Can airline bailouts be part of our greener recovery?

With Aviation responsible for 6% of the UK’s emissions and on track to hit 25% if growth continues, can airline bailouts be part of our greener recovery?

Can airline bailouts be part of our greener recovery?

This time last year, the Committee on Climate Change was warning us that drastic change would be needed for the UK to meet its targets on greenhouse gas emissions. A May 2019 report from the independent advisory body identified various sectors of the UK economy that would need to implement sweeping changes if we had any chance of cutting emissions to net zero by 2050. One of these sectors was aviation, already responsible for 6% of the UK’s emissions and on track to hit 25% if growth continued as expected.

There wasn’t much evidence of a plan to reverse the UK’s trend in aviation growth, but then the coronavirus appeared to make some drastic changes of its own. The enforced reduction in travel saw flights from UK airports drop by 90%. Without government help, it looks as if airports will close and airlines will fold. The airline industry has benefited from the government’s Job Retention Scheme, which is keeping jobs open by paying 80% of employees’ salaries. But the chief executive of Aerospace Wales, giving evidence to a recent parliamentary committee, predicted that the sector will see UK-wide job cuts of around 30% and that many of these jobs could disappear for ever.

Airlines UK, the industry association for British airlines, has welcomed the extension of the Job Retention scheme to October, but says that “more action is needed to protect our world-leading aviation sector”. Meanwhile, airlines have been lobbying individually for government help, most famously Virgin Atlantic. (Richard Branson originally asked for a government loan of £500 million, but now seems to be focusing on getting funding from the private sector.)

But does saving our aviation sector make sense for the climate? Many countries whose economic growth has been pushed off course by the virus are taking this moment to plan a new route forward that centres their climate goals, and this means a different approach to airlines. For example, Austria’s vice-chancellor has said the country will set green conditions for bailing out Austrian Airways (part of Lufthansa).

In France, the government set conditions on its bailout of Air France that were designed to make it the world’s “most environmentally friendly airline”. Air France will have to cut its overall emissions per passenger-kilometre in half by 2030 and begin using more fuel-efficient aircraft. Most significantly, Air France will have to stop competing with rail services. It will no longer be allowed to run flights lasting less than two and a half hours on routes where there is a valid rail alternative.

However, some countries have been happy to offer unconditional help. Russia’s $4 billion “anti-crisis fund” includes tax breaks for airlines, while Australia and the USA both offered bailouts for their struggling aviation industries with no strings attached.

Which way will the UK go? The Prime Minister specifically mentioned the aviation sector when he recently spoke of the need to “entrench the gains” of the unintended slump in emissions. But he has yet to give any detail about any “green strings” that may be attached to possible future bailouts, and when directly asked about this, he refused to answer.

A new paper in the Oxford Review of Economic Policy found that when 231 leading economists weighed up a range of options for recovery policies, they judged that airline bailouts have the lowest economic payoff. (Investment in healthcare and disaster planning topped the list.) A less formal survey for Greenpeace found that the public mood is aligned with the economists’ views on this: just 7% of people surveyed thought that the airline industry should be a priority for taxpayer support.

It remains to be seen what kind of help, if any, the UK will offer its struggling aviation sector. The government’s decisions on aviation funding will tell us a lot about its overall vision for the recovery. Will it seize this once-in-a-lifetime chance to rebuild our economy on greener lines, or try to go back to business as usual?

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