Examining the financial effect of net zero carbon emissions goal on Kenyan airlines
Date
2024
Authors
Obara, S.
Journal Title
Journal ISSN
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Publisher
Strathmore University
Abstract
Despite the adverse effects of aviation on the environment caused by the increase in global air traffic, there has been limited policy locally to mitigate carbon emissions. This was discussed on a global platform in October 2022 that culminated in an adoption of a long-term global aspirational goal (LTAG) of achieving a neutral carbon emissions goal by 2050. The roadmaps to net zero address two key points: reducing the amount of energy needed to fly and substituting the fuel used in aviation. Unfortunately, current national plans are behind schedule on achieving these milestones. This study specifically examined the impact of the LTAG net-zero goal on the local aviation sector and the effect of technological advancements, operational changes and implementation of sustainable aviation fuel on an airline’s overall costs. This study was anchored on the Porter hypothesis which defines the impact of environmental regulation on business performance and the contingent resource-based theory that defines the correlation between a firm’s strategy for managing how its activities interface with the environment and its competitive advantage. It was based on a pragmatic research philosophy in examining the relationships between the study variables while integrating qualitative and quantitative research methods to glean various perspectives on the research problem. The current research used on a mixed research approach with structured and semi-structured questionnaires that was instrumental in examining the causal link between ICAO LTAG recommendations and airline costs by gathering data from questionnaires and interviewing key experts in aviation management. The study population was drawn from the 69 local airlines. The sample study was 138 respondents who hold senior management positions in the airlines. A combination of primary and secondary data was utilized in this research. The secondary data was obtained from the Kenya Airports Authority (KAA), KCAA, aeronautical business reports and journals. The study employed standard deviation, means, regression and correlation analysis. The correlation analysis showed that technical improvement, operational improvement and SAF implementation all had a weak positive significant relationship with the airline costs in Kenya. Results from the regression analysis revealed that net zero carbon emission goal explained 36.7% of the airline costs in the Kenyan aviation industry. The study further found that technological improvement positively and significantly contributes to improved airline costs. The analysis also revealed that operational improvements had a positive and significant effect on airline costs in the Kenyan aviation industry. Lastly, the findings on the third variable revealed an insignificant effect of sustainable aviation fuel implementation on the airline costs in the Kenyan aviation industry. The study recommends that airlines should consider aviation emissions when undertaking fleet upgrades, aiming to incorporate more environmentally friendly technologies. The study also recommends continued investment of resources in optimizing operational processes as improvement of these operations lead to an increase in the airline's margin. The study further recommends an increase in government support and incentives which may be necessary to facilitate the transition to SAF and alleviate the financial burden on airlines.
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Citation
Obara, S. (2024). Examining the financial effect of net zero carbon emissions goal on Kenyan airlines [Strathmore University]. http://hdl.handle.net/11071/15621