2 nd Interview with Martin Porsgaard, Director of Sustainability and Environment in SAS

Transcription

1 2 nd Interview with Martin Porsgaard, Director of Sustainability and Environment in SAS In the beginning we talk about the structure of the project Martin: Investments, go to the suppliers and ask for financial aspects, what do they think will be the future projects! We are the end users and we will not pay more. If it s only until 10% of the price its no problem, but from what we have been told, the price should not be higher and it should be possible for the future to produce biofuel at the same price. Charlotte: We also posed a question on the CO2 compensation, when we join the ETS program will the compensation be directly linked to this, right now it s Joint Investments? Martin: our money goes to a company who buys parts of projects in India and China etc... It is a very big investment to establish wind power plants, and a lot of companies are investing in these projects. They go back to the company ask how many percentage of a new plant they want to buy. Martin: From 2012 when we join the ETS we will delete the CO2 compensation program or change it, as it will be the ETS program that will handle the CO2 growth, so we will probably cancel the CO2 off set program. The price from ETS will be included in the ticket, but the CO2 off set will still be a voluntary program, perhaps something for another environmental program, water vapor or NOx. Charlotte: we discussed the opportunity of, when you buy the CO2 compensation this, investment will go directly to the biofuel research and the customers will know where the money is invested, since at the moment you have to click your way to find out where your money actually goes. But there could be a bias in terms of media coverage, that the customers are paying the R&D investments for SAS etc? Martin: this could be a problem. I think the reason why we haven t started this yet, because we cannot be sure that the investments of the customers will actually give an outcome, whereas the current CO2 program that we are running, we are sure that this is happening. That s a very important difference Charlotte: But still I would say that maybe it could make a difference to the customers that wants to fly SAS in the future and also wants to fly green. They will know exactly where the money goes. There s a guaranty for the customers in this case Martin: Actually I had a very visual solution a few years ago. That SAS could invest in Øresund Windmill Park and on board there could be a flyer saying, look out the window here is your CO2 off set investment. But since SAS is Scandinavian and not only Danish this was not really an option and also it was too expensive. Then with start to focus on biofuels Martin: The specification coming out of the certification is on the same level as Jet A1 fuel, so it is almost the same product coming out from biofuel as from fossil fuel, and this is one of the most important features because then we don t have to change anything in the engines. And it will be a 50/50 % blend in. 1

2 Charlotte: The reason why we ask this is in order to figure out the steps of the supply chain if that is shared with Maersk. The fuel has to be divided at some point and it will probably be in the refining process. Martin: After the refining process there will be a selection. If you go into a refining process today you have the crude oil. In the top you will find aviation fuel and in the very bottom you will find shipping fuel Charlotte: after the first refining it goes to shipping and more investments will be needed for SAS to create aviation fuel? Martin: I think it s the same process; they can use maybe 30% of the total crude oil 30% for cars etc. and 30-40% for shipping. Damien: Is SAS aware of competitors involvement and actions in the biofuel area? Martin: At the same time we need each other all airline companies, to put pressure on the market, the suppliers, politicians and the media, to make it clear that this is an opportunity and necessary future. All at the same time we are doing this together e.g. in SAFUG we are also going individual to the media in order to make it visual that we are doing something proactive. But it is up to each individual company to do this and of course the environmental challenge is in the whole of the sector and some companies are taking it more serious in others. And the differences are up to you guys to find out. Charlotte: We have talked about earlier that SAS is very good at displaying sustainable activities and documenting it online for the customers to see. And when you look at other airline companies the vision is displayed but not as thoroughly as SAS. It seems like it only just started as a trend and is not carried out that seriously yet. Martin: But many of the other companies have had a lot of media coverage from doing the test flights. Damien: But SAS has not made any test flights? Martin: No SAS has not made test flights and it s absolutely not necessary to do it, it just gives you media coverage, but we would like to do it if someone wants to join us in that process. Damien: But you don t know any companies who are already planning to fly on biofuel? Except from British airways! Martin: It is decided to start building it 2-3 years ahead. It will be a part of their supply in the future. As we have other kind of projects, e.g. a research on a project in Stockholm for Arlanda where they will use wood chips and also in Norway. There are some projects in DK, Kalundborg, absolutely a fine project and it is 2. Generation, but it s only for demonstration and not big enough for commercial use. Damien: What are the steps of the current supply chain and will the biofuel supply chain differ from this? Martin: It is really hard to say, since we have such different situations in the different countries and airports. In CPH you have storage for fuel in benzin øen and pipelines 2

3 running to the airport. The easiest way is to use the same supply pipeline, then it is necessary to ask the suppliers to add a certain amount of biofuel into the pipeline, we are buying what they are selling. So we need to include in the contract, so we need to make it clear that we want to use biofuel and the amount of biofuel. Damien: I guess the suppliers will propose you to use their biofuel, but if you want to produce this in DK e.g. in Kalundborg, will the suppliers accept to use this one if they are producing their own biofuel. Martin: It is very difficult to say how the regulation and the supply will be arranged and how it will take place, because it can be done in so many different ways. As endusers, our biggest effort is to put demand into our contract. But we have another situation, and that s is that SAS is no the only user of this pipeline so when a % of biofuel is put into the pipelines it is for all the users in the airport. Damien: If you make a mix of 5% of biofuel in the pipelines, how do you know that the 5% will go to SAS planes? Martin: You in your contract have decided that you buy the oil from this company, it is your supplier, but maybe it won t go directly into your plane. E.g. today we only have 1 pipeline where there are 3-4 companies as suppliers that have a joint contract with us and they put their fuel into the pipeline, but we don t know where it comes from, but the suppliers are regulating it and it would probably be the same for biofuel. Damien: The fuel you get from these suppliers, SAS pays, so after all the fuel is submitted to other companies as well, can you sell this fuel to other airline companies or what s the deal??? Martin: the practice here will be that a certain amount of the fuel is biofuel, if the price is the same then it doesn t matter which company is using it. It might not go into our planes all the time. When you buy electricity you cannot see if it is green, but what you pay for is to put a certain percentage into the electricity net. Damien: So you want to have biofuel, but you are not sure that you will have biofuel in your planes? Martin: What I m saying is that I think it will be arranged like that in CPH since we have the pipelines. Charlotte: so it doesn t really matter who burns the fuel, the fuel will be burned no matter which airline company use it, but SAS is providing the fuel. Martin: Yes, this is how it could be arranged in the future in CPH, maybe in Stockholm it could look different as we have the opportunity, we could go into a partnership of a factory that produces biofuel for the airport. Maybe it is a question of investment from different companies/parties, maybe 2-5 airlines, maybe the airport provider and the fuel companies, could be interested in putting money in to this, then you could make another separation exactly on how much you want to use and pay, maybe we could have 30%. But t is very uncertain of how this will be arranged, no one knows for sure. 3

4 Charlotte: But the process begins with finding out what kind of biomass will be used. Martin: Let s say we have a larger scale than the one In Kalundborg in some years, we will decide to buy from there since they have the certificate, it s 2. Gen and it is sustainable biofuel, but where they get the biomass from we don t know, it is not up to us to decide that. But maybe it s possible to find another company with feedstocks that we have an influence on. So we are depending on some important decisions taken in companies that are producing biofuel, and after the politicians, if they want to give priority, demands or regulations or incentives. But looking at this challenge from the society, it doesn t matter where the biofuel is used, what is important to reduce the carbon footprint, and the society have to decide in what direction to distribute the small amount of biofuel, and there we have a big challenge to convince the decision makers that aviation needs biofuel as cars e.g. have other solutions. Damien: How is SAS ready to invest? And in which areas? But as you mentioned earlier you are not really ready to invest in setting up any production or infrastructure, as you are end users. And perhaps be in a collaboration to carry out your views, but where are you ready to invest? Martin: It is very difficult to say, but I don t think we will invest in that, but as mentioned the project in Stockholm we could probably invest in it in order to create a profit from that production and use it in the aircrafts, then I think we will have a discussion internally of the possibility of becoming one of the investors. I won t say no, but as I see it now it is nor our job to put investments into the production but to put a pressure on those companies and decision makers and to be involved as we have been since the beginning of 2000, and we have invested a lot of energy and personal investments in the biofuel area and of course we will keep doing that. But in the aviation industry there s no surplus that allows these kinds of investments. And for the time being SAS is going in the opposite direction and focusing on the core business and cutting costs and I find it difficult to see that in the next 2-3- years that our shareholders will accept that we are doing any investments where risk is not minimal. But perhaps it will be necessary because of the situation in some production sites. Charlotte: But also by investing you could create an advantage in the end if you will be one of the investors? Martin: Yes that s true, so maybe it is necessary to change that situation. Damien: How will a change to biofuel affect the ticket prices? And can SAS afford to increase the ticket prices? Martin: To our knowledge it shouldn t be necessary to pay more and if it is in the beginning in order to push it forward, we will decide to do that, but it also very difficult it depends on how much more is necessary compared to normal fuel, a lot of projects have told that now it is possible to produce biofuel for the same cost as fossil fuel, so we rely on that. Charlotte: Do you have any intention of adding an additional fee to the ticket when people fly green? Martin: no intention, but if it s necessary in order to be in forefront, I feel that it would be necessary to do it. 4

5 Damien: If SAS is the first one to raise the price, can SAS afford to do that? Or would it be an alternative to wait for other airline companies to take the first step and after follow the ticket pricing? So it will not be a big shock for the customers. Martin: that s a situation that if it will be more expensive, but I don t think that it will be more expensive. Damien: It was just an example of if the biofuel is more expensive and could create a problem. Martin: If this is the case, we would have to wait for the others to raise their price. But SAS is ready to pay what it takes to be in forefront, in order to push the development and that we are doing what we say that we want to do. And we think our customers will accept and understand that and will give us more credit if we do that, that s my guess. Damien: How will SAS manage the responsibility of a first mover position, but if it is not necessary to raise the price, maybe it wont be a problem! Charlotte: is SAS ready to become a first mover on this area? Martin: I think we are a first mover as it is now, and we will continue to attempt to be the first mover if possible. If we can even talk about a first mover. If the situation of the pipeline is realistic, we can say that we have done a lot to move and now we are among the first movers here and we have done a lot to create that situation, but we can t say that we are first mover if it s a parallel situation, but we could talk about it more offensively. Damien: You could be first mover in terms of saying that we set the supply chain ready, but after all the airlines will be able to benefit from this. But in terms of making it happen, yes you could be first mover, but still all the airlines have the possibility of using the biofuel that you have brought to them? Martin: Yes perhaps that would be the situation. Martin: But before that situation, before it is established, maybe we have to make contracts with suppliers that transport the biofuel directly to our planes in the airport perhaps by trucks. Charlotte: But again I guess you have to be careful with the media that would probably notify that there is a perfectly established pipeline, so why are you suddenly making use of trucks. Martin: I m sure someone would point that out but I also think that it is very easy to explain. Charlotte: well yes I guess it s not the biggest problem if it runs a few kms. But perhaps you will have an advantage of the fact that other airline companies have to buy SAS certified fuel, on SAS contracts and SAS could play the role of if you want the biofuel, come to us, we got it! Damien: When the external airlines in Kastrup buy fuel, do they also have contracts with the same suppliers that established airlines have? 5

6 Martin: I m not sure, it is also possible to buy the fuel directly of the airport, but this fueling company is half owned by SAS, so we benefit from this. There is a big underground tank and there s a hose that is connected to the plane that fills it up with fuel. Damien: Another airline company has to go through SAS to buy the fuel? Martin: No they have to go through the company that is half owned by SAS. Damien: What are the current uncertainties and bias in order to enter the biofuel industry? Martin: There are the uncertainties around when it will be possible and how can we be sure on the sustainability element in this. Also how can we be seen as a first mover? And then there is the problem with the suppliers and how can you make it visible and also how can we have the decisions taken about the development. I mean it is uncertainties or perhaps also barriers, it is difficult to say. When you look at the market there are see sustainability in different ways. You can see there is a total aspect for the whole of the supply chain from the field until it is burned. But also some producers may be talking about sustainability from there own process and do not include the whole chain. There we have some uncertainties that we could be a problem. Damien: How does SAS manage general uncertainties? Martin: We always try to make analysis of how the reaction will be, how the customers will react and what is the point of view from the authorities and the politicians and how will it influence the sales and the price. For all that kind of decisions we are trying to make analysis and we are use to do it. Sometimes it is difficult because you only have the option of analyzing on a few things, so risk analysis when we create new activities and products and we are use to do it. Damien: How do you do it, do you make questionnaires? Etc Martin: it depends, if it is a thing like biofuel, I think we will have a dialogue, I m sure we will have a close dialogue with the politicians of what we are doing, and of course we will introduce it to the media. So trying to get a positive feed back, but then again depending on the price, we also have to have a discussion with the most influential shareholders. But it is not a question of price, it is only a question of doing it as fast as possible if you are sure that it is sustainable and it will no create other big problems. On the biofuel conference in Amsterdam, there was a group that handed out a folder saying that biofuel is a total disaster. If you are using biofuel, you cannot control that if will not increase the price of food. And how can you make sure that the fuel does not come from palm oil. There are a lot of questions to raise and answer! But I totally disagree these people are talking about all the biofuel generations including the first Generation. But maybe it is possible to convince them that if you have the guarantee of the second and third generation and with certification that maybe a dialogue could convince them, but I don t know. Charlotte: but having these extremists is good right? Because you have to be aware of the fact that if they can find elements that there has to be taken care of, then the media is definitely capable of coming up with it as well. 6

7 Martin: Yes sure. Damien: But if these extremists are talking about palm oil, it is totally understandable. Martin: The development is global and maybe we can do it green and perfect here. But e.g. in South of America it could be biofuel where we don t know the origin. Damien: could SAS not just take a decision upon only fueling biofuel in Scandinavia. Martin: the development in the global scale, affects the media and our customers, we don t need this kind of negative publicity and strokes. So I agree, please go to the Greenpeace website and find out what they say on biofuel. And every time we have the possibility of discussing with these groups we take it. Damien: Have considered making partnerships with NGOs? Martin: We already have a partnership with WWF, and a lot of times, we have discussed with them and Bellona in Norway, about decisions we have taken and many times we have had discussions about our reports and they have added comments and ideas. Damien: It is my conception that a lot of companies have partnerships with WWF and it seems a bit weird that you can easily have this kind of partnership, the affect of it is a bit lost and it seems more like a business aspect with a misuse of the brand. Martin: It is up to the company, you can engage in a lot of things but are you using it or not. I think we are using it positively. Last week my colleague from Norway was in Brussels with Bellona to see how they were trying to set up a fundament for making biofuel. We have to be involved in this; we cannot just have a piece of paper that we have signed. So sometimes they are able to involve us and the other way around. But of course it also is a possibility just to do it because this is what companies do today. Maybe companies are taking advantage of the brand affect of WWF. Damien: In some cases that s what it looks like to me. Charlotte: Maybe this is a flaw from WWF side, and it shows that maybe their requirements are not high enough. Damien: This is a bit scary. Martin: Maybe they are trying just to get the money. Charlotte: Maybe that is not such a bad perspective as the money does go for a good purpose. Damien: Which position does SAS strive to obtain from the biofuel engagement? The strategic opportunities of R.J. Orsato is presented Martin: Eco-efficiency is not applicable to biofuel but other activities we are doing. Beyond compliance leadership is more suitable for the position we are trying to obtain. But does this not include eco-branding? I think that it is a part of it, branding is not only the logo it is also the image of the company. I think it is included, but it is 7

8 difficult to separate them. Cost leadership is definitely indirectly a strategy as it about making right decisions and investments and positioning in the right time. So a combination of beyond compliance leadership and eco-branding would probably be the strategic moves. Charlotte: What are the underlying strategies of engaging in the biofuel industry? Martin: Society wise it is more effectual to do something for the whole of the industry. Charlotte: Are you trying to manage your competitors? Martin: Of course we are, at the same time. We are not using it directly to reduce our costs, but it is a part of the whole of the strategy, it is difficult to fit your strategy to only one theory, it is a mix. Charlotte: Is a part of the motivation for the engagement concerned with reducing the risks. Martin: Absolutely. This is very important in order to survive. To put aviation into a sustainable future, this is the main goal. Charlotte: So the motivation is not to create a new industry but to make sure to continue and that SAS have a competitive advantage and not doing any environmental harm? Martin: Yes Damien: In what level is the organization involved in the project? Top management exclusively or the whole of the organization? Martin: The environment issue is for everyone in the organization but the biofuel project is very specific and only involves a few people. But it is very important to inform everyone about it. But involved directly we have people from motor engineering staff, from our department and of course top management, and that s it, directly involved. Indirectly a lot more, if we ask how we can prepare? Our top management aware that that biofuel is a necessary step to take on that level they are familiar with the headline but not any details. Charlotte: what is the involvement of the whole of the org? From cabin-crew to top management? And the person who s involved in the business contracts basically the awareness of the SAS image. Martin: Well if you go flying with SAS and you ask the crew on board: I saw something about biofuel then I think the crew should be able to say yes our company is working with biofuels. Damien: Is this the case? Martin: I think it is the case; we are on the ISO certification process right now. And that includes that everyone in the company must know something about our policies and they should be able to know where to go with the ideas and what are the main steps in the certification. 8

9 Damien: Is this the case today? Martin: If you go to the crew portal, crew will receive a letter from your manager that mentions these things I just said. Our certification is 3-4 weeks from now. There s the e-learning program and that is mandatory for all managers to take but voluntary for crew, the letter is mandatory to receive but not to read and to understand. Damien: Is the biofuel engagement a strategic or a responsive solution? Martin: It depends if you are talking about involvement today where it is a common process-taking place in the society. Or if you are talking 4-5 years ago. Today it is a strategic solution we are talking about, because the goal is to reduce our CO2 footprint and to be sustainable. Charlotte: So you want to move beyond compliance? Martin: Yes, and push forward Damien: Are you seeking to use environmental opportunities to create a strategy, and use biofuel as a tool? Martin: Biofuel is one of our 6 targets, and our 6 targets are a part of the business strategy, we have said that environment is one of our 9 selling points and a part of the overall business strategy. Charlotte: What are the benefits of partnerships in this area? Martin: the benefits are of course that on the market, it is a benefit to be more than one company and more than one sector, and also to be together with other big influential players, it is necessary in order to move forward and easier to move forward. Damien: Why could Maersk and Novozymes be interesting partners? Martin: because of what I just said, and it is good brands, Maersk is end-user like us and Novozymes is in the production chain as a very interesting part with enzymes. But maybe you could ask Novozymes how they are going to help us? Damien: Does SAS prefer open or closed relationships? Martin: I think I will say open, but of course, maybe you have to go into closed dialogues with some special selected parties with some questions. Charlotte: What could you imagine for the mentioned companies? Martin: Novozymes is a company with a lot of certifications and approvals etc our situation is quite opposite, we want to use it as a broad perspective and as open as possible. But maybe in the dialogue with us Novozymes would have to hold it close to the body and will not be able to discuss some things. In our case we would strive to have open relationships and open dialogues to the extend that it would not harm our business. Or our partners, if we are harming their protocol, certification or recipe. 9

10 Damien: Is there other partners that could be interesting for SAS? Suppliers/universities/creative SME(s)? Martin: All of them, sure, that s what we do now, we have partnerships and signed letter of intend with some Swedish and Norwegian possible biofuel producers. With universities, we are talking with you and others and have been doing that for many years. Creative SMEs yes, some are suppliers others are airline companies, small jet companies etc why not? I can only say yes we are interested. Charlotte: What are the criteria for suppliers? Martin: when we go to our suppliers and ask for some environment or CSR criteria, we are asking a lot of questions and we also must do the same thing here in the biofuel area, but we are no there yet I think, so I think it will be the same procedure as in all other kind of suppliers situations. Charlotte: What are the requirements for changing suppliers? Martin: we have to follow a structure for that. It is never a strategy to change suppliers and to have fewer suppliers and develop with our suppliers, it is a situation that is very difficult to answer, a lot of situations are as suppliers a big customer, I could say yes and no and maybe! Damien: What type of partnership could be developed? Martin: We will join the industry because it is necessary. Charlotte and Damien: What about a sub-company handling the biofuel? Martin: it has been mentioned in dialogue with our fuel director, and e is making all buying s of fuel today and they are making hedging strategies and now they are introduced to biofuel and of course linked to the fueling company there could be an interest in that in the future but we are no making direct strategies towards this. Damien: But I could imagine that it would be a quite strong message to send if you have trucks in the airport with SAS logo, showing the customers what SAS is doing. Martin: SAS: Sustainable And Secure fuel. Damien: yes something like that, when the biofuel comes, you start to do that and implement a brand for biofuel etc Which technology? Pros/cons Economic and Social aspects as well? Martin: It depends on the lifecycle analysis, as long as it sustainable, and I have learned the last 6 months that different solutions is the best way to go. Charlotte: So you would be able to use bio-ethanol and bio-fuel? Martin: Yes if it is turned into aviation fuel 10

11 Damien: so some kind of biofuel from different biomasses in Sweden a different one in Denmark etc Martin: yes Damien: How can you be sure that it will be sustainable solutions all the way through? Martin: We have to rely on the suppliers and there documentation and I think that here we are talking about society control and interest, because it is such a big question to talk about 50% blend in biofuel in the future, because if you miss everything in sustainability direction in the beginning, you will be totally out of business one way or another if you don t control it. If it s not the authority or politics making control I think you have to make audits or certifications similar to ISO. Damien: Is Kalundborg a realistic opportunity? Martin: it is not on a big scale, I think they are doing a lot of interesting things and they proved that they could do it the next step is to make it in big scales. Damien: but if they can produce something that could be certified for aviation and they can have their fuel certified would that work for you if they can scale it up? Martin: Yes Damien: Which policy must potential collaboration companies comply with? Martin: If it s partners, the same answer for suppliers. Of course everybody is not on the same level, if a partnership disagree in some aspects we will agree to disagree instead of excluding. Some companies are in a high level others are in a low level but the goal is that everyone should be on the same level. 11