Insights
Q&A: Star Alliance Discuss SAF, Digitisation & Aviation Future
Jonathan Pardoe
Fuel Consultant at Star Alliance Services
Like any other, the aviation industry is often a highly competitive environment. Airlines naturally want to attract customers and increase their market share. But what happens when airlines work together to achieve common industry goals and improve customer service? Star Alliance Services is doing just that.
Founded in 1997 between five airlines from the Americas, Europe and Asia, Star Alliance now includes 26 member airlines collaborating at over 50 hubs globally, with the main purpose being to provide customers with as seamless a journey as possible. Joint services include airport co-location, digital infrastructure, frequent flyer integration, joint business lounge projects, and other services to improve the customer travel experience.
With many of Star Alliance’s associated into-plane providers and fuel suppliers using i6 solutions, we were fortunate to catch up with Jonathan Pardoe, Fuel Consultant at Star Alliance. With over 30 years of experience in aviation fuel procurement, hedging, and supply logistics, Jonathan provides Star Alliance with essential advice and insights regarding the best approach to fuel-related sustainability and efficiency.
Keep reading to discover how Star Alliance is determined to help its members and customers achieve a greener future…
Star Alliance started in 1997 when five airlines (Air Canada, Lufthansa, Scandinavian Airlines, Thai Airways International and United Airlines) got together to coordinate certain activities, particularly travel scheduling and hosting of airport lounges. This was to provide greater connectivity for passengers, enabling them to go from one aircraft to another seamlessly.
This worked very well and Star Alliance now consists of 26 airlines covering at least 50 global hubs and thousands of destinations across the globe. It's the biggest airline alliance with the greatest global coverage by far.
The alliance offers passengers a much better structure for seamless travel than ever before, being more connected than any of the other alliances, as far as I'm aware and from what I've observed.
The advantages to the customer are numerous, particularly when planning flights to multiple destinations. Instead of purchasing multiple tickets from different airlines and dealing with numerous parties, Star Alliance carriers allow customers to book their entire journey and associated requirements in one go.
It also means that flights are more likely to connect seamlessly and have far shorter wait times thanks to cooperative scheduling. For example, if a customer’s incoming flight is delayed on one carrier, this is communicated to the next carrier. They can then make arrangements to help them continue their onward travels.
Then there are customer air miles and travel loyalty incentives. When a customer travels on any Star Alliance carrier, the points earned between those airlines are combined and can be used with all member carriers. This is great for passengers because they collect points on their preferred airline in their region, but when travelling further afield, they know they can also collect them on your flights. This leads to customer loyalty and allows member airlines to impress customers with their service.
For member airlines, a huge benefit is through shared costs and savings. For example, instead of competing at airport lounges, they can collaborate with a collective Star Alliance lounge. Or, for hub airports, members can have their lounge constructed, and then gain revenue to help finance the lounge by allowing other Star Alliance carriers to use it. Additionally, if all, or a subset of, the Alliance carriers are negotiating for standard equipment such as seats or in-flight entertainment systems etc., then this can be done collectively to deliver greater benefits or savings.
Members can also collaborate on other infrastructure where appropriate, such as hub fuel management, operational digitalisation, or app connectivity.
This is discussed at every level within the Alliance and within member airlines. We look to our Flightpath for the Future to guide us in increasing sustainability for our members, looking at everything from operational efficiency to improving sector lengths and optimising flight paths and schedules. We avoid creating unnecessary carbon emissions by streamlining and collaborating on our services and increasing airline connectivity.
Of course, it is still a difficult situation. Airlines have differing approaches to reducing environmental impact, as do the governments in the regions they operate within. Some have less regulatory interest in carbon reduction or provide fewer initiatives, making it difficult for airlines to invest without losing their competitive edge on pricing versus airlines that choose not to invest.
All of our members agree on wanting to invest in carbon reduction, so the Alliance is helping them standardise and align their approach where possible.
The approach to SAF across the whole Alliance differs from airline to airline, due to regional legislation and support, as well as local availability of SAF. Airlines are attempting to utilise more SAF globally, but primarily where governmental pressure is present.
However, sustainable fuel production is often limited, or non-existent, in many regions where the airlines operate. We do not want to create sustainable fuels in Europe and then burn additional fuel to ship them halfway around the world just so that we can claim that we are reducing our carbon emissions - it defeats the purpose of making it in the first place.
One way to alleviate that issue is through the ‘Book & Claim’ system. In this case, SAF is not physically transported into the aircraft. Instead, it goes into the fuel system at an airport close to where the SAF is being produced, where it is tracked and verified, and then carbon emissions are calculated and allocated accordingly.
Some airlines have even looked at investing in feedstock. These carriers generally have the greatest access to incentives such as tax reliefs or other regional benefits. Or they have the strongest governmental mandates to push the production and adoption of that product.
There is a very high interest in pushing SAF from all carriers. I was very impressed with the activity of ANA, a Star Alliance carrier working with Shell, Itochu, Neste, and other parties to push sustainability in Japan when originally there was no real incentive to do so. ANA started working on that in the local region, which triggered the government to take action. Many airlines are pushing forward with procuring SAF, even though there may be little pressure within their region.
One of Star Alliance’s aims is to try to make buying sustainable fuels become ‘business as usual’. We introduce sustainable fuel into all tender contracts, even if only a small proportion, where possible. We can then build that percentage gradually over time and get it to the point where it ceases to be an add-on to your contract but is just part of the standard contract terms and conditions.
These initiatives are very positive for passengers who choose to contribute. However, in a world where things are becoming increasingly expensive, many individual private passengers tend to avoid it, which is a shame but completely understandable.
Companies with larger travel budgets are looking at their carbon emissions and are much more inclined to do something to help the airline reduce carbon emissions. They pay towards sustainable fuels to help offset the cost for the airline, which is very positive and something everyone is keen to see.
Over time, these voluntary contributions towards the cost of sustainable fuel may be embraced by more people as they become more conscious of their environmental impact. Or we may see a more established mandatory fee within ticket pricing, as was recently discussed in Singapore. The Singaporean government are looking to put in a tariff to cover the purchase of sustainable fuel. These things will change over time, but we currently see a relatively low voluntary pickup by actual individual customers.
Fuel supply digitalisation has been a big topic within the Alliance for many years now, and we've been following the progress of i6 and other companies in that area and looking to create greater efficiencies for the airlines.
Our carriers welcome digitalisation - they see it as essential in creating greater efficiency and improving turnaround times. Improving the digital aspect of the whole fueling process from start to finish not only drives efficiency, speed, and accuracy but also saves money in the long term because it avoids errors.
Solutions such as those provided by i6 can stop someone from adding too much fuel onto your aircraft, which saves time and money. In the past, if someone gave the wrong fuel figure to a Fueler, you would need to find someone to remove the excess fuel. Or you would have to take off cargo to reduce aircraft weight or perform an aircraft swap.
Mistakes are far less likely with digitalisation, You are no longer relying on pencil and paper, scribbled handwriting, or word-of-mouth, so it is significant in driving both operational efficiency and ensuring accuracy. The Pilot and Fueler can connect digitally, so you no longer have Fuelers having to walk past your business-class passengers to get sign-off from the cockpit. Without the hassle of manual calculations and assessments, you enter a much more efficient world with more confidence in your data.
Fuel stock at the airport is another area where digitalisation and the ability to access that information would be essential to both the supplier and the airline. They are relying on their supplier to ensure sufficient stock at an airport to meet their requirements for flights coming up over the next few days and, particularly during a disruption to supply, they want to see what the stock situation really looks like. That is a key area, given the disruptions seen at certain airports.
You start to see major impacts when you digitalise the entire fuel lifecycle and other aspects of fueling, such as tendering and invoice processing. With i6, you have not only the into-plane fueling process but this is also connected to planning and allocation, to fuel supply, and to finance. You can see the fuel journey from when it leaves port to when it enters the aircraft to when the invoice is paid - that can be a lifesaver and a real benefit for many airlines.
One issue with tendering is that numerous suppliers put offers in different formats. This results in a manual process requiring the user to ascertain the best offer using a spreadsheet while accounting for different credit terms and pricing structures. Digitalisation makes it more efficient, saves a lot of hassle, and removes potential human error.
Electronic invoicing allows you to feed data straight into your fuel system that has been checked against verified electronic data from the airports. You can then set up an automatic system for payment so that once it has been validated and approved in the system it can be paid immediately. The airlines are happy because they no longer have to review each line on an invoice and the suppliers are happy because they receive prompt payments.
Digitalisation is a winner for everyone and should only increase efficiency moving forward. We are keen to see what i6 is doing with potential new solutions for the future.
This is certainly a goal that all of our airlines are keen to try and achieve, and I sometimes feel that they are more dedicated to this than some of their governments. However, several things need to happen to achieve this goal.
Regarding sustainable fuel, we need additional facilities and production capacity when you look at the percentage of SAF that should be available by certain key periods. Some of these targets are highly unlikely and optimistic without significant growth in production. We are struggling to get to 2% SAF in many regions, but to achieve the goal of net zero by 2050, the supply targets are extremely aggressive.
We need to see greater incentives for the production of sustainable fuel. Government support is essential instead of pushing responsibility onto somebody else. They need to provide something that will encourage the production of sustainable fuels and encourage the existing fossil fuel suppliers to invest more money in producing sustainable fuel.
The best way to do that is to provide some kind of incentive and ensure that the incentives are sufficient for every fuel type. In some areas, there are greater incentives to produce renewable diesel. SAF directly competes with diesel, and companies fight for the same production facilities, so governments need to encourage production with incentives and have agreed goals in the form of mandates for suppliers.
Airlines cannot purchase SAF if it is not there to buy, so it is unfair for them to be penalised. Mandates should state to suppliers that ‘by this time, you should be introducing this amount of sustainable fuel into your daily supply at a regional level’. This is a massive additional cost for the industry and airlines cannot bear it alone without significant price increases for their customers.
If you look at the media, many people are trying to reduce carbon emissions in aviation. But for the individuals booking flights, when they look at the price selection options, many are not concerned with carbon reduction and how green that airline is. They're looking at the actual price, which is understandable and that's not to say that there aren't any people who make decisions on sustainability.
But for most, it is certainly low on their list of criteria - they want the cheapest option available. A relatively small but important percentage of people book flights based on reduced carbon emissions. There needs to be greater awareness and positivity regarding passengers who may be more willing to help contribute towards that cost.
By 2050, most airlines will still rely on purchasing carbon credits in the market. Airlines do not want this, even though it is much cheaper than sustainable fuel. Airlines do not want to avoid their responsibilities, so if they can obtain sustainable fuel at a reasonable price, they will purchase as much as they can to achieve their sustainability goals.
We want to ensure that aviation is there for the next generation who want to travel, allowing them to meet people and learn about the world. These things are key to our societies now - we do not want to become isolated again. But it must be done correctly, and these are the key areas which airlines, governments, and suppliers must focus on.
