Much remains uncertain about the impacts of the global coronavirus crisis, but one thing is certain: aviation is going to take a major hit. The International Civil Aviation Organisation (ICAO) predicts that 2020 will see three million fewer passengers and $391bn less revenue for the sector.
Climate campaigners have seen an opportunity to reign in aviation’s CO2 emissions. Although it makes up only 2% of overall emissions, aviation is the fastest-growing source of CO2, its emissions having risen by 130% over the past two decades. While the most radical campaigners have said governments should let airlines go bankrupt to reduce flying, others want governments to impose strict emission reduction requirements in exchange for bailing out airlines.
Europe’s carriers have so far been granted €30bn in taxpayers’ money. These enormous bailouts have been made possible by the European Commission’s temporary suspension of EU state aid rules to assist the Covid-19 recovery. Climate campaigners had hoped the commission would make this relaxation conditional on climate efforts, but EU competition chief Margrethe Vestager announced in early May that such conditions would not be included. Commission lawyers believe it would not be legally possible for the commission to impose them as a condition for approving state aid.
According to EU sources, there was a disagreement between Vestager and Frans Timmermans, the commission’s climate chief, over this question. Timmermans and his team wanted the EU to mandate green conditions and believed it would be legally possible to do so.
Without any EU requirement in place, most EU countries have opted to forego green conditions. Bailouts of €9bn for Lufthansa; €343m for British Airways; €1.8bn for British-German company TUI; €670m for EasyJet; €750m for Iberia; €407m for Scandinavian Airlines (SAS); and €1.2bn for TAP Air Portugal all came with no such conditions attached.
Only France, Austria and the Netherlands have imposed climate criteria, but NGOs say even these measures will not make a big difference.
Scrapping short flights in France
France was the first to grant a bailout with green conditions, requiring Air France to cease all flights competing with a high-speed rail connection of 2.5 hours or less, in exchange for a €7bn bailout. The move got quite a bit of media attention when it was announced in April, but although these short haul flights attract much attention, their contribution to aviation emissions is almost negligible.
“The most attention-grabbing condition has been the scrappage of short haul flights,” says Andrew Murphy, aviation manager for Transport & Environment (T&E), a Brussels-based NGO that is tracking the airline bailouts. “But these flights only make up a very small percentage of all flights – less than 1% of overall French aviation emissions. Even if you expanded it to routes that take five hours by train, it would still only be 4.5%.”
Much more important, Murphy says, is how emission reduction commitments are measured and the size of the bailout. By this metric, the Austrian bailout is best, while France’s fails, he says.
The French bailout requires Air France to improve the efficiency of its fleet by half by 2030 compared with 2005 levels, but this is being measured relative to CO2 per passenger kilometre, rather than by absolute emissions.
“That doesn’t work because it means you can improve efficiency, but your overall emissions can keep growing,” says Murphy. “Airlines have been improving efficiency since the industry was born. The efficiency improvements are cancelled out by an increase in passenger numbers.”
He also points out that Air France already volunteered this commitment last year.
The French bailout also requires Air France to reduce emissions from domestic flights by half by 2024, but no comparison year is given for this target, and it is unclear what accompanying measures will promote rail. Finally, Air France will have to burn a minimum of 2% alternative fuels in 2025, up from zero at present. The problem is that those alternative fuels are actually easiest to implement on domestic flights because the state can ensure the right infrastructure at both ends. They will be much harder to mix in for international flights.
An Air France spokesperson said it will unveil a roadmap this summer on how it intends to meet the bailout conditions.
“This target will be reached by renewing the fleet with Airbus A220s, but also by adapting the network when efficient rail alternatives under 2.5 hours exist,” she said.
Austria’s best in class
The bailout of Austrian Airlines is far smaller than in France – €450m. Austria has made the aid conditional on the airline reducing emissions by 30% by 2030 compared with 2005. This might seem much weaker than the request to Air France, but Murphy says it is not because emissions have to be reduced in absolute terms, not per passenger kilometre.
“In our eyes this is what makes the Austrian conditions the most meaningful,” he says. “The commitment is per flight. This addresses long haul aviation emissions as well, which is important because they have a much greater CO2 effect, not only because they are longer but because they fly higher.” A total of 80% of aviation emissions come from long haul flights.
Austria has also required the airline to scrap domestic flights, although the government has been less keen than France to flag this, perhaps because it appears less impressive for a small country. In addition, Austrian Airlines will have to reduce its domestic emissions by half and end flights where a train connection exists that is under three hours. This requirement goes beyond France’s pledge because it will include ‘feeder’ flights – short routes that connect to a major hub — which France has exempted. People wanting to take a long haul flight from Austria will have to take road or rail transport to Vienna.
Finally, the government is also requiring a €40 minimum price for air tickets. T&E says that while this is good, it is unclear how it will be legally enforced.
Overly generous Dutch
KLM’s €3.4bn bailout from the Netherlands, announced on 26 June, is the weakest of the three, according to T&E’s analysis.
“A few weeks ago, the Dutch Government said it would attach climate conditions, but when the announcement came, we see those conditions are just what KLM already said it would do,” says Murphy.
The Dutch Government has requested the same emission reduction requirement as Air France received (the two are part of the same airline holding company), a 50% reduction by 2030 compared with 2005. As for Air France, this will be measured in terms of CO2 per passenger kilometre, allowing continued emissions growth.
The biggest problem with the Air France and KLM bailouts, Murphy says, is that they are overly generous.
“The most impactful green condition is the size of the bailout,” he says. “If you are overly generous to an airline, that airline will have a big cash reserve to start cutting ticket prices when flights resume. Then it doesn’t matter what conditions you have attached to that, you have basically just put a lot of money into a polluting industry.”
For climate campaigners, the bailouts have been immensely disappointing – but all hope is not lost. “
These were the immediate bailouts,” Murphy says. “What we are now looking at for the next months and years is overall aid to the sector. Much of that will come from the [yet to be agreed] EU recovery fund. We are moving to a second stage of regulatory support for aviation.”
He hopes this will lead to “regulations that will over time reduce emissions in the sector”. Murphy adds: “There will now be a different relationship between some of these carriers and regulators. In the last years we have seen airlines escape climate regulation, not being part of national climate targets. Maybe we are going to see that change now.”
Overzealous regulation from some governments that feel newly empowered by the bailouts is exactly what the aviation industry fears – because it could result in a patchwork of measures that distorts the market.
“We say the wider the scope of a measure the less distortion you create in the market,” says Laurent Donceel, a director with industry association Airlines4Europe. “With a narrow scope you can create carbon leakage.”
By this he means that if the EU imposed a fuel tax on airlines landing in Frankfurt, companies might decide to use Istanbul as a hub instead to avoid the tax, and keep polluting.
On this, campaigners and airlines agree. They would both much rather see aviation emissions tackled at a global level through ICAO, to prevent planes diverting to the least-regulated locations. But with little progress at the international level, and some national governments having new leverage over their airlines, the risk of a patchwork of climate rules for aviation has never been greater.