Airline bosses have criticised a Dutch plan for a European Union-wide phase-out of fossil fuel subsidies, saying such a move will be fanciful until there are affordable greener travel alternatives.
Ryanair boss Michael O’Leary and Lufthansa chief executive Carsten Spohr were among European airline executives who said at a briefing last week that train fares remained too expensive to replace air travel, and policymakers’ plans to make aviation more sustainable by cutting support would backfire.
The Dutch government announced last month that it spent up to €46.4 billion in 2023 supporting the use of fossil fuels, either through direct subsidies or tax schemes that indirectly led to more polluting energies being used. More than €3.6 billion went to airlines, as fuel supplied for use in aviation is currently fully exempt from taxation in the EU.
Rob Jetten, the Dutch climate minister, told the Financial Times that reforming the tax system and cutting subsidies was “crucial” to delivering the clean transition, and that governments should “redesign the rules of the market”.
He added, however, that fossil fuel subsidies, particularly ones that resulted from international agreements such as for airlines and shipping, “need to be tackled from the EU level”.
But Mr O’Leary, the Ryanair boss, said: “Until you have some affordable alternative that you can offer to voters and to consumers across Europe, it’s all just pie in the sky.”
Ourania Georgoutsakou, managing director of the industry body Airlines for Europe, added that increasing fuel taxes for airlines would increase costs which “at some point will impact the passenger”.
Fuel is one of the single biggest expenses for airlines, and accounts for about 25 per cent of their operating costs. Aviation is also among the toughest sectors to decarbonise, with alternatives to jet fuels still at an embryonic stage.
The airline industry last week reiterated calls for more support to increase production and lower the cost of so-called sustainable fuels, which are significantly less polluting than kerosene.
European airlines have historically struggled with profitability amid thin margins, leaving them limited capital to invest on decarbonisation, Mr Spohr said.
Still, the industry is enjoying a strong run amid high ticket prices, and European airlines are forecast by trade body Iata to post a combined $5.1 billion net profit this year, having lost more than $45 billion during the pandemic.
Wopke Hoekstra, the EU’s new climate commissioner, has also backed plans to phase out fossil fuel support schemes although there is “no guarantee on the outcome”, one EU official said.
But Mr O’Leary dismissed the Dutch push to phase out fossil fuel subsidies, which for airlines include exemptions on kerosene tax and VAT for passenger transport, as a “wish list”.
An EU proposal to update energy rules in 2019, which aimed to remove many fossil fuel subsidies, has stalled as it requires unanimous approval from all 27 member states, which it is unlikely to get.
EU ministers are due to discuss support for fossil fuels on Monday as part of negotiations ahead of the UN Cop28 climate summit in December.
The Dutch government has been among the toughest in Europe on airlines as it tries to cut carbon emissions to meet its target of achieving net zero by 2050.
In January, The Hague increased air passenger duty and in February introduced a cap on the number of flights permitted at Amsterdam Schiphol airport, the Netherlands’ largest.
Other European countries, including Ireland, Austria and Denmark, have all indicated support for the subsidy phase-out plan, according to an official close to the talks.
Mr Jetten acknowledged that some sectors would have “to pay extra in energy taxes in the upcoming years – and it makes total sense because they’ve been using [fossil fuels] for extremely low prices for a very long time and we need to change that”. – Copyright The Financial Times Limited 2023
