Integrated ETS Management.
Environment meets Business.
Benjamin Walther Christian Lambertus
T +49 (0) 170 354 365 8 T +49 (0) 176 830 233 87
mail bwalther@aviationexperts.de mail clambertus@aviationexperts.de
visit www.aviationexperts.de visit www.aviationexperts.de

Management Summary
Status & Overview:
Most Airlines are not yet fully aware of the scale in which EU-ETS will influence their business decisions and their
future plans.
The challenge of EU-ETS is to develop strategies to close the gap between allocated allowances and the actual
amount of certificates required at the end of each trading period.
Your airline receives free allowances covering ~83% of its emissions. The remaining ~17% have to be acquired via
diverse channels. This gap increases by x% as your airline intends to grow within the trading period. (See slide 5)
Integrated ETS Management:
The Integrated ETS Management concept enables airlines to determine the size of the gap and its development
during the trading period with regard to growth.
Elaboration of right measures and strategy to close the existing gap, enables airlines to manage their allowance
stock efficiently. Thus providing a competitive advantage.
Determination of optimal mix of acquisition channels for allowances to reduce costs to the utmost minimum.
AviationExperts ETS-Services:
AviationExperts combine proven aviation industry knowledge with EU-ETS framework competency.
Due to our aviation expertise we are aware of the strong interdependencies of affected business processes which
enables us to develop solutions that are feasible for airline operations and tailored to your needs.
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Agenda
Status & Overview
Integrated ETS Management
Our Services
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01.10.2009 Integrated ETS Management

The importance of an EU-ETS strategy is underestimated by
numerous airlines.
Facts Status of ETS Strategies
Including EU-ETS into an airline’s strategic 100
decisions is essential for its future development
and competitiveness. 75 85%
Major airlines are developing global strategies
including EU-ETS. 68%
50
Many Non-European airlines currently consider
short-term milestones (i .e. Monitoring
Concepts) and neglect the long-term 25
implications of EU-ETS.
In the long-run, non-consideration of EU-ETS 0
will be a high risk for Non-European airlines. Major EU Airlines Mid-Sized EU Small-Sized EU Major Non-EU Mid-Sized Non- Small-Sized Non-
Airlines Airlines Airlines EU Airlines EU Airlines
Already developed Currently developing Not yet considered
The integration of EU-ETS in an airline’s processes and strategy is the key to gain a
competitive advantage in the future.
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The challenge of EU-ETS at a glance.
Situation Composition of Allowance Stock
The free allowances allocated for the second period Unknown Expansion
Uncovered Gap
2013-2020 will be based on the operated flights of +X% Factor X
2010.
The amount of free allowances will not change during Gap of uncovered
the whole trading period from 2013-2020. 17% emissions in trading period
Any expansion after allocation will reduce the portion of
free allowances whereas the unknown expansion factor
X increases.
Free Allowances
The arising gap can be closed by:
Over the counter trading
Free allowances
Emission stock exchange 83% allocated by EU for
Hedging of allowances reports of base year
EU special pool for large expansion
CDM/JI-projects
Certificate auctions
Penalties for uncovered emissions
For the second trading period (2013 – 2020) every airline will receive free allowances for ~83%
of their emissions in 2010.
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The portion of additionally required allowances will increase in
line with your airline‘s expansions.
Example Calculation Example Illustration
Taking a mid-sized airline with 1.5 Mio. Tonnes 535.000
2
Million
of emissions in 2010 and an annual growth of
350.000
2%.
The quantity of additional required allowances
will increase from 350.000 in 2013 to 535.000 in
2020.
1
Under consideration of the current price per
allowance (~14 €) additional costs of 4.8 Mio. €
in 2013 and 8.1 Mio. € in 2020 will arise.
The complete trading period from 2013-2020 will
cause costs of 50 Mio. €.
0
2013 2014 2015 2016 2017 2018 2019 2020
Free Additional
The more ambitious your airline’s growth plans are, the more you should focus on the gap of
allowances that you require to cover all emissions.
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Agenda
Status & Overview
Integrated ETS Management
Our Services
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01.10.2009 Integrated ETS Management

Your airline‘s business goals will be affected by four major
components arising from ETS in the future.
Additional Costs Additional Constraints
Airlines will face additional
Emission allowances as a
costs due to required
constraint will affect future
allowances not covered by
fleet & network planning.
free allowances.
Business
Goals
Additional Processes Additional Market
Allowance trading will
Designated ETS processes
become an additional
will be essential to cover
competitive stage for
the new requirements.
airlines.
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An integrated ETS Management Concept enables you to maintain
your heading in terms of business goals and strategy.
1 Allowance Optimization 2 Network / Fleet Planning
Optimization of allowance management Consideration of ETS in mid-and long-term
for complete emission coverage. network and fleet planning.
Identification and management of CDM/JI Evaluation of future business models
projects and activities. under the premise of ETS.
Identification of opportunities from Determination and Integration of ETS
swapping CER’s and ERU’s Integrated costs in network planning decisions.
ETS
Identification of the optimal Management Early integration of proper operational
allowance trading mix. ETS processes.
Consideration of non-aviation business Implementation of IT-Systems to support
opportunities along with ETS. ETS processes.
Development of an ETS organization
Design trading processes and strategy.(in-house
development vs. out-sourced service).
3 Trading Mechanism 4 Enterprise Integration
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1
CDM / JI projects – A strong leverage to compensate for ETS costs.
What is it about? Example
Clean Development Mechanism (CDM) and
• A mid-sized airline emits 1.5 Mio. tonnes of CO2 per year.
Joint Implementation (JI) are mechanism for
• The assigned free allowances in 2013 will cover ~83% of the
ecologically neutral industrial growth in
emissions.
developing countries.
• Without CDM/JI projects and a current price of ~14 € per
Common examples are the installation of filter tonne of CO2, the airline faces additional costs of 3.5 Mio. €.
systems in power plants or realization of wind (Scenario 1 )
energy projects. • By using CDM/JI projects the airline can reduce the costs for
CDM and JI also represent an opportunity for additional allowances to 1 Mio. €. (Scenario 2 )*)
airlines to gain additional emission allowances.
Investing in existing projects or setting up own 17% 12% 5%
projects will result in an ROI determined in
1 2
EUA’s.
Although a cap of 12% of allowances generated 83% 83%
from CDM/JI exists, the ROI in combination
with the marketing leverage created should be
considered. Free Allowances CDM/JI Projects Additional
*Additional costs for CDM/JI projects are not considered. The above
example only holds for CDM/JI projects with a investment of >2.Mio:€
and a return of the maximum of 12% of allowances.
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1
CDM / JI projects are easy to realize and a complementary
component for acquiring the necessary allowances.
General Rating
Invest in existing
The United Nations provide a list of approved
project
CDM/JI projects currently open for investment. CDM/JI projects can be very useful for
The administrative effort to invest in such gaining additional allowances.
projects is comparatively low. Some projects require huge
investments. Therefore, a detailed
business case is essential for all
planned CDM/JI projects.
Moreover all CDM/JI projects should be
Setup own project
Beside investing in existing projects it is also
aligned with an airlines’ strategy.
possible to setup own projects.
A mix of several small shares in various
Compared with the higher administrative and projects can be used for CSR marketing
financial effort an airline can achieve further in the desired region.
benefits out of those projects (Corporate
Social Responsibility).
AviationExperts have the expertise to develop CDM/JI business cases determining the best-fit
scenario with the optimal ROI in allowances and CSR for your airline.
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2
Network planning decisions have to take ETS-costs into account.
What is it about? Example
Future Network Planning will be strongly
influenced by EU-ETS, as it will increase costs • A flight from JFK to BOM with 300 passengers on board.
per flight (see example). • Scenario 1 : 1-Stop flight via LHR
Therefore it is essential to adjust your future • Scenario 2 : Non-stop flight to BOM
network strategy with regard to ETS.
Small capacity with high frequency results in
higher emissions. Scenario 1 Scenario 2
Each route planning scenario has to consider
JFK - LHR 126t CO2 JFK - BOM 316 CO2
ETS for business case modeling.
The fleet management has to be reviewed LHR – BOM 165t CO2
according to possible changes to network
strategy. Cost per t CO2 14 € Cost per t CO2 0€
Every new route increases the expansion factor
ETS Costs 4.074 € ETS Costs 0€
regarding the coverage of emissions with free
allowances.
Airlines that are able to integrate ETS Management into Network Management will reduce
costs arising from the increasing gap of allowances resulting from expansion.
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3
Airlines will compete on an additional non-aviation market:
Trading of allowances.
Trading of additional allowances Trading of complete allowances
Airlines have to participate in allowance trading in Airlines can participate in allowance trading with their
order to buy additionally required allowances. complete allowances.
One approach is to stockpile the amount of Airlines receive their free allowances one year in
allowances by traditional buying of certificates. advance.
The portion of free allowances will not be used to During the year airlines can either secure the
generate additional certificates. allowances or start trading with them.
Only buying additional allowances has low efforts By using the allocated free allowances for trading,
concerning business processes, but bare the risk of airlines have a better leverage to acquire the amount
high costs depending on the current bid price for of certificates necessary.
allowances.
X X
Additional Additional
Free
Free
Trading No Trading Trading No Trading
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3
Airlines have to choose an adequate trading model today to benefit
tomorrow.
Trading Models Trading Methods
Trading Partner Over the Counter Trading
All trading activities are performed by a Direct trade of certificates
partner (broker or bank). between companies.
Stock Exchange
Trading Pool
Trade of certificates at the
Composition of a trading pool together
European Energy Exchange
with other airlines or participants.
(EEX)
Own Trading Department
Hedging
Setup of an own trading department who
is in charge for all trading activities. Trade of certificates and
securing through futures.
€
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4
The integration of proper ETS processes will help to reduce the
overall costs.
What is it about? Areas of Enterprise Integration
EU-ETS is more than the
development of Monitoring Concept
Organization IT
and will have a significant impact on
Designation of ETS responsible Integration of IT system
all processes of an airline.
persons as well as a ETS Task supporting you in all areas of
To minimize the impact it is essential Force and an ETS hierarchy. ETS (i. e. Automated Reports).
to integrate ETS-activities accurately
into your existing business process
environment.
Therefore it is important to build up
Processes People
processes & organization to operate
Setup and documentation of Training of staff to create
ETS in the best possible way. proper ETS processes fitting into awareness of EU-ETS in
your current operations. departments.
An organization can effectively operate when all components are working along a common
path towards a clear and shared goal.
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Path to realizing the Integrated ETS Management Concept.
Setup Analysis Evaluation Implementation Management
Identification of Analysis of Development of Selection of Continuous
stakeholders and current strategy strategy scenarios strategy. monitoring and
departments. with regard to: for acquiring Implementation of management of
Setup of ETS 1. Future traffic lacking strategy into ETS strategy.
project team. allowances. business Ongoing
2. Future network
Commitment of Development and processes and adjustment of
3. Expansion plans.
management. assessment of organization. strategy.
Identification of business cases.
Development of Definition of key
interfaces
project plan and Development of performance
between current
goals. risk strategies. indicators.
processes and
ETS.
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Agenda
Status & Overview
Integrated ETS Management
Our Services
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AviationExperts combine proven industry knowledge with the
dedication for innovative solutions tailored for each client.
Aviation Know-How Your Benefit
Integration of ETS under the premise
Operations Control, Network Management,
Scheduling, Revenue Management, Capacity of operational feasibility.
Control, Airline IT-landscape, Airline Business Immediate return on investment as
Processes, Airport Operations. experts need no “acclimatization” to
the industry.
Awareness of interdependent
processes within an airline
ETS Know-How
guarantees a sustainable result.
Get access to industry best-practice
Regulatory Framework, Compliance, Risk knowledge.
Management, Trading, Monitoring, Verification, High product quality due to specific
Reporting, IT-Support, CDM/JI Project training according to industry
Assessment
standards.
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AviationExperts – we are the specialists among consultancies.
We integrate necessary ETS activities into your airline’s business process
environment.
We find ways to acquire the necessary certificates at lowest possible
cost.
We assist you in the further development of ETS processes to stay the
leading edge and maintain a competitive advantage
We develop your specific ETS strategy according to your needs and
preferences.
With AviationExperts as specialists for ETS integration your airline gains a competent partner
with proven industry expertise to guarantee long-term success for your business.
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For further information please contact us.
Your contacts:
Christian Lambertus T +49 (0)176 830 233 87
clambertus@aviationexperts.de
www.aviationexperts.de
Benjamin Walther T +49 (0)170 354 365 8
bwalther@aviationexperts.de
www.aviationexperts.de
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01.10.2009 Integrated ETS Management