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Infrastructure : EU transport chief cautions against green strings for airline bailouts
European Commissioner for Transport Adina Valean told EURACTIV in an interview that the coronavirus outbreak means it is the wrong time to condition state aid for airlines on green measures, but warned the industry to stick to its passenger rights obligations.
Coronavirus lockdown measures have severely disrupted the transport sector, as border closures and travel restrictions forced airlines, rail companies and ferry links to scale back or cancel services.
Freight movement also risked stalling and interrupting crucial supply chains, as extra border checks caused massive traffic jams. The European Commission initially had to play catch-up but transport chief, Valean, insists the EU executive is now in the driving seat.
“We have seen developments that we weren’t necessarily expecting, like unilateral measures taken by member states in terms of mobility of people. The ban on flights also, which started unequally, and then developed at a high level,” she told EURACTIV.
“From the beginning though we’ve been hands on,” the Romanian official added, citing practical guidelines issued to governments on opening up priority lanes for cargo services and the EU’s quick decision on suspending problematic airport slot rules.
In the early days of the outbreak, the uncoordinated response – which included Poland shutting down its borders completely – threatened to cripple the internal market but a network of contact points in transport ministries was quickly set up to help matters.
“We tap into that network every day, so we can see what measures are on the way and advise them not to implement them if needed, so the green corridors can function well. It’s all built on trust,” Valean explained.
Transport ministers have been quick to adapt to the new virtual way of working but the new Commission’s plans for the sector look to be at risk of delay due to the virus, which is forcing policy-makers to concentrate more on the economic recovery.
According to a draft update to the EU executive’s work programme – seen by EURACTIV – a number of initiatives geared towards increasing the use of sustainable fuels in the aviation and maritime sectors will be delayed until 2021.
But the centrepiece of Valean’s portfolio, a comprehensive strategy for sustainable mobility, is still on this year’s agenda and is due to be published towards the tail-end of 2020. Her services are now working “to adapt it to the needs of the recovery”.
Fight for your rights
Much of the EU’s transport-related virus response has been geared towards the aviation sector, as plummeting air traffic – down up to 92% in places – threatens parts of the industry with extinction, as many of the smaller players face bankruptcy.
The bloc’s quick decision to waive the ‘use it or lose it’ airport slots rules was followed up by more practical advice on cargo flights – essential for high-value imports – and clarification that the outbreak can legally be classed as an “exceptional circumstance”.
Airlines do not have to pay out compensation as a result but were still left disappointed by the Commission’s insistence that they refund passengers rather than offer them vouchers for flights at a later date instead.
The EU’s passenger rights legislation says that carriers can suggest coupons instead of reimbursement but that it is up to the customer to accept them or not. Some firms are flouting those rules and a group of 14 countries support a degree of more leniency on the issue.
But Valean is uncompromising in her position that the rules “clearly say that passengers are entitled to reimbursement” and that the bloc’s rights codex is a safeguard that is worth protecting.
“Any modification to the rights would mean going through the normal legislative process, for which I believe there isn’t really support,” the former MEP said, although European Parliament sources say it would be a close run vote.
The Commissioner did concede that airlines are free to make vouchers as attractive as possible to travellers and some member states hope to exploit the few grey areas of the legislation.
The Netherlands has approved time-limited vouchers that will revert to full refunds if not used during a certain window, while Denmark will protect issued-coupons against insolvency, which is one of the main asks of groups like the European Passengers’ Federation.
Green bailouts
Airlines are keen to offer coupons because refunds drain vital cash reserves at a time when they are most needed. But Valean also pointed out that the Commission has relaxed state aid rules in order to help companies build liquidity.
France and Sweden were the first EU members to get approval for airline support schemes but more significant interventions using public money are expected in the coming weeks and months, as the industry does not expect to start recovering until next year.
Environmental groups want state aid to be conditional on further cuts to emissions and an agreement to start paying fuel tax once the virus passes, given aviation’s carbon footprint is predicted to increase significantly this decade.
But the EU’s transport chief cautioned against the idea, warning that “we need to be realistic here because we do not know how the industry will look after this crisis. It’s a fact that this is one of the most competitive industries we have, it’s a fact that we need aviation.”
“When talking about investments in greening measures while companies are facing bankruptcy, we need to have more caution,” she added, suggesting that the market for green initiatives like sustainable fuels is simply not mature enough to roll out during a crisis.
“Raising these conditions now is not necessarily something I would support,” the Commissioner said but she did reiterate that the relaxed stance on state aid does not free airlines from their passenger rights obligations.
After the virus
The fall-off in air travel demand is hurting carriers in the short-term and will complicate matters in the long-run, as a UN-level deal on offsetting emissions – known as CORSIA – will use data from 2020 to calculate how much airlines are on the hook for financially.
CORSIA commits its participants to carbon-neutral growth from 2021 and it is due to enter a testing phase, which will include the EU, until 2023.
Reduced carbon output means that the 2019-2020 baseline will be lower than expected, so carriers will have to buy more permits – which fund renewable projects, for example – in order to keep their emissions from growing.
The International Air Transport Association (IATA) has called for the baseline to change to just 2019 in order to make it easier for the industry to fulfil its requirements under the voluntary scheme.
Valean has insisted since she took office last year that policy decisions related to aviation and maritime need to be coordinated at international level, with UN regulators ICAO and the IMO, in order to be effective.
The Commissioner told EURACTIV that the “global nature of these sectors will not change because of coronavirus” and that the CORSIA agreement “needs to be treasured”, when asked if the aviation industry’s concerns about the deal were legitimate.
“I’m sympathetic towards the airlines because I know how hard the industry has been hit and we need to maintain its competitiveness,” she said but added that “Europe has to implement CORSIA to show that we are true to our word”.
ICAO is due to meet in the summer, where the issue is expected to get top billing. China is among those countries pushing for a baseline change but Valean only conceded that “if discussions evolve, we’ll take stock of them”.
Budget on the rails
Aviation is reeling from the virus outbreak and although rail companies are also feeling the pinch, new analysis by UBS Research predicts that high-speed train travel is set to get a boost during the recovery period.
Lower investment costs and broader public and political support for rail should propel the sector to new heights over the course of this decade, which could shift significant numbers of travellers from planes and cars into train carriages.
But Valean is cagey on the idea of using the virus as an excuse to gift rail a long-awaited resurgence, insisting that “we need all transport types, so I wouldn’t say that one mode should win over another. Rail is close to our hearts because it is the most sustainable one.”
The Commission suggested in May that 2021 should be “the European Year of Rail” but the EU executive is still waiting on governments to fully implement the Fourth Railway Package, a set of rules adopted in 2016 aimed at revitalising the sector.
“This was something I was very keen to pursue this year. We have some difficulties in the technical pillar since some member states do not work properly in terms of their parliaments discussing and adopting the measures, so there are delays,” Valean explained.
Although there are no plans for a Fifth Railway Package, the transport chief said that the EU’s long-term budget, the MFF, should be used to “put a focus on rail, though the Connecting Europe Facility (CEF)”.
Budget talks stalled before the virus hit but the Commission is currently working on a tweaked proposal due to be released by the end of the month. Recent compromise texts by the Finnish Presidency and Council chief Charles Michel both reduced the CEF war chest.