1. Scandinavian Airlines: The Green Engine Decision MBA 241 Anamika Bhardwaj Jane Finnegan Margaret Hwang Rekha Srivatsan

2. Company Profile Largest airline in Scandinavia, serving 32 million people 4th largest in Europe, important player in global airline market Pioneers and forward-thinkers 1st to have a female pilot 1st to offer business class 2

4. Able to justify expense of environmental initiatives

5. Competitors reacting to pressure

6. Corporate customers demanded reaction3

8. Financial, cultural, and political drivers must all be considered in the decision-making process4

10. Produced significantly lower NOx emissions

11. Represents a strong environmental commitment

12. “Green” engine would add approximately 2 billion US dollars to the whole fleet

13. No specific figures on company economic impact5

15. EmissionCalculator

16. http://sasems.port.se/EmissionCalc.cfm?lang=1&utbryt=0&sid=simple&left=simple6

17. Environmental Concerns in the Airline Industry Airline’s environmental impact 90% comes from flight operations 5% comes from cabin operations 5% comes from ground operations Emissions from aircrafts are thought to have global warming effects up to three times greater than ground transportation 7

18. Political and Regulatory Drivers Airline industry is governed by international, federal, regional, and local legislation Environmental standards have been developed by the United Nations International Civil Aviation Organization Sweden is one of the leaders in managing the environmental impacts of air travel 8

19. Cultural Drivers Scandinavian culture 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 CAA recognizes Scandinavian countries as exceeding their commitment to the environment 9

20. Deterrents and Incentives of Purchasing Green Engine Technology Deterrents: - High Cost of the technology - Opportunity Costs - Potential of technical complications Incentives: - Upholding brand image - Anticipation of market demands and emission caps - Establishing a leadership role as a First Mover 10

21. Activity Group 1 (Team 1 & 3) Group 2 (Team 2 & 4) List the environmental impact (s) of aircraft engine performance. Which of these impacts were key factors in the DAC engine decision? How do you think Scandinavian culture affected SAS’s decision? Should corporations make environmentally responsible investments even if they don’t have a shorter term payback ? 11

22. Vote for each of them Given external and internal influences at the time of the decision, what would SAS’s motivations have been for purchasing the engines? Use the following list as a guide to discussing which motivations were most relevant to the SAS decision and why. Desire to avoid or anticipate future regulatory action Financial benefits (short term and long term and/or money saved and money earned through corporate greening) Competitive advantage Stakeholder pressures Enhancing image, being a good corporate citizen 12

23. Activity Continued… Group 1 List the arguments FOR purchasing the more expensive green engines from the point of view of the director of aircraft and engine analysis. Group 2 List the arguments AGAINST purchasing the more expensive green engines from the point of view of the SAS management team. 13

24. What is our Decision??? 14 DAC