Business / Sustainability Challenges To The Airline Sector Of The Economy
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Autor: anton 10 June 2011
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Sustainability challenges to the airline sector of the economy
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TABLE OF CONTENTS
1. WHAT CHALLENGES DOES AVIATION FACE IF THE GOAL IS LONG TERM SUSTAINABILITY FOR THE SECTOR? 5
1.1 ECONOMIC CHALLENGES 5
1.2 ENVIRONMENTAL CHALLENGES 8
1.2.1 The challenge of air pollution 9
1.2.2 The challenge of noise 10
1.2.3 The link between environmental and economic challenges 11
1.3 SOCIAL CHALLENGES 11
1.3.1 Principles and characteristics of Social Sustainability 11
1.3.2 Challenges to long term social sustainability 15
1.4 GOVERNANCE CHALLENGES 15
2. WHICH OF THESE CHALLENGES ARE ALSO CHALLENGES IF THE GOAL IS TO BE A RESPONSIBLE CORPORATION? 19
2.1 ECONOMIC CHALLENGES 20
2.2 ENVIRONMENTAL CHALLENGES 20
2.3 SOCIAL CHALLENGES 20
2.4 GOVERNANCE CHALLENGES 21
3. DESCRIBE THE SECTORâ€™S PROGRESS TOWARDS, OR (FAILURES) MOVE AWAY FROM SUSTAINABILITY OVER THE LAST 20 YEARS. 21
3.1 BACKGROUND 21
3.2 ECONOMIC SUSTAINABILITY 22
3.3 ENVIRONMENTAL SUSTAINABILITY 24
3.3.1 Progress 24
3.3.2 Shortcomings 25
3.4 SOCIAL SUSTAINABILITY 26
3.5 DEVELOPMENT IN GOVERNANCE ISSUES 27
3.5.1 Progress 27
3.5.2 Shortcomings 27
4. WHAT SHOULD AVIATION AND REGULATORY AUTHORITIES DO TO PROMOTE SUSTAINABLE DEVELOPMENT IN ITS SECTOR 28
4.1 ECONOMIC SUSTAINABILITY 28
4.2 ENVIRONMENTAL SUSTAINABILITY 28
4.2.1 Regulations 29
4.2.2 Taxation 29
4.2.3 Technology 30
4.2.4 Other ways to promote environmental sustainability 30
4.3 SOCIAL SUSTAINABILITY 30
4.4 GOVERNANCE DEVELOPMENT 31
INTERNET DOCUMENTS 33
APPENDIX 1.2 38
APPENDIX 1.2 40
APPENDIX 1.3 41
APPENDIX 1.3 42
APPENDIX 1.4 42
APPENDIX 3.4 46
This paper deals with sustainability challenges to the aviation sector in the economy. Four questions are addressed and simultaneously make up the structure of the document.
In section 1 we discuss what challenges (to business and regulatory authorities) aviation is faced with if the goal is long term sustainability. Sustainable development consists of three factors (economic, environmental and social) in addition to a governance point of view. This is the basis of our dissection of the 1st section â€“ where each factor is discussed with a linkage to aviation.
The 2nd section reviews those of the first sectionâ€™s challenges which also represent challenges if the goal is to be a responsible corporation. An important distinction is here done between sustainability and responsibility.
Describing aviationâ€™s progress towards â€“ or move away from â€“ sustainability over the last 20 years since the Brundtland Commissionâ€™s launch of â€œOur common futureâ€, make up the 3rd section. UN milestones after this report are, in short, went through in the Appendices. Important principles, introduced during these 20 years, are included in the main text (examples from aviation are given at the same time). The majority of our response is however focused on each factor (clarified in section 1) of sustainable development and the positive or negative direction of the evolution of these.
The discussed issues culminate in a 4th section where we launch some opinions as to what aviation should or could do in order to promote sustainable development.
Transportation by air has experienced a rapid expansion since the World War 2. Traffic growth became a result of declining operating costs and fares per unit of traffic (measured in passenger-kilometres). In 1945, 9 million passengers took to domestic or international air transportation. Today - at the end of 2005 - we find ourselves light years away from this level, as 704 million passengers choose to travel by air. On average, this tremendous enlargement of air passenger traffic has had an annually growth on ca 10 per cent in the 60 years that have passed. Comparatively, the growth in gross domestic product (GDP, the broadest available measure of world output) has been at an average of 3, 8% annually in the same period.
(Source: ICAO 2001)
When looking ahead, forecasts show a 5 - 5,5 % growth in world air traffic up till 2007 and then 4,3 - 4,9 % growth till 2017. GDP is expected to have an average annual growth around 2,5 - 3 % over the next ten years.
(Source: IMF 2006)
The west-east longitudinal belt is the main pathway of air transportation, that is, the routes between Europe â€“ Middle-East â€“ South-East Asia â€“ Japan â€“ USA â€“ Europe. This is where the largest markets lie (measured in the volume of scheduled traffic generated), and therefore is the focal point of concern when assessing and evaluating aviation in this paper.
1. What challenges does aviation face if the goal is long term sustainability for the sector?
There are many definitions of sustainable development. At governmental level sustainable development is often defined as â€œâ€¦development that meets the needs of the present without compromising the ability of future generations to meet their own needs.â€ This is also the definition adopted by the Brundtland Commission. Applying this to the transportation sector, the Transportation Research Board noted this as: â€œTransportation planners and providers must continuously struggle with the trade-offs between the economic and societal benefits of transportation and the associated unsustainable environmental, safety, health, ecosystem, and equity impactsâ€
This assignment will look at the key challenges the aviation sector face if the goal is long term sustainability. It is said that aviation is not sustainable. This is because it uses organic fuel that is not renewable.
Sustainable development consists of three important factors, in addition to the governance side of sustainability. The three factors are economic, environmental and social. The UN states: â€œEconomic development, social development, and environmental protection are interdependent and mutually reinforcing components of sustainable development (Zadek, 2001). Zadek goes further on and classifies the components as:
â€¢ Economic: the creation of material wealth.
â€¢ Social: quality of peopleâ€™s lives and so particularly about equity
between people, communities and nations.
â€¢ Environmental: protecting and conservation of our natural environment
â€¢ Governance: the process of decision-making and the process by which decisions are implemented (or not implemented). The governance view is defined by the UN.
We will discuss these issues linked to aviation. We will try to separate them, but when discussing one issue, it may be natural to include another.
1.1 Economic challenges
Aviation â€œproducesâ€ several economic benefits. The most important factors are:
â€¢ Size â€“ its contribution to Gross Domestic Product (GDP) and employment.
â€¢ Growth â€“ its internal and wider economic contribution to productivity, and
â€¢ Increased specialisation of goods.
â€¢ Extended market penetration.
â€¢ Knowledge diffusion.
â€¢ Economies of scale in international production processes.
â€¢ Foreign direct investment.
â€¢ Export revenue.
â€¢ Exchequer contributions.
â€¢ Inbound tourist revenue.
â€¢ Consumer benefits.
(Grayling & Bishop, 2001)
These are important factors to why aviation has grown in the way it has.
In a wider perspective aviation may contribute to growth by:
â€¢ Creating larger markets.
â€¢ Facilitating collaboration between companies.
â€¢ Spreading the fixed costs of innovation.
(Grayling & Bishop, 2001)
By creating larger markets, businesses allow greater scope of economy of scale. Further on it allows better specialisation in different industries. Facilitating collaboration between companies give better learning and research bodies and more effective networking, and therefore improve innovation. Spreading the fixed costs of innovation gives businesses the opportunity to improve the profitability of investing in other sectors, lowering consumer prices, and encouraging greater innovation. Businesses such as pharmaceuticals, computing, electronics and financial services, are in a strong position, especially in Europe, and are great examples of aviation dependent businesses (Grayling & Bishop 2001).
These economic upsides contributed by the airline industry can be seen as great challenges as they are in contrast to the important environmental and social downsides. The key to the economic sustainability is to keep these upsides, in the balance of treating the environmental and social issues.
We have mentioned key factors to why aviation gained the position it has today. Even though the global community is depending on aviation, and is growing with the aviation industry, reports have not been able to find a conclusion to what factors a community needs, to take advantage of the growth in aviation. The SACRA and OEF report did not find any conclusion to the question of aviationâ€™s impact on GDP in the UK (See Appendix 1.1). A known factor is that the developing countries are depending on transportation to have economic growth. Aviation is an important part of this.
The aircraft industry has many competitors, like sea freight and ground freight. As of today, these competitors have not been able to reduce the demand for air freight. This is because of a balance between time and cost. When talking about economic issues, we see that aviation is more cost effective than other types of transportation when travelling over long distances. And with the new low-cost airlines, trips have also become cheaper for the consumer, although this may not reflect the actual costs of flying. The key question and a great challenge to the industry is how to keep it as cost effective as it is today. Transportation is a key factor to the global market, and all different parts compete for the demand.
Airline business is a capital intensive industry, with aircrafts costing several million dollars. Producing a plane can take several years. This forces the companies to make predictions about the future. When buying an aircraft, the company has to make estimations of future demand that can generate money for the huge cost of the investments. This has not been a huge problem since the industry has seen a major growth in demand in the long run. However, incidents like September 11th can have a great impact on the demand for aircraft transportation in a short perspective, and is able to ruin a company.
Low cost airlines sell tickets to as low as 1 euro. How can these companies make money? The thing is that it is not the actual ticket they are making money from. Low cost airlines have so called sponsors that pay the airlines to transport the people. This can be tourist offices, or commercial companies that see profit in people travelling. These airlines also choose the airports with the lowest charge, and therefore avoid big hubs like Heathrow. Since these airlines are not service oriented, they are exposed to price sensitive customers. The more ticket costs the cheaper the alternatives are that fly to central areas, and often where people want to go. And with the rising oil-prices, the airline business may not be economical sustainable in the future.
Fuel forms a key cost driver of aviation. It accounts for between 15 â€“ 30% of airline operating costs (Frontier, 2006). It is a great challenge for the airline industry to minimize this cost driver, making it more profitable to fly.
The airline business is dependent on oil for survival. It is a non-renewable factor, and because of its unreliable future, the price of oil has increased in the later period. This has a great impact on aviation, both for economical reasons and environmental reasons. Higher oil prices means higher costs per flight, and may lead to less profit. Todayâ€™s aviation market is dominated by low-cost airlines that have competitive prices. Companies like EasyJet have reported of loss periods when oil prices were high. Because of the high volatility, it is hard to predict the future cost of air traffic, and tickets sold months before the actual flight may actually not reflect the cost of the specific trip.
Higher oil prices can also give positive effects. A high oil price will make it more profitable for other types of fuel. This also means that these other alternatives that otherwise would not be considered, are forced to be more cost efficient. More money is given to development of alternative fuel that can be cheaper and more environmentally friendly.
The airline sector receives a number of distortionary tax exemptions and subsidies that may favour its growth over other kinds of economic activity (Grayling & Bishop, 2001). These exemptions will probably not be sustainable, and corporations should take these costs into account in the future.
Summarizing the economic challenges, we can say that aviation industry is in a good position. This is mainly because of the economic benefits that the industry produces. These advantages have led the debate on social and environmental challenges away from this industry. But the airline industry canâ€™t expect to be isolated from this debate in the long run.
1.2 Environmental challenges
Aviation has several environmental impacts. These can be divided into health, community, local, regional and global impacts. These impacts occur in relation to air, water, land and biodiversity recourses. It is documented that aviation has a major impact on the green house effect. However, it is hard to measure how great this impact actually is. The problem arises when discussing the environmental issue and the aviation sector. The fact is that aircrafts are getting more environmental friendly, but this is to little help when the airline industry is growing faster than ever.
Aviation was not included in the Kyoto Protocol. This means that aviation is not part of the plan to reduce greenhouse gas emissions by 5 per cent of the 1990 levels by 2012. Still, many countries have taken aviation into account and are doing efforts to reduce pollution made by this sector.
Aircrafts use the most fuel and produce the most emissions during taking off and landing. It is therefore to great concern that nearly three-quarters of all new flight routes in Europe and North America are less than 2000 km. As much as 25% of the fuel can be consumed during take-off and landing, making the ratio of fuel used per km very high compared to longer flights. (SEI, 2004)
Aircrafts are not the only source of pollution on the local level. Other factors from airports are also important contributors. These are:
â€¢ Aircraft maintenance
â€¢ Other airline operations
These factors contribute to pollution within a radius of 15-20 km from an airport, and therefore affect the local community.
Access to airports also causes emissions as most people tend to travel by cars. Some countries have efficient public transport systems. These are often linked to major airports not located far from the city. Low-cost airlines have a tendency to use smaller airports far from the city centre, and are therefore contributors to pollution as they â€œforceâ€ people to drive longer.
(Source: Aviation and sustainability, 2004)
1.2.1 The challenge of air pollution
Pollution in the air is the most discussed environmental issue by the aviation sector. Flying produces Nitrogen Oxides (NOx), Carbon dioxide (CO2), and other toxic waste that has a known impact on the climate globally, regionally and locally. (See appendix 1.2 for explanation of how these affect the environment)
(Source:European Union Road Federation)
Aviation produces 3% of un-natural emissions. This has been argued to be very little, but the numbers do not tell the whole story. Aircrafts produce emissions in heights that have proven to affect the greenhouse effect more than emissions on the ground. It is said that aviations impact on the greenhouse effect is 2-4 times more than regular CO2 emissions. The focus on this fact will probably increase in the future, and give more pressure to the airline industry than today.
1.2.2 The challenge of noise
Noise problems are affecting people living near airports. Noise problems consist of people getting annoyed, sleeping problems and health problems. Some of the health problems that can be mentioned are cardio-vasacular disease and impaired hearing and communication performance, especially non-auditory physiological effects.
20% of the European population is exposed to noise. 4 % of these people are exposed to noise caused by aviation (West, About). This means 3.2 million people. Although noise is a significant problem, it is a not growing in Europe. This is mainly because of new technology in aircrafts.
As the western world get new aircrafts, old are sold to developing countries (Goldschagg). This means that noise is still high in countries like Africa and South America.
The introduction of new aircrafts cannot be expected to compensate for the vigorous growth of aviation itself, as aviation spreads to airports located in small towns and regions, as well as growth in military aviation.
Noise has been a controversial theme for the last four decades. Successful international meetings have led to certain rules concerning the amount of noise allowed.
This problem also has economic costs through noise mitigations and noise abatement. The range of problems due to noise pollution has led the World Health Organisation (WHO) to propose a range of noise standards designed to protect human health and to recognise the importance of vulnerable groups (Whitelegg, 2000). People living near airports have a higher exposure of noise than recommended by WHO, and regulatory authorities does not have a plan to reduce this to the WHO safe levels.
1.2.3 The link between environmental and economic challenges
Environmental issues are linked to the economic issues, and we can say that they correlate in a strong degree. A good example of the economic impact from environmental issues in the EU:
Annual external costs of EU aviation: in billions of pounds
Passenger Freight Total
Noise 1,9 0,6 2,5
Air pollution 3,1 1 4,1
Climate change 6,1 2 8,1
Total 11,1 3,6 14,7
(Source: Whitelegg & Fitz-Gibbon, 2003)
Although aviation creates many social and economic benefits, the question is if these are sustainable in the long run. Environmental challenges create cost that will have a great impact on these benefits. If aviation is to keep its position as a cost effective transportation solution, it has to deal with the environmental issues in a higher degree than today.
1.3 Social challenges
The GRI Guidelines of July 2000 defines the social dimension of sustainability and its implications in the following way: â€œThe social dimension of sustainability captures the impact of an organizations activity on society, including on employees, customers, community, supply chain and business partners.â€ (Zadek 2001)
1.3.1 Principles and characteristics of Social Sustainability
The impact of an organizations activity on society in can be categorized into five principles, which in turn are divided into a set of characteristics. The principles are designed to capture the goals of socially sustainable communities and to this end, are aspirational and visionary statements that describe what makes a community healthy and liveable, both now and in the future.
(Source: WACOSS 2002)
1. Equity â€“ the community provides equitable opportunities and outcomes for all its members, particularly the poorest and most vulnerable members of the community.
2. Diversity â€“ the community promotes and encourages diversity.
3. Interconnectedness â€“ the community provides processes, systems and structures that promote connectedness within and outside the community.
4. Quality of Life - the community ensures that basic needs are met and fosters a good quality of life for all members at the individual, group and community level.
5. Democracy and governance â€“ the community provides democratic processes and open and accountable governance structures.
Based on these principles, a set of characteristics (a complete list can be found in Appendix 1.3) one would find in socially sustainable communities were developed (WACOSS 2002). Thus, by examining to what extent the relevant characteristics are fulfilled by the airlines industry, a picture of what challenges the sector faces, is formed.
â€¢ There is equal opportunity for all members.
Air travel used to be a luxury preserved for the upper class. With the introduction of low-fare airlines like Ryan Air and Easy Jet, airfare prices are no longer such an insuperable hurdle. In fact, the majority of air journeys are taken by people in the C, D and E socio-economic groups (Bishop & Grayling 2003). (See appendix 1.3 for statistics.)
â€¢ There is equity in relation to disadvantaged members.
While members of the community are given equal opportunity to travel, aviationâ€™s ability to sustain its societal benefits is in question. There is an increasing wide divide between the upper and lower ends of air transportation. Members with enough money are given the possibility to pay more and avoid the high load factors, fewer frills, increasing congestion and security hassles of commercial flying. (Andrus 2006)
â€¢ The community is inclusive of diverse groups.
â€¢ The community values difference.
With overall increased tourism due to growth in the airline sector, members of the community are getting cultural enriched as a result of the cultural exchange that occurs. This makes for a community more tolerant towards foreign cultures, and in effect the community value difference and gets more inclusive to diverse groups. (BATA 2006)
â€¢ Transport promotes connectedness.
Aviation is the safest, most efficient means of public transportation. Over long distances and across geographical barriers, no alternative means of transport exist. Aviation's vast network of affordable transportation services offers freedom to travel for nations, regions and individuals and facilitates the exchange of cultural and educational experiences. Many outlying communities would be isolated without access to air services (IATA 2006)
Inward tourism results in a greater sense of connectedness within a nation, while tourism abroad creates a sense of connectedness to the world.
â€¢ The quantity of social processes promote connectedness.
With airfare prices getting more affordable, more people travel and the quantity of social processes increase.
â€¢ The quality of social processes promote connectedness.
With quantity increasing, the quality of social processes also increases due to the possibility for closer links between family and friends.
Quality of Life:
â€¢ Community members have a sense of safety.
The increased amount of travel by air has in recent years made it a more popular target for terrorists. The strong signal effect of striking against aircrafts has made terrorism very visible, and decreased the overall sense of safety in the community members. However, the airline industry also contributes to an increased sense of safety through the increasing amount of jobs it creates.
â€¢ Community members have a sense of belonging.
â€¢ Community members have a sense of place.
As discussed, the increased inward tourism results in a greater sense of connectedness within a nation. It will give the community members both an increased sense of place and an increased sense of belonging.
â€¢ Community members have a good quality of life in relation to clean air, soil and water.
While there seemingly are a lot of benefits concerning the airlines industry towards social sustainability, as we have discussed the environmental dimension of sustainability suffers. In effect this decreases community membersÒ‘ good quality of life in relation to clean air, soil and water.
â€¢ Community members have a good quality of life in relation to health.
While the increased airline based tourism generates more wealth leading to improvement of health through poverty reduction, there are several negative effects on the health of the community members caused by noise levels and pollution generated by the airline industry. Effects of noise on humans can lead to hearing impairment, sleep disturbance, stress, nausea, headache, insomnia, irritability. Effects of pollution on humans can lead to drowsiness, worsened immune system and asthma, among other things
â€¢ Community members have a good quality of life in relation to education.
The efficient and affordable way of travel the airline industry offers, facilitates exchange of educational experiences. (IATA 2006)
â€¢ Community members have opportunities for personal and social development.
The creation of jobs, and facilitation of exchange of educational experiences gives community members the opportunity to develop their human capital, which consists of knowledge, skills, health and motivation, all of which are required for productive work (Zadek 2001).
â€¢ Community members have a good quality of life in relation to employment.
With the economic growth associated with the increase of air travel, a lot of opportunities are created. The inward tourism leads to that companies and individuals may decide to relocate to take advantage of regional links, which otherwise would be deserted. Tourists from abroad also generate a significant foundation for employment. For example, expenditure by foreign tourists in London accounts for 70 per cent of total revenue (Bishop & Grayling 2003).
â€¢ Community members have a good quality of life in relation to income and
standard of living.
As a result of the economic growth comes a higher employment rate, which again leads to higher average income and a higher standard of living. Also, the airlines industry adds to consumer choice, and the availability of vacationing.
â€¢ Community members have a sense of self-worth.
With more people employed and a better opportunity for personal development comes a higher sense of self-worth.
Democracy and governance:
â€¢ Community members have access to information, knowledge and expertise.
â€¢ There is integrity of democratic processes and governance structures.
â€¢ Democratic processes and governance structures are accountable.
â€¢ Democratic processes and governance structures incorporate justice and legal rights.
These characteristics all benefit from the positive globalization effects caused by the airlines industry. Effects like the exchange of educational experiences, and the self-regulatory effects on democratic processes caused by the way the airlines industry â€œmakes the world a smaller and more transparent placeâ€.
1.3.2 Challenges to long term social sustainability
To summerize, the social part of the airlines industryâ€™s sustainability has significant benefits in the positive effects of globalization it generates, like the exchange of knowledge and culture, which results in celebration of diversity and economic growth with all its social implications. A challenge for the sector will be to keep these positive trends, and spreading them to the less fortunate and developed parts of the world without compromising the other dimensions of sustainability. Also, the sector need to address the increasing divide between the upper and lower ends of air transportation, the rising threat of terror within the sector, as well as minimize its negative effects on the general health of the community caused by pollution.
1.4 Governance challenges
Susan Baker (2006; 9) states that governance can be understood as â€œsteering society towards collective goalsâ€. Ever since humans began to gather in societies, different forms of partnerships have existed within and between such groupings. The collective aims of each society were pursued and the evolution brought forward greater civilizations and governments to rule fractions within these. Today it seems that the old and fundamental idea of partnerships has been rediscovered (Zadek 2004). Greater importance is laid on the development of partnerships (between governments, national and international institutions and businesses) and inter-sectoral collaborations. During the last three decades (since the first conference in Stockholm, 1972, cf. Appendix 1.4) the ability and legitimacy of the traditional government intervention and policy making have been challenged due to the complex issues posted by the promotion of environmental concerns (Baker 2006), especially by sustainable development. Issues like climate change, biodiversity loss, deforestation, noise and local air- and ground pollution, have pushed forward an evolution within the concept of partnerships and governance. The emergence of this new step offers more effective ways to address social and environmental problems, and is referred to as â€œnew social governanceâ€ (Zadek 2004). The political movement towards deregulation and privatization, and increased globalization are other sides that support this evolvement (Midttun 2005). New civil governance (Zadek 2004) involves:
â€¢ The building of agreed-upon rules.
â€¢ The overseeing of these rules by institutional structures and processes.
â€¢ Systems of penalties and rewards.
If one is looking for a definition for the term governance, the UN has come up with the following: â€œThe process of decision-making and the process by which decisions are implemented (or not implemented).â€ An analysis of this term includes both formal and informal participants and actors in the decision-making and implementing process. Midttun (2005) identifies three fundamental groups:
â€¢ Civil society.
Here, multiple partnerships are invested in to mobilise the common resources.
In Appendix 1.4 one can find some central initiatives and organizations which function as main forums and regulatory bodies in aviation. Since the industry is international by its very nature, and the need to promote international standards of technical (safety and security most important), economical (air ticket taxes, emission fees), legal and environmental problems and goals is growing, regulation of and cooperation between stakeholders in air transportation have been sought harmonized on a worldwide basis.
To evaluate what good governance is and find out whether aviation holds sustainable governance or not, UN has come up with 8 characteristics:
Participation, following the rule of law, effectiveness and efficiency, encompassing equity and inclusiveness, responsiveness, transparency, accountability and being consensus-oriented. Good governance is an ideal and therefore very difficult to achieve in real life, but in order to ensure sustainability in aviation and - of more importance - human development, it is vital that actions are taken to work towards such an ideal. (Source: UNESCAP 2002)
To what extent one can say that these are fulfilled, corruption is minimized, the views of minorities are taken into account and the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society.
The following can be seen upon as governance challenges because it is in the interest of aviation to aim for the fulfilment of these to facilitate sustainability:
1. Participation â€“ Both men and women should be represented in the institutions and decision-making arenas, either direct or through representatives. Formally speaking this means freedom of association and expression and an organized civil society. Equal opportunity between the sexes is still a challenge in aviation, as in many other sectors. This is mainly due to the fact that aviation historically was a manâ€™s arena (cf. military flight operations and the high technicality of aircraft handling and maintenance).
2. Rule of law â€“ Fair legal frameworks and impartial enforcement through an independent judiciary is required for good governance. Much of the law regarding civil aviation has been developed through a combination of domestic law and international agreements. Since aviation is a global industry, the legal framework requires the highest degree of uniform regulations and procedures worldwide. ICAO, amongst many, is ensured with this, and as in many large international bodies/organizations one can see that an extensive bureaucracy and powerful members could reduce the fairness and impartialness in the making of the legal framework. In addition, there is the always-luring problem of corruption and misuse of power, but this is a larger challenge in the lower part of the system; that is, in the airline and airport business .
3. Effectiveness and efficiency â€“ Results that meet the needs of society should be produced while making the best use of disposable resources. This covers both sustainable use of natural resources and the protection of environment.
4. Equity and inclusiveness â€“ All the members should feel that they are included and have opportunities to uphold or improve their well being. As in 2., the problem here is if a member misuses its power to achieve benefits that would not be the case if it had not been for its size or influence. A just political system within the organization could reduce this possibility, but as we have seen in UN, countries like USA still have much power of decisions made. Another point is the inclusion of third world members; have these equal opportunities to forward and trump through their wishes?
5. Responsiveness â€“ Institutions and processes should try to serve all stakeholders during a reasonable timeframe. Bureaucracy has a tendency to make decision-making a time consuming affair. This is also the situation in aviation organization at both national and international level.
6. Transparency â€“ The enforcement of decisions taken should be legitimized by the authority of laws and regulations. Also, information should be freely available and directly accessible to those who are affected by it. Some rules regarding this point have been made in most of the larger regulatory bodies, like ICAO and EASA, especially in relation to prevent and to deal with fraud, corruption and other illegal activities.
7. Accountability â€“ The key requirement for â€œgood governanceâ€ upholds the need for governmental institutions, private sector and civil society organizations to be accountable to the public and the stakeholders absorbed by decisions and actions made. Accountability is rather cumbersome to evaluate.
8. Consensus-oriented â€“ Different interests should undergo mediation to reach to reach a broad consensus in society on what is the best interest of all involved and society as a whole and how it can be achieve.
Among the larger aviation organizations, mediation is the normal way of achieve consensus. This is mainly a result of the close link these have to UN culture through their building blocks (the many conventions on environment, health, human development etc., cf. ICAO and The Chicago Convention). A problem would though be inertia; the system and the processes experience slow-moving and also little constructive decision-making. In addition, conflicts of interests between stakeholders are almost inevitable, e.g. governments who wishes lower emissions (cf. their obligations in signing The Kyoto Protocol), civilians who want both lower air fares and a less polluted environment and the air transportation business who seeks lower costs and less regulated market forces.
Turning back to Bakerâ€™s (2006) thoughts on sustainability, we can sum up the governance challenges by posing some questions about core issues and concerns:
Is aviation supporting a development that is economically and ecologically sustainable? Is aviation implementing environmental protection measures and resource management? Is aviation supporting the involvement of an informed public, NGOâ€™s and the scientific community? Is aviation providing legal means; ensuring that national and international law keeps up with the accelerating pace and expanding scale of impacts on the ecological basis of development?
2. Which of these challenges are also challenges if the goal is to be a responsible corporation?
If an airline business has the aim to be a responsible corporation, it has to go beyond the rules set by legislators. We are not talking about sustainable development of the corporation, but a corporation working towards sustainable development of the society. This can be seen as a balance of being sustainable and responsible, and thereby not only looking at what can be done, but also what should be done.
A responsible corporation should be aware of all the challenges discussed earlier and work towards solutions in best manner.
Responsibility does not only mean following rules and requests by various organisations and NGOâ€™s, but also working together with these interests to find solutions emphasized by all.
Corporate responsibilities are often communicated through values stated by the airline company. BA (British Airways) has even introduced a corporate responsibility statement implemented in the annual report. The report explains what challenges BA are facing. It sets goals for the future and gives measures of what level these targets are met. This is an important step, and should be adopted by other airlines. By being aware of the challenges BA can communicate these to the society, making it easier for the industry to work in the same direction. The awareness, and willingness to give information on the issues, are good examples of being a responsible corporation.
2.1 Economic challenges
The challenges this sector has to face if the goal is to be a responsible corporation, would be to look away from the bottom line of the business. To be sustainable in the long run, the airline industry has to be cost effective, to meet the competition from within and outside. But to be responsible, it has to look at the environmental issues, and pay the cost of pollution. The industry has to work towards a business, where money can be made at the same time as the cost of the environmental and social challenges as met. This may include changing the culture of low-fare tickets at any cost.
The low-cost carriers are giving far less attention to the social and environmental challenges. When talking to NAS (Norwegian Air Shuttle), a low-cost airline, they could not show us any specific work towards these issues, while SAS (Scandinavian Airlines), a traditional airline company, had a division responsible for implementing social and environmental work in the day to day business. This is because low-cost airlines are living on the edge, always selling tickets to as low price as possible. We can say that these companies are focusing on the economic issues of surviving. They want to be sustainable through the economic perspective, and forget about the social and environmental issues that have to be faced by the industry. These companies only act to the extent of the legislative control. SAS would be a better example of a responsible airline corporation.
2.2 Environmental challenges
The main drive force for meeting todayâ€™s environmental challenges is the legislative control set by various organisations and regulatory authorities. An important question would be if this is enough?
To be a responsible corporation, an airline company has to meet the environmental challenges today. It has to be aware of the environmental downsides of its business, and work to get them better. This view should to be implemented throughout the organization.
Environmental challenges like pollution should be implemented in the business plan for the future. As mentioned earlier this involves spending a lot of money dealing with the challenges.
2.3 Social challenges
The social challenges are not controlled in the same level as the environmental challenges. Although they are linked to a certain degree, the focus seems to be on the environmental challenges around the transportation sector. As mentioned, the airline industry brings a lot of social benefits. If a company wants to be a responsible corporation, it has to face the challenge of spreading the social benefits to new parts of the world, especially developing countries. It has to make sure that these countries get the same opportunities. An example would be forcing better work environment in developing countries.
2.4 Governance challenges
As mentioned earlier corporations should go beyond the legislative rules when being a responsible corporation. This can for example mean not doing business with companies linked to corruption in countries where this may not be set by legislative control.
The airline sector is a global industry, which have an impact on many parts of the world. A harmonization of control and standards should be emphasized to give equal opportunities. This may involve only doing business with companies that are approved by curtain organisations, for instance firms that have adopted the ISO standards.
The corporation should adopt the views of interest organisations to learn more about the challenges that they face. The interest organisations like NGOâ€™s work hard to find solutions to problems.
With these examples we can conclude that the governance challenges involve looking at the ethical and moral dilemmas of the industry. Rules of business may be different in some parts of the world, but this should not be an excuse of bending what may be right and wrong. This may be situation based, and it is therefore important to introduce a culture in the organization dealing with the views of what the corporation may think is right and wrong. It is better to prevent situations that may happen, rather than ending up as the â€œbad wolfâ€.
3. Describe the sectorâ€™s progress towards, or (failures) move away from sustainability over the last 20 years.
The World Commission on Environment and Development (WCED) was set up in 1983 and published in a report called â€Our common futureâ€ in 1987. The report contained guiding principles for sustainable development and explicitly addressed the links between the social, economic and ecological dimensions of development (Baker 2006). The Brundtland Commissionâ€™s definition of sustainable development , mentioned in the beginning of part 1., is in Alfsenâ€™s and Moeâ€™s paper on indicators of sustainable development (2005; 5), interpreted as â€œdevelopments that continue â€œfor everâ€ or (â€¦) till the end of the time horizon considered by policyâ€. They also point out that the developments should have a positive quality, that the â€œsituation should not deteriorateâ€. However, it can be difficult to judge whether a given development is good or bad. A response to that problem has therefore been sought by the international society, and especially the UN. Some milestones after the Brundtland Commission are presented in Appendix 3.4 where one can get an overview of the work that has been done in the field of sustainable development. This function as helpful background guidance when we later assess the progress or failures of sustainability in aviation.
The Rio Declaration
In Rio, the parties reaffirmed and sought to build upon the work of the Stockholm Conference (cf. Appendix 1.4). The restated declaration proclaimed 27 principles where some are of more relevance in an aviation context.
Polluter pays principle
The Rio Declaration (1992, Principle 16) states that â€œnational authorities should (â€¦) promote the internalization of environmental costsâ€¦â€ This principle further defines the polluter pays principle as: â€œthe polluter should (â€¦) bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.â€ In aviation, many externalities have already been internalized by the submission of environmental regulations (e.g. emission permits and noise targets), requirements of different certificates for aircraft design and operation (e.g. airworthiness and security training for aircraft staff) and.
Principle 15 is interpreted through Article 3 of the UNFCCC and can concisely be understood as a way to safeguard against environmental degradation by anticipating, preventing or minimizing the causes of climate change and reduce its unfavourable effects. Global Compact, which many air transportation corporations have adopted, incorporates this principle; businesses are endeavoured to promote a greater responsibility towards environmental challenges. The problem is though that opinions as to how and at what stage preventative actions should be applied.
3.2 Economic Sustainability
The economy of aviation has changed dramatically the last 20 years. This is mainly because of the huge growth in demand for air transportation. In the period 1985 â€“ 1995, total tonne-kilometers of freight (in billions) grew from 39,6 to 83,1 in all ICAO (International Civil Organisation) states (Whitelegg, 2000).This led to a economic boom within the industry. The 80â€™s and 90â€™ can be summed up with the economical challenges of meeting the demand of the market. The airlines made all progress in meeting these demands, and being more sufficient when producing its services.
In 2001, there was an incident of airplanes being involved in a major terrorist action. This led to an unsafe future for the airline sector. The demand dropped quickly as people were scared to fly, especially in the US. Large companies like UNITED Airlines were forced to cut down on its workforce. Later they filed for bankruptcy.
As mentioned, the airline business is capital intensive. The airlines are depending on being right on future predictions, to be able to pay the cost of new airplanes. As new airplanes had been bought to meet the demand from the market, airlines were not able to pay these costs after September the 11th. This situation was a major challenge to many airlines, especially in the US. Fortunately the demand has grown to an all time high, making the past challenge of meeting the demand again. There has also been great progress in meeting this demand, with new more sufficient and cost effective aircrafts.
The 80â€™s and 90â€™s were years dominated by the traditional airlines. The competition consisted of being able to give good service, and not ticket price. As low-fare carriers rose, the competition changed, making the traditional airlines loose the dominance and stability. These were not service oriented, but found new ways in cutting cost, and therefore giving a competitive product. This was one of the reasons why DELTA and Northwestern filed for bankruptcy in 2005 (CNN, 2005).
The last couple of years have been dominated by a rising oil price, making the cost of jet fuel higher. The chart shows the development since 1978:
(Source: Oilenergy.com 2006)
The oil price is on a constant change, but no one had predicted the sudden rise from 2004. The price of jet fuel had an average price of 56 cent, and never exceeded 65 cent from 1991 to 1999 (ATA, 2006). This stability did not make the cost of jet fuel into a challenge. Predictions were made on higher oil prices. The growth in use of oil on a global basis, at the same time as the focus on the sustainability of this fuel, has led to a higher increase in this price than predicted. This has also been to great impact for why companies like DELTA have filed for bankruptcy (CNN, 2005). A good example would be the percentage of cost consisted by fuel:
(Source: ICAO Journal, 2005)
The airline industry has failed to cut the cost of fuel. This is mainly because of little focus on developing alternative fuel. With the past stability, this was not an issue, but as the fuel price rises, the airlines are making progress in this area.
3.3 Environmental sustainability
In the area of environmental sustainability several sides can be pointed out as progress or setbacks. The two most important implications of air transportation are emissions and noise, as discussed in 1 b. These topics will be the focus of the coming sections.
Regulations have seen great progress in field of taxation and noise restrictions. Switzerland have introduced (as the first country) nitrogen oxide (NOx) charges related to landing charges while Sweden in addition levies hydrocarbon and carbon dioxide emission charges on domestic flights. On international level, ICAO may grant dispensation for emission charges on international flights whereas the European Commission currently is working on proposals for emission charges in the EU area.
In the matter of technology and in flight and on ground processes, aviation has experienced great improvements. This have brought forth fuel efficiency and noise reductions due to improvements in engine and airframe design, development of fuel saving operational procedures, more efficient routing and higher load factor. Additionally, the new concept of â€œgreen landingâ€ (a procedure when the airplane glides towards landing, instead of using the engines actively. The method is used by among others SAS in both Sweden and Norway) results in lower fuel consumption and a better use of the slot system.
An area where development the last twenty years has accelerated is the aiming for a more overall, extensive aeronautics research, like the ACARE project in Europe. The goal is to better serve the societyâ€™s needs while becoming a global leader in the field of aeronautics. Challenges within affordability, environment, safety, security and efficiency are met by identifying solutions and technical contributions. These are implemented with respect to Vision 2020, a dramatic charter of change, including noise reductions, emission reductions, reduction on travel delays, and a safer air transport. Another implication of ACARE is the research on alternative fuel (e.g. bio fuel), which could be both more environmental friendly and cost effective.
A further outcome of technology advancement is the retirement of older, less fuel efficient airplanes. The fleet mix is becoming newer, which has positive consequences on noise, fuel consumption and emissions.
The last note on progress made is the increase in load factor. More people are being carried by fewer airplanes; that is, aircraft size is decreasing in terms of average number of seats.
As the airline industry grow, so does the environmental emissions. Although the industry has managed to develop more â€œemission friendlyâ€ aircrafts, the growth exceeds the setback of pollution. The industry has not found any permanent solution to the environmental impacts made by this sector. There is no incentive to break this major growth in air traffic.
The growth in aviation does also have an impact on noise. Although the level of noise has been significantly reduced the last 20 years, airport traffic continues to grow. This makes the frequency of noise exposure higher.
In 1997 an important meeting on environmental issues was held in Kyoto, Japan. The result was an agreement between countries that the developed countries were to reduce its emissions on a specific timescale. Unfortunately, the aviation industry was omitted from this protocol, which was valid from 2005.
Later research has shown that the newer aircrafts may not produce less emission than older aircrafts. While the emission of carbon monoxide has dropped, this is not the case when it comes to NOx (EPA, 2005).
(Source: European Union Road Federation)
3.4 Social sustainability
The airline industry has had both failure and progress towards social sustainability during the last 20 years. With the introduction of low fare airlines a progress has been made as the lowered price has made equal opportunities for all members of the community. As the airline industry has grown, the need for employment has grown. This has been a progress towards social sustainability in the sense that when more members of the community are employed, the perceived safety for the individual increases. Also the possibility for personal and social development increases, thus resulting in the sense of self worth increasing.
The industry growth has cause both inward and outward tourism to grow. Inward tourism has contributed to progress toward social sustainability by making members of the community having an increased sense of connectedness. Tourism abroad has contributed to progress with the increased cultural exchange, resulting in cultural enrichment, increased tolerance towards foreign cultures and a celebration of diversity.
The industry has also experienced failures, and a move away from social sustainability the last 20 years. With the increasing amount of flights, airplanes have become a target for terrorists, resulting in a decreased sense of safety for members of the community. With the increasing traffic came increasing noise and pollution with its impact on the general health of the community.
3.5 Development in governance issues
The field of governance in a sustainability point of view has experienced major improvements in addition to shortcomings which in the long-run will obstruct the sustainable development of aviation as a whole.
The Brundtland Commission with its predecessor, the Stockholm Conference, constructed the three-pillar approach of sustainable development and adopted a global focus. This established the agenda of global environmental politics as a norm for promoting sustainable development. Normative and good governance principles have been articulated and a pattern of increasing negotiations, cooperation, participation and institutional development has occurred (the Rio Conference was particularly essential as buffer in this respect). It must though be underlined that the larger, more influential organizations (ICAO, FAA, IATA and ECAC) were created decades before the Brundtland Commission. Though have other initiatives and organizations been established in wake of the pioneering works in the early nineties; especially on the European arena, in Asia and the Middle East, and between airports, air navigation business and the leisure travel industry (e.g. Airports Council International, ACI; Civil Air Navigation Services Organization, CANSO).
In addition, the national and global partnerships have increasingly invited NGOs, civil society and governmental representatives in decision-making and discussions concerning various fields of aviation challenges. As a result of this, inclusiveness (as to who is represented and involved) could be seen upon as enhanced during these 20 years.
The developments of â€œsoft lawsâ€ (non-legally binding) and general norms have been accepted by a large group of stakeholders (states, environmental organizations, customers, airlines and common suppliers and contractors) which in turn have evolved into â€œhard lawsâ€ (e.g. safety and security regulations in USA and emission and noise limits in the EU).
Even though the development concerning governance shows positive effects, also negative sides must be considered and evaluated. Some major issues will be mentioned in this section.
One significant shortcoming of the current governance policy, is that institutional regimes in aviation are dominated by the perspectives of Western policy makers and specialist expertise. The lack of democratic dimensions is problematic in many local, national and global bodies. Are third world countries and organizations equal partners, or are powerful states like USA and influential associations like some pilot organizations (e.g. AOPA) more leading in constructing and implementing decisions? A key issue is: to whom are these groupings accountable and which objective shall be weighted most?
In the same genre as above, the political clouts overshadowing many decision-making arenas have led these to be infective, overly cautious and dominated by national interests. In this way inadequate targets and global plans are hindered in being realized within an acceptable timeframe.
The promoting of gender equality also seems to be somewhat lacking behind. There are still relatively few females in the pilot profession and inside the organizationsâ€™ administrations and boards. Limited and elite participation constitutes serious challenges, both in regards to gender and the division of powers.
4. What should aviation and regulatory authorities do to promote sustainable development in its sector
4.1 Economic sustainability
Oil is by far the most significant cost for the airlines industry. While other costs have been reduced to a minimum, the price of fuel has proven to be a problem.
The price of oil has increased significantly the last decade. The Federal Aviation Administration (FAA) has based its forecasts for the next decade on oil prices falling to $54 a barrel this year and to under $51 a barrel by 2010. As a reference point oil is being traded for $60 a barrel (November 2006). As a result of this, FAA predicts that if oil reaches $70/barrel or more, a liquidation and/or further contraction of mainline carrier route structures would occur, and that several large U.S. airports could lose their major service provider (Andrus 2006). For the airline sector to be economically sustainable either authorities would need to subsidise airline fuel, or the industry need to find ways to increase its fuel conservation or develop alternative fuels.
4.2 Environmental sustainability
To subsidise fuel would not be a good alternative, as it would completely compromise the goal of environmental sustainability. The airline industry and authorities have some tools to achieve environmental sustainability. Among other things, the use of regulations, taxation and technology.
Airports are not accountable for the air pollution it produces; instead it is the government that stands accountable. The only thing the government can do is to ask the airports to take voluntary action. A way for authorities to promote environmental sustainability in this case would be to bring airports and aviation within a framework of accountability for their polluting activities. This could be done by including airports in the national air quality strategy, strengthening the regulation of airport-generated noise and including emissions from international aviation in the Kyoto protocol (Bishop & Grayling 2001).
As of today emissions from international civil aviation are not included in the Kyoto protocol. However, there are already measures being made. The United Nations Framework Convention on Climate Change (UNFCCC) has charged the International Civil Aviation Organisation (ICAO), with developing proposals to include emissions from international aviation in the Kyoto Protocol (Bishop & Grayling 2001).
Also, regulations could be established to make airports ensure safe minimum standards for noise and local air quality based on the EU framework directive on noise and the national air quality standards. The current ICAO standards for aircraft noise and emission standards are unchallenging and Inadequate. Instead of the regulations following aircraft technology, instead regulations could be set to such a high standard that it would be leading and giving incentive to improvements made in aircraft technology (Bishop & Grayling 2001).
Another incentive to promote environmental sustainability is the use of taxes and charges. By increasing the access charges at overly congested airports, demand would be distributed more equally, reducing the negative effects of congestion on the environment. Not only would this promote high load factors and an equal distribution of air traffic throughout the world, it would minimize the damages on the local environment caused by traffic to and from the airport, while the positive economic effects of an active airport also would be distributed more equally between communities.
Arlanda airport in Sweden Zurich airport in Switzerland are both regulated in the sense that they are capped in terms of the pollutants they can produce. By introducing these regulations and pollution charges on other airports, authorities could form a mechanism to secure local air quality objectives (Bishop & Grayling 2001).
There is a strong incentive in the airline industry to conserve fuel due to the fact that it is the main cost. As technology advances, fuel consumption within the industry has decreased. Through further development in engine performance, airplane design and fuel technology the environmental sustainability within the sector would be strengthened. New engines use less fuel, pollute less and run more quiet. The development of lighter aircrafts like the micro jets or very light jets (â€œVLJÒ‘sâ€) is also resulting in less emitting aircrafts. The FAA has released forecasts assuming that almost 5,000 VLJÒ‘s will be in operation by 2017 (Andrus 2006). As these technological advantages contributes to a more sustainable environment, it is crucial to also try to spread this trend to the planes operating in less developed parts of the world.
4.2.4 Other ways to promote environmental sustainability
If the industry improved itâ€™s logistical efficiency, fuel efficiency would also be improved, resulting in a more sustainable environment. Introducing better airspace management, streamlining aircraft movements on the ground, flying more slowly, using â€œeco-routesâ€ and flying at less damaging altitudes the fuel efficiency could be maximized (Bishop & Grayling 2001). Through a better utilization of slots, aircrafts would spend less time circling in the air waiting to land, and a reduced amount of time idling when waiting for take off.
Also by promoting the principle of â€œgreen landingsâ€, landings where the pilot uses less throttle and more glide, the industry would decrease fuel consumption (Nilsen 2006). Even though the load factor has increased in recent years, the capacity utilisation could be further improved to lower the fuel consumption per passenger (Bishop & Grayling 2001).
4.3 Social sustainability
With the airline industry being such an international industry, steps should be made towards making labouring legislation more standardized across boarders to avoid socially unsustainable issues like working hours and working conditions. E.g. Norwegianâ€™s recent utilization of apprentices instead of a regular workforce (Verdens Gang 2006). The emission and pollution created by the industry discussed under â€œenvironmental sustainabilityâ€ also makes an impact on peoples health, thus should also be taken into account when promoting social sustainability. Noise level restrictions should be implemented globally to reduce the impact on local communities. Noise levies could be earmarked to cover the cost of noise alleviation measures, and night flight restrictions could be implemented to limit or avoid sleep disturbance where possible (Bishop & Grayling 2001).
4.4 Governance development
From a governance perspective, authorities like the International Civil Aviation Organisation (ICAO), the United Nations Framework Convention on Climate
Change (UNFCCC), the Federal Aviation Administration (FAA), the EU and the UN all need to agree upon a common, achievable set of objectives, standards and regulations for the airlines industryâ€™s path towards a sustainable development.
Baker, Susan. 2006. Sustainable development. Milton Park, England, and New York, USA: Routledge.
Zadek, Simon. 2001. The civil corporation. Earthscan.
Alfsen, Knut H. and Thorvald Moe. 2005. â€An International Framework
for Constructing National Indicators for Policies to Eenhance Sustainable Developmentâ€. United Nations Division for Sustainable Development.
Andrus, Kathrine. 2006. â€œSustainable Aviationâ€. Air Transport Association Inc.
Bishop, Simon and Tony Grayling. 2003. â€ The skyâ€™s the limit policies for sustainable aviationâ€.
Bishop, Simon and Tony Grayling. 2001. â€œSustainable Aviation 2030â€. Institute for Public Policy Research. Southampton.
Dokken, David J. et al. â€œAviation and the Global Atmosphereâ€. Intergovernmental Panel on Climate Change.
ICAO. 2005. â€œAnnual Review of Civil Aviationâ€
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