European governments must not bail out airlines, a multinational campaign which promotes sustainable transportation has urged.
Instead, public funds should be used to help vulnerable citizens and small businesses, as well as to finance a just transition.
Stay Grounded, a network involving more than 150 organisations, sent a letter to European transport ministers who held an emergency (virtual) meeting on Wednesday 18 March 2020, urging them not to offer the aviation sector an “unconditional bailout”.
“Let’s not bail out shareholders and executives who have spent years lining their pockets, while hundreds of thousands of small businesses, owner-operated restaurants and creative artists go out of business,” Magdalena Heuwieser, a climate justice activist and co-founder of the Stay Grounded campaign, said on behalf of the coalition.
The airline sector is a notorious recipient of direct and indirect state subsidies, such as tax-free fuel and an exemption from value-added taxation, which gives flying an unfair edge over more sustainable modes of travel.
For a change, free market advocates agree with environmentalists about not bailing out airlines, albeit for somewhat different reasons. “An airline bailout primarily benefits the airline bosses,” wrote Tiana Lowe in the conservative Washington Examiner. “If airlines cannot save themselves, they don’t deserve anyone else to save them.”
Business class for CEOs
In addition, the windfall from these subsidies does not go to workers but is used to bolster executive pay and stock prices. For example, American airlines have used, over the past decade, a whopping 96% of their free cashflow to buy back their own stocks. This does nothing to boost the competitiveness and viability of a company nor improve workers’ conditions, but it does maximise the value of shares, which benefits shareholders and top executives whose generous compensation packages are largely in the form of stock options.
“It is unacceptable that the industry’s profits are privatised, while it expects its losses to be covered by the public,” Stay Grounded’s Magdalena Heuwieser insisted.
For its part, the aviation sector has demanded that transport ministers hammer out a comprehensive set of measures to rescue airlines, including a stimulus package, including the deferment of tax payments and charges, as well as direct support from EU funds. “We consider that this unprecedented crisis mandates an unprecedented response,” Thomas Reynaert of Airlines for Europe and Montserrat Barriga of European Regions Airline Association wrote in a joint letter.
It is unclear why the airline industry issued this letter to EU transport ministers when it is already eligible for state support, unless it is seeking a separate bailout package that would give it preferential treatment not afforded other sectors.
Earlier, on 13 March 2020, the European Commission had unveiled a coordinated response to the economic fallout from the COVID-19 pandemic which relaxed state aid and budgetary discipline rules to enable member states to alleviate the temporary economic hardship caused by coronavirus crisis.
This European response package already included possibilities for wage subsidies and the suspension of tax and social security payments. In addition, aviation is one of the sectors the package explicitly mentions as being eligible for compensation for direct damages caused by the crisis.
Change in the air
The lockdowns and restrictions that have accompanied the COVID-19 pandemic have led to significant temporary reductions in emissions from transport and industrial activity, especially over coronavirus hotspots such as northern Italy.
This has led to a marked improvement in visibility and air quality, especially over urban areas. In addition to its global warming effects, air pollution kills an estimated 7 million people a year, according to the World Health Organisation, and 90% of humans breathe air laden with pollutants. Moreover, the health consequences of poor air quality make people living in polluted areas more vulnerable to coronaviruses, previous research has shown.
Magdalena Heuwieser urged European leaders to take advantage of “this unintended pause in air travel to rethink what we can do to stop far worse consequences from climate collapse, and flying’s contribution to it”.
This process of rethought and reinvention has been in motion for some time. Campaigners have long been calling for subsidies to the aviation sector, including massive tax breaks and free emissions trading credits, to end, and for short-haul flights to be seriously curbed and replaced by more sustainable modes such as trains.
The EU’s flagship European Green Deal also recognises the radical need for an overhaul of the transport sector as a whole, especially when it comes to high emitters such as airlines. “To achieve climate neutrality, a 90% reduction in transport emissions is needed by 2050,” admits the Green Deal’s blueprint document. “Fossil-fuel subsidies should end and… the [European] Commission will look closely at the current tax exemptions including for aviation and maritime fuels and at how best to close any loopholes.”
Environmentalists have long been calling for an end to the tax exemption on kerosene which airlines currently enjoy, and Stay Grounded has organised a petition to demand this. Taxing kerosene would lead to an 11% reduction in aviation emissions (the equivalent of taking 8 million cars off the roads), would have no net impact on jobs or the economy, and would deliver €27 billion in desperately needed tax revenues, a leaked European Commission study found.