​Lufthansa chief calls for review of EU SAF mandate
June 05, 2024
Europe should reform its sustainable aviation fuel mandate model when the policy comes up for review later this decade, Lufthansa Group chief executive Carsten Spohr believes. Speaking to journalists at the IATA AGM in Dubai on 3 June, Spohr comments that “if a mandate is undoable, it has to be changed.” The Lufthansa chief argues that if the only way the mandate can be met is by importing SAF from elsewhere in the world via ship, “the environment is not benefitting”. The EU has stipulated that fuel provided at EU airports must contain 2% SAF from 2025, rising gradually each year to 6% by 2030, 20% by 2035 and 70% by 2050. Airlines have long complained that such a system does not incentivise producers to drive down the cost of SAF or the price that carriers have to pay. They prefer an incentive system for SAF production and use, such as has been enacted in the USA under the Inflation Reduction Act. IATA estimates that SAF currently accounts for only around 0.5% of fuel use, a figure which needs to increase by a thousand times if the industry is to hit its long-term climate ambitions. Spohr believes a better balance needs to be found between mandates, the availability of SAF and the affordability of the fuel type, with the risk being that SAF will drive up the cost of flying in Europe, leading customers to “bypass” Europe’s hubs in response to higher prices. “The new Commission needs to take a look,” he comments, referencing European elections which are about to take place and that will result in new leadership of the EU's executive body. He adds that the SAF mandate policy is up for review in 2026, “and I think we will need [the review] as an industry and the EU commission will need it.”

​IATA bemoans European airlines’ ‘relative decline’
June 05, 2024
IATA has warned that Europe’s airlines are continuing to suffer from a high regulatory burden and hostile government policy, which, in its view, threaten the ability of carriers to compete globally and support the European economy. At the association’s AGM in Dubai on 4 June, regional vice president for Europe, Rafael Schvartzman, cited a failure to reform the EU261 compensation package, slot policy, the failure to create the Single European Sky (SES), new Europe-wide border regulations and a proliferation of environmental taxes and restrictions as factors that are acting as a drag on the sector. ‘The European market is a mature market and there are faster growing markets around the world, but that doesn’t mean that we shouldn’t solve the issues that we are having today that hinder the strategic connectivity which is part of the lifeline of the European economy,” says Schvartzman. He says a lack of action by policymakers to support the industry is driving up prices, hurting competitiveness and amounts to a “relative decline” for the continent’s carriers as other regions, which he believes are far more supportive of the industry, pull ahead. Turning to infrastructure, he says governments have failed to invest in airports and capacity, including on technology to ease passenger journeys. He notes that KLM was recently forced to axe some services because it did not have available stands to park their aircraft, just one example of how poor infrastructure investment is hurting the industry. In a similar vein, he says there has been an absence of action to reform the EU261 compensation regulations, although the arrival of new EU Commission following upcoming European elections could provide the means to improve the regulation guidelines. A proposal on EU261 has been on the cards since 2013, which would take measures such as defining ‘extraordinary circumstances’ and issue new thresholds for compensation. IATA argues that the current legislation is “a drag on connectivity” that costs the European economy €5 billion ($5.4 billion) per year, plus €1 billion to airlines. Schvartzman is similarly disappointed by the latest action to reform Europe's airspace, known as SES2+, commenting that the legislation "will not make any difference." The industry was hoping for a strong independent regulator that could drive efficiency across air navigation service providers, alongside strict targets for performance, but this was absent from the final agreement which is expected to come into force in the first quarter of next year. "It's a pity" he says of the new legislation, but "we will continue to look for ways to drive efficiency." Across the continent, IATA now expects carriers to report net profits of $9 billion this year – up marginally on 2023 – with a 3.8% margin equalling $6.93 per passenger. This is on demand up 11.1% and capacity, measured by ASKs, that will rise by 11.5%. Globally, IATA expects per-passenger profit of $6.14, but this rises to $13.10 in North America and $15.20 in the Middle East. "Europe has a positive outlook on performance with demand expected to remain strong in 2024," IATA says in its outlook. "However, supply chain issues, together with high interest rates and the risk of labour disputes could limit the prospects for further near-term increases in profitability."

African airlines particularly hard hit by locked funds: ATA
June 04, 2024
African airlines are continuing to suffer the effects of not being able to access millions of dollars’ worth of earnings that are blocked behind national borders, IATA warns. Of the roughly $1.8 billion of airline funds that are blocked globally, around half of this is within African countries, the airline association states. Within the continent, Algeria is the worst offender, blocking $286 million, followed by users of the Central African CFA franc – which encompasses Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon – totalling $151 million, Ethiopia ($148 million), and Eritrea ($75 million). Funds become blocked when airlines are unable to access their sales because national authorities impose restrictions on capital flows. This has long been a problem for African airlines, due to governments on the continent imposing the practice in a bid to stabilise their currencies. “When you can’t get your money out [of a country] it strangles the airline itself," says IATA’s regional vice-president for Africa and the Middle East, Kamil Alawadhi, speaking as part of the association’s AGM taking place in Dubai. "Africa is a challenging environment for the aviation industry. Adding something like blocked funds to the mix is even more complicated when you consider the logistics of getting, for example, supply chains and spare parts, fossil fuel charges and so forth. The last thing you want it to get your money trapped,” he adds. Alawadhi believes that when governments engage with the industry, changes can be rapid. He cites the example of Nigeria, which, last year was the worst nation globally with $850 million blocked. In response some carriers reduced their operations into the country and one to temporarily cease flying there entirely. Since then, the “government has been extremely active” he comments, and “things moved positively since November last year and now we have almost nothing blocked," Alawadhi states. Likewise, Egypt has also taken action to clear its blocked funds. However, in both cases, IATA notes that airlines were nevertheless hit by devaluations of the Egyptian pound and the Nigerian naira. Although a global problem, the amount of blocked funds has dropped by $708 million since December last year, IATA notes. Outside of Africa, Pakistan accounts for $411 in blocked funds and Bangladesh $320 million, followed by Lebanon on $129 million. IATA describes the situation in the former two countries as “severe”, threatening the ability of airlines to operate into the two countries.


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