SCANDINAVIAN AIRLINES : THE GREEN ENGINE DECISION
Q1-Analyze the Factors that are emerging from the external environment of SAS Sol- What a kind of Company is it. Compare SAS with other Airlines. SAS is a commercial Airline serving almost 32 million people per year. This Airline had a reputation in the commercial aviation industry for being forward looking and had pioneered such steps as being the first major Western Airline to have a female Pilot, to offer business class on board its flights and to have its environmental report audited and verified by a third party. The management realized the current issue involved in developing policies, strategies and decision making were cost reduction, the company’s image as well as the ability to anticipate the market and regulatory changes and be able to plan ahead of time. SAS operates predominantly at the Scandinavian, a domain that has given much importance to environmental issues. The decision making process and outcomes of Scandinavian Airline’s (SAS’s) decision to improve its environmental management practices through the procurement of green engine technology, thus better committing itself to environmental and economic sustainability.
Although the Airline industry is part of service industry, it posses several characteristics, including intense regulation, high entry barriers, high capital costs with tendencies towards the market. Air travel is one the fastest growing sectors in tourism carrying with it some of the most significant environmental impacts (i.e., High level of fuel consumption, noise, air pollution and waste production). Because of the increased use of air travel the demand on the environment has grown significantly. Unfortunately it is difficult to manage in traditional, regulatory, fashion given the complex international setting in which many air lines operate. Thus the air line industry has been heavily regulated through traditional methods, there has been an emergence of voluntary, market based mechanism seeking to encourage the green management practices in the airline industry, which was ultimately initiated by the SAS and after some time into the whole industry.
. • The management realized the issues involved in developing policies. There are several factors influencing: Corporate Culture • SAS has a feeling of both the serenity and efficiency in their work environment. Equality of employees was visibly present. strategies and decision making were cost reducing.
Eco Political Vision • Achieving profitability by minimizing the environmental impact. Scandinavian Culture and Ethics • Associated with deep set of values and beliefs regarding the importance of caring for the environment. • • Strong role in reacting to environmental challenges faced within the Airline industry. Utilization of those methods that will result in lowest possible impact. Scandinavian countries are exceeding their commitment to the environment.Q2-What are the internal Influences at SAS? Sol: What are the internal influences? Go through the company internal part. The Attitude. • • Increasing environmental awareness throughout by conducting several activities at all levels and in all decisions. Values and beliefs generated internally have a critical impact on the SAS’s Policy making.
Both Nas and the CEO knew that the environment had made
. Hence the cost of having an environmental department is justified. Jen Stenberg took in making the environment a strategic priority had strong impacts on how SAS managed environmental issues because he was aware of the importance of this. The environment had become part of the overall policy making structure for SAS. o Avoid or deregulatory action o Comply with pressures imposed by banks. The feasibility of the project was determined by the internal financial structure and management of SAS. clients. Over the years SAS’s environmental image helped in boosting the image of the company. suppliers that do not wish to inherit environmental liabilities. insurers. SAS was presented with an option to “green their fleet”.
Q3-Based on External and internal influences what is SAS’s motivation for being Green? The environmental policy of SAS can be described along a continuum ranging from internal to external factors. environmental organizations and community members o Encourage employee pride and productivity through enhancing corporate culture.
The Scandinavian Airlines and the Green Engine decisions highlights how the internal and external factors influence internal policy decision making. o Conform to pressures from community groups. Individual companies participate in the environmental initiatives to o Reduce costs and increase efficiency by cutting resources use and waste generation. improving the brand of SAS and living up to the spirit of Scandinavian people. o Gain a competitive advantage o Enhance a positive image in the market place as a good corporate citizen. This was based on Customer satisfaction index.The leadership role that the CEO.
thereby increasing their service abilities.its way upto a strategic level in the company. SAS secures their place in the market. Positive (i) a reduction in fuel costs through increased fuel efficiency. (iii) an enhanced national and international corporate image. SAS had to weigh several factors that would directly impact their business. Increasing productivity of employees by creating a corporate culture of which employees
. The purchase and utilization of DAC engines. Also.
Q4-What are potential outcomes (positive and negative) of purchasing the DAC engine for SAS? Sol. Furthermore. could be mitigated by this decision. For example. External factors such as fees associated with breaching emission caps. (v) an enhanced ability to meet the rise in flight demand by an increasing customer base. These costs have the potential to be greatly reduced with the use of DAC engines. (ii) a minimization of risk associated with future operational limitations. Another benefit of the airline implementing DAC engines is derived from the secondary. social effects. By meeting the external factors head on and designing a unique proposal that met the external pressures and placed at internally. Any internal or external drivers that may cause senior management to balk on the decision to purchase green engines. By reducing fuel costs. (iv) increased productivity by employees who could take pride in their corporate culture. The costs associated with the procurement of jet fuel have risen sharply over the past two decades.Some federal court ruling for purchasing. future operational limitations manifested through financial constraints and probable regulatory action can be ameliorated by implementing the DAC engines. Thus Nas was able to convince senior management to purchase the DAC engine. by offsetting the cost of DAC engines with fuel costs and a viable. the potential. jet fuel cost. Nas was able to convince the senior management that the project was financially feasible. money can be recovered from the initially high green engine implementation costs. market turbulence. The DAC engines represented one of the many options the company had for outfitting their new fleet. green public image that increases the customer base. and (vi) a decrease in the likelihood of having regulatory action taken against them for not complying with CO2 and NOx emission caps. the implementation of the DAC engines allows SAS to run more flights before hitting the CO2 and NOx emission caps. Utilizing the environment issue.
it remains difficult to quantify. by implementing DAC engines. This is best achieved through the potential increase in national business and customer base. Scandinavian Airlines. if SAS decided against implementing the DAC engines based on cost. their work on branding their airline as environmentally responsible would be significantly negated Q5-What Should SAS do? As the global demand for a green tourism industry grows. citizens of Sweden will take pride in their national airline. and in order to do so. If they failed to live up to their commitment. The current turn toward sustainability coupled with governmental regulations limiting in-flight and ground emissions could result in another period of turbulence for the airline industry. Since the 1980s. in the light of positive outcomes and offsets. The companies that were able to maintain their market share during those times have been those that were able to adapt to those challenges. The management of SAS is allowing for the reduction of emissions and waste generated through their daily operation to procure green technology. SAS established itself as a leader in environmental commitment.
. they could potentially lose their green image. and market a green image to maintain a footing in the highly competitive airline industry. and possibly begin to prefer their services over those of competitors that offer cheaper flights but with harmful environmental impacts. Negative The prominent reason for voting against DAC engines is the cost associated with the initial DAC engine procurement. These policy decisions are generated through the analysis of the financial cost-benefit. They developed an environmental policy stating that they were committed to using the best available environmental technology. In the early 1990s. increasing numbers of airlines are proactively altering internal policies to reflect their commitment to the environment. the cost can be justified. In mid-2001 the industry experienced an economic downturn as a result of Terrorist Attacks and the SARS outbreak in Asia. It is therefore. Furthermore. however. given that Sweden is a nation that takes great responsibility for the environment. they would have to alter their environmental approach to dealing with the cap on NOx and CO2 emissions. has invested corporate resources in technology and practices aimed at reducing their impact on the environment. the understanding of the regulatory setting. has the ability to impact financial losses associated with a lack of productivity. beneficial for a company to utilize resources efficiently. the airline industry experienced a period of growth until the 1990s when the industry began to deregulate. and through the desire to enhance corporate citizenship and public image. Also. Though the Green Image of SAS is important to the longterm sustainability of the company. As the largest airline in Scandinavia at the time. in the long term. SAS desired to meet the rise of global travelers with service. The cost added to each Boeing-737 is initially shocking. a Green Leader in the airline industry.can be proud.
the ability for a company such as SAS to make decisions that do not have immediate.
.or medium-term payback is determined by both internal and external factors. Scandinavian Airline had access to the capital needed (internal driver). Without these factors coming together. and the establishment of eco-efficiencies in the form of water and fuel saving make this decision positive in the long term.or medium-term. environmentally.oriented management (internal driver). Though the decision would not see benefits within the short.As mentioned earlier. the decision to implement the DAC engines would not have been positive. it was wise for SAS to utilize green technology. The benefits to the corporate image. and the social and regulatory drive (external drivers) to implement the DAC engine program. establishment of a competitive advantage through anticipation of social and regulatory requirements.