Presentation about Air Canada and BioFuels strategy for a Case Competition at HEC Montréal, Canada Team : Green Across Canada

1. Green Across Canada
Consulting
David Boisseleau
Cédric G.-Ducharme
Frédéric Larivière
Simon Turcotte
Air Canada BioFuels

2. GAC Consulting

3. GAC Consulting
Rarity of petroleum resources
Increase fuel cost
Carbon tax
Industry Changes
Problematic
Economic
Environment
Global warming
New Local and international regulations

4. GAC Consulting
Aviation
Industry
Regulations
New Energy
Sources
Carbon Tax
Green
awareness of
consumers
Global
MidClass
Increase
Alternative
Transportation
Ecotourism
Telecom
Oil producers
Airports
MFG : Engine
Aircraft
Distribution
Network
Forces and Threats

5. GAC Consulting
12B$ Revenue
178 Destinations, 2/3 Local
205 Aircrafts
New CBA
Best N.A. Airline (awards)
-40% CO2 emissions/flight with Biofuel
Continuous commitment towards environment
Operation Cost Control
Employees empowerment
Innovation leadership
LEAVELESS Program
3 signed agreements with Oil Producers
(RenTech, Altair Fuels, Solena Fuels)
Air Canada : Leaveless Program
Goals and Objectives of AC
2012

6. GAC Consulting
WHAT CAN BIOFUELS
DO FOR AIR CANADA?
IS IT PART OF THE
SOLUTION?

7. GAC Consulting
Canadian Biodiesel Capacity
284Ml/yr (2011) –> 598Ml/yr (2012)
Subsidies in Canada and Worldwide
Objectives 2020 for Aviation
IATA : 6%, E.U 4%
ICAO : Leadership on global regulation
Multiple R&D Programs,
Various Oil Producers Investments
Increased consumption of other industries
(Petrochemical…)
KD Communications 2011 – K&T.Daynard
0
50
100
150
World U.S Brazil Germany
Biofuel Production (BLitre)
Current situation of Biofuel Market
R.Branson CEO Virgin

8. GAC Consulting
Competition
2009/01
Continental Airlines’ First Biofuel flight
2010/04
United Airlines’ First Biofuel flight
2012/06
Air Canada’s First Biofuel flight
2012/04
Porter Airlines’ First Biofuel flight
2011/07
Virgin Airlines’ Partnership to develop new feedstock
2010/01 Quatar Airlines Partnership to develop technology and
supply
More than 30 Airlines trialing and deploying
biofuels
First Flight
First Dev

9. GAC Consulting
Supply availability
Approval ASTM
D7566
GHG Emission
Public
Employment
BiofuelSocial
Environment
Economy
Sustainable Viability

10. GAC Consulting
“If the airlines need alternative fuels, want
alternative fuels, and we‟ve flown aircraft
with them, why then, don‟t we have them?”
Glenn F. Tilton, Chairman,
President and CEO of United Airlines

11. GAC Consulting
Feasiblity - Production
Technical Requirement
for Jet-Engine
Availibilty
in CA
Net Carbon Footprint Socio-Economic
Value
Non edible
Oils +++ + +++ +++
Edible Oils --- +++ +++ --
Animal Fats +++ + +++ +++
Energy Crops --- +++ +++ --
Agricultural
Residues
---
(Ok only 3rd gen)
+ +++ +++
Woody
biomass
---
(OK only 3rd gen)
+ +++ +++
MSW TBD + +++ +++
Offer Demand Influence
Agricultural
Forestry
Petrochemical
Refinery
Plastic Industry
Transport Industry
Government
Local Administration
NGO
Production needs to increase

12. GAC Consulting
Develop NextGen biofuel and increase efficiency
Private Investments
(Engine and Aircraft Manufacturers, Petrochemical, Oil
producers, feedstock producers)
Government Investments
Alliance between organizations (BioFuelNet)
Information sharing across all stakeholders,
Formulation common objectives
R&D and Innovation

13. GAC Consulting
Hypotheses:
 Jet fuel: $0.86/L ($3.22/gal)
 Biofuel: $1.32/L ($5/gal)
 Equivalent energy density
Biofuel ratio 0% 5% 20% 50%
% GHG reduction 0% 3.5% 14% 35%
Additional fuel costs - $93M $371M $927M
Carbon tax effect $97M $93M $83M $63M
Total additional costs $97M $186M $454M $990M
 GHG reduction for pure Biofuel: 70%
 AC Fuel usage at 2011 level (3.9B L)
 Carbon tax fuel cost break even point: $0.02/L
 For Jet Fuel at $0.86/L, biofuels are profitable at $0.88/L
Scenario Analysis

14. GAC Consulting
Global Discussion
Supply security and product safety
International technical standards
(type : ASTM , RED, RFS)
Strong aviation industry presence in Montréal
Biofuels life cycle and GHG Emission reduction objectives
Mutual recognition between countries
Government Global Organizations
Canada, EU, US,
ASIA
ICAO, IATA, ,SWAFEA,
NGOs
Key Players
Global consensus

15. GAC Consulting
Supply Chain
Secure and reliable supply
- Feedstock suppliers: open to adapt ?
Geographically adequate ?
- Transportation and Distribution : Is current
equipment compatible and sufficient ?
- Conversion Suppliers : Capacity and
willingness to incorporate biofuels ?
- Airports : Infrastructure adaptation
- Abroad supply chain ?
Increase communication and
cooperation between stakeholders
Continuous improvement

16. GAC Consulting
Possible Alternatives
 Stand still (status quo)
 Secure supply by purchasing an energy producer
 Purchase carbon credits
 Other sources of energy?
 No other serious options at the moment

17. GAC Consulting
Goal: Few aircrafts (1-3) on short, busy routes; 20% blend
 Visibility, branding, concept proofing
Implementation: Partnerships with suppliers
 Biofuels
 Immediate local availability (recycled oils)
 Avg. 3.8M L / yr / aircraft
 0.64% of actual Canadian production / aircraft
 Aircraft and engine manufacturers
 Technology, optimization, wear
 Airports
 Storage, dispensing (trucking)
Recommandations – Short Term
2013 2014
PILOT

18. GAC Consulting
Goal: Biofuel mix supply at major local airports
 5% blend
Implementation: Local standardization
 Biofuels:
 Integrate supply chain
 Secure >200M L / year supply
 Lobbying; subsidies, incentives; common front
 Distribution
 Adapt existing transport/storage infrastructure
 Outsource blending to jet fuel refiners (ISO)
 3.5%GHG reduction  32% CAN biofuels
2013 2017
Recommandations – Mid-Term
EXPANSION

19. GAC Consulting
Goal: Reach full potential on 2nd gen. biofuels
 20-50% blend
Implementation: Global Rollout
 Biofuels:
 700M – 2B L supply annually
 Lobbying; subsidies, incentives; common front
 Airports:
 Integrated distribution at all major destinations (intl.)
Beyond:
 Integrate 3rd gen. biofuels to reach >50% blend
 Maximize GHG reduction, >40% CO2
 14 – 35 %GHG reduction
2013 2023
Recommandations – Long Term
GHG Reduction

20. GAC Consulting
Communication: Visibility and rebranding
PR: Reach the public, politicians, industry
Visual: Green planes, website, airport displays
Partnership : Integrate with Aeroplan and create green
miles program
The New Air Canada Brand
Air Canada is a Green Pioneer
 Early adopter of biofuels
 The environment conscious airline of choice
 Create a „Canadian Green Belt‟ linking all major
cities with biofuel powered flights coast-to-coast.
Marketing

21. GAC Consulting
To reach 40% C02 reduction
 Aircraft technology:
 Weight reduction (1Kg = xx ton CO2)
 Aerodynamics
 Engines efficiency
 Fuel flexibility
 Flight control operators:
 Optimize flight routes, take-off / landing procedures
 Government:
 Stringent emission standards
 Carbon regulation
Future Outlook

22. GAC Consulting
THE ROAD AHEAD
Now:
 High cost
 Limited supply and impact on emission reduction
 Success requires long term commitment

23. GAC Consulting
DETERMINATION, VISION, LEADERSHIP
Wright Brothers,1903

24. Green Across Canada
Consulting
David Boisseleau
Cédric G.-Ducharme
Frédéric Larivière
Simon Turcotte
Questions ?