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Tuesday, July 14, 2020

No green strings attached in Lufthansa’s bailout package

Lufthansa Chief Executive Officer Carsten Spohr has previously said the airline, Europe’s biggest with over 760 jets pre-crisis, would slash emissions by investing in more fuel-efficient aircraft.

By: Bloomberg | Updated: May 27, 2020 10:14:37 am
Merkel Says Lufthansa deal close as airline warns on urgency Passenger aircraft, manufactured by Airbus SE and operated by Deutsche Lufthansa AG, sit grounded on the tarmac at Munich Airport in Munich, Germany, on Monday, May 4, 2020. Photographer: Michaela Handrek-Rehle/Bloomberg

Germany’s multi-billion euro bailout of Deutsche Lufthansa AG may cost the airline some precious airport slots, but one thing it won’t have to do is meet any new environmental rules.

Chancellor Angela Merkel’s government on Monday offered Lufthansa a 9 billion-euro ($9.9 billion) package to help the carrier survive the coronavirus pandemic. There was no mention of new measures to safeguard the climate, leaving the airline to stick to its strategy of replacing old jets with more fuel-efficient models and using less-polluting alternative fuels where possible.

It’s a sharp contrast to demands attached to bailout packages from other European Union countries, which are seeking fresh measures to curb airlines’ carbon footprints.

“It is a big mistake that Germany, unlike France, the Netherlands or Austria, does not link economic aid to specific climate-protection requirements,” said Claudia Kemfert, professor of energy economics at the DIW research institute in Berlin. “An important opportunity is lost.”

The bailout for Lufthansa, the airline that connects Germany to the far-flung markets on which its export juggernaut depends, will see the state take a 20% stake. There was no demand that domestic routes be eliminated.

However, Air France was told by the French government to scrap local flights in exchange for its 7 billion-euro lifeline. In Austria, the government is calling on Lufthansa subsidiary Austrian Airlines to reduce flights for journeys within the country that can be made by train. The Dutch finance minister has said emissions cuts should be a condition of state support for national carrier KLM.

Lufthansa Chief Executive Officer Carsten Spohr has previously said the airline, Europe’s biggest with over 760 jets pre-crisis, would slash emissions by investing in more fuel-efficient aircraft. In practice, that’s meant shifting away from kerosene-hungry, four-turbine models like Boeing Co.’s 747 in favor of twin-engined planes like the 777.

Coupled with fuel-conserving flying techniques, that’s allowed Lufthansa to curb emissions per passenger kilometer by 30% since 1994. However, the surge in demand for flying over recent decades has pushed the company’s absolute emissions steadily higher, hitting a record 32 million tons of carbon dioxide in 2018, according to the firm’s 2019 sustainability report.

The airline is also partnering with refineries to develop synthetic jet fuels made from carbon dioxide plucked from the air and hydrogen, a potential pathway for making aviation carbon neutral. Projects are at an early stage.

Analysts are expecting a slow recovery in demand for air travel over the next two years, and for that to expand in the coming decades as newly wealthy Asian consumers satisfy their tastes for travel abroad.

That means Europe’s biggest airline will likely continue to face pressure to curb emissions. A string of extreme weather events in Germany had propelled climate change to the top of the political agenda before the Coronavirus pandemic hit, making Lufthansa a target for criticism.

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