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ERA Environmental and Social Group meeting

On 2 April, the first ERA Environmental and Social Group meeting took place to discuss current environmental issues, and address the impact of the COVID-19 crisis on them.

Despite the current COVID-19 crisis, work is still ongoing on environmental issues. Thus, ERA gave an update on the environmental activities it is undertaking. At an international level, the IATA/ATAG industry-wide campaign is ongoing. It is a campaigned aimed at the passenger that has not made their mind up on whether to fly or not to fly. Its website was launched in February 2019 and covers aviation’s journey towards decarbonisation so far, its commitments towards operations, market-based mechanisms, technology and sustainable aviation fuels, and also how passengers can fly greener. IATA/ATAG have also prepared material for airlines to use such as, seatback cards, messaging and communications guidelines and pilot announcements. Secondly, an update on the European Sustainable Aviation Roadmap (ESAR) was given – the ESAR sets out realistic measures for the industry to reduce its CO2 emissions. Four ERA members have volunteered to give expert input to the Roadmap: Air Nostrum, Euroairlines, Wideroe and Zeroavia. The roadmap will be used for lobbying purposes at the European Union level. Given the circumstances, the publication, expected at the end of May, might be delayed. Thirdly, ERA’s sustainability report has also slowed down, but will be published as soon as possible. The report promotes the crucial role of regional aviation and the efforts of ERA members to decarbonise. It includes a technology review carried out by Zeroavia and individual member’s commitments to a cleaner sector. As of the 2 April 2020, 16 ERA members have contributed to the report. ERA also believes that the regional sector must be the forerunner to electric flying, so its been following  developments throughout Europe. For example, in Norway, the Norwegian ambitions for establishing the electrification of short haul passenger aircraft report was published, to which Wideroe has contributed. ERA has also been in contact with CleanSky joint undertaking, who are also optimistic about electric flying in the regional sector- they will have a public consultation on the Strategic Research and Innovation Agenda by mid-April. As for sustainable aviation fuels, ERA has been involved in many events, such as the SAF debate at the European Parliament, the International Petroleum week, and the SAF roundtable organised by the European Commission. Finally, the Ecolabel initiative has been put on hold until June 2020, the CCO/CDO Action Plan work has been terminated and the CORSIA baseline is currently under discussion due to the low emissions in 2020.

The group also received updates from Sweden in terms of taxes and mandates. The Swedish Aviation Industry Group gave an overview of the climate in Sweden. These are difficult times for regional airlines in Sweden, even before the COVID-19 – in fact, in February domestic flights were already down by -11 per cent. In 2021/22, an obligatory climate declaration for long distance travel will be introduced – all Swedish retailers (aviation, trains, shipping and buses) will need to declare to the passenger the amount of CO2 emissions. In addition, the Government will propose a GHG emission reduction obligation for jet fuel of 1 per cent and will increase by 1 per cent every year. The Swedish Government is one of the supporters for taxing aviation jet fuel at European level, via the Energy Taxation Directive. Adding to this, the government would like to increase the aviation tax by 19 per cent in 2021- this is still under discussion. In this scenario, the Group is asking the government to review the reforms and not further impose taxes on aviation at this moment, and if a blending mandate is imposed, then a tax is not necessary as the extra cost will be covered anyway and represents an extra burden on the airlines. This is a very difficult time for Swedish aviation.

Zeroavia gave an outline of the technology review present in the ERA sustainability report. The ERA member airlines have a unique profile that make the perfect starting point for decarbonisation given their short-haul nature. When electrifying aircraft you have many ways of doing so: either via electric battery, hybrid electric or hydrogen electric propulsion. Therefore, Zeroavia looked at how to tackle emissions in the cheapest and most effective way at its source. Zeroavia worked with ERA member airlines to understand the status quo via a survey and with manufacturers to look at the technology options and timeline. The technology options they looked at were sustainable aviation fuels, hybrid-electric, battery-electric and hydrogen electric and looked at how the direct operated costs were affected by each technology. During the presentation, Zeroavia give an economic outlook of this- how does each technology affect the cost structure of flying and emissions. Looking at generic 300NM flights and direct costs of <20 seat turboprop and 5—80 seat turboprop aircraft, where jet fuel is the benchmark, SAF will increase the operating costs because the cost per litre is more expensive today until the end of 2020s. But the cheapest way to decarbonise might always be one of the electric options as these technologies reduce operational costs (fuel, maintenance and depreciation costs). The graph also shows that there still is uncertainty in the cost structure. Generally, hydrogen electric aircraft is seen in a smaller uncertainty range but show less benefits than moving towards battery electric. Electric aircraft will be limited in range and infrastructure that needs to be built for them. Zeroavia finally gave an outline of two case studies, Loganair and Binter. For Loganair, moving to hydrogen would reduce CASK by -16 per cent, compared to a 37 per cent increase by using SAF, while on Binter the CASK would increase by only 14 per cent, compared to the +33 per cent by using SAF.

The group then received updates from DG MOVE from the European Commission. It was emphasised that despite the crisis, the Commission was still working and advancing the files. In fact, for the Green Deal, which DG CLIMA is leading, the agenda is not slowing down due to the current situation, there might be a delay of few months for certain files, but the intentions are not stopping. DG MOVE is working on the SAF mandate – the EC had a roundtable back in March to put this in motion. The impact assessment has been published and by the end of this year there will be a legislative proposal put forward. This is an economic instrument that will enable the market to take off as soon as possible with cost efficiency compared to conventional jet fuel. As for CORSIA and EU ETS, they have clear deadlines and EU ETS is not stopping because of the international agreement. In fact, the EU ETS will be revised on the free auctioning and integration of maritime in the scheme. This is making the instrument more complex due to different amount of proposals such as inclusion of shipping, reduction of free allowances and integration of CORSIA. As for the Single European Sky, the EC is working on the proposal however, it is delayed due to COVID-19 as Council needs to be included. SESAR, CleanSky and Horizon Europe are the main project pillars and aim is to realign what they are doing to the objectives of aviation decarbonisation. DG MOVE is also looking at greening airports’ activities and allow deployment of electric and hybrid aviation whenever it will be able to enter the market. Multimodality is also important – modes of transport need to be integrated, and some air routes can be substituted. Urban mobility is also an issue that is coming- it will have an impact on noise and visual pollution. Furthermore, DG MOVE is conducting a study on the non-CO2 effects and will have a report by mid-April (internal to EC)- the EC will need to see how to integrate these impacts in the legislation. Local air quality is also part of the green deal and DG ENV will come with a new proposal. By September there will be a high-level document on the Sustainable Mobility Strategy- it is put on hold as it will have to be revised to consider the current crisis and recovery period. Finally, the EC sees a merit on environmental awareness on aircraft and fleet level, but this needs to be done the right way and avoid any risks. This is a great opportunity to implement solutions due to low traffic, such as greener operations.

Finally, Credit Suisse gave a presentation on the costs of sustainability after COVID-19. With air taxes rising, the short-haul segment is the most vulnerable, for example, in 2011, in Austria and Germany, the air travel tax drove capacity decline. Fare floors could affect low-cost carrier growth, and growth strategies will be the most difficult to implement for the smaller operators. Before the crisis, Credit Suisse was expecting around €500m in carbon allowances across the top tier, on a short-haul perspective, this represents a big challenge. Long-haul operators are seeing less damage and can be a competitive disadvantage. Even if higher taxes and other initiatives were not on the agenda, the risk of higher fuel prices would always need to be tackled. The focus on sustainable operations and the possibility of creating value for the shareholders is crucial, therefore, new technology can produce more costs savings. European legacy carriers have a lot to do to improve efficiency, but would be able to catch up with other airlines and who is able to do it quickly will have a competitive advantage and would have benefits on a PR front. In a post-COVID-19 environment, the healthier airlines with operating margins will be favoured. From a regional perspective, regional carriers are facing more challenges. 

You can find the presentations here. You are welcome to send comments to martina.dipalma@eraa.org