¶ … drivers of using biofuel in the airlines industry are closely linked to the evolution of oil prices in the last decade, as well as to the risks associated with the use of petroleum fuel. First of all, the oil prices have continuously increased over the last decades and the evaluations that this would happen date back to after 2003.
As early as 2009, the predictions for the period 2009-2016 reflected oil was expected to increase by 50% (as a trend) from an average at that time of around $50 (Kitov, 2009). This was based on existing statistical facts and evaluations and past data, thus carrying a high level of abstract objectivity. These evaluations were translated in practice, with oil prices currently at $92. All this would translate into an increased cost for the airline carriers.
Even more worrying when it comes to oil is that much of the price is politically regulated and, as a consequence, subject to political risk. The group of exporting company, united in a cartel, decide when and whether the output of oil varies or not, which generates price fluctuations. Evaluations are that changes in the Middle East, in strategic oil producers such as Saudi Arabia, could increase price as much as $200-$300 (Farge, 2011). With the Arab Spring and important changes in the Middle East in the last years, it remains to be seen whether the stability of oil prices can still be supported.
Instability, difficult in access to this resource, and a trend that shows that the prices of oil will likely continue to increase, no matter what the period of time to which we are referring, seem to be the most important drivers for using biofuel. As such, the airline companies need to consider both political and economical risks when dealing with their supply of petroleum and oil fuels.
Another consideration should be given to the environmental pressures to which the companies are subjected, notably in terms of switching from oil to a more environmentally sustainable option. The trend has been clear over the last decades: more and more environmentalists have put significant pressures on companies to become more environmentally responsible, to develop in accordance with norms that have been adopted at a global level and to accept the realities of climate change and the impact that companies have on accelerating this process.
Another driver that should be considered is the fact that, over the long-term, biofuels may also be a more sustainable option from an economic point-of-view. The initial investment is certainly high and the entire transformational and change management is not an easy one. However, once the initial investment is made, the airline companies would be able to capitalize on lower fuel costs.
b. Prajogo and Ahmed (2006) proposed, in their Stimulus-Capacity-Performance (SCP) approach, that human capital and technological capital are the main factors that affect innovation performance and drive innovation capacity. The human capital includes four factors: leadership, people management, knowledge management and creativity management. The analysis here will start by looking at these four factors of human capital, with the belief that the human capital is more important than the technological capital when it comes to driving innovation capacity.
Of the four factors in human capital, the most important one seems to be leadership. In order to drive an innovatory process, such as switching to biofuel, both European and Australian airline managers need to prove leadership skills. Primarily, this would mean identifying that there are increasing risks with using petroleum and other related oil products and making the decision to start using biofuel, with all the challenges and implications that this has.
However, this is only a very incipient stage of a leadership process that is required here. As Chemers (1997) pointed out, leadership implies "social influence in which one person can enlist the aid and support of others in the accomplishment of a common task." There are several dimensions to this definition. The common task has been identified and this is implementing biofuel to replace petroleum at the airline (European or Australian). The challenge is to convince all stakeholders that this is the appropriate solution and to enlist their aid and support, from the company employees to shareholders and to other partners involved.
This leadership process will significantly affect the entire innovation process, mainly because a successful leader will be able to drive the innovatory process ahead is a sustained manner, while also ensuring that the decision has support within the organization, that it is properly understood and embraced by the rest of the company. Leadership also means vision, the fact that the company leader...
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