Air Canuk and the Green Engine Decision
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Transcript of Air Canuk and the Green Engine Decision
Air Canuk and the Green Engine Decision
Dr. Jennifer LynesEnvironment & Resource Studies
University of Waterloo
Dr. Jennifer LynesEnvironment & Resource Studies
University of Waterloo
The case study
The Toronto-based airline Air Canuk airline needs to upgrade its aging fleet of DC-9s with a more modern fleet and has decided on the Boeing-737
The next decision the airline has to make concerns the type of engine they will purchase for the B-737
The airline is considering purchasing an environmentally-friendly engine for the fleet, but this ‘green’ engine costs more money
Your mission
To consider whether Air Canuk should purchase the green engines or stick with the engines that are traditionally used with the Boeing-737
To think about both the financial and environmental implications of the decision with regards to your role in the company (which we will assign to you)
Case Study Objectives
To get you thinking about how corporations balance relationships between stakeholders in environmental decision-making processes
To encourage discussion about how far should a corporation should go to be ‘green’
Trends in the airline industry Growth - over the last 50 years, the industry has
experienced almost continual growth in passenger numbers
People are travelling longer distances for vacation and for business than ever before
Since 2001 many airlines have been going through economically difficult times
Low cost airlines are having big effect on the market and forcing larger airlines to lower their prices
Airlines have been experiencing increased pressure from regulatory bodies and environmental groups to reduce noise and air emissions
Environmental Issues in the Airline Industry Flight Operations (approx. 90% of an airline’s impact)
Fuel consumption Air and noise emissions Air traffic congestion
Cabin Operations (approx. 5% of an airline’s impact) Water consumption inflight Waste produced from inflight meals Materials used in cabin grooming
Ground Operations (approx. 5% of an airline’s impact) Energy use of vehicles on the ground Aircraft maintenance (use of chemicals, de-icing, etc.)
About airline fleets
Replacing an aircraft fleet can cost an airline billions of dollars
The choice of aircraft has long-term consequences for an airline since a fleet can last 25-35 years
The type of engine is an important aspect of this choice since it determines, to a certain extent, the fuel efficiency of the aircraft.
Air Canuk’s New Fleet
They have chosen to buy 50 new Boeing 737s
They need to decide which engine to purchase for this new fleet
The ‘green’ option for the engine reduces air emissions but adds 10-15% to the total cost of the engines
MARKETSCost-benefit analysis of commercial benefit
and marketability
Key considerations
SOCIAL SYSTEMDiscourses of
knowledge building, understanding and consensus building
SCIENCEScientific knowledge and expertise in the
assessment of cause and consequence
POLITICAL SYSTEMPolitical culture,
government influences and regulatory environment
Pressure from industry stakeholders
Being a good corporate
citizen
Financial cost-benefit
Airline Image
Adapted from Renn (2001)
Deciding which engine to buy
The Market System
•Some airports are charging airlines landing fees according to an aircraft’s level of air emissions (I.e. the higher the emissions, the more the airline pays the airport)
•More and more airlines are developing environmental management systems
•Low cost airlines are putting financial pressure on airlines - forcing them to cut costs
The Social System
Airlines are feeling pressure from non-government organizations to be greener
Protecting the environment is now of the top concerns for Canadians
The Political System
Noise and air emissions from aircraft are regulated by the International Civil Aviation Authority
The Kyoto Protocol is putting pressure on countries to ensure that businesses are trying to reduce greenhouse gas emissions
The Science System
Airlines must try to balance noise and air emissions, while also optimizing the fuel efficiency of the aircraft
Scientists are working hard to determine the effects of air travel on climate change
New technology can be risky as it hasn’t been tested on a wide audience
Here are some reasons why airlines are trying to improve their
environmental commitment
MARKETSCost-benefit analysis of commercial benefit
and marketability
Key considerations
SOCIAL SYSTEMDiscourses of
knowledge building, understanding and consensus building
SCIENCEScientific knowledge and expertise in the
assessment of cause and consequence
POLITICAL SYSTEMPolitical culture,
government influences and regulatory environment
Pressure from industry stakeholders
Being a good corporate
citizen
Financial cost-benefit
Image
Adapted from Renn (2001)
Environmental commitment
Activity 1: Reading the Case (3 minutes)
On your own, briefly read over the two page case study we have given you
Highlight key points that you think are relevant to the decision
Activity 2: Developing your argument (10 Minutes)We will designate each of you to a role you will
play for this case study. The roles include:1. Financial, 2. Environmental, 3. Marketing, 4. Maintenance, 5. Non-profit organization6. Industry Organization
Write down the pros and cons of the proposed decision and try to come up with arguments for and/or against the decision
Activity 3: Stakeholder discussions (10 minutes) Form into a group so that you now
have one member from each of the six different roles
As a team you have to come up with a recommendation on whether or not to purchase the engines based on the arguments that each of you presents to the team
This recommendation will be put forward to Air Canuk’s senior management
Activity 4: Presenting Recommendations One member from each group will
present the group’s decision to senior management
Each group will have 1-2 minutes to present their case
Try to make a strong argument so that you can convince management that your recommendation is a good one!
Elevator Pitches - the one minute presentation Many times in business you might only have
a short period of time to convince someone that you have a good idea – that’s why we call them ‘elevator pitches’.
If you are on the elevator with the person that has the power to implement your idea you want to make sure you make a compelling case before the elevator door opens!
Elevator pitches can take on various forms – from asking potential investors for money to convincing your boss about a great idea you have for the company.
Elevator Pitches - the one minute presentation You need to identify, package and
sell your idea to the executive team in a short period of time
Frame your argument in a way that would convince management that the decision is a sound one for the company
Refer to the handout for a list of things you should include in your presentation
What your "Elevator Pitch" must contain: A "hook"
Open your pitch by getting the persons attention with a "hook." A statement or question that piques their interest to want to hear more.
About 150-225 words Your pitch should be about 1 minute in length.
Passion Investors expect energy and dedication from entrepreneurs.
A request At the end of your pitch, you must ask for something or re-emphasize the argument you are making.