Welcome to our latest edition of HFW Aero, our quarterly update of the legal, commercial and regulatory issues affecting the aviation industry.
In this edition, we feature VMO Aviation’s Marilyn Gan as she looks back on her career and how her own experiences have shaped her work as a board member of ISTAT. Marilyn shares valuable advice for companies on how to create the best possible conditions for the success of women in their organisations. We also look towards sustainable aviation and how CORSIA will impact airlines from 2024. To round off we look at the developing area of aviation that has emerged as a rapidly developing new technology with the potential to provide a sustainable solution to the industry’s needs – eVTOL!
Rebecca Quayle in “ For me, a big part of addressing this is opportunity. We need to give women and minorities the opportunity to go for any conversation with job opening. It starts from ground zero – the candidate slate.” Marilyn Gan linked loan for one of the airlines in and David Swan (COO, SMBCAC) who Marilyn Gan is Senior Vice the Middle East incorporated diversity persuaded me to stand for election. President & Head of Asia metrics at the senior management That itself was daunting. Who would Senior Vice President & Pacific - VMO Aircraft Leasing. level which, if achieved, would result in want to put themselves out there certain cost savings for the airline. to campaign and potentially not be Marilyn is responsible for definin Head of Asia Pacific - VMO Aircraft Leasing elected? Thankfully I made the cut! Certainly, more can be done in our and implementing VMO’s ISTAT has given me so much and so industry towards gender diversity. revenue strategy and managing serving as Vice President is, for me, Companies need to look at all the the company’s presence in giving back to this organisation. roadblocks to gender parity and develop the Asia Pacific region. specific programmes that address How do you think ISTAT can best these roadblocks. We have come a build on the diversity and inclusion long way during the last twenty years work it has done to date and what so I do see progress being made and will “making an impact” look like? each cohort will do better than before. Since my appointment (I was only You are responsible for definin Is there a perception that you have the negotiating table. Having said that, For me, a big part of addressing this is one of two female board directors and implementing VMO’s revenue to have a particular skill set, training I have received nothing but absolute opportunity. We need to give women out of a board of 16), we now have strategy and managing the or availability to make that transition support from the moment I started and minorities the opportunity to go for more women serving and more company’s presence in the Asia from a legal role to a commercial and have had the benefit of fantastic any job opening. It starts from ground directors from diverse backgrounds. Pacific region. You are currently role? If so, do you think any of those mentors and allies along the way. zero – the candidate slate. We need to The board has evolved over the years serving on the Board of the perceptions act as barriers to prevent Robert Martin and Phang Thim Fatt widen and expand the list of potential and is more representative of the International Society of Transport certain groups of people from taking (from BOCA, spring to mind). When I candidates from that point. The pool of industry. I would encourage more Aircraft Trading (ISTAT). Having had on those roles? moved to DVB, Bertrand Grabowski was candidates must be diverse, including women to stand (we have elections a long career in the aviation industry a great guide and mentor. To be able and most importantly at the candidate/ imminently and the greatest number There have been many lawyers and and taken on a number of roles to have that is crucial because these interview slate stage. Research has of female candidates running to date engineers who have transitioned during that time, can you tell us a are the allies that will put your name shown that the likelihood of hiring which is fantastic). We also have our successfully into a commercial role. I little bit about what roles you have forward for opportunities that come up. outcomes is dependent on the makeup first female ISTAT President taking think a large part of it is opportunity had and with what organisations? I am a great believer in mentoring the of the candidate slate. The more diverse over the helm come March which and being in the right place at the younger generation as they progress the candidate slate, the higher the is testimony to the openness of our I started my career as Legal Counsel right time. Obviously, you need to up the ladder and I think we as women likelihood that a diverse candidate will industry to evolve with the times. with SALE (now BOC Aviation) some understand the product but beyond leaders can do more to encourage this. be hired. Knowing this, we need to twenty years ago and during that that, anyone going into a front facing At ISTAT, we have set up a standing create and maximize opportunities for time, women were a rare species in role needs to enjoy being customer What do you think the industry diversity committee and are actively a diverse slate and focus on that, rather the industry. I was grateful for the facing (be it airline, lessor or bank). could be doing to encourage organising events and training across than the outcome. opportunity to join such a niche Given the industry we’re in, you need a more diversity and inclusion, diversity and inclusion. At each of our industry back then and spent seven big dose of confidence and self-belief. particularly at a senior level? You have served as a board member major conferences, we aim to have a years honing my skills on all things Women tend not to put their hand up of ISTAT since 2017 and in March will session on DEI with guest speakers The awareness of the benefits of aviation until I had my first child. I unless they are 150% sure of themselves be taking over as vice president. invited who are experts in this field diversity is indisputable. There are then moved on to aviation insurance and need to be encouraged to step up During that time you have been active We also hope to have more diverse many studies that show the benefit brokerage with Marsh as I was looking and take hold of the opportunities as in promoting diversity and inclusion. representation up on stage at our of a diverse workforce to a company’s for a more front facing role within they arise, ready or not. conferences and this is something balance sheet and profitability. The As you know, ISTAT back in the day the industry. After that, I was able to we are actively encouraging and When transitioning between roles, more diverse the workforce, the better was a very US-centric, male dominated join DVB as Relationship Manager in monitoring on a going forward basis. have you noticed a change in the the impact to the business. If we look organisation. I was always under the 2005 and effectively stayed at DVB (in make-up of your colleagues from a at banking, the industry is 100% behind impression that you needed to have various roles and offices) until it was diversity standpoint? this initiative and there are numerous a certain amount of grey hair before acquired by MUFG in 2019. In 2021, I was ESG and sustainability products that being appointed. Referring to my approached to join VMO, a new leasing Leasing is an extremely male incorporate diversity metrics to clients. earlier point on having male allies, it company, to start their Singapore offic dominated industry and when I started In fact, the most recent sustainability was Steven Townend (CFO, BOCA) and that’s where I am currently. out, I was, very often, the only female at 6 | HFW Aero | March 2023 HFW Aero | March 2023 | 7
Sustainable aviation: 3. CRITICISM FROM SOME lower quantity of EEUs which an airline important role in the growth of SAF QUARTERS: notwithstanding what needs to purchase may be a welcome usage and the development of this should be considered a significan development for the industry. ecosystem. Other factors likely to be How will CORSIA impact industry achievement, the new crucial in driving demand and supply 5. EMISSION UNITS ARE HERE CORSIA baseline has nonetheless of SAF include the role of industry TO STAY - AT LEAST FOR NOW: in been criticised by certain quarters stakeholders such as airlines, airports terms of how CORSIA offsetting will suggesting that it is not stringent and fuel producers in sharing the risk airlines from 2024? occur, EEUs will continue to play enough to be compliant with a Paris of supplying new technologies to ramp a pivotal role in assisting airlines Agreement warming trajectory. up supply of SAF, as well as the role of 4 meet such requirements, at least in governments in developing policies It has also been said that the new the near future. ICAO’s LTAG report in parallel to ICAO’s LTAG (such as baseline may depress airlines’ suggests that SAF has the greatest implementing SAF usage targets and emissions unit demand by 30% potential to reduce CO2 emissions bridging the cost differential of SAF and compared to ICAO’s original plan from international aviation and in .5 fossil jet fuel). Ultimately, it is a delicate exercise the achievement of the LTAG.6 While .6 by ICAO to juggle many competing operators can indeed reduce their This article was first published in considerations. What is clear is that CORSIA offsetting requirements by October 2022. Please click here to the baseline should be consistently claiming emissions reductions from view the original. reviewed against the rate of recovery CORSIA Eligible Fuels, the role of EEUs JAMES JORDAN of airlines from the pandemic and in assisting airlines to offset emissions Partner, Singapore, correspondingly the emissions levels should not be undermined. A recent T + 65 6411 5374 of airlines. If for instance emissions report has highlighted how the cost E [email protected] levels from international aviation return of reducing CO2 emissions using SAF PETER ZAMAN to pre-COVID-19 levels, the basis for is currently 50 to 700 times more than the adjusted baseline would likely fall that of using emissions units. Partner, Singapore .7 T away. This then invites the question of +65 6411 5305 6. SAF NEEDS TO BE SCALED... E whether the next scheduled review of [email protected] AND FAST: although the pricing of CORSIA in a Nutshell following COVID-19.1 On the other have to offset international fligh the baseline, three years from now in Footnotes: EEUs could well increase as demand hand, setting the baseline with only emissions in excess of 85% of their 2025, is too distant. The Carbon Offsetting and Reduction grows, and SAF costs may decrease reference to 2019 flying emissions 2019 emissions level. This will lead 1 Oka-Institute .v., should CORSIA be changed due to Scheme for International Aviation 4. RISK OF DOUBLE COUNTING: an as techniques develop and improve the COVID-19 crisis has been criticised by environmental to larger offset obligations than the (CORSIA) has been adopted as part 2. The Pilot Phase and the First Phase are voluntary airline operator under the jurisdiction and state subsidy or speculative groups for delaying climate action and requirements prior to the 41st Assembly, (i.e. States rather than individual operators choose of the broader package of measures of a CORSIA state party will have GHG capital is provided, this takes time and reducing overall mitigation achieved which only called for offset purchases whether or not to participate). The Second Phase will to help the International Civil Aviation mandatorily extend offsetting obligations of the Pilot emissions that arise from international the gap is unlikely to be fully closed by CORSIA by about 25% to 75%. As once emissions reach the full 2019 Phase and the First Phase to all international flights Organization (ICAO) achieve its long aviation, but the EEUs that airline in the immediate future. In order such, in 2020, ICAO determined that output. The 85% threshold is, however, between States, excluding flights to and from a term aspirational growth (LTAG) State which satisfies certain requirements. For more operators use will arise from GHG for the aviation industry to meet it the baseline would be calculated solely still below what the threshold would information, see: HFW I Sustainable Aviation: How objective for international aviation emission reductions or removals sustainability goals, the widespread use by reference to 2019 emissions during have been under CORSIA’s original plan, COVID-19 moved the CORSIA goalposts of net zero carbon emissions by achieved at a domestic / national of SAF will need to be commonplace 3. ICAO, Carbon Offsetting and Reduction Scheme the pilot phase2 from 2021 to 2023. ICAO which required carriers to offset any 2050. CORSIA’s approach is based on for International Aviation (CORSIA) - Assembly 41 level. As such, there is a clear risk of with IATA estimating that perhaps 65% considered that using 2020 emissions emissions above their average output Skytalks comparing the total CO2 emissions of double counting if the same emission of the mitigation needed for net zero figures would cause an inappropriate for 2019 and 2020. 4. Carbon pulse, ICAO to review CORSIA offsetting an airline operator in a year against a reduction or removal is claimed by emissions in 2050 will come from SAF8. baseline in 2025, experts say current level not Paris economic burden on carriers and baseline level of CO2 emissions. 2. GROWTH STILL POSSIBLE: the aligned an airline operator seeking to fulfi A report also shows that in order to contravene the spirit of the CORSIA 5. Carbon pulse, UPDATE - Aviation industry at risk of new CORSIA baseline strikes a balance its CORSIA obligations as well as the achieve a commitment by airlines and Fluctuations in the CORSIA Baseline framework agreed in 2016 (as actual overlooking non-CO2 warming effects -analyst between ensuring that airlines are not country hosting the offset project corporate customers of an SAF volume 6. ICAO, LTAG Report 2020 emissions were far lower than In 2016, the CORSIA baseline was set overly burdened by CORSIA compliance to achieve its nationally determined of just 70% out of total jet fuel demand 7. Trove Research - Blog: Does EasyJet’s Pivot Away what had been expected when the at an average of 2019 and 2020 flyin costs on one hand, while ensuring from Carbon Credits Mean Airlines are Cooling on contributions (NDCs) under the Paris by 2030 (noting that a SAF volume of pandemic occurred). The baseline to the Carbon Market? emissions. However, air traffic in 2020 that airlines are on track to achieve Agreement. For this reason, post- 73% to 75% of total jet fuel demand be applied to subsequent phases after 8. IATA, Net Zero CO2 Emissions Goal Tops was significantly impacted by COVID-19 sustainable growth. The revisions in 2027 vintage EEUs, which covers is needed to achieve credible l.5°C Achievements at 41st ICAO Assembly 2023 was to be determined during the - ICAO reported a total decline of 65.5% growth factors, with an increased 9 Mission Possible Partnership, Making Net Zero offsetting obligations under the firs targets). Over 300 SAF plants need to CORSIA periodic review in 2022. Aviation Possible of passenger traffic in 2020. Adopting focus on sectoral rather than individual and second phases, will be subject to a be built and SAF production needs to the average of 2019 and 2020 flyin Impact on the aviation industry: growth of operators, suggest that corresponding adjustment. This is how increase by 5 to 6 times from currently emissions would essentially present a what do airlines need to know? operators that grow faster than other double counting between the CORSIA planned SAF projects.9 An additional .9 lower baseline. This means that airlines operators are less impacted in terms of framework and the Paris Agreement investment of between $49 to $97 The following key points would have to offset more emissions. the increase in offsetting requirements. 3 accounting framework is managed. billion would be required over the next are worth noting: This should be encouraging to airlines Accordingly, EEUs of post-2027 vintages three decades from fuel producers for According to the International Air 1. HIGHER BASELINE TARGETS (BUT that are focussed on post-COVID-19 are expected to be priced higher. From SAF production plants to bring global Transport Association (IATA). The NOT AS HIGH AS IT COULD HAVE recovery and avoids penalising faster this perspective, the new CORSIA aviation to net zero by 2050. Book increased CORSIA compliance costs BEEN): for the first and second CORSIA growing airlines. baseline and consequentially the and claim systems are likely to play an would have risked the sustainable implementation phases, airlines will recovery of international aviation 8 | HFW Aero | March 2023 HFW Aero | March 2023 | 9
