Resources

• Decarbonizing aviation: Executing on net-zero goals (McKinsey report)
• Short-haul flying redefined: The promise of regional air mobility (McKinsey report)
• Target True Zero: Infrastructure for alternative propulsion flight (McKinsey report)
• Working to Build a Net-Zero Sustainable Aviation System by 2050 (US Federal Aviation Administration)

Guests

Climate Rising Host: Professor Mike Toffel, Faculty Chair, Business & Environment Initiative

Guest: Robin Riedel, Partner and co-head of the McKinsey Center for Future Mobility

Transcript

Editor’s Note: The following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview.

This is Climate Rising, a podcast from Harvard Business School, and I’m your host, Mike Toffel, a professor here at HBS.

Today’s episode is part of our series on hard-to-abate sectors – those with some of the most significant greenhouse gas emissions, where decarbonization depends on scalable, cost-competitive technologies. 

In this episode, I’m talking with Robin Riedel, a Partner at McKinsey who co-leads the McKinsey Center for Future Mobility, and who is a lifelong expert in the aviation industry.

I’ll ask Robin to describe the major drivers of aviation’s emissions and the different levers to decarbonize its value chain. I’ll also ask Robin for career advice for those who want to get involved in decarbonizing aviation.

Here’s my interview with Robin Riedel from McKinsey.

Mike Toffel:
Robin, thank you so much for joining us here on Climate Rising.

Robin Riedel:
Well, glad to be here. Thanks for having me.

Mike Toffel:
Well, we've brought you here as an industry expert in aviation, one of the hard-to-abate sectors, and really excited because you have a lot of deep expertise in this area and a lot of broad expertise as well. So can you tell us a little bit about where you are and how you got there?

Robin Riedel:
Yeah, happy to. I mean, aviation has always been a passion of mine. I continued my journey for the last years and now a partner at McKinsey & Company. I'll get to that in a bit, but maybe to tell you a bit about the journey. So I grew up in Germany in an aviation family. My father and grandfather were pilots, and so I got a bit of that early exposure and some of my earliest memories are looking over the fence at the airport at airplanes. And so I ended up spending most of my life, most professionally, a lot of it personally too, in aviation. So I became a pilot and learned how to fly large aircraft, certified on an Airbus, the A320 series aircraft.

I studied aerospace engineering at MIT, both undergrad and grad, to get an idea of building these systems. I worked for an airline for a while in baggage handling and kind of overseeing the whole ground operation processes for that airline. And then more recently, for the last decade or so, I've been at McKinsey and they have been an advisor to a larger number of aviation companies across the value chain from airports to airlines to OEMs. And so I like to say my whole life kind of evolves around airplanes. It's very much true.

Mike Toffel:
Wow, that's a very interesting story. The idea of going from a pilot, also having baggage and operations experience, and then ending up here at McKinsey. And we'll talk about McKinsey's practice in a bit, but first I wanted to take advantage of your expertise to get a sense of sort of the lay of the land of aviation in terms of its relationship with climate change. So to get started, how might we think about the carbon footprint of the aviation industry?

Robin Riedel:
So look, aviation today is roughly 2% to 3% of the overall carbon footprint of our society, right? That sounds like a pretty small number to start with, but you got to put that into context. First of all, it's a small percentage of people in the world that create those 2% to 3%. And then this is a hard-to-abate sector, and so the 2 to 3% today could become 10, 15, 20% in the coming years as aviation keeps growing and as other sectors decarbonize. And so 2% to 3% of carbon is a meaningful number, it's probably going to grow.

Mike Toffel:
Got it. When we think about the carbon footprint of aviation, what are the main factors? Clearly, fuel is a big deal.

Robin Riedel:
So fuel is the largest issue really for aviation. More than 95% of the overall impact of the industry comes from burning fuels in jet engines or sometimes piston engines. Other things like running airports, operating plants to build aircraft, making the materials for aircraft. They're meaningful topics, but in the grand scheme of things don't really matter as much. And so it's really aviation fuel that drives the big footprint.

Together, all of this is about 2 to 3% of the world's carbon production, so to speak, or carbon emissions. Aviation is 2 to 3% globally. Aviation has another interesting piece that comes with that because it's not just about the carbon. It might be 2 to 3% of carbon, but aviation is operating at very high altitudes in the atmosphere. And so there's other effects that aviation has on the climate and they're not quite as well understood. But most studies kind of come up with factor of somewhere between 2 to 3 times the impact when you take those factors into account as well. And so while we often talk about decarbonization when we talk about basically the earth, for aviation, there's this other factor of non-carbon effects, which is also pretty material.

Mike Toffel:
So this non-carbon effect implies the combustion of these engines at these high altitudes have a greater impact on warming. Is that what we're talking about here?

Robin Riedel:
That is correct. I think the non-carbon effects are things like contrails, so water vapor in the air that creates reflective behaviors in the air. It's other emissions like soot that happens at a high altitude, which takes more time to settle. It also has different effect on the sunlight that comes through the atmosphere and other things. And so those things together are a pretty significant portion of aviation climate impact even though they're not directly carbon related.

Mike Toffel:
Now that's 2.5% or so of CO₂ emissions, but around maybe 6% of the warming, that's today. Let's talk a little bit about the future and the trends that we're heading. Now, I'm imagining there's a bunch of different factors here. There's on the one hand the growth of the industry. On the other hand, these jets are getting more fuel efficient with each generation. So how does that all balance out? What are we looking at as far as a trend?

Robin Riedel:
Aviation keeps growing globally and we're growing pretty fast and it's hard to abate. And so the relative carbon emissions are not going down quite as fast in other industries. And so if you play all of that forward, we'll have other industries get greener and we have aviation growing pretty fast. And even though it gets more efficient, it doesn't quite offset that gross. And so overall, aviation will capture more and more of the share. And it's not crazy to think that by 2050, aviation could be 10, 15, even 20% of the climate impact because other sectors are kind of reducing their impact and aviation will continue to grow.

Mike Toffel:
Yeah, that's super interesting. So we'll talk a minute about how aviation is decarbonizing and the various levers. But before we do that, I want to get your sense of why. So why are companies in the aviation sector concerned about climate change? Or maybe I should step back and say, are they?

Robin Riedel:
I think there is a general concern in society and the growing concern in society about the impact we're having on climate. And so for airlines and airports and other aviation players, that is a big concern for a couple of reasons. And let me lay out a few.

I think for one reason, your customers are starting to care. We do see other sectors where there's a big move towards lower carbon products. Aviation has a bit of that. We have flight shaming as a phenomenon more in Europe than in the US. But people are getting more conscious about, do I really want to fly and have that impact? There's government regulations coming into place. We see around policy quite a bit happening when it comes to mandates or other things in Europe. At France, they implemented a ban for certain type of regional flights if you can do it by train instead. And so airlines and other aviation players are taking note and say, "Well, we probably have to do something here before our business gets shut down or we no longer can grow."

There's a financial aspect too in the sense that investors are starting to look at this, and the cost of capital or the cost to lend money might depend on how green you might be in the future. And so there is a bit of thought around, how do we keep our investors on board and people willing to lend and invest in this business? Do we need to adjust for that as well?

And then last but not least, employees are a big factor as well. As society gets more conscious about the environment, employees are asking about the purpose and how well their companies are playing within the society. And there is a big push from employees in some countries to say, "Hey, hold on. We want to do our part to decarbonize the world and therefore our industry."

Mike Toffel:
That's super interesting. So that's a whole host of stakeholders who are increasingly leaning into this issue. Now I know of course because so much of the carbon footprint is fuel, and fuel costly, that fuel in one sense, the incentives are aligned for airlines to try and reduce their use of fuel. So at least from an efficiency perspective, the efforts to go from one generation to the next in terms of aviation models of aircraft, there's been this long history of improved efficiency, which has is primarily as I understand it, about cost reduction, operating cost reduction, and it has this benefit of a climate kind of co-benefit I guess one might say.

Robin Riedel:
Yeah, I think you could frame it that way. I think aviation is one of the few goods that has continuously gotten cheaper and cheaper, right? If you compare in real terms what a ticket cost in the late '70s to what it does today, we're significantly at lower cost today. And of course, efficiency improvements have made that possible. And so if you look at the last, call it two decades or so, the Western world aviation has really reduced its fuel burn per passenger kilometer or per thousand passenger miles, whichever metric you want to use about by 3.5% per year, which is a pretty significant number, right? I mean, we're getting better and better. We're getting more efficient. And to your point, we're doing that to save money, but it has this nice side effect that it's good for the environment.

Mike Toffel:
That's fuel burn per passenger kilometer. That was the metric?

Robin Riedel:
That is a typical metric you look with. So the reason we look at fuel burn for passenger kilometer is it gives you kind of a unit metric. So it takes out the growth of the industry and looks at just the unit of production.

Mike Toffel:
Got it. And of course, but we also need, as you mentioned earlier, to think about the totality, what it all sums up to, given more and more passengers are flying

Robin Riedel:
Absolutely. And aviation has grown for many years at plus 5 to 7%. If you're improving your efficiency rate at 3.5%, that's nice, but it doesn't offset that growth as an industry.

Mike Toffel:
So let's talk about the different ways that companies are trying to decarbonize. And efficiency is certainly one of them. I know we've been talking about aircraft design, there's a couple of others. Can you just hit the highlights?

Robin Riedel:
I think generally we look at about five different levers to decarbonize the industry at a high level. I think one is just better aircraft than rolling over the fleet. So you might've heard of the A320 Neo, or the 737MAX, also the latest airbus at Boeing aircraft. They're about 15 to 20% more fuel efficient than the version before. And so as we're rolling these new aircraft out to replace the older ones, we're getting a 15, 20% efficiency increase from a fuel perspective, and that definitely helps.

The second big lever are operational efficiency levers, including airspace. So we've all been in a holding pattern at some point, I'm sure, that burns unnecessary fuel. We've waited at an airport on the ground maybe for a gate to get ready, that burns unnecessarily fuel. So you put these things together. If we can get more efficiency on how we operate, maybe taxi was one engine instead of two, maybe not land with full flaps every time, maybe descent more continuously, all of those little things help. And so there is a few percentage points within just operating more efficiently as a second big lever.

And then we come to kind of the three big levers that really require what I would call innovation around them. So the first one of those, by far the largest lever towards 2050 is sustainable aviation fuel or SAF as we call it. And that is really just a way to create liquid hydrocarbons. So fuel that works with today's engines, but not use of fossil source for these, but make them from either biomaterials or from carbon capture, and as a result, make it a circular fuel. So you capture the carbon and then you burn it again. So that will be the third one.

The fourth lever is what I would call novel aircraft design and novel propulsion. This could be completely different aircrafts or blended wing bodies would be a topic here on the one hand, or different propulsion systems, mostly hydrogen or battery electric systems or even hybrid electric systems that people are talking about.

So those are kind of the four big levers that are within the industry. And then the last one is going to be offsets. Offsets is going to play a major role because even if we do all the other things, we're not going to get to exactly zero with aviation, there's always going to be a residual there. So if we want to get to net-zero, we'll have to take advantage of offsets, whether that's carbon capture or other things to really kind of bring it then to the net-zero part.

So five levers; aircraft fleet renewal, operational efficiency, sustainable aviation fuel, novel aircraft configuration of propulsion, and offsets.

Mike Toffel:
Terrific. That's a great overview. Let's dig into each of these and maybe just to the next level of depth. So you mentioned 15 to 20% improvement from model to model when we're talking about next generation aircraft design. What is it, what are the inventions or innovations that are leading to this? I know wing tips is one thing people look at. Maybe the body aluminum versus carbon fiber, so lightweighting. What else is going on here?

Robin Riedel:
Yeah, there's a number of different things that make one generation of an aircraft more fuel efficient than the previous one. The biggest by far tends to be the propulsion system, so the engine. So if you think about what we've been able to do with engines over the last, call it 50 years, with jet engines, we've gotten to higher and higher bypass ratios, which makes them more efficient. It makes also the engine look a lot bigger, but it allows for more airflow through it in a more efficient way. We've also been able to raise the temperatures inside the core of these engines with new materials, better engineering off the materials, better cooling systems that has helped with efficiency.

So you kind of put these things together. And so the engine typically is the biggest driver of efficiency from one generation to the next. And then you have other things. We have been doing weight reduction on aircraft, right? So either using lighter materials or more, call it, crafty designs in order to minimize how much weight we carry around. And that directly helps the efficiency. And then there's been aerodynamic inventions, for example, winglets, vortex generators, things like that that just make a better airframe design and a better aerodynamic performance. And then last but not least, I think digital is starting to play a much bigger role as well, just how the aircraft are being flown, the flight support systems.

And so you put all of those things together with leading the pack here being the engines, all of that makes the new generation aircraft 15 to 20% better than the generation before.

Mike Toffel:
Wow, that's really helpful. And the players here, the engine manufacturers, are they the ones leaning in, the incumbents? Whether it be GE or Pratt & Whitney? These are just names I've heard of.

Robin Riedel:
Yeah, I think generally speaking, when it goes to building large aircraft, there's a limited number of main players doing it. So on the airframer side, you've got Airbus, Boeing, Embraer, now COMAC in China, but those are really the big players that built the big jets. And then on the engine side, Rolls-Royce, Pratt & Whitney, and GE are really the ones in the driver's seat here of bringing that innovation to bear and coming up every decade or so with the next technology that then brings us to the next level of reduction in terms of fuel burn for those engines.

Mike Toffel:
And on the digital technologies, is that also these incumbents or are these startups who are trying to sell into these incumbents?

Robin Riedel:
It gets more interesting there. So you still have many of the incumbents playing. So names there would be Honeywell for example, or also GE, for example, plays in that space. But you do start getting startups applying AI, new data sources, new ideas to come up with little pieces here and there that you can add onto the airframe or into your operation that help you optimize a little bit further out of these. And so even on the hardware side, by the way, you have some innovative companies that, for example, winglets, in many cases are done by third parties to retrofit aircraft later on in life. And so, there is both the big players but also a whole bunch of smaller players including startups playing within making aircraft more efficient.

Mike Toffel:
Got it. That's super interesting. So let's pivot and talk about the second lever, which was operational efficiency. And here you mentioned earlier about routing, holding patterns. And I think also you've spoken about the density and load factors, which is to say how many people you can squeeze into the aircraft and how full the aircrafts are. These are also other levers that are trying to reduce this fuel per passenger kilometer metric.

Robin Riedel:
Look, I think on the real operating side, there's just always ways to think about how can I optimize the trajectory and the use of the aircraft in order to be more fuel efficient, whether that's minimizing delay minutes on the ground or delays in the air or flying at the optimal altitude, staying out of headwinds and using tailwinds, right? So there's a number of these things that we're operating in a constrained environment with other traffic and airspace constraint and noise abatement procedures. And so kind of managing that complexity and finding ways to more efficiently operate the aircraft is a big part of that. And that is both incumbents and startups and individual airlines and even individual pilots trying to figure out, "How can I squeeze a little bit more out of this and get more efficient?"

And then I think at the system level, to go to your point about load factor and seed density, if you're really trying to optimize the unit emissions, so how much emissions do I have per seat kilometer flow or for flight from A to B, of course loading more people into an airplane gives you a better number there. And so seat density increases, so getting more people squeezed into the safe space is one lever to get there. Another one is to fill more seats. And both of those, of course over the last, call it a decade and a half or so, have been going up quite significantly. The emergence of low cost carriers, revenue management systems that better optimize the seat load and load factor, those are the kind of things that we do for commercial reasons in the airline industry, but they do have an impact on the environmental metrics.

Mike Toffel:
What's interesting to me hearing this story is that some of these issues are under the control of the airlines. For example, the revenue management piece, which is sort of clever ways of thinking about pricing in order to fill the aircraft while managing profits and how many seats you put in. These are clearly within the airline's control. Routing is something that's kind of interesting to me. That seems like it's somehow the combination of the airline, the pilot you just mentioned. That's interesting. And I presume the air traffic controllers also have something to say about your routing. So how do those three players, and maybe I'm missing some, combined forces to lead for the potential for more efficient routing?

Robin Riedel:
Yeah, look, it's one of those great challenges in aviation that's, to be honest, is why I love flying because on every flight I have dozens of people that need to be involved in order to be successful. And so good weather forecasts help you because you know where the wind's coming from, where the temperatures are, and therefore you can optimize your trajectory, which direction to fly, which route to take, which altitude to fly. You have dispatchers on the ground, other group. Just in addition to the pilots, there are traffic controllers which have to weigh in and help with the flight planning. You have software suites that do that. So it's a complex environment.

The reality is I think we're getting good at it. The questions that remain are really some of forecasting. How can we get better at forecasting weather? So if I take off, what's the weather going to be like five hours later? And therefore, if I know it's not raining, I can take less fuel because I know I don't need that buffer. Or how do I better forecast traffic so that I know what is the right time to arrive at the right speed to take in order to not end up in a waiting pattern? And so with the emergence of AI in the sector, I think we're seeing quite a bit of innovation right now thinking about how do we better predict these things and then adjust our plans accordingly, all in the effort to minimize fuel burn, which then as a result also minimizes emissions.

Mike Toffel:
Let's move on to sustainable aviation fuel. So where are we with sustainable aviation fuels? Is it taking one path or are we all over the place? And what do you expect will happen in the coming years?

Robin Riedel:
Yeah, it's a great question. So sustainable aviation fuels today is really a category of many different solutions, right? We describe something as a sustainable aviation fuel, if it is a circular fuel in the sense that it captures the carbon and doesn't rely on fossil source of carbon, but it captures the carbon early on and then you turn it into a liquid carbon, you can drop it into airplanes that fly today because it's almost identical to the fuel we have today at least from a chemical perspective and then you burn it just like you burn fuel today.

Now where do we capture the carbon and how do we create this fuel is where things vary. And there is dozens of different combinations of that, right? So we talk about the feedstock on the one hand, and that could be biological feedstock or it could be carbon capture. And then we talk about the pathway itself, which is really the chemical process. Do you then use to take that feedstock and turn that into a liquid hydrocarbon? And there is different ways to do this; require different capital intensity, require different types of processes, but in the end what comes out is that fuel.

And so I think where at an interesting time where we have dozens of these feedstock pathway combinations and the uncertainty around each of those is enough that we really can't tell yet which one of these is going to be the lowest cost and the right solution because we have good estimates on things like how will they scale, how will cost come down over time, what could efficiencies look like. But these curves are all intersecting and so it's very, very hard to say, "Here's the one winner to pick." And as a result as an industry, we have dozens of these things which are happily growing and moving towards demonstrating what they can do so that we can start narrowing down those uncertainties.

I think that is a really interesting moment in time because we are going to have winners and losers decided over the next five or 10 years and it creates a ton of business opportunity for different players to try out things, invest in certain areas, invest in other areas, and really build a portfolio to then in the end of the day feed the world with sustainable aviation fuel.

The other thing that's really interesting about this is that it's probably going to differ regionally. And so you might have a region like Chile where there's a lot of green electricity available from hydropower et cetera where power to liquid or e-fuels makes a ton of sense and they might even be an exporter of e-fuels in the future, versus there's other areas like the Pacific Northwest in North America, for example, where you have a lot of biomass from the forestry industry or otherwise that could make sense in the pathway to convert. So it's really kind of a local solution that we'll need to find. And we really need to figure out which of those literally dozens of pathway feeds their combinations can get to a cost which is lower.

And since we talk about cost, that would be my last point of this. The cost of sustainable aviation fuels today is significantly higher than fossil fuels for aviation. Depending on the fuel you use, the pathway it feeds that combination, you're looking at 2 to 3X of what fossil fuel is. Or convert that into dollars per ton of carbon abated, you're talking somewhere around 500 plus or so dollars per ton abated. And that of course makes it challenging for airlines, but also other industry players to truly use this at scale because it would be economically non-viable. And so that's what makes sustainable aviation fuel such an interesting topic right now to study because we have a whole bunch of challenges, but we also have the need to figure this out because this is the one pathway that's going to really help us to get to 2050.

Mike Toffel:
That's quite a high premium. I could see why it's going to take some time for technology and scale to figure out how to eventually get that cost down. But let's suppose that there was a mandate today to switch to sustainable aviation fuel and let's ignore the fact that we couldn't possibly supply it overnight. We would need time to sort of build up the infrastructure. But at the cost of 2 to 3 times for fuel, what does that mean in the context of a ticket? So a normal maybe $500 ticket to go coast to coast in the US. If all of a sudden airlines had to pay 2 to 3 times more for fuel, and supposing they passed that along to the customer, what does that look like in terms of the ticket? Because ticket prices include lots of taxes and airport fees. So it's not like the ticket would necessarily rise by 2 to 3 times.

Robin Riedel:
So let's do the math together. Fuel today is roughly call it 30% of an airline's cost base. And let's say the mandate in Europe, for example, right now in the is 5% of SAF by 2030, and let's say it's just 2X the cost of fossil fuel just for the math here, right?

Mike Toffel:
Yeah, good.

Robin Riedel:
You would say, "Okay, I got 30% of my cost of which 5% now will come at double the cost." So that is an increase in overall costs then for the airline of about 3%, right? Now, you're right that the cost is not what the ticket is. You add the fees and taxes on top, so you're really looking at a 1 to 2% increase if we get to 5% of sustainable aviation fuel, which is again the mandate for 2030 in Europe. If you went to 100%, of course all of a sudden you would have to take those 30% and double them. And so the increase in ticket price would be in the 20-ish percent range probably by that point.

So you can see how that has a meaningful impact. And look, aviation is one of those sectors which is very price sensitive in that if an airline changes its price by 2 or 3 percentage points up or down, you immediately see the demand reaction. People will buy more or less. And so, the aviation industry of course very concerned about the cost and how to think about passing it through versus absorbing it. It's not an industry that has a lot of margin either, so it's not a lot of opportunity to absorb it within the industry.

Mike Toffel:
Super. Of course, it'd be very different if everyone had to face that higher cost. So you're not shopping between airlines in that case, but it could affect aggregate demand for sure.

Robin Riedel:
You're raising an interesting point. I think aggregate demand gets impacted. But the other interesting thing about aviation is, is that aviation is a global industry, yet we have local regulation. And so I'll give you an example that makes this kind of tangible.

If you're flying from let's say Hamburg and Germany to some place in India, you could fly Lufthansa through Frankfurt and that is a German airline. And so the EU rules apply for both of those flights, the Hamburg-Frankfurt flight and then the Frankfurt-India flight. Or you could fly Turkish Airlines, which would fly Hamburg to Istanbul and then Istanbul to India. So Hamburg to Istanbul, Istanbul to India. Well, for Turkish Airlines, because they're not in the EU, they wouldn't have the same mandate on the second flight, the Istanbul to India flight. And so you could see how there's not a level playing field if we don't harmonize some of these requirements around the globe and some of these policies. And it is a global industry. And so competition gets kind of, for lack of better words, torn into different ways when we don't have that of a playing field.

Mike Toffel:
So why is sustainable aviation fuel so attractive compared to other fuels?

Robin Riedel:
Yeah, it's a great question. Sustainable aviation fuel has the big benefit that it's a drop in fuel as we call it. And so from a chemical perspective, it's pretty much identical to the fossil fuel we use today. And so the aircraft engines can use it the same way, so we don't need to change the airplanes. We also don't have to change the airport infrastructure, right? The tanks, the hydrant system, the fuel trucks, all of that can stay the same. And so when it comes to investing in the infrastructure, really where we need to invest that is at the front end of making the fuel, but the rest of it stays the same. And that is a big benefit because we don't have to change every airport and every aircraft out there. We've done the math and what would it take if we actually wanted to change the aircraft itself? And aircraft, as you know, live for 30 plus years. And so every aircraft that comes out of a Boeing and Airbus factory today, it's still got to be around in 2030. Oh, sorry.

So every aircraft that rolls out of a Airbus or Boeing factory today is still got to be around in 2050. And so this solution, sustainable aviation fuels, works for those aircraft without having to change them. If we had to change them, and we've done the math on this, we would've to spend about $1.8 trillion in riding off early retirement of aircraft. Economically, that doesn't make sense. And so sustainable aviation fuels is the pathway to preserve some of these aircraft out there and keep them flying and keep them to their useful life without having the aviation emissions impact that they have today.

Mike Toffel:
Got it. Yeah. This drop in piece, people hear of drop in fuel and maybe not know exactly what that means. Not only does it aid the operations side like in the airports. Most critically, it allows you to use the existing engine infrastructure.

Robin Riedel:
That's correct. Drop in fuel really just means you can drop it into today's fuel tanks and it works the same way, whether it's on the airport or in the aircraft engine. And it also allows you to blend, right? Today we fly mostly with blended sustainable aviation fuel, meaning 2 or 3% of a tank might be sustainable aviation fuel. To the engine, it all looks the same. To the fuel farms, to the fuel trucks, to the fuel hydrant, it all looks the same. So it's very kind of easy from an operational process. We don't have to do a lot of investment in infrastructure or even aircraft.

Mike Toffel:
That's really interesting. Yep, super important point. Thank you for sharing that.

Let’s talk about the novel propulsion, the fourth dimension. You’ve mentioned earlier, blended wing bodies. I don’t know what that is. And then you also talked about hydrogen and battery solutions. Now, batteries I thought were off the table when it came to airlines because they don’t have nearly the same energy density that liquid fuels do. But you mentioned batteries, so maybe we could start there. What application could you imagine batteries being used for in aviation?

Robin Riedel:
So there’s a lot to unpack here. I think batteries, as you mentioned, are significantly heavier for the same energy content than fossil fuels or any kind of liquid hydrocarbon fuels are. And so the problem we had something heavy in aviation is that we’re always fighting gravity. And so it takes energy to carry weight. And so when you carry something heavy, you burn a lot of energy. And so, batteries, as you want to fly with them, you need a lot of energy to carry them. You can’t have a lot of energy inside of them. And so you’re really range restricted, meaning how far you can fly when you think about battery aircraft.

In today’s batteries which have around 200-watt hours per kilogram or so in terms of gravimetric density, that means you can probably fly 100 to 200, maybe 300 miles operationally depending on the aircraft design, but that’s about it. After that, if you add more battery to fly further, what happens is the weight that you’re adding requires all the energy that you’re adding. And so you’re not actually gaining any more distance because you’re fighting gravity.

So what are the applications? Well, first of all, I think there is a whole bunch of short range aviation opportunities, and this is new type of aviation. You might’ve heard about EV tolls, electric vertical takeoff and landing aircraft, flying cars, so to speak. That is one application. Drones, whether it’s delivery drones or cargo drones on shorter distances is another application. Or even just regional aircraft that fly shorter distances, there is an application there. And there’s a range of startups that are building these aircraft or working on solutions for that. And so there is this whole area of advanced air mobility or regional air mobility emerging, which will heavily use battery electric aircraft.

I think the second area for batteries of application is hybrid aircraft. And so the thing with an aircraft today is we really give the engines a very challenging task in that we tell the engines, “Look, you should be efficient when running at cruise power, but you also need to be able to do takeoff and landings, which requires a lot more power. And by the way, we want you to be redundant.” So on a two-engine airplane, we need each engine alone to be able to carry the whole airplane in case one fails.

And so we’re basically building an engine that can do cruise power and then 2X of that. During takeoff, a single engine kind of go around a single engine takeoff. And so as a result, they’re not super efficient at any given point because they have that broad range. So what batteries now allow us is to think about how do we design maybe a combustion engine that is very efficient but only works at one design point and we augment the other design points, whether it’s the takeoff and landing or the emergency situations with a battery system that can kind of provide the required power but without impacting the efficiency of the engine. This is a topic that both incumbents and startups are working on hybrid electric aircraft engines, and that could even be on larger aircraft.

And then the last thing I would mention is look, technology continues to advance. And even though we’re maybe 200-watt hours per kilogram today, maybe there is a breakthrough in the chemistry, maybe there is a breakthrough in other technology and we get to 1,000-watt hours per kilogram in the next decade or so. And if that happens, all of the sudden instead of only doing 200 or 300 mile range, you could do a thousand miles, which covers a lot of the flying that happens today.

Mike Toffel:
Now you mentioned the weight concerns of batteries, but I’ve also understood the volume was also an issue. Is volume not an issue in aviation?

Robin Riedel:
Volume is also an issue, but less so for batteries. I mean, volume is really the issue for hydrogen. Because the interesting thing about hydrogen is, hydrogen is super light, but it’s not very dense from a volume perspective. And so on the one end, you have batteries’ really heavy, on the other end you have hydrogen really light, and then you’ve got liquid hydrocarbons, which is somewhere in the middle and kind of outperform in the combined space.

Mike Toffel:
Got it. So we’ve talked a lot about batteries. In the hydrogen space, is that the primary issue that we can’t compress it enough for it to be useful yet in an aircraft setting?

Robin Riedel:
Yeah. Look, hydrogen is a promising pathway and there is a whole bunch of people working on it, but the thought was about challenges, right? I think one big challenge is the storage of hydrogen. How are we going to store it? Especially remember an airplane goes from ground level, sea level, up to 30,000 feet where the pressure and temperatures are very different. So building a vessel that can contain the hydrogen in those changing environments and contain a lot of it, which means it’s probably liquefied or under high pressure, is not a trivial thing. And so research shows that the technologies we have today to build these tanks is actually quite heavy. And so the benefit you get from having hydrogen being quite light gets somewhat eaten up by having to build a really heavy and bulky tank.

The beauty of today’s airplanes is the liquid fuel kind of goes in wherever you want it to go, and so you could put it into the wings. That’s where it is in today’s airplanes. It’s not so easy to do that with hydrogen because the tanks just have a different shape. So tanks is one big question.

Another big question is where do we get the hydrogen from? I know there’s a lot of people thinking about, “Hey, hydrogen industry overall, we’ll get to a dollar per kilogram of green hydrogen or so on.” But we’re nowhere close to be there yet. And if we think about the electricity that’s going to be required to make hydrogen through electrolyzers and others and then to liquefy it or to put it under pressure, it’s not a trivial problem to solve on where do we get the hydrogen from.

And then there’s kind of two different ways to use hydrogen aviation. You could use it either for combustion, so you burn it in an engine just like we do with liquid fuels today, or you run it through a hydrogen fuel cell to create electricity and then run kind of an electric motor from it. And so both those technologies, there’s a lot of work being done on to see how efficient can we really get and how light can we really get? Because again, weight is always the problem of aviation.

Mike Toffel:
Those same two approaches to hydrogen are being discussed in the trucking industry right now, I understand, which has of course a whole different set of challenges and opportunities. So I want to come back to... I won’t sleep well tonight if I don’t understand what a blended wing body is. So tell us about that. This is a novel design.

Robin Riedel:
Absolutely. And look, as someone who studied aerospace engineering, I’m quite excited about some of the things we’re starting to do because if you think back for the last 50, if you’re generous, but probably more 80 plus years, airplanes have looked the same. They’re a tube with wings attached, and then you just throw a couple of engines either under the wing or on the back of the fuselage.

What we’re talking about now is building different types of configurations, so different shapes of aircraft. And what makes that possible is on the one hand, digital today and analytics allows us to study these things much better than we could in the past. And so we can make lots of design iterations, run them through computational fluid dynamics, understand how they would perform. We’re also much better understanding what structures are needed, how do the loads happen within them, et cetera. And then we have new materials, whether it’s carbon fiber or eventually thermoplastics and others, to build things slightly different. And so from a manufacturing perspective, we’re getting to a point where we can build different types of aircraft.

And so you see a few programs out there, whether it’s a trust-based wing, whether it is a blended wing body that just look nothing like the airplanes you’re used to. They’re just different kind of shapes with different kind of efficiencies. And so a blended wing body is basically, imagine your airplane today, you just get rid of the fuselage in the middle, and what remains is just the wing. And so you put the passengers and the cargo and the fuel, everything, inside the wing, and it’s basically just one big flying wing. That comes with some challenges around how do you maneuver in an airport environment. It comes with some challenges around people won’t have windows to the same degree they have on airplanes today. It comes with some challenges about how do we truly design this and make it pressurized and all of those things. But it is something now that we’re seriously investigating.

In the past, this was kind of a military application, the B-2 bomber would be an example of that. But we’re now thinking about doing that for passenger flight. And you could imagine a 20, 30, even 40% efficiency improvement if you got that right, versus the airplanes we’re flying today just because it’s aerodynamically better.

Mike Toffel:
Fascinating, but that’s really interesting. I’ll have to go Google and see what these look like.

So the last lever was carbon offsets or carbon credits, and I wanted to talk to you about that. It seems to me like there’s maybe two things to talk about here. One is that airlines themselves have been purchasing carbon credits as part of their carbon reduction or net-zero goals. And then also a growing number of them are offering customers the opportunity to purchase carbon credits sort of as you check out on their websites. So I wonder if you can speak a little bit about this sort of dual strategy and who are the leaders in this space and what challenges they’re facing. And we’ll make sure to talk about a recent lawsuit that’s just arisen against Delta Airlines for their carbon-neutral claims.

Robin Riedel:
Look, it’s a complicated topic with a lot of things to unpack. So let’s start with why do we going to need carbon offsets for aviation? I think the reality is even if we pull all the levers, even if it would fly with 100% SAF, we’re getting to a point where SAF in itself is never 100% offsetting in itself. There’s always residuals, even if you have a good SAF today that’s about 85%. So you have that residual of 15%, which is still there. And so that’s where kind of offsets come in. And it’s more likely than not that we’re not going to ramp up SAF supply quite as fast as we need. And so carbon offsets might provide that buffer while we’re kind of ramping up SAF supply.

And in the offset world, there’s a broad range of different solutions. You have anywhere from nature-based solutions to technology-based solution of capturing carbon from the air. They come with different qualities. So it’s still an industry that’s kind of emerging. And so I think airlines overall are cautiously experimenting in figuring out how do we deal with that? What do we want to buy? What do we want to pass on to our customers? Because the customers are concerned, whether it’s individuals or corporations about the carbon footprint. So can we make that part of our offering?

And so I think you’ve seen a number of players trying things out. There’s a big European airline that has green fares now where they’re truly offsetting your whole footprint if you buy one of those green fares. They’re more expensive than the standard fares, but you’re doing the right thing. Other airlines offer a click-through process on the website and the booking flow to be like, “Hey, do you want to buy some offsets to offset your footprint?” So I think there’s that experimentation going on. Now with all of that, it's always risky if there is no ”lear accounting f’amework on what counts or what quality do you have. And so some traps are out there that might be accused of greenwashing when you do some of these things. They might not be as high quality as you might’ve thought or as you might’ve presented.

Mike Toffel:
We’ve done full episodes on this topic and it’s awfully complicated. I remember Virgin, I think, was one of the early offerings of carbon credits, and I was like, “Oh, what’s this?” And now it seems like almost everyone’s doing it. Is that right? Or is that just an American perspective?

Robin Riedel:
I do think you’re right in that a lot of airlines have started to offer some sort of either offset or purchasing SAF through their website in this experimentation that is partially because there’s startups out there who’ve made this really easy to put that widget on the website to allow the process to go through. Airlines are generally trying to figure out the roles they want to play here.

There’s this interesting question around individual consumers. If you ask them, and we run surveys every year on this, most people will actually say, “Hey, I’m worried about this and I’m willing to pay a little bit more.” Yet we’re not quite seeing that reflect in behavior. So it’s a stated preference revealed action kind of challenge. So individual travelers to be seen when they really take up on that.

Corporate customers is a more interesting bucket right now, because corporations in a way have in many cases made their own statements around when they want to read an net-zero and what they want to do about their missions. And for many places, travel emissions, business travel of the employees, is one of the largest sources. So if you are a large professional services company or large technology company and you fly people all over the globe as part of your work, you have some real emissions coming in as Scope 3 from this flying around that you’ll have to deal with. And so airlines are trying to figure out how do we help our corporate customers continue to fly? Because the alternative is they stop flying, which is not really what airlines want.

Mike Toffel:
Yeah, yeah. No, I imagine that that includes McKinsey. It certainly includes Harvard as well with air travel being a large part of our footprint. And we’re working on figuring that out as we speak.

So this has been a wonderful overview of both how aviation affects climate and what are the major levers. Let’s talk about what McKinsey’s role is here. You’re a partner in an aviation practice at McKinsey. What are the types of projects that you work on?

Robin Riedel:
Yeah, look, I think aviation sustainability is one of those topics that’s gained a lot of attention the last couple of years. And so I’ve been fortunate to be able to play across the value chain with a number of different players to help them think that through. So let me give you a few examples.

So on the one hand, I’ve worked with airlines that are trying to figure out, “What should be my pathway, what should I be willing to commit to? And then what are the things I need to do to get there? Do I need to think about my fleet renewal differently? Do I need to start buying SAF? Do I need to build a corporate customer program so people can buy SAF through me? How do I think about operational efficiency? Do I need to train my pilots differently?” And so we get to help airlines build that strategy and then also execute it, like building a SAF sales program internally or building an operational efficiency program. So that’s kind of the airline bucket.

There is the OEM bucket. OEMs are on the one hand worried about, “Hey, if aviation gets somehow damped by environmental concerns, what does that mean to our business in the future and how can we minimize that risk? And then on the other hand, how do we stop disruption from other technologies?” And so if you’re a big aerospace OEM today, you might be feeling good about the product you have, but you might say, “Okay, we’re having all these startups planning to build hydrogen and battery electric aircraft. And while many might not make it, some of them might, and then could that be a big disruption to my industry?” So there’s strategic questions for incumbents around that.

Airports is another one of those examples where airports need to think about how do they decarbonize? What role do they play in offering sustainable aviation fuels? How do they electrify? How do they think about, “Hey, if hydrogen or electric airplanes come, I need infrastructure to provide for these aircraft, whether it’s charging or hydrogen”? Those are things that you have to plan 10 years in advance in many cases. And so, those are some of the topics we help players think through.

And then we get to work with some of the NGOs out there and some of the investors out there thinking through what might the future look like, and therefore, what are the areas to invest in or the areas to facilitate?

Mike Toffel:
Where are the major locations of your aviation practice around the world?

Robin Riedel:
It’s a great question. I think McKinsey, as a global firm, we have over a hundred offices in over 60 countries. There’s really no primary location for any of these topics because we kind of bring the best of the firm to our clients independent of geography. And so I have clients close to home that might be in the same city or just an hour away. And then I have clients halfway around the globe that now after COVID, we spend a lot of time on video conferences that occasionally have to fly there, but it’s really not about the location of where we do the work. It’s really the location of where the work needs to get done. Where are our clients? Where are the people in the industry that are really thinking about these topics? So for us, so anyone thinking about, “Hey, which McKinsey office should I get into in order to work on aviation sustainably?” It’s almost the wrong question. It’s more, “Do you have the right passion to work on this?” And it almost doesn’t matter where in the world you are.

Mike Toffel:
Yeah. So that brings me right to the next two questions I was going to ask. One was about where is that work getting done? So where in the world are we seeing that interest strong enough to hire McKinsey to help them? And who are the types of people that you bring into your practice?

Robin Riedel:
Yeah. So look, I think our work is really globally. I do think in the last couple of years, we’ve touched pretty much every continent, I would say the majority of the work happens in North America and Europe because those are the two regions where I think the overall sustainability debate is going on and where regulation and policy and other places stay in. But it goes beyond that.

And so what does that mean in a way for who do we bring in? I think if you looked at our practice today, we have a broad range of people that come from broad variety of backgrounds. We have aerospace engineers, we have former pilots, we have people with PhDs in climate science. And then we have a bunch of generalists who might not have any formal training in any of this, but have the passion and want to learn and kind of come in because, look, a lot of us are figuring this out as this evolves, right? Three or five years ago, there was very little talk about aviation sustainability. Well, now it’s a pretty big topic, but it’s still growing and we’re still learning a lot. And so it’s almost like you have the specialists who might’ve been in one piece or another of this in their whole career, but you also have a number of people who are just interested in the topic, find it fascinating, want to solve a hard problem and kind of join it and learn.

Mike Toffel:
So let’s just make this a little more concrete if we could and take us through one or two examples of client engagements. I know you can’t speak to the client’s name, but just take us through what’s an example of a project where they brought you in and how you helped?

Robin Riedel:
Let’s look at a project where an airline had developed its sustainability plan and had made some commitments and now needed to figure out how to fund solve this. Because we talked earlier about how sustainable aviation fuel is more expensive and it’s not in the industry where you can really afford to give a lot of your margin away to cost decreases. And so it was really the question about, “Hey, how do we engage our customer base to carry some of that extra cost so that we can pass through the cost of sustainable aviation fuel to either individuals or corporate customers?" So it was really surveying what are all the different options we have here from adding a click-through on the web page to embedding it into ticket price, to green fares, to special corporate contracts, and think through what that also takes, what the other side needs other than just the flight. They might want the credits, the Scope 3 credits so they can put those on their book.

And so it was really thinking through all the options, talking to customers, talking to system providers, and then help the airline figure out what approach do they want to take and over what time do they want to implement it. And then really setting them up for successful negotiations with some of their corporate customers, but also with some of the SAF suppliers so that they could get some SAF supply, get it into their aircraft, but also sell it onward or sell the credits onward. So something like that is a project of somewhere between 2 to 3 months typically. You touch on a lot of complications of the business during that time, and there’s a lot of good problem solving and overcome some of the challenges.

Mike Toffel:
So that’s an example of working with an airline. You also mentioned you’re working with OEMs and airports. Can you give us an example of one of those engagements?

Robin Riedel:
Yeah, let me give you two other examples. So maybe one example here we’re talking through is when we work with an OEM that’s trying to figure out from a strategic perspective, what might the future look like? And we talk about novel propulsion, for example, or novel aircraft design. If you’re an aircraft or an engine manufacturer today, at what point do you have to be afraid that these things might disrupt your market? And do you want to come in and disrupt yourself? And the interesting part is that there’s a lot of uncertainty about these things. We have a whole bunch of startups trying to build hydrogen aircraft and battery electric aircraft. You could take the view and say this is really hard. They might never get there, but that’s a risky angle to take. Because even if the chance is very small that they’re going to make it, if they do, you have a big problem at your hands. And after Tesla and after SpaceX, I think industries come around that disruptors can truly disrupt existing businesses that are successful.

And so we work with some of the incumbents, really kind of game planning out what could the futures look like? What are the kind of disruption threats? Should you partner with players to get better insights? Should you buy players to get a step ahead? Should you just wait it out and invest later? Should you do something and how? So there’s a whole range of strategic options in this uncertain environment that OEMs can take and therefore take some good strategic thinking and framing up of the challenges. So that’s another good example of the kind of work that we do in aviation sustainability.

Let me give you one other, which is, helping investors that are thinking about where to invest, particularly sustainability investors. There’s been a lot of talk about green aircraft, whether it’s hydrogen or where it’s battery electric about EV tool. And so helping them frame up, “What is the investment thesis that makes sense here? What do you have to believe for these things to truly take off?” No pun intended. “And therefore, what should be your willingness to invest? Or what’s the market look like? Who are the different options to invest in?” And so helping investment funds not only do the markets again, but even do the diligence on individual players and help them understand what strengths people bring and what they have to believe for that to be successful. So that is the kind of work that would also fall under sustainable aviation here.

Mike Toffel:
Great. Those are super helpful to put some meat on the bone there to get a real sense of what the type of work is that you’re engaging in.

So let me turn to the final question that I ask all of our guests, which is about career advice. As you think about folks who are either looking to get into this space with no background in this, or may already be either in consulting or in aviation and want to work in consulting regarding aviation and the new economy and the decarbonization here that you’re working in, what is some advice you have for them or resources they should consult?

Robin Riedel:
This might sound somewhat conceptual, but I truly believe it, which is I think you have to have your passion guide you. And if you don’t have passion, at least your curiosity. What I mean by that is any of these areas are miserable places to work in if you’re not having fun. And so you need to have some form of passion or curiosity that drives you towards doing that. Don’t treat aviation in general, but definitely not sustainable aviation as a job we earn in a paycheck and that’s it. You’re not going to have a good time doing that. There’s easier ways to make a living than diving into those things without a passion for it. And so I think you should ask yourself why are you interested in it? What kind of purpose do you see? What kind of passion do you have for it?

I’ve been lucky in the sense that I always had a passion for aviation that came naturally to me. But I do see colleagues that fight the special later in life where they say, “Wow, hard-to-abate sector. Really interesting. We’re trying to do these amazing things of putting people on airplanes and throw them 30,000 feet up in the air and try to do that carbon-neutral now. Wow, I like hard problems. Let’s go solve that.” But you need that kind of drive in a way to come into this space, I think. And then really, I think my second piece of advice would be keep an open mind. There’s so much to learn. There’s so many things that are getting what I would call rediscovered and reinvented, and traditional wisdom doesn’t always apply anymore. And we’re really rethinking things. And so keep an open mind and really engage in conversations, particularly with people that don’t share your initial hypothesis, so to speak. And talk to them.

It’s fascinating to me. I talk to call it 10 different PhDs in the sector, people that have studied it for a long time that have gone into industry and done things for a long time. And even though they all have the same classical education at similar pathways, they come up with different answers. You have hardcore hydrogen lovers on the one hand, you have hardcore disbelievers that say, “No, we’re never going to go away from combustion engines the way we have them today.” And it’s just fascinating because small changes in initial assumptions change that. And so keeping an open mind, having a lot of conversation really challenge your own beliefs, I think, is really important in the space.

And then, look, what I would say beyond that, it is an area where there’s just so much opportunity for disruption. People say the whole transition to a green economy overall is one of the biggest capital redistribution we’ve ever had, and that is definitely true in aviation. And so we’re going to have agriculture join the ecosystem. Fish leftovers from the fish processing plants might be a feedstock aviation fuel. And so therefore fisheries in Alaska and other places are not part of the aviation ecosystem, right? There’s so many new things evolving and that creates so many new business opportunities and opportunities to re-check the economy and to re-optimize. And so just have an open mind and look for some of these opportunities because they’re just endless right now when it comes to sustainable aviation.

Mike Toffel:
Well, your passion certainly shines through in your description of these opportunities. It’s really exciting. Thank you so much for spending time with us here on Climate Rising. It’s been a really interesting wide-ranging conversation. Appreciate your time.

Robin Riedel:
Well, it was my pleasure. Thank you for having me.