SAS and Norwegian are among the winners when the EU abolishes free emissions allowances for the aviation sector. At the same time, the Union's climate plans could be a death blow for companies with weak finances.
”It will be survival of the fittest,” says aviation analyst Hans Jørgen Elnæs.
The aviation industry continues to be under severe pressure, and the bill for the industry's emissions will soon rise significantly. Last week, the EU parties agreed to stop giving airlines free emission allowances as early as 2026, with a gradual phasing out from 2024.
SAS SAS +1.40% estimates that it could increase the company's costs by 75 to 300 million SEK per year, given today's traffic and the price of emissions rights. Also Norwegian and BRA confirms that they expect higher expenses.
To increase The incentives to use sustainable aviation fuel, abbreviated SAF (Sustainable Aviation Fuel), will allow airlines to deduct the cost of such purchases in emissions trading. Sustainable aviation fuels include both biofuels and synthetic jet fuel produced from electricity and recycled carbon dioxide. The problem is that the supply is too low.
”"We already sell bio-fuel flight tickets and are one of the companies that flies the most biofuel in Sweden, but the supply is too small. We sell out of everything we buy," says Maria Fiskerud, sustainability manager, BRA.
She and several others in the industry are critical of the phasing out taking place as early as 2026. Production of SAF is not expected to become large-scale until the following year, while it may take even longer before electric aircraft are on the market.
”"We welcome the initiative to increase the production of sustainable fuels, but think it is wrong that emissions rights are phased out before effective solutions to reduce emissions are available in the quantities needed," writes Charlotte Holmbergh, communications director at Norwegian, to Di in an email.
However, both Norwegian and SAS could be winners under the EU's new climate plan, says aviation analyst Hans Jørgen Elnæs.
”"SAS will have a fairly new Airbus fleet from 2025, and Norwegian is also in a process where they are purchasing new aircraft, so they are quite well positioned," he says, also mentioning Ryanair and Wizz Air.
”Newer aircraft emit less carbon dioxide, and that is an advantage for companies when emissions cost more.”
Good finances mean that some companies can pave the way for a better starting position in the future. To secure access to SAF, for example, many airlines are purchasing future volumes now.
”"It is the companies with the best finances that have the opportunity to position themselves and buy biofuels on futures contracts, Ryanair, for example, has done so," says Hans Jørgen Elnæs.
He sees similarities with the pandemic, where the companies that were best financially equipped were able to position themselves well for the future.
”"It will be survival of the fittest, to put it simply. It will be important for airlines to have modern fleets, good finances and be competitive."”
Can it make the industry more sustainable?
”"Yes, I think so. It's like the EU is tightening the screws a little more to speed up development."”
Source: DI.SE
