How Delta is Flying High in the Face of Climate Change
By Alex Gherardi, Kelly Farmer, Kaitlyn Shipskie, Michael Stogner
How Delta’s Business Model will be Affected by Climate Change
Delta’s business model is centered around operational efficiency and customer service, both of which can be majorly put in jeopardy by climate change. With increasing surface temperatures, major climate events have become, and will continue to become, more frequent; meaning that weather events frequently disrupt flight routes. This will continue to put more strain on scheduling and will likely lead to more delayed and canceled flights if Delta continues to operate historical schedules and routes.
This represents a major operation risk for both operational efficiency and customer service. For operational efficiency, delays and cancellations due to weather events risk Delta’s industry-leading on-time departure percentage and increase the leverage that Delta needs to maintain with air traffic control at all the airports in which it operates in order to secure departure windows when weather conditions start to deteriorate. This also is a major risk to customer service. Despite weather events not being within Delta’s control, delays and cancellations reflect poorly on the airline with many customers.
Delta can also expect regulations aimed at mitigating climate impacts to affect their business and financial models. In the EU, Delta already is required to report emissions data, not only carbon but also nitrogen oxides, soot particles, and other pollutants. It remains to be seen whether other countries/regions will require this type of reporting but what is clear is that Delta will have to not only accurately measure its emissions data but also focus on how it stays below required limits.
Delta and Climate Change Mitigation
Along with many other companies and as a climate mitigation response, Delta has committed to a goal of net-zero carbon emissions by 2050. Delta acknowledges that the aviation industry is hard-to-abate and will require many avenues, so their decarbonization pathway consists of three major categories: emissions reduction within Delta control, emission reduction contingent on significant external progress, and emission compensation. Delta’s medium-term goals to reduce emissions to 2035 from a 2019 baseline have been validated by the Secured Science-based Target initiative (SBTi) technical experts through the target validation service.
Strategies to reduce emissions within Delta control include fleet renewal and operational initiatives. Delta has identified fleet renewal as being the “greatest opportunity to improve fuel efficiency and emissions intensity.” Through 2035, Delta aims for annual improvements in fleet-wide fuel efficiency. Beyond 2035, Delta expects next-generation aircraft technology to be available and to contribute to emissions goals (i.e. novel airframe designs and propulsion technologies). This strategy has already been proven to aid in a reduction of emissions as the newest aircraft added to the fleet in 2022 is 25% more fuel-efficient than aircraft that were retired in 2019. (Delta, 2022)
Delta’s sustainability strategy, which is dependent on external progress, involves the use of sustainable aviation fuel (SAF) and revolutionary aircraft. SAF is an alternative fuel that can be used as a drop-in fuel, depending on the feedstock, it has the potential to reduce emissions by up to 94%. (DOE, n.d.) Unfortunately, SAF is not available at scale and is significantly more expensive than conventional jet fuel. Delta has been working to signal a strong demand for the SAF market and is a founding member of the First Movers Coalition to accelerate the development of SAF. Delta has signed offtake arrangements for future SAF supply with four different suppliers and has a goal of 10% SAF utilization by 2030. (Delta, 2022)
The final category of Delta’s net-zero strategy is emissions compensation through the purchase of carbon offsets. Delta has supported the LEAF (Lowering Emissions by Accelerating Forest Finance) Coalition, which finances large-scale tropical forest protection to facilitate carbon sequestration. In 2022, Delta purchased and retired $116 million worth of carbon offsets, but claims that their future sustainability goals are more focused on airline decarbonization strategies other than offsets. (Delta, 2022)
Additional Steps Delta Should Consider
While Delta has a net-zero strategy in place, there are several measures that could be improved to strengthen that plan. Below are 3 potential improvements for consideration that Delta can consider to improve their climate change mitigation and adaption strategy.
Extreme Weather. As discussed above, operational efficiency and customer service are cornerstones of Delta’s business strategy. As extreme weather events such as larger hurricanes, severe blizzards, and flooding increase, so do service interruptions. To maintain exceptional service levels, Delta should consider strategic initiatives to minimize the impact of severe weather events on service. Examples of items to consider include flight routes, location of hub cities, and flexibility in ticket changes.
Sustainable Aviation Fuel (SAF). SAF accounts for 40-50% of emissions reductions in Delta’s Net-Zero Strategy. Not only is SAF a purchased good for Delta, but it is also a purchased good with a supply chain that does not exist yet, at least at the volumes required to meet Delta’s Net-Zero commitments. Delta is currently under contract with 5 different SAF providers who are developing the capability to produce about 50% of their 2030 emission reduction goal. Diversity of suppliers is a strength of this approach and would be beneficial as Delta seeks to meet the remaining 50% of their demand for SAF by 2030.[1] Additionally, if the SAF is crop-based that supply chain is further at risk due to changing weather patterns. If crops for SAF production are destroyed due to extreme or changing weather patterns, Delta will be unable to meet their carbon emissions reduction goals.
Carbon Offsets. Delta’s Net Zero strategy includes the purchase of carbon offsets for 4 – 7% of emissions reductions by 2050. Carbon offsets are an emerging market where regulation is inconsistent and unclear. There have been instances of carbon offset brokers selling the same offsets to multiple buyers as well as the sale of carbon offsets for forests that would not otherwise be destroyed.[2] Delta has faced a lawsuit over the validity of their carbon offset purchases.[3] Additional due diligence in verifying the quality of carbon offsets purchased would strengthen their Net-Zero claims and credibility.
By strengthening these 3 aspects of their Net-Zero carbon emissions approach, Delta will improve their position to continue delivering exceptional operational efficiency and customer service in the face of a changing climate. Improvements to the SAF supply chain and carbon offset vetting process serve as additional key measures for climate change mitigation. The additional focus on planning for extreme weather events serves as an adaptation measure for our changing climate.
[1] https://news.delta.com/sites/default/files/2023-04/delta_esgreport2022_0.pdf
[2] How to solve the ‘doubling counting’ problem — Harvard Gazette
[3] https://www.theguardian.com/environment/2023/may/30/delta-air-lines-lawsuit-carbon-neutrality-aoe
