALTA, to illustrate them and to make them see that it's not that simple as copying mandates from Europe, and so that they have all the information on the table before they make a decision.

Felipe Gómez:No, from, from a public policy view, I would say that the region needs first to to focus on how to amplify the access to the service. Latin America needs airplanes to develop. We are in a different stage compared to Europe and the US in terms of development, and the airplane here in our region plays a significant role trying to pull our population forward in terms of development. So my first take is Governments should focus on how to make this service more accessible so as to help our population move forward. That's my first take. The second, in terms of environmental challenges, I would say that the focus should be on efficiency and infrastructure and technology, because the truth is that our region, given the limited infrastructure that it has and the technologies that it has, It's very, very inefficient and it generates a lot of CO2 emissions that are not necessary. If we had more efficient airports, more technology, better ATC technologies and procedures and so on, we would emit much less.

Marco Andres Larson:Absolutely.

Felipe Gómez:So what I would love to see is similar efforts, efforts as we are seeing on the SAF front, Because on the SAF front, we are seeing efforts by the Colombian government, the Chilean government, the Brazilian government trying to put a lot of actors together, trying to talk about how to move SAF forward, what is needed, regulation, investments. That's good. But those countries should also create similar conversations in terms of infrastructure. Fuel logistics, technologies, procedures, things that are needed today in order to lower our footprint and be more efficient. And that conversation is not happening because SAF, it is important, but somehow distracts us from what is needed now to lower emissions. And that is very important to our region, not just because it lowers emissions, but it makes the service more efficient. more affordable, and it impacts more people that need that service in Latin America.

Alex de Gunten:Absolutely. And you've mentioned, you know, working together and in a collaborative fashion. Do you feel this issue, sustainability, especially as it works on the, on the CO2 emissions side, is a Competitive opportunity between airlines? Do you see these airlines competing as to, hey, I'm way more, more fuel, uh, environmentally friendly than my competitors, so fly with me? Or you see this more as safety is an industry collaborative need, something, hey, this is good for everyone, we as airlines Avianca, Sky, we shouldn't compete. We should always work together to improve the, the, the industry.

Marco Andres Larson:I think it's a mix of both. We're always competing on which airline is most efficient in order to lower our cost and generate more revenue, but some things need collaboration. And one of the examples is the study that we're conducting in ALTA, which has every major airline there actively participating in the conversations and proposing ideas and trying to develop this roadmap for the region, which by the way, in terms of global emissions, Latin America and the Caribbean is responsible for, I think it's 0.002% of global emissions. So we shouldn't be treated as airlines in Europe or North America. And we have the commitment and the responsibility to lower our emissions, but our— we are in a different place than Europe and North America. And yeah, going back to your question, I think it's a mix of both. Sometimes we collaborate and sometimes We compete.

Alex de Gunten:We're beginning to run out of time, so I wanted to get to at least a couple of other questions. But in, in, in, in very few words, Simon, do you see other regions— do they see it as a collaborative effort or a competition?

Simon Elsegood:So there are some collaborative efforts. One of the interesting things is some of the airline alliances are doing joint purchasing, and there's talk about using some of the industry associations as kind of an independent middleman as well to help with sustainability efforts in general, like broader pan-regional sort of goals. One of the things though I think that is missing— we talk about net zero by 2050. I think we're missing smaller targets that we can publicize and let people know.

Álvaro Covarrubias:Yeah.

Simon Elsegood:what is going on in the sector and let people know that the, the industry is driving down— is driving its emissions as low as it can, and that fundamentally being more efficient as an airline also means you're more efficient in terms of your emissions.

Alex de Gunten:And okay, so now let's talk about non-carbon sustainability, so access to other resources to be sustainable. Um, Felipe, what is your What would you say would be the number one issue that you work on that helps the industry or that concerns you?

Felipe Gómez:Well, obviously for us, the more— the most important issue right now is access. Like, in terms of sustainability, Avianca is working really hard to get people that have not flown with us or have not flown at all Just to give you some numbers, Avianca in 2024 flew 38 million passengers. That was a record number for us. Out of those 38 million, 21 million were Colombian, in the Colombian market. Again, another record. And of those 21 million, 15% were passengers that had not flown with Avianca before.

Álvaro Covarrubias:Wow.

Felipe Gómez:before. We believe that has— that that has a substantial impact in the country's development and economic impact. But also, we have been working quite hard with 25 social and environmental allies to bring medics, architects, engineers around our countries to travel directly to certain communities that need their service. To change their lives, to get medical attention, to build water solutions, to basically bring to the people that have not had that sort of access to those health services access to them. And last year we managed to impact 28,000 people through this process. So, so I believe that while we are obviously focusing on being more efficient and emitting less, There are also several actions in Avianca, and I'm sure in other airlines, in order to get people to understand that airplanes are really tools of development for our countries and that airplanes are a key part of the development of Latin America in the upcoming years.

Marco Andres Larson:Perfect.

Alex de Gunten:Marco, the time is running out.

Marco Andres Larson:Yeah, I'm gonna keep it short. Well, as well as Avianca, we support several organizations, mostly here in Peru and in Chile, transporting their people so their impact can be stronger and bigger. We're also focusing a lot on bringing more women into the industry. We have developed a Women Dare to Fly program in Chile and Peru, and we invite women not only to join as flight attendants but also in the pilot segment and Engineering and maintenance. And we also support our countries whenever there's a natural disaster, which occur sadly every now and then here in Peru and in Chile.

Simon Elsegood:Great.

Alex de Gunten:Well, unfortunately our time has passed. I noticed that they just added some of the questions on Slido, but you see the panelists, they're going to be— are you going Are you going to the dinner tonight?

Marco Andres Larson:Yeah, yeah, I will.

Alex de Gunten:Yes, both of you, the 3 of you. If you buy them a Pisco Sour, I'm sure they will ask— answer the questions directly for you. So thank you very much. Thank you all. Thank you for staying with us.

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