Government support to the biggest airlines during the coronavirus pandemic risks distorting the playing field, pushing out smaller companies and removing some international connections, according to a JRC report.
At the same time, governments are in a position to make their support conditional, presenting an opportunity for a more sustainable air transport sector.
Aviation share of global CO2 emissions is rather limited (around 3%); however it is one of the sectors with the fastest-growing level of greenhouse gas emissions.
Emissions from international air traffic grew by over 75% between 1990 and 2012, which was almost double the average emissions growth rate from all other economic sectors.
Aviation is also one of the sectors worst hit by the pandemic, as people have both been prevented from travelling by air, and have chosen not to. The sector could suffer for much longer than the duration of the pandemic and will probably have a complicated and slow recovery.
Last week the Commission announced that temporary provisions to ease the financial pressure on aviation operators and groundhandlers will be extended into 2021.
A wider economic slowdown has contributed to a current net decrease in aviation emissions while complicating further the supply and demand of aviation services, as well as investment and innovation in the sector.
Several airlines, airports, and other aviation-related operators have lost a significant part of their income since mid-March 2020, raising worries about their financial stability and their capacity to recover their services. Most countries are providing financial support to their largest airlines to safeguard connectivity and protect jobs.
While direct government support will probably result in a market concentration that favours larger airlines and airports, it can also be an opportunity to accelerate the adoption of sustainable policies and reduce the environmental impact of the sector.
Despite reduced emissions and environmental impacts caused by air travel restriction policies, the pandemic has put several aviation-related climate and environmental agreements at risk.
For example, the carbon price in the EU Emissions Trading System (which includes aviation) has dropped severely, weakening the economic incentive to reduce emissions further.
If airline executives and shareholders are given strong financial incentives to meet carbon reduction targets, this could help ensure progress towards international climate targets. France and Germany have already stipulated environmental obligations in the government support to Air France and Lufthansa.
For example, Air France agreed to reduce domestic flights by 40% in order to incentivise travel by train, a more environmentally friendly option on certain routes. Lufthansa agreed to retire several louder, more polluting planes from its fleet.
Protecting jobs and connectivity
The report finds that government support to airlines varies significantly in each country. Support is often given to only a handful of national operators in each country – ‘national champions’ who were already enjoying preferential treatment compared to the competition.
While this support is designed to protect as many jobs as possible and ensure the highest level of connectivity, it will most probably result in these larger companies gaining a higher market share, to the detriment of smaller players who cannot attract as much private or public financing. For travellers, this could have a negative impact on fares and the supply of travel services.
Several unprofitable routes and airlines may disappear in the short term and will only be able to recover or be substituted by new players when overall market conditions improve.
Either due to the direct financial repercussions of the pandemic itself, or as a result of the increased market concentration, the levels of air transport connectivity reached in 2019 will probably not recover in the near future, the report finds.
Big markets in wealthier countries can preserve their connectivity more effectively than smaller markets in less-developed countries. A domino effect of government support to protect the competitiveness of their national public and private airlines can be expected, leading to imbalances in air transport connectivity internationally.
However, in the same way as with environmental obligations, government support can be an opportunity for balancing competition in the air transport industry.
The Commission’s approval of the German government’s support to Lufthansa is one example. Lufthansa is obliged to offer some free slots in its Frankfurt and Munich hubs for use by competitors, and to remove a number of aircraft from its fleet.
- Data tal-pubblikazzjoni
- 19 Novembru 2020