Key findings shared by the advisory team

SITA's involvement with various airlines to date has acted as a catalyst in their preparations for ETS and ensured they are better informed and stay / go on the right track for both the monitoring plans and preparing for the start of the ETS monitoring period on 1 January 2010 with the support of the SITA Aircraft Emissions Manager.

Some more detailed key findings shared by the SITA advisory team should be useful for your EU-ETS preparation.

The importance of getting the tonne-kilometres right from the beginning

The allocation of the "carbon cake" via the tonne-kilometres (TK) calculations has created a great deal of discussion within airlines. In particular we have raised awareness of the need to develop a strategy to properly calculate and consider maximising TKs in 2010 to the potential benefit of the carrier. In some cases airlines have brought forward plans to increase frequencies or start new routes to the EU.

In respect of Tier 1 and Tier 2 selection for payload methods, there can be significant advantages / disadvantages for their total tonne-kilometres that will be reported in 2010 if the wrong one is chosen. Notwithstanding making that choice, there appear to be differences in opinion (or interpretation) of the EU ETS directive by different member states which are creating some confusion on whether the choice of Tier 1 or 2 is a wholly free choice, or "free" but aligned to current standard operating procedures of the airline.

Only time will tell how the verifiers and member states will interpret this critical area of carbon allocation and the financial impact for the airlines becomes evident. In the meantime we are advising that it is essential that airlines focus on ensuring they count all relevant payload including re-positioning crew and their baggage while also ensuring that they have effective mechanisms in place for excluding the tare weights of ULDs (aircraft containers) to avoid being penalised.

Moreover, we have observed that an airline's evolving marketing strategy to limit the number, or weight, of passenger hand baggage needs to be made in the context of assessing the potential impact upon the TK calculation for 2010 and subsequent decisions by the EU that will provide an amount of free allowances for nine years (2012 - 2020).

The key point is that any increase or decrease of payload during 2010 will have a long-lasting effect on the level of free carbon allowances handed out by the EU, therefore careful financial assessment that is required. Building on SITA's experience in departure control system (DCS) and the knowledge of the load messages the new SITA Aircraft Emissions Manager will ensure that all the relevant payload information is correctly captured and calculated and that where there are any gaps they are highlighted and promptly assessed and actioned.

The challenge about capturing complete aircraft emissions data

The area around ETS fuel processes is generally one of the least automated areas within airline flight operations. The challenge is primarily around the capture of data that is predominantly manual in nature. After SITA's consultation almost each airline had to amend their current processes by either adding measurement points or changing when and how the measure is being recorded. Some airlines are as well considering to work only in weight, thereby avoiding the endless debate over fuel density measurement. Working in weight for fuel measurement also turns the verification process to an easier task as there reconciliation between volume and weight may not be feasible.

In all cases we have seen the airlines setting-up plans to go for a full automated solution which is recognized as the only viable solution in the long term. Indeed, using ACARS messages may place them at an advantage to more accurately calculate their fuel consumption and in conjunction with the SITA Aircraft Emissions Manager system the assessment of data and process quality and final reporting to the verifiers and authorities can be highly beneficial to an airline.

In respect of an airline choosing the EU ETS fuel consumption calculation methods of "Method A" and "Method B", they have proven to be one of the points engaging in much deliberation due to the difficulty to comprehend the practical consequence between each method..

While the methods initially appear to be entirely equal in their calculation of fuel consumption, SITA's experts noted that in some cases there are potential advantages of an airline using one method versus the other. Similarly, they have noted that significant differences in fuel measurement accuracy may arise according to the exact timings of when fuel measurement readings are taken.

In respect of APU fuel use, airlines regularly point out that that such fuel use on the ground should be outside of the logical scope of EU ETS. This could well be challenged legally in the future but in the meantime the airlines must understand their own scenarios adequately so that they are not placed at a disadvantage.

EU ETS can have a strong financial impact - preparation is key

One area where there has generally been less awareness and preparation has been in understanding the financial impact of EU ETS. There are, for example, potential mitigating actions that the airlines can already take today to help minimize their exposure to future carbon costs that typically represent 10% or more of the airline's fuel bill. With airlines facing carbon bills of perhaps tens of millions of Euros per annum, even hundreds of millions in some cases, it is important that airlines get to grips with this issue immediately.

To help the airlines highlight the potential cost impact of carbon, SITA has developed a model which takes various inputs of the airline's operational data and is merged with some generic industry facts as well as financial assumptions for the EU ETS. The result is one or more scenarios that can be useful to the airline in considering a response to the increase in its cost base. For some airlines, we have seen an increase in fuel burn of 3% can translate into an increase of allowance shortage of more than 10%. Equally SITA has demonstrated that the cost increase between 2012 and 2013 could be for a traditional airline as much as 45%.

Carbon offsets and ETS - confusing concepts

SITA helped clarify some confusion around between the role of IATA and other carbon offset programmes which are voluntary initiatives, versus the ETS which is a compulsory scheme. The two schemes are incompatible with each other as are their respective carbon certificates, but the airlines need to be aware how the two schemes may potentially support each other in terms of green marketing and financial strategy for their airline.

Clear guidance for data storage

Most airlines were unaware of the need to store ETS related information for 10 years. The SITA AEM solution will alleviate some of the impact of this upon the airlines, but not entirely, and we have stressed the importance of ensuring that adequate archiving procedures are introduced as soon as possible in order that they are live from 1 January 2010.

_{The summaries and examples on this page are intended solely for informational purposes. No legal advice is being given, nor should any be construed. Please consult your own legal counsel for any such advice.}