No environmental conditions linked to the airline bailouts: a missed opportunity?

By Luca Donatella

The before and after of the aviation crisis

The aviation sector hit significant economic losses during COVID with a decline of 62.3% of global passenger traffic in 2020. The health crisis inevitably led to  international travel became either near-impossible or was hit with a plethora of restrictions making it impractical  to fly internationally. Airline companies were the first to be hit and have been amongst the last to recover.

Despite the considerable disruption in the sector, there is quiet confidence in the sector that it will not have any significant lasting impacts on the overall growth of the sector. Historically the sector has a positive long-term response rate to crises, notably after 9/11 and the SARS epidemic.

A 2015 International Air Transport Association (IATA) report indicated that it would take at least three to five years for the sector to correct itself and for growth to resume to pre-crisis figures.

The environmental plans for the future

The real question is thus: how do we negate the impact of the environment whilst continuing the steady economic growth that so many rely on?

IATA has already committed to reducing carbon emissions by 50% by 2050, a commitment which we have frequently heard across many sectors.

IATA points to using more efficient aircraft; hydrogen/electric aircraft; and sustainable aviation fuel as the main most promising areas to reach this goal. All three methods require significant economic investments which aviation companies are not prepared to commit to.

The European Commission has set similar goals to improve efficiency in the aviation sector and reduce the overall environmental impact. In July 2021 the Commission launched the “Fit for 55” proposals which aims to reduce emissions by 55% by 2030.

These statements follow the all too familiar rhetoric of ambitious environmental proposals  with little substance or real investment behind them.

Impact of State Aid on the aviation sector

So how did airlines survive during COVID-19? The Commission responded to the pandemic by establishing a “Temporary Framework” which allowed for looser EU state aid rules and to bailout the airline companies.

Airline companies have received up to €37 billion in bailouts since the start of the pandemic. This includes €11 billion to Lufthansa, €10.6 billion to Air-France KLM and €3.5 billion to Alitalia.

Ryanair has challenged many of these state aid interventions, with a majority of these challenges coming to no avail. The Commission called the Air France bailout both “necessary” and “proportionate” setting a clear precedent at EU level that such state aid is permissible.

The State Aid given to Air France had some environmental conditionalities, notably by setting out a series of targets with the use of sustainable aviation fuel and a decrease in certain domestic routes. The conditionalities are however mostly non-binding and will have not nearly enough of an effect on the 2030 and 2050 ambitions of the Commission and IATA ambitions.

Why were there no environmental conditions in the bailouts?

The IATA has set out the most efficient ways of reforming the aviation sector and has clearly indicated the extensive investment needed in more environmentally efficient methods such as the use of sustainable aviation fuel. Airline companies on their own following of a global health and economic crisis clearly do not have the funds to invest in this.

Greenpeace, Transport & Environment, and Carbon Market released data to analyse all the EU bailouts and the climate conditions linked to the funding, and of the 31+ bailout agreements only the Air France and Austrian Airlines bailouts had any sort of climate conditions, which were still inadequate and not legally binding.

Of the 37 billion given in state aid they almost all follow a pattern of having no serious legal obligations in respect to placing the sector on a sustainable pathway. If both national countries and the EU were serious in establishing a clear precedent on reforming the airline sector clear obligations with detailed plans and quota obligations would have been placed on these companies.

Despite the political rhetoric and discourse of turning Europe green, notably with the recent Green New Deal, practically we are not seeing any real and realistic movements towards this in the aviation sector.

Both the Commission and national member states clearly had an inadequate response to climate change in the aviation sector, and this was a prime opportunity to rescue the aviation sector economically and environmentally.

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