Deep Diving into the Consulting Project Work

With this post I would like to reflect on the progress our team has made and the ways in which our relationship with the client has both informed and shaped our analysis. Following our initial consultations, we decided to conduct a deep dive on three companies that are included in the client’s ESG-focused portfolio: Airbus, Nike, and Deere. Three of the team members each chose one company, whereas the fourth would be responsible for quantitative analysis and ensuring that the overall analysis was cohesive. 

My choice was Airbus since I find the company fascinating and am a self-declared aviation geek. It also happens to be one of the first adopters of reporting their ESG strategy, goals, and progress towards accomplishing these goals. Given the impact of air travel on global carbon emissions, it has become imperative that plane manufacturers devote increasingly more resources to designing and building more aerodynamic, fuel-efficient, and durable products. As such, Airbus and Boeing have been in a tight competition. Airbus has chosen to focus on the potential use of hydrogen as fuel for the future, with a goal of deploying the first carbon zero plane by 2035. The dynamics within Airbus have been very interesting – given that the biggest source of emission reduction must come from the plane’s engines, it is the engine manufacturers who bear the responsibility of modifying existing engines to make them more fuel efficient and producing a new generation of engines that might be hydrogen powered. As such, Airbus (and Boeing) finds itself as a customer lobbying for change. Obviously as a customer Airbus has significantly more power – due to its size and the highly-concentrated nature of the aerospace industry – than individuals or even other companies, but it has been interesting nonetheless to see that regardless of industry, it is still customers who lobby for change. This holds true for Airbus’ customers as well: airline operators are demanding more fuel efficient and less carbon emitting aircraft from Airbus (and Boeing) since they themselves have to respond to the changes in preferences of their customers – individuals using the airline’s services. Prior to analyzing Airbus from this angle, I had – albeit naively – underestimated the power that we as customers possess to push for a change in the behavior of every product-maker that we give business to. That has been a very refreshing realization. 

Airbus uses its power as a large customer to ensure that its top suppliers are all meticulously tracking and reporting their carbon emissions and ESG goals by having them submit the CDP questionnaire and get their grading. The company aims to have all its suppliers complete this process within the next year.

Discussions with our client have led us to a new analysis that I am looking forward to conducting: the effects of worsening and more frequent turbulence on the future of airplane design and the extent to which this can contribute to transitional risks for Airbus. According to an article in the Washington Post entitled “Climate Change is Raising Flight Turbulence Risks”(March 4 2023), climate change is increasing the frequency of and the severity of turbulence by affecting “wind shear, the degree to which wind speeds vary at different altitudes.”  Since 1979, according to this article, wind shear “has increased by 15%” and “when wind shear is high, those differences in wind speeds create atmospheric disturbances much like rippling, if not raging, waves in a surging river.” This is making turbulence more severe and harder to detect since this happens in the absence of clouds. Since pilots usually have no warning, and keep the seatbelt sign off when clear skies are ahead, encountering severe turbulence results in increased likelihood of injuries on board, potential hospitalizations, and increased costs for the airlines. The analysis we are aiming to conduct will assess the scale of future incidents of severe turbulence and assign an average monetary value to it. Additionally, I will attempt to see whether specific aircraft are more or less susceptible to turbulence and then try to relate this back to Airbus’ exposure. I am sincerely looking forward to conducting this analysis and assessing what the results show.