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Second Sustainability & Environment Advisory Council (SEAC/2)

On 25 March the second Sustainability and Environment Advisory Council (SEAC/2) took place to discuss the impacts of COVID-19 on environmental issues.

  1. Briefing on economic impacts of COVID-19

Presentation from IATA’s Chief Economist on the COVID-19 crisis

Markets with severe restrictions represent 98 per cent of the global passenger revenue. COVID-19’s initial impact was worse than SARS and the case may give a guide on what will happen in other markets around the world. In China, based on booking data, there are signs of improvement in terms of yields (above zero now). The number of pax in March is, however, still very low. We are already in mid-recession and this will delay recovery (most likely it will be a u-shape recovery). Governments are taking a lot of action - there’s not much they can do regarding interest rates, but fiscal policy is really key for the speed of economy. The effectiveness of this policy will be critical. The situation is not good: In Q2 capacity will be down -50 per cent and by the end of the year will still be down 10 per cent of capacity. Pax are down -6 per cent in Q2 and in Q4 by -3 per cent. In terms of revenue, this is a big hit: 38 per cent RPKs and 252 billion pax revenue loss in 2020. This represents a massive shock to the industry never seen before. Liquidity is one of the biggest challenges: before crisis airlines had two months’ worth of cash in balance sheets. More immediate action is necessary on the liquidity front.

  1. CORSIA: impacts of COVID-19.

An initial analysis was undertaken to understand the behavior of CORSIA with the unexpected drop in traffic and getting figures on what economic impact of raising attention to the need to address the issue on CORSIA. The assumptions were decided a month ago and the situation has changed so it is nowhere near current reality. Obviously the crisis has a major impact on 2020 emissions by lowering them. This has an impact on choosing the baseline emissions for CORSIA used to set offsetting requirements for the future. Any reduction in baseline is affecting all operators with offsetting requirements. The impact is going to be exactly the same for everyone. No region will not be impacted by the 2020 drop in emissions. With a lower baseline there would be an annual average increase by $563m per year as result of COVID-19. The cost increase as a result of baseline will have a major impact on CORSIA. But other operators also raised issues with compliance of verification of emissions reports and will be delayed due to travel restrictions – this needs to be addressed. A 2019 baseline would be the simplest way forward and closest to the scenario. We need an industry perspective.

  1. SAF: mandates

A lot is happening on SAF, particularly in the EU. In the Green deal, SAF will be a discussion item for Q4 and the mandate is one policy option that is being considered. IATA “We do not favor any mandates particularly due to distortions and environmental risk that can come with them”- how we address this needs to be considered. An EU-wide mandate is almost inevitable. Currently, there is a roadmap consultation on SAF - DDL 21/04. Some participants stated that here should be no mandate until infrastructure improvements are implemented. There should be consideration on competition with other modes and there should be a domestic markets focus and not a global one. A small task group is to be set up by IATA on SAF.

  1. Information item: long-term goal: overview of ATAG Waypoint 2050 report

Presentation of Waypoint 2050 conclusions. Discussion and feedback from SEAC on the report will be deferred to a later time.

IATA presented the work on waypoint [internal use only].The aviation industry is exploring how to meet its long-term climate goal to reduce CO2 emissions to 50 per cent of 2005 levels by 2050. This is possible by using many solutions available to aviation, also requires disruptive changes to the energy system. IATA presented many scenarios:  

  1. BAU: a lot of reliance on MBMs necessary
  2. increased contribution from tech – reliance on SAF and MBM if needed
  3. Aggressive SAF scenario – not much contribution from technology
  4. Aggressive tech improvement – lower reliance on SAF and MBM

It may NOT be possible to not meet the 2050 goal without much reliance from MBM but may feasible in reaching net zero.

Please find the documents in the downloads section.  You are welcome to send comments to martina.dipalma@eraa.org