Introduction

In line with the European Council Conclusions of 26 March 2020 calling for a “coordinated exit strategy” as well as a “comprehensive recovery plan and unprecedented investment” to ensure “sustainable growth, integrating inter alia the green transition and the digital transformation” — EU leaders must act urgently to put the aviation ecosystem back on its feet. Throughout its ecosystem, the air transport industry continues to be severely impacted by the COVID-19 crisis. The entire sector will have to reset its supply chains and search for new and lasting mobility services.

Since the beginning of the COVID-19 outbreak, our industry has faced massive booking cancellations in addition to a huge decrease in operations due to travel restrictions worldwide. This has put the very existence of many airlines at risk, as current liquidity challenges make them unable to face basic financial obligations. In Europe, the industry is now forecasting a 55% drop in air travel and an up to €82 billion loss in passenger revenue for 2020.

Such an impact will have lasting implications for the overall EU economy, particularly for trade, tourism, and overall investment. The present 90% collapse in air traffic puts some 6.7 million jobs at risk and could lead to a negative GDP impact of €418.5 billion across Europe.

As a key enabler of economic activity and a backbone of the European Single Market, no significant recovery can take place without the restoration of air connectivity. 

The current crisis highlights the essential role of air transport, notably in helping to avoid shortages of essential goods and medical equipment during the pandemic. Air cargo has been instrumental in keeping value chains active. As a result, European airlines continue to repurpose their passenger aircraft for cargo-only flights to aid in the transport of COVID-19 supplies. The publication of European Commission guidelines was helpful in ensuring as seamless cross-border air transport as possible.

Whilst emergency support measures were taken at EU and national levels, the risk of business bankruptcies, reduced investment plans, staff redundancies and lower contribution to government finances remains high. Nevertheless, smart legislation and targeted financial support towards the sector in a non-distortive manner could ensure a sustainable and digital return of the air connectivity offer.

The Single Market as a cornerstone of Europe’s economic recovery

A revitalised and open Single Aviation Market would improve connectivity and boost demand through affordable fares, enabling the free movement of people and goods throughout the continent. This will be the cornerstone of any European economic recovery.

To restore air transport services, connectivity and free movement, cooperation and coordination between Member States and all industry representatives are essential in order to maintain the Single Aviation Market and ensure a level-playing field. Harmonisation of measures and regulations at a European — if not global level — is needed to ensure mutual recognition of health regulations amongst countries. The European Commission’s guidelines on restoring transport services and connectivityEuropean Commission C (2020) 3139 — COVID-19: Guidelines on the progressive restoration of transport services and connectivity. (13.05.2020) and EASA guidance (20.05.2020) are welcome instruments to coordinate national approaches. The aviation sector will keep a close eye on how these are implemented by Member States across the EU: measures and regulations must be proportionate to the actual risk levels, as border controls are gradually lifted and Schengen is restored.

Short term priorities 

In the short term, the goal must be to restore air connectivity in Europe and safeguard the health of our passengers, crew, and staff without unnecessary legal, regulatory, or operational requirements.

Eliminating restrictions for international transport at intra-EU and external borders whilst ensuring a uniform approach across all Member States in reopening air transport is a good first step. Only mutually recognised measures will avoid market distortions and ensure a smooth restarting of air traffic for both passengers and cargo.

This will only be possible if the measures to protect health are based on scientific evidence and supported by robust risk assessments. Measures must be proportionate, temporary in nature and evaluated on a continuous basis. At a minimum, coordination of measures, responsibilities and processes must take place on an EU level, but optimally at a global level, as well to avoid ambiguity and ensure clear accountability.In its Reconnect Strategy of 12 May, A4E lays out the key principles for a return to normal operations in the most efficient and safe way possible. See here. A quarantine imposed when arriving at a destination will deter travellers from embarking on any leisure or business trip, therefore such measures should be used as a last resort.

An important second step is to extend the waiver of the 80/20 rule for airport slots through the winter 20/21 season, as the recovery is widely expected to be slow and gradual. Domestic markets for air travel will likely re-open in Q3 2020, while international markets will take longer and may only have recovered 50% of their capacity by Q4 2020.For further details, see IATA’s analysis of April 2020 here. The implementation of health and sanitary measures will affect available capacity for both airlines and airports as will the uncertainty about the timing of lifting restrictions in Europe and beyond. Continued operational flexibility will therefore be necessary to support and sustain the recovery into 2021.

All of this will be to no avail if airlines cannot afford to operate their services to begin with. Airline revenue is what keeps the whole aviation ecosystem alive. Until airlines are back on their feet financially, the aviation system will require other sources of funding to be able to pay for air navigation and other services.

Two points have become blatantly clear both in the time directly before the crisis began and during the last months: the high inefficiency of Europe’s air transport network and the weakness of its underlying regulations. It is now obvious that the structure of service provision to airlines is not resilient enough to withstand even smaller crisis situations.

• The starting point for aviation’s recovery should therefore be to improve the efficiency of the air transport network as a whole. This includes ensuring that all aviation charges (airport or air navigation) are based on cost-efficient operations.
• Completing Europe’s Single Aviation Market by reforming the regulatory framework (Single European Sky) and improving its airspace architecture and broader Air Traffic Management (ATM) system as part of a digital single European Sky of the future is also paramount. This represents an important first step towards mitigating the economic impact of the crisis on the air transport sector, while at the same time reducing our carbon footprint. It should be given political priority.

In March, the EUROCONTROL Member States addressed the short-term liquidity crisis of airlines and Air Navigation Service Providers (ANSPs). Unfortunately, the situation has now worsened beyond the most pessimistic scenarios imagined at the time. Consequently, deferring payment of air traffic control charges will simply not be enough. A full-year waiver of charges or additional funds to finance the entire aviation value chain needs to be secured. Post 2020, a funding solution must be identified to shield airlines from increases in ATC charges caused by ANSPs and/or states needing to recover losses incurred during the crisis years.

Medium term priorities 

In the medium term, structural changes are also needed. Measures to increase airspace efficiency and to allow more fuel-efficient operations were developed and agreed upon before the COVID-19 crisis, but their implementation was slowed by limited available resources (e.g. lack of air traffic controllers). Now is the time to re-focus on the most essential measures that will be needed to prepare for the period post 2021, when air traffic is expected to recover.

It is equally important to embrace changes brought by investments in air transport’s digitalisation. The ongoing crisis drop in traffic and recovery funding mechanisms represent opportunities to encourage the digital transformation of Europe’s skies. Speeding up the introduction of a digital single sky requires updating the Single European Sky (SES 2) Regulation. Considering the opportunity to improve airspace and operational efficiencies, there can be no pause in the legislation’s revision. The next reference period for the economic regulation (RP4) is set to begin on 1 January 2025. Work on a sensible drafting of the RP4 regulation can only start when the new legislative framework is available.See A4E’s backgrounder on the Single European Sky here and the joint industry letter to EU Transport Ministers of November 2019 here.

Revising the 2009 Airport Charges Directive (ACD) must remain a priority. The Commission’s 2019 evaluation showed clear shortcomings in the current framework with respect to the regulation of airports with significant market power; the mandate and powers of national supervisory authorities; and the requirements for consultation and exchange of information between airports and airlines. As noted by the evaluation, competition remains limited for some (large) EU airports, which can extract prices and terms that would not be achieved in a competitive market.European Commission, Evaluation of the Directive 2009/12/EC, July 2019. Available here.

The revision of the ACD was important before the COVID-19 crisis to ensure an efficient market for airport infrastructure services and affordable air travel in the EU. High or excessive charges increase airline costs. This will, in turn, affect decisions on the size of the aircraft (seat capacity) used on any given route, the level of frequencies and the economic viability of that route altogether.

Today, the ACD review is even more important and can help support the recovery phase. Keeping the cost of air travel down will be necessary to stimulate the market and rebuild demand. The expected global recession will affect demand for both leisure and business travel in the next couple of years. Airport charges are an important component to keep the cost of air travel low. The best way to ensure this is effective and targeted regulation is with a strong and independent regulator. It will ensure that airports are operated efficiently, that charges are reasonable and directly related to costs, and that they are set in a fair and transparent manner.For further details, see A4E’s position papers and studies on airport charges, available here.

The crisis has once again demonstrated the urgent need to complete the revision of Regulation 261/2004 on air passenger rights, which has now been pending for seven years. Some of the Commission’s proposed changes, such as a list of extraordinary circumstances, would have helped in this crisis and previous ones. An appropriate balance must be struck between consumer protection and obligations placed on industry. Before the crisis, Reg. 261 obligations were already estimated to cost the industry €5.3 billion in 2018, up from €1.6 billion in 2011.European Commission, Study on the current level of protection of air passenger rights in the EU, January 2020. Available here. The revised framework also needs to be “crisis-proof” and adaptable to unforeseen circumstances if necessary, such as the impact on airline liquidity caused by the obligation to provide immediate cash refunds during COVID-19.

In addition, work on the future of the European Aviation Security Strategy should be driven by the importance of key concepts such as ‘One-Stop-Security’, which have demonstrated their efficiency, but also by outlooks on new technology, innovation and smart regulation.

The European Single Market is also supported by a well-functioning air cargo sector. It has proven essential since the beginning of the COVID-19 outbreak in bringing essential goods (food, critical medicines, protective equipment, etc.) to Europe and maintaining global value chains. During times of crisis, when supply chains are breaking, only air cargo can help within hours worldwide — and it does so under the most difficult conditions. A4E welcomed the Commission’s guidelines on “Facilitating Air Cargo Operations during COVID-19 outbreak” (26.03.2020) and continued attention needs to be placed on air cargo as the EU and its Member States work on exit strategies.See A4E position paper on what needs to be done to support air cargo in the Recovery Phase, available here.

An environmentally sustainable recovery

The EU’s Green Deal and the Industrial Strategy aim to transform Europe’s industry to ensure it is sustainable, digital and competitive. In the current challenging economic circumstances, ensuring that the aviation industry is fit for the future will require significant public support, in combination with an adequate regulatory framework. The recovery plan should include digitisation, production of zero/low emission aircraft, support for research & development into the deployment of sustainable aviation fuels, support in financing aircraft acquisitions, (e.g. through the European Investment Bank), aircraft design and engine efficiency.

Prior to the crisis, European airlines had committed to invest €169 billion in greener aircraft technologies over the next 10 years. Modern aircraft are on average 25% cleaner and less noisy than their predecessors. The possibility to tap into existing, scaled-up programmes of the European Investment Bank or other measures to support and incentivize purchases of low-emission technologies could ensure these commitments are maintained.A4E’s proposals to regulations in support for the industry’s drive towards zero or low-carbon air transport in Europe, part of a broader aim to minimise airlines’ environmental footprint and move to a more sustainable European economy can be found here.

Speeding up the development, production and use of drop-in sustainable aviation fuels (SAFs) in Europe is another pillar of airlines’ sustainable recovery strategy. Coherent support schemes for SAF technology development and capacity build-up in Europe (development of low ILUC feedstock, de-risking investments in new production facilities) notably via the Emissions Trading System (ETS) Innovation Fund can provide multiple benefits for Europe’s economic recovery by creating world-leading breakthrough carbon solutions, clean growth, jobs, intellectual property, and improved fuel security.In its April 2020 paper on the production and deployment of SAFs in Europe, A4E suggests solutions to support the development of SAFs in Europe and provides policy recommendations on the development of a European policy framework. See here. Support for the deployment of SESAR technology and electric taxiing can create new jobs, bring cleaner air and lower CO2 emissions at airports.

Unlike other industries, European airlines are not seeking to use the current crisis to push back on the Green Deal and remain committed to making it a recovery success. No exemption from European airlines’ ETS obligations has been sought, underlining airlines’ contribution to the EU’s decarbonisation efforts. If an adjustment to the CORSIA timeline is a necessary accounting requirement to make the CORSIA baseline representative, it is not an attempt to jeopardize the scheme. On the contrary, adapting the baseline would ensure that voluntary participation from States is maintained at current levels (and hopefully increased).

In this context, industry is convinced that climate regulations through national taxes, levies, or bans are ecologically and economically counterproductive. Imposing taxes without reinvesting their revenues in de-carbonisation projects does not help effectively lower CO2 emissions from flying, as the only thing it achieves is hampering connectivity for passengers in peripheral and insular regions. Taxes shift CO2 emissions to other regions and divert the industry’s capacity to invest and innovate in a crucial moment when research and development in low carbon technologies should be supported.

Recommendations

EU leaders need to act urgently to put the air transport ecosystem back on its feet, drawing all lessons from the crisis. Ambitious policy measures will ensure that air transport can play a vital role in enabling Europe’s economic activity during its recovery. This is particularly true if the following key measures are implemented:

• A dedicated place for the air transport ecosystem in future recovery plans, comprised of smart legislation and targeted financial support in a non-distortive manner towards the sector. This would include a waiver of ATC charges in 2020 and an extension of the slots waiver for the winter 20/21 season;
• A harmonised approach to the reopening of air transport, with a revitalised and open Single Aviation Market without restrictions at intra-EU and external borders;
• Introduction of a digital single sky (Single European Sky) through an efficient and integrated air traffic management system by updating and adapting the existing regulation to the crisis, as well as to future requirements;
• More effective and targeted regulation of airports with significant market power as well as greater harmonisation of the setting of charges across the EU through a revision of the Airport Charges Directive;
• Urgent revision of Regulation 261/2004 to strike an appropriate balance between consumer protection and industry obligations, including provisions to ensure that the framework is “crisis-proof” and adaptable to exceptional circumstances such as COVID-19;
• Support for a more environmentally sustainable air transport sector through scaled-up investment programmes and adequate legislation for SAFs and clean technologies (aircraft/engines).