Emission Trading ? Strategy Implications for Airlines



Emission Trading ? Strategy Implications for Airlines

Authors

H Peters, Ecotrans Consulting, DE; S Albers, J-A Buehne, University of Cologne, DE

Description

Based on a discussion of the current proposals on the design of air transport emission trading schemes we identify and analyse the respective consequences for airlines? strategies.

Abstract

The installation of an emission trading regime that involves the air transport sector is currently on the agenda of many policy makers. The introduction of a trading scheme will have ?and is intended to have - a direct influence on the cost structure of airlines and will hence be reflected in their market actions. Even though the implementation of an emission trading scheme into the air transport sector is well discussed among ecologists as well as aviation economists, it has yet received only minor attention among strategy scholars. However, strategic implications need to be identified and should be taken into account in the design of such a trading scheme.
With this paper, we intend to bridge this gap. The assessment of the strategic implications of an emission trading scheme for the aviation industry is primarily based on an analysis of the economic impacts in terms of absolute surplus costs caused by the scheme implementation. Since ? contrary to private actors in the transportation sector (e.g. car users) ? the commercial-oriented transport companies have to act much more economically in a highly contested market, a cost-induced price increase for aviation consumers (e.g. passengers, industrial enterprises, forwarders) can be assumed. Hence, an increase of fare prices is a possible impact scenario which has the potential to initiate a reconfiguration of route networks and international traffic patterns in air transport ? and is likely to do so differently depending on the airlines? basic strategic orientation (e.g. full service vs. low cost).
Based on a discussion of the current proposals on the design of air transport emission trading schemes, we identify and analyse the respective consequences for airlines? strategies, and hence their likely reactions to its introduction. Besides evaluating the economic impacts by using the cost analysis approach, the strategic implications for airlines will be assessed by conducting expert interviews with important stakeholders, especially with representatives from airlines (e.g. Lufthansa AG), to refine our hypotheses and to test their validity. We extend current knowledge by explaining and evaluating strategic implications in the aviation market and thereby provide valuable conclusions for aviation researchers, strategy scholars as well as for airline managers.

Publisher

Association for European Transport