What Will Airline Bailouts With Carbon Contingencies Mean for Aviation?
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Airlines around the world have been forced to accept government bailouts that provide a lifeline during the COVID-19 crisis. While US airlines were able to dip into $50 billion worth of funds with limited ecological constraints, a couple of European countries have decided to attach green strings to the financial relief they are providing. How will this affect business, and will other airlines be subject to the same phenomenon?
The rumblings of eco-conscious activists grew louder as the coronavirus crisis strengthened its grip on the aviation industry and airlines were strapped for cash. Carriers looked to governments for help, and some argued that this would be an ideal time for policymakers to impose strict measures related to climate change.
In the US, a draft of the CARES Act tabled by House Speaker Nancy Pelosi required airlines to start offsetting their carbon emissions in 2025 and halve their overall emissions by 2050. This initial draft also required the US Environmental Protection Agency to finalize new aircraft emissions standards within 18 months; provided grants through the FAA to develop sustainable aviation fuels; and incentivized airlines to swap their older aircraft for more fuel-efficient models à la Cash For Clunkers. These terms were left out of the final bill, effectively shutting the door on government-enforced environmental initiatives for US airlines.
In Europe, the pressure was palpable. On April 6, an open letter coordinated by activist network Stay Grounded endorsed by over 250 organisations and 26,000 signatories, advocated for strengthening low-carbon alternatives like rail travel. One week later, a European Commission official made it clear that it expects airlines to continue to contribute to the continent’s emissions targets as outlined in the European Green Deal despite the current economic turmoil they are facing.
On April 28, French finance minister Bruno Le Maire detailed the conditions of the country’s $7.6-billion Air France bailout. The carrier must halve its overall carbon dioxide emissions per passenger kilometer by 2030, compared with 2005 levels. For domestic flights, this must be accomplished by 2024. Another condition orders a reduction of service for flights of less than two-and-a-half hours when a viable rail alternative is present. Furthermore, 2% of the fuel used by its planes will need to be derived from alternative, sustainable sources by 2025. “Lastly, investments will have to be directed in the coming years to renewing the fleet of long and medium-range planes to more effectively fight emissions,” Le Maire said.
Pressed for comment, Air France press officer Mathieu Guillot told APEX Media that sustainable development has been a priority for the airline for several years. Its Horizon 2030 program, which was released in October 2019, outlines the same CO2 reduction goal that Le Maire prescribed. To achieve it, the airline has 38 Airbus A350s on order for long-haul flights and 60 Airbus A220s on the way for short- and medium-haul flights. It will also implement weight reduction schemes and practice initiatives like eco-piloting, which involves taxiing on the runway with half the aircraft’s engines running.
Guillot said Air France plans on reducing its CO2 emissions by 50% on domestic flights to and from Paris-Orly and on region-to-region flights within France by 2024 to fully meet the demands of the French government. It will achieve this with the help of the aforementioned A220s. “This summer, Air France will present a roadmap on its domestic network, taking into account environmental stakes but also the need for this activity to recover from an economic standpoint as it recorded losses of $225 million in 2019,” Guillot said. He noted that the airline has partnered with France’s national railway for several years. Asked if any carbon reduction goals have been dropped due to the COVID-19 pandemic, Guillot mentioned that the company will continue to offset the CO2 emissions of all domestic flights.
The latest airline to receive a government bailout with green strings attached is Austrian Airlines. The federal government is requiring the airline to shift passenger traffic away from short-haul flights to rail when a train trip would take less than three hours. Cityhopper flights like the Vienna – Salzburg route are at risk of being kyboshed. The airline must also halve its CO2 emissions by 2030 as part of the deal. Furthermore, the government is ushering in a measure that was supposed to be introduced in 2021: it is imposing a flat-rate flight tax of $13.50, which will be bumped to $33 on flights under 217 miles. All tickets to or from Austria must be sold at a minimum price of $45 to discourage price dumping on the part of low cost carriers.
Environmental initiatives will likely play a key role in the post-COVID-19 travel landscape. A poll by UK-based Institute of Travel Management members revealed that 56% would continue to prioritize sustainable travel after the crisis is over, and 40% say it will be an even higher priority. It remains to be seen if more airlines will need to go green to get the green.