Sustainability is a critical issue for the aviation industry, not just from a regulatory perspective or even from a funding perspective, but also from a consumer perspective. In terms of underlying demand, LEK's strong belief is that it is one of the most significant strategic issues placing the industry. For airports, people talk about scope 1-2 and three. Scope one and two emissions are often talked about and you see airports setting scope one and two targets.
To be honest, in our mind, these are the easy bit. Scope one and two targets represent between 1 and 10% of overall emissions depending on how you measure them. And the reality is that it comes down to electricity, where with a green power agreement one can immediately, very quickly get to net zero. The real challenge is in Scope 3, Scope 3 because it's outside the airport's direct control, because it's complicated, because it's more uncertain and because it covers a very wide range of areas.
We see the need to help help people prioritise and work out. They really need to move on. In prioritising the Scope 3 initiatives, it is important to consider both the cost or financial impact on the airport and the cost and financial impact on the industry as a whole. There are some initiatives which are cost saving for the industry and therefore easy for everyone to get behind.
There are others that impose cost on the airport. There are some, such as sustainable aviation fuel, that create a cost for the industry but are being firmly backed by airlines and governments and it obviously makes sense for the airports to get behind that as well. Sustainable aviation fuel will be essential to the sector's ability to abate its emissions. It will impose cost.
Aviation is going to be a hard to abate sector of the economy. Lek's analysis estimates that a 65% adoption of SAF is likely to increase the cost of air travel by approximately 18% on average. This is a large number, but our experience and research has shown that air travel is a relatively inelastic segment. This is not going to kill the industry.
So airports that get behind SAF will have a strategic advantage in our view. We see there are six key steps to delivering a successful Scope 3 strategy. First, get clarity on the inventory and starting position. Shareholders, even within the same asset, have different measurement expectations.
It is not crystal clear. Secondly, recognise that this is about strategy, not ESG. This has to be embedded within the organisation rather than being treated as a compliance activity lurking within one department. Thirdly, we need to recognise that this strategy has to deliver commercial goals and we need to prioritise those initiatives that will deliver on commercial goals while also delivering sustainability.
Fourthly, lean into SAF. It is going to be required in an environment that is still very uncertain. Airports need to avoid falling into the trap of being dragged into commitments that they really don't know they can commit to 2050 targets or other metrics that are highly uncertain and risk being over ambitious or insincere and opening you up to accusations of greenwashing. Lastly, and perhaps most importantly, to ensure traction and real progress, it is important to recognise what you are doing and what you are not doing.
As with the client that when we started working with them had over 100 initiatives. Strategy is often about the activities you drop to focus on the ones that really matter.
