From Operations to Policy: Integrating the CII Index into Analytical Frameworks for Airline Decarbonization

Abstract

The aviation industry, contributing 2–3 % of global CO₂ emissions annually, faces growing pressure to balance environmental responsibilities with economic performance. With the International Air Transport Association's (IATA) net-zero carbon goal by 2050, airlines must address challenges such as carbon tax policies, fleet optimization, and consumer affordability. This study examines the impact of market-based emission policies—carbon taxes, trading systems, and offset mechanisms—on Full-Service Carriers (FSCs) and Low-Cost Carriers (LCCs). Findings reveal that LCCs, with high efficiency and short-haul operations, adapt better to regulations than FSCs, which face higher costs due to long-haul networks. Strategies like fleet modernization, increased load factors, and sustainable aviation fuels (SAFs) are explored as pathways to mitigating passenger cost burdens while ensuring compliance. Methodologically, the study employs a Log-Mean Divisia Index (LMDI) decomposition model alongside a decoupling analysis to assess the environmental and financial performance of airlines. Highlighting the importance of tailored strategies, this study provides actionable insights and emphasizes collaboration between governments, airlines, and consumers to achieve sustainable growth in aviation. In addition, the study adapts the Carbon Intensity Indicator (CII) from the maritime sector to aviation, providing a novel metric for assessing carbon efficiency. Integrating CII with LMDI and profitability indicators enables a more transparent evaluation of airline sustainability and offers policymakers a robust tool for emission management.