Plane taking off

Climate commitments could force airlines out of business in just ‘three to five years’

While airlines have had a challenging year since the start of the Covid-19 pandemic, ramping measures designed to tackle climate change could result in even more failures for airline firms in the future, a report has found.

The Centre for Aviation (CAPA) report indicates steep cost increases for airlines as emission reduction measures are introduced or strengthened, including higher carbon pricing and mandated blending of sustainable aviation fuels.

The report found that multiple airlines could fail in just the next three to five years if they do not have the financial strength to invest in decarbonisation or misjudge the need to accelerate their climate mitigation plans.

This is because carbon offsets for airlines will likely become increasingly uneconomic or unavailable, with offset prices rising with broader demand for decarbonisation and tighter criteria for legitimate offsets.

It also predicts that corporate customers and investors will increasingly demand more reliable data on decarbonisation and proof of meaningful action, to make informed decisions on purchasing or investment.

Aircraft fleet age was found to have a clear impact on aviation emissions. If the average age of aircraft deployed in 2019 was reduced by one year, total CO2 for the whole airline industry would have been reduced by about 40 million tonnes, or 4.5 per cent.

“Climate change is a critical challenge and climate inaction is a critical mistake,” said Peter Harbison, chairman, CAPA.

The report was made in partnership with carbon reduction strategists Envest Global.

David Wills, the firm's global executive director, said that historically the environmental performance of most companies had been driven by the need to comply with regulations: “What we’re seeing now is that pressure on companies to improve their environmental performance is coming from their customers and investors, to line up with their own commitments. The airline industry is facing a real challenge here as those pressures increase.

“We’ve looked at over 100 corporations which are among the biggest corporate travellers globally and there’s a very consistent pattern that’s emerging. About three quarters of those companies have made some net zero emissions commitment and those commitments are typically in the timeframe of 2025-2030. But if you compare that to airlines that have net zero commitments, they’re typically in the 2050 timeframe - a 20-year difference.

“About 40 per cent of those companies also have specific travel carbon-reduction goals, in the order of 30 to 50 per cent from a 2019 base. If airlines can’t better align their actions with corporate customers, then there will be a reduction in corporate travel, or a shift of business to more sustainable airlines, to enable those big customers to meet their own climate goals”.

Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.

Recent articles