Federated Hermes Research Hub

Federated Hermes is actively addressing the aviation sector's decarbonization challenges by advocating for a holistic, multi-lever strategy beyond the industry's reliance on sustainable aviation fuel (SAF). Recognizing significant supply constraints and regulatory hurdles, the firm promotes a transition approach centered on operational efficiency, such as the adoption of electric ground equipment, AI-driven flight path optimization, and accelerated fleet renewal. These initiatives are highlighted not only for their environmental impact but also for their direct link to financial performance, as fuel costs often account for 25-30% of airline operating expenses. Through targeted engagements with industry leaders including Airbus, Lufthansa, and ANA, Federated Hermes emphasizes the necessity of robust, actionable transition plans to secure long-term sustainability. This research underscores a shift toward operational optimization as a primary mechanism for managing climate transition risks and enhancing airline profitability.