Aviation is one of the first and most visible economic losers from restrictions introduced to halt the spread of Covid-19, with 95% of passenger flights grounded. The industry says it faces losses of more than US$250 billion this year.
Recent weeks have seen regular pleas for help from individual airlines and the industry at large, closely followed by condemnation from environmental and social justice campaigners who suspect the aviation industry is using the crisis to further delay action against climate change.
Several leading organizations have called on governments to ensure that any support given to airlines comes with environmental strings attached. These include the American company Environmental Defense Fund (EDF), based in Brussels Transportation & EnvironmentUK based Institute for Research on Public Policy and global campaign group green peace.
A petition organized by campaign groups Possible and Stay Grounded also calls for any bailouts of airlines using public money to put workers and the climate first. It garnered over 55,000 signatures within days of its launch.
Campaigners want taxes imposed to deter frequent theft and to ensure the industry pays fair taxes. Currently, aviation fuel is exempt from excise duty in the UK, and many countries also exempt tickets from value added tax.
No unconditional support
There are few signs that governments are listening. In the United States, a $2 trillion bailout agreed by Congress in March gave airlines some $58 billion in loans and grants. Clauses proposed by Democrats but omitting would have required airlines receiving financial assistance to offset all domestic flight emissions by 2025 and support the commercialization of sustainable aviation fuels.
Elizabeth Gore, first vice-president of EDF, said the government was repeating the mistakes that had led to the worsening of the coronavirus pandemic. “It is time for our leaders to follow the facts, listen to the scientists and act on the dangers facing our economy and our society,” she said.
Such calls for environmental conditions on aviation support programs are part of a broader attempt to ensure that global recovery plans are aligned with the transition needed to achieve the goals of the Paris Agreement. The aviation sector is responsible for 2% of global carbon emissions and has long been considered a laggard in reducing emissions.
Rising passenger numbers mean its emissions are expected to increase by 300% by 2050 compared to 2005, according to the International Civil Aviation Organization (ICAO).
Under the Carbon Offsetting and Reduction Program for International Aviation (CORSIA), airlines have committed to ensuring that any growth in international flights after 2020 is carbon neutral by purchasing offsets. CORSIA is due to come into effect in January 2021, but will be voluntary for the first six years, which means that only flights between countries that have chosen to participate in the program will have to be compensated.
The regime has been widely derided by activists as far too weak. ICAO has planned that airlines will spend $5-24 billion per year on carbon credits globally by 2035, representing 0.5-1.4% of total revenue.
The offsets will be purchased under several programs, including the United Nations’ Clean Development Mechanism, which has proven to be unreliable, with around a 75% chance of producing the claimed reductions, according to a report published by UK think tank The Green Alliance, which claims that CORSIA will not deliver net emissions reductions between 2020 and 2035.
Aviation is the economic sector most misaligned with the Paris climate agreement
Furthermore, aviation is the economic sector most misaligned with the Paris agreement, ranking even below oil and gas in an evaluation released by the investor-led Transition Pathway Initiative in February.
“Any money to airlines should be allocated with very clear measurable targets to ensure the companies that receive it will move decisively towards alignment with the Paris Agreement,” says Nick Robins, professor of sustainable finance at Grantham Research. Institute, London School of Economics.
Daniel Rutherford, program director for marine and aviation at the International Council on Clean Transportation, said: “I would be concerned about state aid aimed explicitly at bringing the aviation industry back to business as usual, given that the level growth in traffic seen over the past decade cannot really be corrected with the airlines’ own climate targets.
For instance, industry’s own data shows that since 2013, global air traffic has grown six times faster than fuel efficiency has improved, he says.
Protecting aviation and the climate
But the aviation industry says it is facing its “deepest crisis ever”, estimating revenue losses at 44% compared to 2019, even if the travel restrictions last only three months. Without financial aid, most airlines will go bankrupt, according to the International Air Transport Association (IATA).
The industry employs 2.7 million people and supports an additional 65 million livelihoods in its supply chain, according to IATA, adding that restarting the global economy will be extremely difficult without aviation.
IATA has been vigorous lobbying for government assistance in the form of direct financial support, loans, loan guarantees and corporate bond market support by government and central banks. He also wants tax relief, the abolition of airport fees and the ability to reimburse passengers with vouchers instead of cash.
It is also lobbying ICAO to change the base year of the CORSIA program. Currently, we are in 2019/20, but as flights have been reduced, any growth will mean the airline industry will have to buy more offsets than it would have without the pandemic.
Some governments have already agreed support packages, including Singapore, China, Australia, Brazil, New Zealand, Sweden, Denmark, Norway and Finland. The Eurocontrol air traffic management organization has agreed to postpone to 2021 some 1.1 billion euros in payments for navigation services until May this year.
The UK government has so far resisted pressure from airlines, with Chancellor Rishi Sunak telling them that individual support would only be considered once all other options were exhausted, including fundraising from shareholders, investors and banks. EasyJet needs to borrow $500m from trade creditors and has now secured a $730m government loan.
Meanwhile, the EU is closest to committing to aligning recovery deals with its new Green Deal. A joint statement of the bloc’s 27 leaders said in March: “We need to start preparing the necessary steps to return our societies and economies to normal functioning and to sustainable growth, integrating green transition and digital transformation.
In terms of specific support for airlines, the EU allows member states to decide whether limited state aid can be granted. However, Andrew Murphy, director of aviation at Transport & Environment, notes that the commission continues to advance policies on taxes and alternative fuels, such as a consultation launched since the beginning of the Covid-19 crisis on the introduction of a mandate for alternative fuels for aviation.
“After the crisis, we believe the European Commission will continue with its Green Deal, which will force the aviation industry to start introducing the kind of technology needed to reduce its emissions,” Murphy said.
Rutherford is cautiously optimistic: “I think it is still early days, and we expect further bailouts, some in regions like Europe where environmental awareness is high. So there is a good chance that conditions will start to recover.