Airline bailouts: bad for citizens and the climate?

Despite the aviation sector’s impact on the climate, governments on both sides of the Atlantic have offered airlines generous rescue packages worth billions, most with no strings attached.

These bailouts offer top executives and shareholders golden parachutes while jettisoning taxpayers and the environment. Khaled Diab reports.

Government rescue packages for European airlines worth €13 billion have been agreed or are being negotiated, according to the latest independent Airline Bailout Tracker, which was released last Wednesday (22 April 2020). The airlines in question include a number of flagship carriers and household names, such as SAS, Lufthansa, Air France-KLM group, Virgin and easyJet.

The tracker is a joint initiative between Greenpeace, Transport & Environment, and Carbon Market Watch.

Although only days have passed since the release of the report, the total has already mushroomed. For example, not only was the deal with Air France-KLM approved, it grew from the €6 billion recorded in the tracker to €9-11 billion (€7 billion from France and €2-4 billion from the Netherlands).

In addition, at the time the tracker was released, no information was available on the value of the German package to Lufthansa. Since then, reports have emerged that it could be worth as much as €10 billion.

On the other side of the Atlantic, Washington has been possibly more generous, earmarking $25 billion, much of which will not need to be repaid, to keep grounded US airlines up in the air.

Private gain, public pain

Environmentalists, social justice activists and scientists find these bailouts hugely problematic because, before the crisis, the aviation sector enjoyed enormous public subsidies, despite being a major polluter, which airlines used to enrich shareholders and top executives instead of setting funds aside for a rainy day.

“Airlines have enjoyed huge tax breaks over the past decade and have been lobbying against any form of energy taxation. In this sense, even if indirectly, European citizens already paid out of their pocket to support these companies,” explains Barbara Mariani, the EEB’s Senior Policy Officer for Climate. “Every euro that these companies do not pay in taxes is a euro taken away from essential public services, such as healthcare or employment policies. Taxpayers cannot be asked to pay twice, to subsidise airlines in both good times and bad.”

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.

The tax breaks airlines enjoy are worth some €27 billion a year in lost tax revenue, according to a leaked European Commission study, which is more than double the bailout amount currently on the table.

No strings attached

None of the bailouts so far agreed have contained environmental conditions, though a small number have included a freeze on dividends and executive bonuses.

This contravenes the advice and guidelines of civil society. “All company bailouts must be linked to clear conditionalities and comply with strict conditions: no money for polluting industries without binding commitments (i.e. for the aviation sector),” SDG Watch Europe, a coalition which monitors and campaigns for the implementation of the Sustainable Development Goals in and by Europe, said in a statement.

Germany’s environment minister Svenja Schulze defended the no-strings-attached €10-billion package being offered Lufthansa. “We are still in the very midst of the crisis. So what we have are short-term funds to help businesses survive this crisis. This is a protective shield for workers and employees,” she told reporters.

This has left some wondering how the German government had no qualms about imposing severe and strict conditions on Greece, with the widespread misery it caused citizens, in return for shoring up its banking system but is now willing to write a wealthy airline a blank cheque at taxpayers’ expense.

“In Europe alone, airlines have so far applied for €13 billion of taxpayer money without being willing to accept social or environmental measures in return,” Magdalena Heuwieser, a climate justice activist and co-founder of the Stay Grounded campaign, a network involving more than 150 organisations which seeks to reduce the world’s dependence on air travel in favour of more sustainable modes of transportation, told META. “To the contrary, the airline industry is even trying to water down the weak existing environmental regulations.”  

Before the rescue packages had been announced, Stay Grounded sent a letter to European transport ministers urging them not to offer the aviation sector an “unconditional bailout”.

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.”

Ground control

More than 300 organisations, 300 scientists, and 70,000 individuals signed up to Stay Grounded’s #SavePeopleNotPlanes campaign to demand that rescue packages save jobs by shifting them to climate-safe forms of transport, Heuwieser said. If you are interested in signing their petition, you can find it here.

“It’s urgent that we use this pause in aviation for a shift in our transport system,” Heuwieser suggested, insisting that “if taxpayer-backed bailouts are given in bad times, airlines have to pay taxes in good times.”

The EEB’s Barbara Mariani goes even further: “Economic aid to airlines must be conditional to them paying their dues in the form of kerosene taxes and making a greater contribution to reducing greenhouse gases.”

In fact, the aviation sector will need to deliver a gigantic 85% reduction in demand to meet its commitments under the Paris Agreement to keep global warming below 2⁰C this century, according to preliminary results from a simulation carried out using the MEDEAS model. “Besides issues of social justice, it does not seem very smart to save a sector which should strongly reduce its size in a sustainability transition,” says Ignacio de Blas Sanz of the University of Valladolid, who has worked on developing the model.

LOCOMOTION, the successor of MEDEAS in which the EEB is a partner, will expand on and enlarge this modelling effort to help shed more light on what a transition to a truly sustainable, carbon-neutral society involves.

“The idea is to further examine the required transformations (both technological and lifestyle change) to achieve large GHG reductions, taking into consideration more features which will be implemented in the model during the project,” explains Iñigo Capellán-Pérez, also of the University of Valladolid, who is involved in both MEDEAS and LOCOMOTION. “This will enrich and nuance the analysis and results.”

Taxing issues

Long before the coronavirus crisis hit, activists have been demanding that our transport system, including air travel, be rethought and reinvented along more sustainable lines. Campaigners have 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 or abandoned, and replaced by more sustainable modes such as trains.

The EU’s flagship European Green Deal recognises the need for to overhaul the transport sector. “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.”

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 billions in much-needed tax revenues, according to the leaked European Commission study mentioned above.