European aviation urges governments to support the sector's green recovery through public funding
(photo: Tom D'haenens, Brussels Airport)
Tue 30 June 2020 – European air transport and aerospace trade associations have collectively called on EU governments to finance a green recovery from the Covid-19 pandemic through public funding for carbon reduction projects, research and replacement of older aircraft. They urge EU leaders to prioritise specific decarbonisation initiatives when allocating future recovery funding. These include direct capital investment or ownership in sustainable aviation fuel (SAF) production facilities and implementing an incentive scheme for airlines and aircraft operators to replace older aircraft with more modern and environmentally-friendly models. The sector says it is committed to contributing to the economic recovery in line with the EU’s Green Deal objectives. Meanwhile, NGOs have repeated calls for airlines to be taxed on their fuel, which could raise €3.7 billion ($4bn) a year and prevent a return to CO2 growth post-Covid.
The aviation sector says it is among the most heavily impacted by the pandemic, causing a collapse of the air transport system, but that this is compounded by the challenge of meeting ambitious climate change goals.
“Ensuring an accelerated deployment of existing decarbonisation solutions and adequate investments to bring new technologies forward will be key – investments which should be at the heart of the EU’s Covid-19 recovery strategy,” said a joint statement by 13 trade associations representing airlines, business aviation, aerospace manufacturers, travel and air traffic management.
They call on policymakers to include “smart measures” to support the European civil aviation sector recovery through eligibility for funding under mechanisms foreseen by the €750 billion Next Generation EU and the new Multiannual Financial Framework (MFF). A combination of public and private investment would help speed up the sector’s decarbonisation in line with the EU’s 2050 climate neutrality goal, they say.
Their proposals include:
1. Boosting the production and uptake of SAF in Europe through policy measures and public investment plans within the ReFuelEU Aviation initiative (see article) to make Europe a centre of SAF development and production excellence. This should include direct capital investment (or ownership) in SAF production facilities, enabling the necessary de-risking required to debt finance projects as well as the execution of off-take contracts with aircraft operators.
2. Using public funds dedicated to the recovery to replace older fixed-wing aircraft and helicopters. Such an incentive scheme would speed up the green transition towards the EU’s shorter term 2030 ambition.
3. Increase public funding and public co-funding for civil aviation research and innovation through using resources to inject additional capital beyond the amount that would be expected to be provided through the MFF and Horizon Europe, in particular.
4. Continued investment in the European air traffic management system to enhance the benefits of the Single European Sky and temporarily provide 100% public funding for the deployment of SESAR technologies with proven sustainable and environmental benefits, with funding benefiting all stakeholders that will need to contribute to the deployment of new technologies.
5. Investment in sustainable airport and heliport infrastructure to ensure funding eligibility of projects related to energy efficiency, renewable energy and electrification.
“Now, more than ever, it’s crucial to accelerate the sustainable transformation of our aviation sector and have European airlines set the example,” commented Thomas Reynaert, Managing Director, Airlines for Europe (A4E). “These support measures will help our industry regain its economic viability, paving the way for a more resilient tourism sector and safeguarding our ability to continue to invest in decarbonisation.”
Added Olivier Jankovec, Director General of airports body ACI Europe: “Benefitting from these support measures will help our sector regain its economic viability, a pre-requisite for safeguarding both air connectivity and our ability to keep investing in decarbonisation. Airports – along with our partners in the aviation eco-system – have been brought to their knees by this crisis. Our determination to pursue climate action, in line with ACI Europe’s commitment to net zero carbon emissions under airports’ control at the latest by 2050, remains as robust as ever – but our ability to invest has been hit hard. Aviation is one of the sectors where decarbonisation is particularly challenging, so including it in a joined-up green recovery makes sense for all.”
The trade associations also called for existing financial instruments, such as loans, to be made available to provide urgent relief for the aviation sector.
Subject to regulatory approval from the European Commission, KLM is the latest of Europe’s biggest carriers to receive a government bailout package. The Dutch government has agreed loans totalling €3.4 billion to be provided in tranches up to 2025 and are conditional on employment, financial and sustainability targets being met. These include a stepped approach to reducing the number of night flights from Schiphol Airport, although this is partly subject to the transfer of flights to nearby Lelystad Airport, which is currently being expanded, and the substitution by rail to destinations like Brussels and Dusseldorf.
KLM is also expected to comply with an objective that CO2 emissions from international aviation be reduced to the 2005 level by 2030 and emissions per passenger kilometre be reduced by 50% over the same timeframe. The airline is also to contribute to national reduction targets on NOx and particulate matter and commit to a 14% use of sustainable aviation fuel in 2030.
Last week, Lufthansa shareholders and the Commission approved a €9 billion loan and recapitalisation package, which includes the German government taking a stake in the airline. In return, Lufthansa will be required to give up slots at its Frankfurt and Munich hubs but no green strings have been announced as part of the deal.
KLM partner Air France’s €7 billion bailout announced last month came with three green conditions: halving emissions from domestic flights by 2024, along with restrictions on routes where there is a viable rail alternative and the journey by train is 2.5 hours or less; sourcing 2% of its fuel from sustainable sources by 2025; and a 50% reduction in carbon intensity (kg CO2/passenger-km) by 2030 over 2005 levels – similar to the KLM condition. The latter target had already been set by the airline, which has so far achieved a 30% reduction, according to its 2019 sustainability report.
An airline bailout tracker compiled by Brussels-based Transport & Environment (T&E), Carbon Market Watch and Greenpeace calculates that European airlines have sought a combined €32.9 billion in government bailouts since the outbreak of the Covid-19 crisis.
T&E estimates that a jet fuel tax agreed by countries in the EU’s six biggest CO2 emitting regions – Germany, France, Italy, Spain, Benelux and the EU Nordics – could raise €3.7 billion a year. The NGO has come up with an ‘aviation tax tool’ to calculate the impact of taxing kerosene on an EU-wide basis or between groups of European states. An EU-wide tax would require unanimous approval by all EU States but could raise up to €6.3 billion annually. The tool also shows the emissions saved and money generated by various options for reforming the EU’s Emissions Trading System.
“Airlines ask for billions in government bailouts but pay little tax themselves. That’s unsustainable,” said Jo Dardenne, Aviation Manager at T&E. “While European governments are pumping unprecedented amounts of money into recovery packages, ending aviation’s tax exemption will open a much-needed revenue stream.”