TRUTH ABOUT FLYING. (and KLM)

TRUTH ABOUT FLYING (and KLM) Bill Hemmings - 23rd March 2018

2 KLM; world s oldest Airline = #12 Netherlands Population 17.2m = # 66

Industry going gangbusters Pays no tax Heard that before? 3

4 Coffee shops better margin What s the NL tax take?

5 Top European Airports (spot the odd man out) Airport Total pax People 1 London Heathrow Airport (United Kingdom) 77,987,524 65m 2 Paris Charles de Gaulle Airport (France) 69,471,442 65m 3 Amsterdam Airport Schiphol (Netherlands) 68,515,425 17m 4 Frankfurt Airport (Germany) 64,500,386 82m 5 Istanbul Atatürk Airport (Turkey) 63,727,448 83m 6 Madrid Barajas Airport (Spain) 53,402,506 46m Rank

AVIATION > 5.5% 6

7 Emissions Growth

8 DECARBONISATION All current policies fall well short CORSIA doesn t even target aviation CO2 EU ETS now has declining cap Non CO2 - ignoring the elephant Traffic growth far outstrips efficiency Technology - no quick fix; several generations Regulators powerless against the duopoly Sector is hopelessly undertaxed Fuels have some potential

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10 PARIS GOALS FOR AVIATION Source: http://takvera.blogspot.be/p/global-emissions-gap-scoreboard.html

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13 CORSIA V EU ETS

14 NON-CO2 Action first called for in ETS 2008 Directive 2008 CE Delft study on NOx charge shelved ETS Revision 2017; Article 30 new paragraph 5; Before 1 January 2020, the Commission shall present an updated analysis of the non-co2 effects of aviation, accompanied, where appropriate, by a proposal on how best to address those effects. What is the latest science How to address NOx? Avoid contrail/climate sensitive areas

15 PROPULSION Biofuels in transport - bad experience on road Multiplier for aviation in REDDII; little impact Sustainable bio-based alt fuels - limited potential Power-to-Liquid - Fischer Tropsch Drop-in fuel technology ready TRL8 Needs scaling - 5x times price gap 1% mandate adds $20 to $500/tonne or 3.20/pax Safeguards Won t fix non-co2...

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AVIATION SOLUTIONS Dr Lucy Gilliam - 23rd March 2018

19 GROWTH OF EMISSIONS ETS is having only minor impact Traffic growth globally strongest ever >10% Emissions are growing at 3% per year globally according to IATA, 3-6% according to Larkin et al. Growth is 8% in Europe (2016) Boeing says transport doubling every 15 years on current trajectory (4.4% pa) Efficiency gains in aircraft around 1% & declining No silver bullet in engineering to decarbonise planes Alternative fuels expensive and not available at scale THEREFORE: We must price aviation better...

20 PARIS GOALS FOR AVIATION Source: http://takvera.blogspot.be/p/global-emissions-gap-scoreboard.html

SOLUTIONS 1) Taxing aviation more a) VAT b) Kerosene c) Ticket taxes 2) Investing in synthetic fuels 3) Flying less a) Modal shift in mobility b) Demand management 21

TRUE COST OF FLYING EU Budget (2021-2027) unique opportunity for reform aviation to pay for pollution & contribute tax revenue Kerosene Taxes, VAT, Ticket taxes Kerosene taxation limited by Energy Taxation Directive. Domestic only NO and NL Intra-EU flight tickets VAT exempt VAT rules now being reformed Ticket taxes exist in UK, Sweden, Norway, Germany, Austria, Sweden 22

23 MFF - EU BUDGET 2021-27

24 Ticket tax Many countries have - on both departure and arrival Solely national decision Doesn t directly incentivise fuel burn reduction So airlines discredit if the claim is green UK APD 1993 - introduced as revenue raiser Tax is on passengers - airlines must collect UK - easiest/cheapest tax to collect - airlines do the work All pay - companies may get VAT back

25 CE Delft study; tix tax do s & dont s Ticket taxes don t contravene Chicago Convention ICAO resolutions against taxation non-binding - EU files reservation Exempt transfer/transit pax - double taxation Treat all EU airports the same - discrimination Distance bands No direct link to fuel burn

26 Industry action Country with ticket tax Belgium UK The Netherlands Ireland Germany Plaintiff B.A.R. Belgium, Sabena and Lufthansa Federation of Tour Operators Maastricht Aachen Airport and Ryanair Ryanair American Airlines Legal grounds opposition ticket tax Art. 15 Chicago Convention Art. 15 Chicago Convention, First Protocol (A1P1) to the European Convention on Human Rights, Art. 49 of the European Treaty. Art.15 Chicago Convention; State aid due to exemption transfer passengers benefitting transfer hubs like Schiphol State aid due to tax differentiation benefitting Irish airlines Numerous violations of Chicago Convention, EU-USA Open Skies Agreement and Friendship, Commerce and Navigation Treaty Result of case Ticket tax abolished All complaints dismissed All complaints dismissed European Commission required revision of differential tax rate All complaints dismissed Part of tax amended Abolished None None Distance element was removed None Tax status In place Abolished Set to Zero In place Abolished

27 VAT on tickets Intra-EU tickets VAT exempt since before EU Abolish exemption - IATA oppose Now Commission giving in Member states wants total flexibility on rates Place of supply complication Changes to point of departure in 2022 ACTION: We must fight for negative list & place of supply rule change

28 Aviation Fuel tax Brazil, India, Japan, US all have domestic fuel tax Prohibited in Energy Tax Directive until 2003 Domestic then permitted - NL, NO Intra-EU allowed after 2003 - bilateral agreement Complication is foreign carriers Fuel tax exemptions in ASAs slowly being abolished Solution is de minimis and bilateral waivers

29 German Luftverkehrabgabe Introduced in 2011 as revenue-raiser Passenger numbers still increased, but report found law-fares airlines and regional airports suffered dampened demand 0.6% fall in aviation emissions, 1-2m fewer passengers, close to 1bn a year raised Repeated opposition from industry, however rising ETS allowances prices might be the newest threat

30 Swedish ticket tax Due to come into force in two weeks (April 1st) Government study found that CORSIA and ETS were insufficient pricing signals 7.88 for short-haul/eu and 42.36 for long-haul

31 COUNTERING INDUSTRY Ryanair s route closing argument Used to end Irish ticket tax in 2012 Currently being used against Scottish government However used only against small nations: Ryanair currently expanding in Germany

COUNTERING INDUSTRY Increased revenue argument A4E calling for taxes & increased share of EU budget German study: 260m lost government revenue, but 1,240m increase. 1bn net gain. More libertarian anti-tax argument than argument against aviation taxation 32

COUNTERING INDUSTRY Tourism argument Little evidence that tourism suffers from modest levels of taxation Aviation costs only small part of overall holiday costs Any negative impact on tourism can be offset by decreasing other taxes (i.e. on hotels or alcohol) 33

34 FREQUENT FLYER LEVY 70% of flights taken by 15% of people (UK CAA Data) 57% of population don t fly at all in a year Issue of hypermobility - small number of people flying frequently Solution: Frequent flyer Levy? Everyone gets 1 untaxed flight Tax kicks in at low amount and increases with each subsequent flight Spend money to green aviation http://afreeride.org/ #afreeride

35 PROPULSION FUELS Biofuels in transport - bad experience on road Multiplier for aviation in REDDII; little impact Sustainable bio-based alt fuels - limited potential Power-to-Liquid - Fischer Tropsch Drop-in fuel technology ready Needs scaling - 5x times price gap 1% mandate adds $20 to $500/tonne or 3.20/pax Safeguards But won t fix the non-co2 problem.

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38 FLY LESS, ENJOY MORE