Europe’s weaker airlines will be the hardest-hit by environmental regulations to cut emissions, a report by a financial services firm says.
S&P Global Ratings looked at increasing financial liabilities airlines in Europe will face to meet environmental regulations in its European Airlines Prepare For Take-Off On Climate Change study.
“The additional cost burden of emissions regulations will be marginal over the short to medium term, relative to existing volatile fuel expenses, aircraft lease payments, and depreciation charges,” said S&P Global Ratings credit analyst Rachel Gerrish.
“However, any further cost pressure in the extremely competitive, highly cyclical, capital-intensive European airline market will add to pressures and may gradually further widen the difference between Europe’s few strongest airlines and the weaker majority.”
The report found that, given their heavy reliance on fossil fuels, airlines will achieve most of their net CO2 emissions reductions via market-based measures and significant operating and fleet efficiencies.
These, it said, are primarily the EU Emissions Trading Scheme and the Carbon-Offsetting and Reduction Scheme for International Aviation (CORSIA).
However, it notes companies recognise that carbon offsetting is only an interim measure while new technologies are being developed.
Aviation accounts for about 2.5% of global CO2 emissions, the report says, adding that transportation as a whole emits about 20%, and the power generation sector about 40% of the total.
Yet it concedes that aviation’s share may rise as other sectors moderate emissions, for example through electrification of ground transport, concluding that “airlines face a tougher challenge”.
For example, it says a key technological challenge of sustainable alternative fuels is that the energy density of airline fuel needs to be much higher than for ground transport.
“Airlines are communicating more on offsetting schemes and efforts to manage emissions,” added Gerrish. “Yet, whether there will be enough material improvements to meet the industry’s goal to reduce net aviation CO2 emissions by 50% by 2050 relative to 2005 levels remains up in the air.”
This is a community-moderated forum.
All post are the individual views of the respective commenter and are not the expressed views of Travel Weekly.
By posting your comments you agree to accept our Terms & Conditions.