COVID-19: A plan for European aviation

8 May 2020

 

Since the beginning of the COVID-19 pandemic, ETF Civil Aviation Section has been representing the civil aviation workers of Europe, providing feedback to measures introduced by the various authorities and putting forward concrete plans. The responses so far are combined in the new plan for European aviation that introduces short- and the long- term measures, covers all the different areas of civil aviation, and embraces social and environmental sustainability.

 

Initial primary support for the industry

Programmes for initial industry support can be introduced through government equity or debt participation, available to eligible aviation businesses (airlines, airports, service providers, etc.) utilising loans or a loan guarantee programme.

To ensure fairness and social sustainability, such initiatives should include these conditions:

• Any debt should not be reduced through loan write-offs (in other words, eligible businesses must exchange warrants, options, equity interest or debt in their companies to take advantage of the loan or loan guarantee programs, and the loans cannot be written off);

• The state may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients of financial assistance, which, in the sole determination of the state, provide appropriate compensation to the government;

• Participating eligible businesses are prohibited from share buybacks, paying dividends or making capital contributions from the date of the loan until 12 months after the direct loan is repaid in full;

• Recipients’ executive pay will be capped, including limiting pay increases and severance pay or other benefits upon terminations;

• All eligible businesses participating in the program must also maintain employment and are prohibited from reducing their employment levels by more than 10% and must commit to maintain collectively agreed terms and conditions or amend them through renegotiation with trade unions;

• Information and consultation obligations must be respected throughout this process;

• Eligible business participating in the program must have incurred or be expected to incur losses such that the continued operations of the business are jeopardised;

• Alternatively any such participation can be on the basis of business acting as a consolidator or stepping in as a service provider for a business or part of a business that ceases to exist. Put simply this could also be used to favour and incentivise the consolidation and stabilisation of the industry post-COVID-19 crisis measures;

• Such ‘consolidators’ should be those of sufficient size, capitalisation and capacity to undertake such consolidation, and to abide by the terms of any support package.

 

Measures post lockdown

• Articulation of subsidy with social distancing and ‘seat free’ restricted passenger loads. Any subsidy would be based on routes and either directly provided to airlines or through PSO’s;

• Subsidy for airlines, airports and aviation service providers to cover other mitigation measures such as testing pre-boarding, health ‘passports’ and immunisation should be developed to ensure suppression of demand does not result in critical commercial failures within the sector;

• Continued sectoral specific support for labour costs where significant restrictions on travel and/or conditions of travel are maintained for all aviation businesses including airlines, airports, service providers, etc. A planned tapered approach to the end of such support which would offer the flexibility to save as many jobs as returning revenues can sustain, with employers being required to top-up payments for such support and government would reduce its funding accordingly;

• Suspension of provisions of Directive 96/67/EC on ground handling with the provision that where a single service provider exists within an airport, then appropriate regulation of pricing occurs;

• Provision of European wide insurance cover specific to COVID-19 where such cover is not provided by the insurance industry.

 

Air Navigation Service Providers

• Member state governments should, where needed, provide financial support for ANSPs;

• This could take the form of grants, advance of future charges (following the principles of the Eurocontrol initiative), loans etc.;

• Where ANSPs operate in a private market, government funding should be made available in some form to aid in ensuring continuity of service, and to retain staff in order to enable sufficient capacity for recovery;

• If the recovery of the industry is slow or partial, this support should continue to be underwritten by governments pending a better understanding of the likely restructuring of the industry;

• The ATM Performance Scheme should be urgently amended to support ANSPs and RP3 performance plans and targets need to be revisited.

 

Regional airports

These vary in both size and scale, and in importance to the local community and economy as well as for connectivity of a region. The measures should, therefore, differ depending on the airport specifics:

• The size and scale capitalisation of airports handling above the 3 million per annum passenger numbers is such that a scheme for loans or government support could be utilised. The airports below such a size could potentially be transitioned to either public ownership or partnership, as access to financial markets – both currently and in the future – is severely restricted due to their smaller scale economics;

• These airports should also able to utilise an enhanced Public Service Obligation provision in order to maintain flights and routes and ensure connectivity. Such PSO funding should be part of a wider framework of structured provision.

 

Focus on environmental concerns and a more sustainable future

• Drive for sustainable low carbon growth by investing in next-generation low emission Aerospace and Aviation Technologies. Commit to uplift to funding allowing the sector to continue focussing on the development of such technologies with more attractive gearing from governments;

• Seek commitments from airlines to invest in newer more environmentally friendly aircraft and ramp-up in sustainable aviation fuel SAF usage by airlines over the next decade as a condition of Government support packages. Increase and accelerate investment in the development of Sustainable Aviation Fuels and intensify support to emerging industries;

• Position the EU as the world leader by launching a fully-funded programme to study and assess the technical and industrial potential for a zero-emission regional aircraft. Ensure PSO funding is linked to the future utilisation of such aircraft;

• Accelerate the pace of progress on European policy-making in relation to net-zero by implementing market-based measures, regulating up carbon price in the next 10 years, increasing emissions taxes and incentivising low-carbon technologies. Hard link emissions pricing revenue to investment in low emissions;

• Seek commitments from airlines to invest in newer more environmentally friendly aircraft and ramp-up in sustainable aviation fuel SAF (including agricultural sustainability) usage by airlines over the next decade as a condition of the Government support package. Increase and accelerate investments in the development of SAF and intensify support to emerging industries.

 

Note: The above proposals only apply to companies that are registered and based in Europe

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