Airlines Going Green Major Airlines Research Paper

  • Length: 13 pages
  • Sources: 18
  • Subject: Transportation
  • Type: Research Paper
  • Paper: #97332833

Excerpt from Research Paper :

For some airlines, it is not that they do not care about the environment but only that they do not see going green as financially feasible (Friends, 2007; National, 2007; Kim, et al., 2007). If they have incentives, that can affect how they feel and whether they will go green. If there are few incentives, most airlines will decide not to go green because there will not be a large enough benefit to offset the costs they must address (Friends, 2007; National, 2007; Kim, et al., 2007). Companies, overall, decide to go green in the same way that they decide to do anything else - because it is cost effective for them and they feel as though it will be of benefit to them in the long run (Friends, 2007; National, 2007; Kim, et al., 2007).

Cost is a huge factor in whether a company decides to go green. There are also other factors, such as customer satisfaction concerns, pressure from governmental or regulatory agencies, and what the competition is doing (Friends, 2007; National, 2007; Kim, et al., 2007). Those are all valid considerations when companies are trying to decide whether to go green. The competition may be one of the most important considerations, as well, because an airline that does not keep up with its competition can see its sales numbers fall. For customers who feel that environmental health is very important, an airline that goes green and advertises all of the wonderful things they are doing for the environment may be the right choice, even if the cost of flying on that airline is slightly more than other airlines will charge (Friends, 2007; National, 2007; Kim, et al., 2007). By paying close attention to the competition's choices and comparing them with customer attitudes, it is possible for an airline to make its decision about whether to go green in a way about which it feels good.

Positive Motivations for Going Green

Governmental regulations may eventually force the airline companies to at least take some measures toward becoming more environmentally friendly (Intergovernmental, 2007; Intergovernmental, 1999). In addition to what airlines may be required to do, there are many choices that airlines can make now that can help them go green and feel good about their choices. One of the most positive motivations regarding going green for any airline is the way that customers feel about the environment. If people who fly - especially those who fly frequently - want to be involved with companies that care about the environment, then the airlines should give them what they want so that they will retain their business. The airlines can make a lot of money that way, simply by making some changes that signify their commitment to the environment (Intergovernmental, 2007; Intergovernmental, 1999). Of course, all of the positive motivation in the world has little to do with how much something costs, so airlines still have to relate their motivations to whether what they want to do is cost effective for them and will benefit them overall.

Surveying customers and talking to them about the environment can help airlines decide whether they want to consider going green. Knowing that being environmentally friendly will bring them in many more customers and promote loyalty to their airline is a great positive motivation for any airline (Intergovernmental, 2007; Intergovernmental, 1999). In addition, the company may be able to bring in better employees because it will find people who are conscientious about the environment and about their own working environment. These employees can be more dedicated to their employer than others, and they may also have good ideas about going green and about other aspects of the company. Because of the ability to attract great employees that are dedicated and committed to quality work, an airline can be highly motivated to go green and reap the benefits of being friendly to the planet.

Going Green and Profit Margins

An airline is not only interested in how much money it is bringing in, but also in the difference between what is coming in and the operating costs that are going out to pay employees and maintain planes and equipment (States, 2007; The U.S., 2006). In other words, the money that comes into an airline is far from being all profit - and the profit margin is very important to the airline. Any airline company that is considering going green needs to look carefully at the price that it will pay for that from a financial standpoint (States, 2007; The U.S., 2006). How much will going green cut into the profit margin of the airline? Will going green reduce the airline's profit to the point that the airline will no longer be able to be successful? If that is the case, the airline may not be able to go green because to do so would potentially put it out of business. It could go green and then raise fares to compensate, but that could drive away some of its customer base and stop the airline from seeing a big advantage from going green (States, 2007; The U.S., 2006).

Fuel is one of the largest areas of financial importance for any airline. Because airlines generally have many planes flying every day and all of those planes must be fueled frequently, the fuel costs for airlines can run into the hundreds of thousands of dollars (States, 2007; The U.S., 2006). By going green and switching to biofuel, an airline may see its profit margin decrease and may put undue stress on its financial reserves. Profit margins must stay at specific levels in order for a company such as an airline to continue to operate, and going green is supposed to increase that profit margin - but that could take time. In other words, the profit margin for an airline that has gone green will often be lower in the beginning, but it will be higher in the long run. For airlines that have enough cash, that is something worth considering. For other airlines that might not be operating with as much of a reserve, spending extra money up front to go green might not be possible or desired (States, 2007; The U.S., 2006).

Stockholders and Going Green

When an airline decides to go green, it has to consider its stockholders (Lee, et al., 2007; Next, 2009). If an airline is not careful of the people who support it, that airline could find itself in serious trouble financially. Stockholders do not call all of the shots, of course, but what they need and want should be taken into consideration, because they can strongly affect the company. Stockholders own shares in the company, and they can buy or sell shares. They can also vote on the people who operate the company, and they buy the stock with the expectation of getting dividends based on the price of the stock (Lee, et al., 2007; Next, 2009). Because of that, all stockholders have a vested interest in what the company does - including going green. If the airline goes green and the stock price goes up because of that, the stockholders will be pleased. Of course, the reverse is true, as well. When the stock price goes down the stockholders make less than they had hoped for, and they want to know the reasons behind the drop (Lee, et al., 2007; Next, 2009).

If the fact that the airline is going green is what is causing the stockholders to make less money, the stockholders are not going to be happy with that. They will start to sell their shares because the company is not performing well, and the selloff of shares will cause the price of those shares to drop even further (Lee, et al., 2007; Next, 2009). This could become a vicious circle from which an airline can have trouble recovering. When airlines go green, they can expect a change in their profit margin and their bottom line - which can directly affect the stock price in either a positive or a negative way. It is vital that airlines keep that in mind when they consider whether they want to go green and whether it will be cost effective to do so (Lee, et al., 2007; Next, 2009). If stockholders see that going green is a good move for the airline, they will be encouraged to purchase more shares and that will help to drive up the price of the stock. The higher the stock price and the more money made by the airline, the higher the stockholder dividends received (Lee, et al., 2007; Next, 2009).

The EPA - Pressure to go Green

Going green is mostly about money for the airlines, but there are other reasons that it should be considered. For example, the Environmental Protection Agency (EPA) often puts pressure on companies to go green and protect the environment (Executive, 2007; U.S. Supreme, 2007). The agency has…

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