Those who don’t fully understand what it is often call it a scam, but ESG is nothing more than a voluntary set of standards used by those who care about doing proper due diligence in an effort to minimize risk while maximizing profits.
Case in point: Delta Airlines’ recent decision to lower its carbon footprint as part of its “Path to Sustainability” program, which aims for net-zero emission in 2050.
Such a thing is likely to trigger anti-ESG zealots who claim this as an example of putting “woke capitalism” ahead of profits. But nothing could be further from the truth. Because you see, part of Delta’s “Path to Sustainability” includes reducing fossil fuel use.
Last year, the company claims to have saved 10 million gallons of fuel by installing enhanced winglet installations for drag reduction, weight reduction initiatives, and flight routing optimization.
The average price of jet fuel in 2022 was $3.36 per gallon.
Multiply that by 10 million, and you get $33.6 million worth of jet fuel savings.
Delta plans to offset an additional 10 million gallons of fuel going forward, too, which will bring bring its total fuel savings to 20 million gallons.
While I don’t know what jet fuel will average in 2023, if we assume at least $3.00 a gallon, you’re now looking at a fuel savings of $60 million.
That’s not chump change. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
JetBlue (NASDAQ: JBLU) has also integrated an ESG standard in its operations through governance. That is, corporate oversight of daily operations (which includes risk mitigation), that has resulted in both significant cost savings and a better experience for its customers.
Check out this segment from a case study of the company’s use of next-generation weather analytics from a tech firm called Tomorrow.io …
On one cold and “snowy” February morning in Boston, every major weather report was calling for snow from the early hours of the morning until 11 AM. Given this information, airlines at Logan Airport posted delays and halted their regularly scheduled takeoffs, except for JetBlue. Using Tomorrow.io, JetBlue was able to see the weather report was wrong and the snow was going to end closer to 8 AM, and they immediately implemented their action plan accordingly. The team took control, didn’t cancel any flights, and ran all of their operations that morning on time while every other airline sat and watched helplessly. Not only was this a huge win for customer satisfaction, but financially as well since delays cost airlines $75 per minute.
JetBlue estimates Tomorrow.io is saving the operations team as much as $50,000 per month per hub, especially during months with volatile weather.
This is an exercise of proper corporate governance resulting in significant cost savings. A recognition of the “G” in ESG..
It’s really not much more than that.
So no one should be surprised to know that nearly every major airline has already started integrating ESG standards into their operations. These include, but are not limited to …
- Delta (NYSE: DAL)
- JetBlue (NYSE: JBLU)
- Southwest (NYSE: LUV)
- United (NASDAQ: UAL)
- American (NASDAQ: AAL)
- Air Canada (TSX: AC)
- Lufthansa (OTCBB: DLAKY)
- Qantas (AX: QAN)
- Air France (OTCBB: AFLYY)
- Hawaiian Air (NASDAQ: HA)
I promise you, the CEOs of these companies are not putting sunshine and rainbows ahead of maintaining and enhancing profitability.
Don’t let the anti-ESG folks confuse you.
The basic fundamentals of ESG are sound, and most companies that integrate them do so in an effort to minimize risk and make more money. It’s really that simple.
