Smart and Sustainable Mobility Strategy

We have welcomed the European Commission’s Sustainable and Smart Mobility Strategy. The Strategy is aligned with and reinforces the sector’s commitments towards a sustainable post-crisis future for aviation.

While the aviation industry is thus perfectly aligned with the objectives of the Commission’s new strategy, we have warned that our dwindling resources as a result of the Covid-19 crisis stand in the way – presenting a major obstacle to achieving the required goals. This will need to be factored in and fully addressed in the implementation of the strategy – both at EU and national levels.

The Commission will need to work closely with the aviation industry in executing its strategy. This will ensure continued alignment between the industry’s own efforts and the accompanying regulatory framework.

Air Traffic Management

The Commission launched the Single European Sky (ICAO) initiative in 1999 to improve the performance of air traffic management (ATM) and air navigation services through better integration of European airspace. The latest updated Commission proposals (SES2+) date back to September 22, 2020. Although there has been a drastic reduction in traffic due to the Covid-19 pandemic, the key objectives of the European ATM system – improvement in safety, capacity, cost-efficiency and environment – remain valid today. Accordingly, the Commission has identified the revision of SES 2+ as an enabler to achieve the goals of the European Green Deal. In addition, the crisis has shown that the EU ATM system needs to improve its resilience so as to better adjust to traffic developments.

Schiphol Airport capacity

It is essential for the Group that additional growth opportunities remain possible at Schiphol airport to allow for the development of KLM.

The coalition agreement of the current Rutte IV government confirms the value of Schiphol for international connectivity, the business climate and employment. It also reiterates that Schiphol's strong hub function must be retained. Air France-KLM believes it is important that the Aviation Policy Document 2020-2050, which has already been adopted by the same coalition parties, is continued and implemented over the coming years.

The Aviation Memorandum offers prospects for the longer-term development of Dutch aviation and its surroundings. To emerge from the crisis not only stronger but also more sustainably, Air France-KLM will continue its efforts to reduce emissions by continuing to invest in a more sustainable fleet and in sustainable aviation fuels. The coalition agreement supports this and specifically seeks to connect to the European level in order to maintain a level playing field. For an international sector, it remains crucial that measures are taken in an international context.

Consumer rights

The Group is contributing to the European institutions’ work on a revision to the EU consumer rights legislation, regrets that progress has been lacking so far and calls upon these institutions and especially the Member States to finalize their work. It remains vigilant that the rules are proportionate to their objective and are applied equally to all airlines operating to, from and within the European Union. They will also need to be crisis-proof.

French environmental taxation

In the context of the debates on energy taxation, it seems important to take into account that French air transportation is already heavily taxed.

To continue to be a major economic player in the development of countries and territories, air transportation must be able to rely on a coherent, comprehensive and incentive-based regulatory and fiscal framework, facilitating and accompanying its necessary energy transition.

While, for historical reasons, aeronautical kerosene is not taxed, the tax contribution from air transportation related to its activity (civil aviation tax, solidarity tax, EU-ETS) amounts to an annual €1 billion in France.

As of 2021, for its international flights, air transportation also committed to reducing its greenhouse gas emissions via a global carbon offsetting system (CORSIA), implemented by the International Civil Aviation Organization (ICAO), under the voluntary commitments of France and the Netherlands. The Group is participating in the first phase of implementation over the 2021-26 period by reporting its emissions and implementing any offsets. Air France-KLM, which supports its representative organization IATA, welcomed this step forward as well as the adoption of the Long-Term Aspirational Goal (LTAG) for the entire industry at global level.

In this context and in view of the possible complementarity of the different systems, Air France-KLM considers that the same CO2 emissions should not be simultaneously subject to the domestic offset obligations, the European Emissions Trading Scheme and the CORSIA scheme.

Since January 2020, airline tickets issued by airlines now attract a tax on all flights departing from France (but not on flights arriving), except connecting flights. This tax is raising funds for investment in alternative transportation infrastructure, including rail. Such legislation leads to additional competitive distortions between airlines when applied solely to a specific geographical area.

The Group regrets that this additional taxation is not serving the environmental transition of the sector through a contribution to a Sustainable Aviation Fuel fund.

Dutch aviation tax

A national air passenger tax was introduced on January 1, 2021. The proceeds of this tax are channeled back into the general government’s budget and will therefore not benefit the environment. This deprives airlines of the means to invest in fleet renewal and SAFs, and fails to preserve the socio-economic benefits of air connectivity. Aviation, it should be noted, pays for almost all its own infrastructure (mostly, airport and air navigation infrastructure), contrary to other modes of transport. If taxes are nevertheless put in place, their proceeds should at least be earmarked for projects and measures that effectively contribute to decarbonizing aviation.

It goes without saying that Air France-KLM is in favor of more sustainable aviation but the Group opposes national air passenger taxes that do not help preserve the environment. Travelers are then tempted to use their cars to fly from airports located abroad. Furthermore, a study conducted  by CE Delft in 2018 concluded that an aviation tax would have no positive environmental impact. With the Covid-19 crisis further impacting the liquidity of airlines and complicating investment in making the sector more sustainable, the introduction of the Dutch ticket tax is questionable.

Sustainable aviation

Air France-KLM welcomes the renewed focus on sustainability in Europe contributed by the European Green Deal. The Group supports initiatives and proposals that enable the sector to decarbonize effectively.

As early as 2009, air transportation through IATA, made a proactive commitment to concrete climate objectives: an annual improvement in fuel efficiency of 1.5% between 2009 and 2020, carbon-neutral growth from 2020 and reducing CO2 emissions by 50% by 2050 compared to the 2005 baseline.

In February 2021, European airlines, airports, manufacturers and Air Navigation Service Providers published the Destination 2050 roadmap, which shows a possible pathway to net-zero emissions in 2050 for all flights within and departing from the EU, with yearly passenger traffic growth of 1.4%, based on four main pillars:

• Aircraft and engine technology,
• Air Traffic Management and aircraft operations,
• Sustainable Aviation Fuels,
• Smart economic measures.

The industry’s commitments under Destination 2050 are subject to securing the required supporting policy and financing framework at EU and national levels.

In February 2022, the Group was an active signatory of the “declaration of the future sustainability and decarbonization of aviation”, also known as the Toulouse declaration. Under the French Presidency of the European Union, several industry stakeholders have signed a joint declaration that reaffirms the commitment to decarbonizing the sector and reaching carbon neutrality by 2050. In 2021 iat dopted the 41st ICAO Assembly of an ambitious long-term aspirational goal for international aviation with net zero carbon emissions by 2050.

Aircraft and engine technology

Air France-KLM is calling for support for research and development on new propulsion technologies such as electric and hydrogen.

However, electric or hydrogen aircraft will not be available until the mid-2030s and for short flights only. Existing new-generation aircraft such as the Airbus A350, Boeing 787, Airbus A220 and Embraer 195 E2 burn 25% less fuel on average than the aircraft they replace but are difficult to finance in the current context. The Group considers that support should be provided for renewing fleet with these aircraft, e.g. in the form of a “green stimulus” subsidy scheme, and should at least be allowed within the context of the EU Taxonomy for sustainable activities, which is meant to guide public and private investors, and of the lending policy of the European Investment Bank.

Sustainable Aviation Fuels

Sustainable Aviation Fuels (SAFs) are a key lever in decarbonizing aviation in the short and medium term as they emit up to 80% less CO2 than regular kerosene over its full life cycle.  Air France-KLM is calling for a predictable, coherent and long-term EU framework to be put in place, in particular within the context of the European Commission’s RefuelEU proposal, in order to support the ramp-up of an affordable SAF supply in Europe. The feedstock available in Europe must be oriented as a priority towards the aviation sector, as it is harder to decarbonize than other modes of transportation.

The Group considers that sustainability must be at the heart of any proposal. Feedstock used to produce SAF must meet high sustainability criteria. These criteria should be standardized and verified through an independent assessment, such as done by the Roundtable on Sustainable Biomaterials (RSB) or through International Sustainability and Carbon Certification (ISCC). SAF production must have a minimal impact on biodiversity, not compete with food production or access to food resources, be of high quality (for instance no palm oil and first-generation feedstock), have a positive impact on local development and lead to a minimum CO2 reduction of 75%.

Unfortunately, the price of SAFs is still three to six times more expensive than regular kerosene, depending on the price of oil and the type of SAF. It is crucial to close this price gap, not only by upscaling production but also by using EU funds, e.g. from the EU ETS proceeds through the EU ETS Innovation Fund, or through national plans and the €750 billion NextGenerationEU recovery fund.

Smart economic measures

Air France-KLM supports the implementation of CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), a global market-based measure agreed in 2016 by ICAO countries to address emissions from international aviation and achieve carbon-neutral growth from 2020. To date, 80 countries (including the U.S., China and Gulf States), representing 77% of international emissions, are participating in the voluntary first phase of the agreement (2021-2026). The Group calls for any changes to the EU ETS, within the context of the Fit for 55 package, to allow for a full and proper implementation of CORSIA, as emissions are a global issue, which preferably must be tackled at global level.

Additionally, in its 40th General Assembly in October 2019, the ICAO agreed that “CORSIA is the only global market-based measure applying to CO2 emissions from international aviation so as to avoid a possible patchwork of duplicative State or regional MBMs, thus ensuring that international aviation CO2 emissions should be accounted for only once.” This principle should be abided by, meaning that the future EU ETS should only address emissions that are not mitigated by CORSIA.

Climate & Resilience bill and France SAF mandate

In 2021, the so-called “Climate & Resilience” bill was voted through, of which five articles concern air transportation:

• Article 142, which establishes a target for air transportation of an adequate carbon price from 2025, with a preference for the implementation of a European mechanism. If this European mechanism proves insufficient, the Government will have to submit a report to Parliament on the implementation of national measures, in particular by increasing the solidarity tax. These proposals can only be made once air traffic to, from and within France reaches the number of passengers in 2019.
• Article 145, which prohibits scheduled air transportation services within France on any route that is also operated by rail in less than two and a half hours and without connections. Adjustments to the ban will be set by decree in the Council of State, in particular for flights that mainly carry connecting passengers or flights that offer predominantly carbon-free air transportation.
• Article 146, which prohibits projects to create or increase airport capacity from being declared in the public interest with a view to expropriation if they result in a net increase, after compensation, in greenhouse gas emissions generated by the airport activity in relation to the year 2019. A few exceptions are provided for certain airports (Nantes, Basel-Mulhouse) and for necessary work to bring them up to standard, for reasons of security or national defense.
• Article 147 introduces mandatory annual compensation by carriers (whose GHG emissions are subject to the ETS) for GHG emissions resulting from flights within the national territory. This offsetting must be done through carbon absorption projects located in France and in other EU Member States. Carbon credits cannot be used both for national offsetting and for another mandatory offsetting scheme (such as ETS or CORSIA).

The 2021 Finance Bill also introduced a Sustainable Aviation Fuel mandate on flights departing from France which Air France-KLM voluntarily extended to flights departing from the Netherlands, as per January 1, 2022.