Meeting with
and
, Lufthansa
Ref. Ares(2022)5830959 - 19/08/2022
25/05/2022 10:00
Scene setter
You are meeting
and
from Lufthansa.
On 23 March you attended a workshop and dinner organised by Lufthansa (LH) top
management at their Frankfurt premises.
This meeting is a follow-up to the workshop. Lufthansa also wants to discuss slot
relief for the winter 22 season. Lufthansa may also raise a point about aviation
insurance and the need for states to step in as insurers of last resort in case the war
escalates.
Objective(s)
• Fit for 55: To convey the message that they are raising a valid point on the
cumulative impact of Fit for 55 measures and to reassure LH of COM
determination to maintain high levels of connectivity and competitiveness of the
EU aviation industry. To explain that FF55 instruments contain some safeguards
for this purpose (such as phase-in periods). To invite to further dialogue with
MOVE or with co-legislators.
• Call on LH to support the Ukrainian refugee crisis by relying on their extensive
network to enable refugees to reach safety across the Union.
•
• ASR: Initiative to revise the Air Services Regulation now underway. MOVE
particularly interested in LH views on financial fitness of air carriers (including
possible changes to ownership and control requirements), and possibility of
restrictions on traffic rights for environmental reasons. [Open Public Consultation
is open for responses. Deadline 26 May. Targeted consultations for the impact
assessment support study also in Q2 2022].
• Insurance – in a recent call between Dir E UA team and Lufthansa (and their in-
house insurance broker, Albatros), they claimed that states should step in as
insurers of last resort (in case the war escalates). They need to talk to DG COMP
as this may be state aid (MOVE to be kept in the loop).
Key Messages
1. Post-Covid aviation ramp-up + Slots
State of the industry
• Eurocontrol traffic scenarios (1-11 May): We are currently flying at
86%, above the high scenario which was set at 82%. We continue
to monitor the situation.
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• COM is mindful of the severe and lasting impact of the COVID-19
on aviation and conscious of the impact that the war can have on
the recuperation of the sector and in particular long haul.
Slots (beyond S22) and invasion of UA
• COM is working on a proposal for slot relief after the summer 22
season.
•
2. Fit for 55 legislative package (including global competiveness of
European aviation)
• The European Green Deal aims to transform the EU into a fair and
prosperous society, with a modern and competitive economy where
there are no net emissions of greenhouse gases in 2050. So
competitiveness is an essential part of the Deal.
• Therefore, we take your concerns on the potential risks of carbon
leakage and reduced European connectivity very seriously.
• Our proposals address such risks and we consider that they are
limited.
• We look forward to continue discussions with co-legislators on how
to further address them, in a practical manner, if needed. However,
at this stage, the role of the Commission is rather limited.
LH workshop in FRA
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• As regards the proposed Regulation on
ReFuelEU Aviation, i.e. on
the harmonised supply and take-up of the Sustainable Aviation
Fuels, the Commission proposal contains safeguards to preserve a
level playing field and avoid carbon leakage, within the boundaries
of international law.
• Anti-tankering provisions mitigate the risk of carbon leakage, by
ensuring that airlines do not avoid refuelling at EU airports.
Regarding the situation of EU airlines competing with flights that
connect to hub airports outside the EU, the risk of carbon leakage
exists but is assessed as moderate. The reasons for this are the
following:
o By 2025 and 2030, the Commission proposes SAF
obligations of 2% and 5% respectively. By 2030, this would
translate into a marginal ticket price increase of less than 1%
on average. Given the current increase in energy prices, this
is likely to be more.
o Several third countries are currently developing their own
national SAF policies, such as US, UK, CH, Turkey, Gulf
states and others. By 2030 and 2035, it can be expected that
SAF would be available at many hub airports outside the EU,
which would help reducing the risk of carbon leakage.
o More and more non-EU airlines are committing to using SAF
as a way to reduce their emissions in the coming years. This
wil inevitably help EU airlines to compete on equivalent
conditions.
o In the first years of the SAF obligations, the Commission wil
closely monitor the evolution of airlines competitiveness and
the risks of carbon leakage. The Commission proposal plans
for a review by 2028, where adjustments could be made if
necessary.
• If I may add an important point on ReFuelEU Aviation. We are
setting up EU-level rules on SAF that must apply in a harmonised
way across the EU. We must come together with a joint ambition to
decarbonise European aviation as a whole. That means common
targets at EU level – including on e-fuels, not State-by-State or
airline by airline (this could create distortions for airlines and
airports and affect competitiveness and affordability of flying). We
count with LH as a key stakeholder to support an EU-level ambition.
LH workshop in FRA
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• On the
EU Emissions Trading System, ensuring the financial
equality of passengers transferring in the EU to passengers
transferring at hubs outside the EU could realistical y only be done
either by reducing SAF costs through free SAF allowances or by
achieving equal carbon pricing with CORSIA (as the Commission
has not proposed to apply the ETS to extra-European flights). While
we strive to strengthen CORSIA in ICAO - in line with the European
Green Deal that also cal s for global action - bringing it to parity with
the EU ETS is not a realistic objective.
•
On 11 May, we received a cross-
industry letter on “SAF Al owances” that was co-signed by A4E so
we assume the idea is supported by you. This could indeed be a
way to help bridge the price gap with SAF.
• Concerning the
Energy Taxation Directive, the Commission’s
proposal puts forward minimum rates of taxation that encourage a
switch to more sustainable fuels. It also encourages more efficient
and less pol uting aircraft in the EU's aviation.
• The ETD proposal gives MS the optional choice to tax international
flights in case bilateral agreements allow for it.
• The revision of the ETD is subject to unanimity vote in the Council
(no co-decision as in case of other FF55 files), after consulting the
European Parliament and the European Economic and Social
Committee.
• In the Council, MS discussions are progressing, with a PCY
compromise text expected under FR PCY. In the Parliament, the
committee decision is awaited with a vote expected in June 2022.
The EESC has already adopted its opinion in January 2022.
3. Global level playing field
EU external aviation policy (if the subject of CATAs is raised)
• The EU external aviation policy is based on combining market
opening with setting an ambitious set of common standards. These
standards go far beyond those of bilateral air services agreements.
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• CATAs set global benchmarks for fair competition, social or
environmental matters, which would otherwise not be set. This is very
important to keep in mind.
• CATAs generate benefits for all aviation stakeholders, consumers
and the overall economy. We believe this is the right way forward.
• We also continue to push for advancing fair competition in ICAO.
4. EASA-ECDC health protocol
• The European Union Aviation Safety Agency (EASA) and European
Centre for Disease Prevention and Control (ECDC) have issued an
update of the joint document defining measures to assure the health
safety of air travellers and aviation personnel for the summer 2022.
• Overall the new guidelines have been shortened and simplified,
where, as main measures, social distancing at airports has been
lifted, the recommendations on flight services restrictions have been
also lifted and more importantly, it is no more recommended to wear
a mask during the flight, except if it is mandatory at the country of
destination.
• The document place paramount importance on health safety at every
stage of the end-to-end passenger journey. Recognising that airports,
airlines and aircraft are different, it takes a pragmatic approach in
implementation – highlighting and giving guidance on the ways in
which individual locations and situations can best be re-engineered to
meet the new health safety standards.
5. Importance of European hubs
• The COVID-19 pandemic has clearly affected connectivity within and
beyond the EU and, thus, the activity of European hubs. Long-haul
flights have been the slowest to recover. However, several key third
countries, and notably our transatlantic partners, have removed travel
restrictions, so the situation is now improving and intercontinental
flights are picking up.
• The Commission is closely monitoring the situation and has adopted
the Temporary Crisis Framework on 23 March to enable Member
LH workshop in FRA
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, Lufthansa
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States to use the flexibility foreseen under State aid rules to support
the economy in the context of Russia's invasion of Ukraine.
Defensive Points
Fit for 55
The Fit for 55 proposal on ETS puts in doubt the EU’s commitment to CORSIA
– are you still a supporter of CORSIA?
• Yes, definitely. We real y want to see CORSIA becoming successful in relation to
the goal of Carbon Neutral Goal from 2020.
• This requires a high level of participation and robust environmental integrity. The
Commission’s proposal is designed to promote both these conditions and counter
potential weaknesses in CORSIA.
• The fact that we propose to maintain our current emissions trading system for
intra-EEA flights (and departures to the UK and Switzerland) is a reflection of our
higher climate ambition in the EU and is fully in line with the statement delivered at
the last Assembly so it shouldn’t come as a surprise.
• In aviation, the EU is a single jurisdiction as regards many policies that are widely
accepted (market access, ownership and control, single aircraft certification, third
country operators, blacklist, etc).
• To avoid double charging under ETS and CORSIA on the same routes, the
possibility of filing a difference to ICAO exists.
LH workshop in FRA
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Why isn’t there an overarching Impact Assessment for the whole Fit for 55
Package? (Cumulative impacts on aviation)
• The impact assessment accompanying the 2030 Climate Target Plan provides the
costs and benefits of the revised climate ambition, i.e. of achieving 55%
greenhouse gas emissions reductions by 2030. It defines cost-effective pathways
to deliver the targets, assessing the best mix of instruments and sectoral
contributions. It shows that all sectors need to contribute; otherwise, some sectors
wil have to do more, in a less cost-effective way. It also shows benefits in
deploying a broad mix of policy instruments, including extending carbon pricing
and increased energy and transport regulatory policy ambition.
• Al Fit for 55 impact assessments start from the Climate Target Plan, ensuring that
the proposals “add up” to the 55% greenhouse gas emissions reductions target
and that all sectors contribute to the effort cost-effectively. In other words, we
followed a two-step approach: the Climate Target Plan provided the key elements
of the policy architecture (e.g. standards, targets, sectors targeted) that are
spelled out now in the Fit for 55 proposals.
ReFuelEU Aviation: How do you avoid putting EU aviation industry at
competitive disadvantage with non-EU industry, in particular EU hub airports?
• It is essential that all aviation players (EU and non-EU) contribute to the SAF
transition and bear the (financial) effort of using SAF. There should be no
difference of treatment depending on the nationality of the airlines. An anti-
tankering measure wil ensure that all airlines take up SAF at EU airports.
• With moderate targets at the start, the impact on ticket prices wil be minimal
(around 1% increase by 2030). We don’t see any potential for distortion with such
levels, or shift of airlines to non-EU airport hubs.
• We need to continue working at ICAO level towards establishing global action on
SAF. This wil ensure a level playing field.
Are you imposing the SAF blending mandate on non-EU airlines? How will your
aviation proposals affect third-country carriers?
• The decarbonisation of air transport can only be successful if embraced by all
actors on the market and if a level playing field between airlines is ensured. In
setting a SAF blending mandate, it would be essential to avoid creating turf for
distortion of competition, or putting some airlines at a disadvantage.
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• The proposed rules are very different from the ETS full scope. First, the blending
mandate is placed on fuel suppliers distributing fuel at EU airports. Al airlines are
treated equally, regardless of their nationality. Second, the obligation on airlines is
only a technical requirement to avoid unnecessary emission.
• We understand that there is increasing interest from non-EU airlines to
decarbonise their activities with the use of SAF. By boosting SAF production in
the EU, this would create more opportunities for such airlines to reduce the
carbon footprint of their passengers, and also to claim benefits for SAF usage
under relevant greenhouse gas schemes like CORSIA.
ReFuelEU Aviation: What are your expectations on SAF prices?
• It is very difficult to predict accurately how SAF prices wil evolve in the years to
come. The volatility of feedstock prices and the evolution of fossil energy prices
depend on many factors, including the effect on the market of the uncertainty
linked to the COVID-19 situation, the increased reliance of States around the
world on bioenergy to decarbonise, and others. According to
(independent
provider of energy market price information), SAF prices wil remain firm over the
next 12 months, with monthly averages ranging from a low of $2,800/t to a high of
$3,400/t. But increasing demand in 2022 and a tight supply environment could
add upwards pressure to SAF prices. Some downward trend could be expected in
spring/summer 2022, but not back to 2020 levels, and not even to prices in the
first half of 2021.
• Nevertheless, in spite of the current high trend and price fluctuations on the
energy market, the long-term trend for the evolution of SAF production costs as
described in the ReFuelEU Aviation impact assessment remains credible and
endorsed by actors of the aviation and fuels industry. This decrease wil be
possible through economies of scale of the SAF industry (boosted by the EU
industrial alliance on Renewable and Low Carbon Fuels), as well as the following
policy mechanisms. The EU ETS wil play an increasing role in reducing the cost
of SAF for airlines, as the price of a tonne of CO2 is currently around 85€, and is
expected to further increase. CORSIA wil also help to reduce the cost of SAF on
extra-EEA flights. If the energy tax directive is adopted, the zero minimum tax rate
on SAF would give SAF a fiscal advantage. These complementary instruments
wil further reduce the price gap.
• The price of fossil kerosene is expected to increase over time, hence also
reducing the price gap with SAF.
• The current high SAF prices confirms that the approach of starting with moderate
SAF targets is sensible.
LH workshop in FRA
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, Lufthansa
25/05/2022 10:00
SAF: Does the Commission consider Contracts for Difference to decrease the
costs of SAF and support the competitiveness of aviation?
• At the EU level, the Commission recognized in its ETS proposal the role of the
Carbon Contracts for Difference (CCDs) to encourage emission reductions in
industry. Specifically, it proposed to extend the range of measures that the
Innovation Fund can support to projects such as CCDs. While transport, including
aviation, could potentially benefit from this support, no sectoral earmarking has
been envisaged. The specific rules how such type of support would work are to be
defined via a delegated act.
• At the national level, support to Contract for Difference for renewable energy is
possible under the new Commission’s Guidelines on State aid for climate,
environmental protection and energy (CEEAG).
• The upcoming Industrial Al iance for Renewable and Low Carbon Fuels Value
Chains wil also provide a forum and opportunity for stakeholders to further
explore how CfD could be operationalised in the aviation (and waterborne)
context and effectively combined with other measures such as uptake obligations.
CATA
You should set more stringent sustainability targets and requirements in air
transport agreements with third countries:
• We are all in favour of the need to fight climate change and make use of all the
tools at our disposal to do so. EU aviation agreements are one of them and the
latest agreements being negotiated include important elements on sustainability.
• They stress the need for environmental protection, to work together at domestic
and international level to reduce emissions, and allow for taxing aviation fuel within
the EU. This is a major improvement from the current bilateral agreements of
Member States, which include zero elements on the environment, and fully exempt
aviation fuel from taxes.
• However, we can only be successful in this area if MSs, that negotiate most of the
aviation agreements, wil be ready to renegotiate their existing bilateral
agreements to include new environmental requirements and wil refuse to
negotiate any new ones unless these clauses are included.
• Otherwise, there is very little we can achieve at EU level as third countries wil
refuse to negotiate with the EU and wil prefer to follow the bilateral route with MSs
that is less demanding in this area.
Qatar should provide full financial transparency (ie separate accounts for the
airline) for the past years in advance of the Joint Committee meeting:
• Financial transparency is a key element and the EU-Qatar CATA has set a new
global benchmark with its transparency obligations.
• However, the CATA was signed last October only, and its rights and obligations -
including those on transparency - only started applying from the day of signature.
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• As there is no legal basis for such request, we should take a forward-looking
approach instead. We wil discuss financial transparency at the forthcoming Joint
Committee and ensure that the obligations are being complied with.
The Commission should ensure that non- EU airlines comply with the
principles set forth in the agreement before they are signed:
• Let us stay realistic: This is not how international agreements work. Rights and
obligations are exchanged with the signing and application of the agreement.
• We therefore have an interest to swiftly sign these agreements, and apply them in
their entirety from day 1.
CRS
When will COM be proposing a revision of the CRS Code of Conduct
Regulation?
• Timing of revision of the CRS Code of Conduct aligned with timeline of the
initiative on multimodal digital mobility service, in order to ensure full coherence.
Scheduled timeline for adoption for MDMS is Q4 2022.
Insurance (Russian invasion of Ukraine)
Would MOVE support the airline industry in its discussions with COMP to make states
the “insurers of last resort” in case the war escalates and no commercial insurance
can be obtained?
• We are aware that some insurance clauses may automatically terminate the insurance
coverage (e.g. nuclear attack, war between the UN Security Council members). At the
same time, the insurance community has been reassuring it that they wil continue
providing coverage for as long as possible. This is their business after all and if all
insurance contracts were to be cancelled, they would not make any revenue.
• At the same time, we hear and acknowledge your concerns about the risk that if the war
was to escalate, there would be no insurer ready to step in. We note your view that
ultimately the states should be the “insurers of last resort” (similarly to what happened
after 9/11). We encourage you to discuss it with DG COMP as such state involvement
may amount to state aid. MOVE would like to be kept in the loop.
Background
ReFuelEU Aviation
The Commission adopted a legislative proposal as part of Fit for 55, which consists of
a SAF blending obligation on aviation fuel suppliers with increasing targets over time,
starting in 2025. An obligation on airlines to uplift aviation fuel prior to departures
from EU airports aims to prevent fuel tankering and ensure a level playing field
between airlines and airports for intra and extra-EEA flights. The ramp-up of SAF
binding targets is as follows:
LH workshop in FRA
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Total shares in
the fuel mix (in %)
2025
2030
2035
2040
2045
2050
SAF ramp up out
of which:
2
5
20
32
38
63
Specific sub-
mandate on e-
-
0.7
5
8
11
28
fuels
State of play of ReFuelEU Aviation discussions
The Commission adopted a legislative proposal as part of Fit for 55, which consists of
a SAF blending obligation on aviation fuel suppliers with increasing targets over time,
starting in 2025. An obligation on airlines to uplift aviation fuel prior to departures
from EU airports aims to prevent fuel tankering and ensure a level playing field
between airlines and airports for intra and extra-EEA flights. The ramp-up of SAF
binding targets as proposed by COM is as follows:
Total shares in
the fuel mix (in
2025
2030
2035
2040
2045
2050
%)
SAF ramp up
out of which:
2
5
20
32
38
63
Specific sub-
mandate on e-
-
0.7
5
8
11
28
fuels
State of play of ReFuelEU Aviation at the EP and Council
Discussions in the EP are progressing well. The draft report in TRAN was presented
by the rapporteur Søren Gade (Renew, DK) on 11 February and consideration of
amendments on 19 April. The draft report is broadly in line with the main features of
COM proposal. Ongoing discussions between groups centre around (1) broadening
of the SAF definition to include more feedstock, hydrogen and electricity, (2) the level
of ambition for e-fuels, and (3) the need to preserve a level playing field for the
aviation market. ITRE and ENVI committee opinions push for higher ambition,
notably mandating the use of liquid hydrogen and electricity by 2035. The report in
TRAN is expected to be voted mi-June and in the plenary end July.
Discussions in the Council are progressing. A policy debate took place at the TTE
Council on 9 December and Coreper on 6 April clarified MS position on the two
political questions (see below). Next Coreper is planned for 20 May. Discussions
mainly revolve around two points:
a) The level of ambition: some MS argue for higher overall targets (DE, DK, NL, SE,
FI, LU, AT), including the possibility to set higher national targets (same MS).
Others argue for lower level of ambition (PL, HU, CZ, SK, MT, CY). We are
strongly attached to the EU-level of ambition and must preserve it by all means.
Differing national binding targets would be unmanageable for the airlines and the
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fuel producers alike, and would create real competitive distortions in the aviation
market.
b) The nature of fuels and feedstock eligible: some MS are happy with the proposed
approach. Others want to open the eligibility of fuels to first generation feedstock.
It is not for ReFuelEU Aviation to decide which feedstock is sustainable or not.
This should be decided under the revision of the Renewable Energies Directive
(RED).
FR Presidency aims to make progress and reach a General Approach by June. TTE
Council wil take place on 2 June.
Background on the status of ETD:
In the European Parliament, the files was assigned to the Committee on Economic
and Monetary Affairs (ECON), with ITRE commit ee associated; TRAN commit ee is
contributing. The ECON appointed rapporteur is Johan Van Overtveldt (ECR,
Belgium), and for ITRE – Robert Hajšel (S&D, Slovakia). The rapporteur delivered a
draft report on 28 February 2022, which was then opened to amendments. Although
the report recognized the risk of carbon leakage and impacts on competitiveness of
aviation and maritime, the amendments proposed support taxation of jet fuels,
although introduce more favourable treatment for cleaner fuels. The committee is
expected to vote on the final report on 20 June 2022, with a plenary vote
provisionally scheduled for 12 September 2022.
In the Council, the examination of the proposal has taken place in the Working Party
on tax questions. The aviation specific provisions were discussed so far during two
meetings: on 20 October 2021 and 8 April 2022. FR PCY aims to propose a
compromise text stil during its term. FR PCY partial compromise (excludes aviation
articles) was discussed on 2 May. As anticipated, MS positions on aviation are
divided, with many MS stil developing their position:
- a number of MS support the introduction of a fuel tax;
- some MS proposed to discuss on a ticket tax, even combined with the fuel
tax;
- a transitional period is considered necessary by many MS;
- geographical and connectivity concerns have been raised, together with
possible issues of international competitiveness and fuel tankering;
- overall impact on the sector should be further assessed.
The European Economic and Social Committee adopted an opinion on the Energy
Taxation Directive in plenary on 21 January 2022. Concerning aviation and
waterborne, the Committee questions whether taxation is the best way to promote
improved sustainability in these modes, and instead suggests to propose dedicated
solutions to promote new and sustainable means of propulsion. It also considers
worldwide solutions should be promoted.
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EU DCC
The EU Digital COVID Certificate has been a crucial element in Europe’s response to
the COVID-19 pandemic, has rapidly become a global standard and is greatly
supporting the recovery of the aviation sector. Since its roll out and the application of
the EU DCC Regulation, more than 1.7 billion EU Digital COVID Certificates have
been issued and around 60 States (27 EU States and 35 third countries from all five
continents) across the globe are now part of the system,
The date when the EU Digital COVID Certificate Regulation is currently set to expire
is on the 30 June 2022. However, as a result of the current epidemiological situation,
Member States might find it necessary to keep EU DCC to maintain or reintroduce a
requirement for EU citizens exercising their right to free movement. In a survey,
essentially all responding Member States indicated a possible need, in the context of
travel, for proofs of vaccination, test or recovery during the second half of 2022 and
the first half of 2023,
In early February 2022, the Commission proposed to extend the application of the EU
Digital COVID Certificate Regulation by 12 months, so that, in the event that certain
restrictions to free movement based on public health would stil be in place after 30
June 2022, EU citizens wil not be deprived of the EU Digital COVID Certificates as
an effective, secure and privacy-preserving way of proving their COVID-19
vaccination, test and recovery status.
Contact:
, MOVE E1
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Document Outline