Bursting the Bubble

Perfect is the enemy of good – Europe negotiates the future of flying

10 July 2013 | by

Soon, the opportunity to spot Edward Snowden stranded in the duty free zone may not be the only reason to choose a flight with a connection at the Sheremetyevo airport in Moscow. If something goes wrong during the negotiations held in the UN’s International Civil Aviation Organization, air transport in Europe and the rest of the world might be heavily impacted. The outcome may affect the aircraft sales of Airbus, raise air ticket prices, impede the competitive position of the European airlines, and even flood the airports in Moscow and Istanbul with European passengers looking for best fares on routes to the Far East.

Travelling is a fascinating activity. While this statement is probably shared by the larger part of the population, I guess not so many people agree with my belief, that it’s the act of physical movement from place to place itself, which is the highlight. But there are just too many amazing transport-related stories for me to doubt this belief .

One of them is a train from the Russian Railways, which I sometimes see in the evening at the central train station of Warsaw, on its way from Moscow to Paris. It takes it two long days to complete this journey, and the tickets cost more than a four-hour flight. More than that, although it stops in many stations on the way, it’s impossible to get on this train in Warsaw, simply because such ticket would not be sold to you.

In spite of these bizarre terms of service, the train runs regularly and is usually quite full. One of the secrets behind it is that the train is quite luxurious – it offers gourmet meals, waiter service and  the other secret, revealed by one of the conductors to a German TV station, is that Russians simply like train travel and prefer this mode of traveling above flying.

When I told this story to a group of American and British expats living in China, they all laughed, saying that if they had to choose between going by train and flying Russian airlines, they would also prefer the train, even if they had to spend two days in it. This point was indeed funny, but also very unfair towards the East-European air carriers, many of which have long ago upgraded their fleets and service to the civilised standards.

I recall this story in reference to a series of negotiations, which is scheduled for the next few months in the UN’s International Civil Aviation Organization (ICAO). If something goes wrong in the talks, many European and American globetrotters may have more opportunities to confront those stereotypes with reality, becoming even more frequent passengers of the Russian and Ukrainian airlines, as well as the carriers from Turkey or the United Arab Emirates.

This is likely to happen if the ICAO negotiations fail to resolve a disagreement on how to curb carbon emissions from passenger aircrafts. ‘Disagreement’ is probably the mildest way to call what happened between the Commission and the governments of the USA, China and Russia, after 2012 when the EU expanded the Emission Trading System to civil aviation. This forced airlines to buy allowances for carbon emissions produced by all passenger aircrafts arriving at or departing from the EU airports, even if the majority of the route was outside the EU airspace.

The decision of the Commission was like putting a cat among the pigeons. American and Asian airlines, backed by their governments, claimed that the EU acted beyond its mandate by charging for emissions produced outside its territory and threatened with retaliation measures, such as cancelling their orders for European aircrafts.

Creative Commons - Flickr Stream of Jun Seita

To ease the tension, the ICAO promised last November to start working on a global market-based mechanism to curb airline emissions. The European Commission agreed to “stop the clock” for flights to and from outside the EU. However, the system does operate on the internal routes in the EU, Norway, Iceland and Liechtenstein.

The talks in the ICAO are ongoing, with the conclusion still being remote and unclear. A few weeks ago, when I attended the meeting of the EP Environment Committee with the Climate Action commissioner Connie Hedegaard, I listened to a Green MEP from Finland, Satu Hassi, who hopes that the Commission will not give up in fighting to count the entire distance of flights into the ETS. What she meant was that whereas the US and other countries want the carbon tax to be charged for the distance flown within the EU airspace, the EU insists on counting the entire distance covered by the aircraft and rejecting the ‘airspace-based approach’.

What instantly came to my mind, was that we should be careful with this kind of hope. The reason for this is that if the final agreement will indeed have the provision for charging airlines for the entire distance of their flights, there will still be a lot left that could go wrong.What kind of trouble do I mean? Most of all, the inclusion of air transport in the ETS was designed to motivate the airlines to invest in new, environment-friendlier fleets.  Unfortunately, in the short-term, the reform inevitably led to passing the costs on to the passengers. This is why the surcharge called “ETS levy” was added to some airline booking engines, usually amounting for less than 1% of the ticket price.

It sounds like  nothing significant,  but if applied to a long-haul intercontinental flight, the sum could grow by €10 to €30 per return ticket.* Given that the surcharge would only be for flights to and from the EU, it would pose a grave threat to the European carriers.

The threat is the airlines from the Eastern Europe and the Persian Gulf, which are able to offer many flights from Europe to the South Eastern Asia, with connections at airports in Moscow or Istanbul. With the ETS as it was before the clock was stopped, they only have to pay for the short feeder flights to their hub, and not the long-distance segment flown entirely outside the EU.

This way, direct long-haul flights from the EU would be subject to much larger emission fee than connections with a stopover just outside its borders. Should they take advantage of their geographical location, eastern carriers will easily be able to offer cheaper alternative for routes between Europe and Asia. This will particularly affect airlines such as Finnair, based in the peripheries of the EU and focused on connections with Asia.

In conclusion, the talks in ICAO will have a grievous impact on the European airlines, many of which are already having a difficult time. The EU officials must take very cautious steps during the negotiations, as the EU airlines will be heavily affected if the decision to count the entire flight distance in the ETS will not be accompanied by similar measures outside Europe. Or even worse, if the negotiations fail to reach a compromise, the clock will start ticking again, and the ETS will be reactivated in its initial form.

Read more about the negotiations in ICAO: http://www.transportenvironment.org/news/clock-has-stopped-where-icao-now

* Source: ICTSD, http://ictsd.org/i/news/bioresreview/119707

What do you think?