tag:theconversation.com,2011:/global/topics/air-france-klm-103731/articlesAir France–KLM – The Conversation2023-12-12T17:30:11Ztag:theconversation.com,2011:article/2195912023-12-12T17:30:11Z2023-12-12T17:30:11ZThe NZ aviation industry is making bold climate claims – and risking anti-greenwashing litigation<p>On the same day last week that Air New Zealand announced the purchase of its <a href="https://www.rnz.co.nz/news/business/504050/air-new-zealand-purchases-its-first-battery-powered-electric-aircraft">first fully electric aircraft</a>, Christchurch Airport <a href="https://www.christchurchairport.co.nz/about-us/who-we-are/media/2023/cop28-christchurch-airport-among-first-ten-in-the-world-to-achieve-new-standard-for-decarbonisation/">announced</a> it had reached “a new standard for decarbonisation”. On the face of it, great news for reducing aviation emissions in Aotearoa. </p>
<p>The reality is a little more complex – and risky. As the climate warms, so too is the temperature in boardrooms and courtrooms. The aviation industry is under increasing scrutiny for its sustainability claims, and climate litigation is on the rise.</p>
<p>At the same time, “net zero” strategies in general are being challenged. The United Nations <a href="https://www.un.org/en/climatechange/high-level-expert-group">High-Level Expert Group</a> was established at last year’s COP27 summit, as Secretary General António Guterres explained, because “net zero suffers from a surplus of confusion and a deficit of credibility”. </p>
<p>The expert group has put forward a set of net-zero guidelines to put a “red line through greenwashing”. The guidelines underpin the UN’s approach to net zero, which requires corporate entities to advance ambitious climate mitigation actions based on rigorous and comprehensive <a href="https://sciencebasedtargets.org/about-us">science-based targets</a>. </p>
<p>Among other things, the targets must include emissions reductions from the entity’s <a href="https://zerotracker.net/insights/un-hleg-net-zero-recommendations">full value chain and activities</a>. These include emissions from sources the entity owns and controls directly (known as scope 1); emissions the entity causes indirectly (scope 2); and emissions not produced by the entity itself, but arising up and down its value chain (scope 3). </p>
<p>The expert group also notes that voluntary carbon credits (offsets) <a href="https://zerotracker.net/insights/un-hleg-net-zero-recommendations">cannot be counted</a> towards interim emissions reductions required on the pathway to Net Zero 2050. This is because carbon offsetting has been shown to be <a href="https://theconversation.com/were-burning-too-much-fossil-fuel-to-fix-by-planting-trees-making-net-zero-emissions-impossible-with-offsets-217437">troublesome at best</a>, and in many cases a <a href="https://www.stuff.co.nz/environment/climate-news/79031600/government-allowed-climate-fraud-to-reach-emission-reduction-targets--report">scam</a>. </p>
<h2>Airlines in the firing line</h2>
<p>Key players in the global aviation industry that make unsupportable claims have become <a href="https://theconversation.com/airlines-are-being-hit-by-anti-greenwashing-litigation-heres-what-makes-them-perfect-targets-214501">targets for climate litigation</a>. </p>
<p>A recent greenwashing complaint to the European Commission, for example, was filed by consumer groups in 19 countries against 17 airlines. Virgin Atlantic and British Airways are <a href="https://www.theguardian.com/business/2023/nov/30/airlines-virgin-atlantic-british-airways-face-formal-complaints-over-contested-sustainability-claims">facing formal complaints</a> filed by a climate charity and law firm over sustainable flight claims. </p>
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<a href="https://theconversation.com/airlines-are-being-hit-by-anti-greenwashing-litigation-heres-what-makes-them-perfect-targets-214501">Airlines are being hit by anti-greenwashing litigation – here's what makes them perfect targets</a>
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<p>Advertisements for Air France, Lufthansa and Etihad <a href="https://www.bbc.com/news/business-67625200">have been banned</a> in the UK for greenwashing, following complaints to the UK Advertising Standards Board that phrases such as “protecting the future”, “sustainable avitaion” and “low-emissions airline” are misleading consumers.</p>
<p>Delta faces a <a href="https://www.bloomberg.com/news/articles/2023-06-13/a-greenwashing-lawsuit-against-delta-aims-to-set-a-precedent">class action lawsuit</a> for claiming to be “the first carbon neutral airline on a global basis” in a case brought by a California resident claiming the airline has grossly misrepresented its climate impact. </p>
<p>And KLM is <a href="https://www.reuters.com/business/aerospace-defense/greenwashing-lawsuit-against-klm-can-proceed-dutch-court-2023-06-07/">being sued</a> for greenwashing by law firm Client Earth, which successfully argued the Dutch airline’s “Fly Responsibly” campaign consitutes <a href="https://www.clientearth.org/latest/press-office/press/klm-tells-dutch-court-it-will-pull-fly-responsibly-ads-following-greenwashing-lawsuit/">misleading advertising</a> under EU law while KLM is growing its number of flights rather than reducing emissions.</p>
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<h2>Long-haul growth versus decarbonisation</h2>
<p>Cases like these raise questions about Air New Zealand’s “<a href="https://www.airnewzealand.co.nz/sustainability-carbon-reduction-management">Flight NZ0</a>” <a href="https://flightnz0.airnewzealand.co.nz/">strategy and marketing</a>, which focuses on sustainable aviation fuel and next-generation aircraft (including its recently bought electric <a href="https://www.beta.team/aircraft/">Beta Alia</a>), complemented by carbon offsetting and operational efficiency.</p>
<p>The focus on sustainable fuel will have to overcome significant scientific, energy, scalability and cost <a href="https://www.sciencedirect.com/science/article/pii/S0048969723025044">barriers</a>. Solutions to these <a href="https://royalsociety.org/topics-policy/projects/low-carbon-energy-programme/net-zero-aviation-fuels/">complex problems</a> are likely to be decades away at least.</p>
<p>While Air New Zealand promotes the Beta Alia – with its inherent altitude, payload and range limitations – it also aims to <a href="https://www.airnewzealandnewsroom.com/press-release-2023-air-nz-attracting-offshore-visitors-with-expanded-capacity-and-fleet-investment">significantly increase</a> its long haul network, and is <a href="https://www.stuff.co.nz/business/industries/128136504/air-new-zealand-sets-lofty-goal-for-ultralonghaul-aucklandnew-york-flights">setting its sights</a> on the “ultra long haul experience”.</p>
<p>The contradiction between long-haul growth and decarbonisation strategies is expressed in the airline’s own 2017 <a href="https://p-airnz.com/cms/assets/PDFs/sustainability-report-2017-v2.pdf">sustainability report</a>, in which the sustainability advisory panel chair wrote:</p>
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<p>And that’s the dilemma for anyone who cares passionately about addressing the multiple threats of climate change: either stop flying altogether (the logical but somewhat unworldly idealist’s position), or fly as little and as discriminatingly and responsibly as possible (the often uncomfortable pragmatist’s position). </p>
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<p>As consumers and environmentalists focus more on the validity of climate claims and the viability of carbon reduction strategies, Air New Zealand may find it harder to defend its net zero pathway.</p>
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Read more:
<a href="https://theconversation.com/high-court-decision-on-125-million-fine-for-volkswagen-is-a-warning-to-all-greenwashers-171733">High Court decision on $125 million fine for Volkswagen is a warning to all greenwashers</a>
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<h2>Airports on the radar</h2>
<p>The environmental claims of other players in the wider aviation system – notably airports – are also likely to attract critical attention.</p>
<p>Airports Council International (ACI) is the <a href="https://aci.aero/">global industry body</a> for airports, with over 550 airports taking part in its <a href="https://www.airportcarbonaccreditation.org/">Airport Carbon Accreditation</a> program, including many in New Zealand (most recently <a href="https://www.airportcarbonaccreditation.org/invercargill-airport-joins-airport-carbon-accreditation/">Invercargill Airport</a>).</p>
<p>Christchurch Airport has been in the program for longer, and makes significant climate claims. In April 2022, it <a href="https://www.christchurchairport.co.nz/about-us/who-we-are/media/2022/another-world-class-sustainability-achievement-for-christchurch-airport/">announced</a> “another world class sustainability achievement”, going “beyond carbon neutral, to become climate positive”.</p>
<p>But this doesn’t account for scope 3 emissions, mainly associated with flights in and out of the airport, which make up 95.39% of <a href="https://www.christchurchairport.co.nz/globalassets/about-us/sustainability/carbon/fy2022-23-independent-ghg-inventory-report">total emissions</a>. Airports can only appear to be climate-neutral by not accounting for the high and growing emissions of the planes that are their core business.</p>
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Read more:
<a href="https://theconversation.com/boys-will-be-boys-why-consumers-dont-punish-big-polluters-for-greenwashing-lies-194902">'Boys will be boys': why consumers don't punish big polluters for greenwashing lies</a>
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<h2>Stakeholder reputations on the line</h2>
<p>Key stakeholders are also exposed to any potential accusations of greenwashing. Christchurch City Council own 75% of the airport through a holding company, and the government owns 25%. Both have <a href="https://newsline.ccc.govt.nz/news/story/christchurch-city-council-declares-climate-emergency">declared climate emergencies</a> and made emissions reduction commitments.</p>
<p>Industry groups are involved, too. Tourism Industry Aotearoa, which represents businesses across the tourism industry, last month announced Christchurch Airport the <a href="https://www.tia.org.nz/news-and-updates/industry-news/new-zealand-tourism-awards-winners-for-2023/">winner of its Tourism Environment Award</a>. </p>
<p>It cited the airport’s “climate positive” status and hailed it as being “at the forefront of airport environmental initiatives globally”. Such claims can be technically true if one accepts the limited parameters used to measure them.</p>
<p>But the Tourism Industry Aotearoa will need to ensure its environmental awards keep pace with developments in this rapidly changing field – including the increasing risk of litigation over unsustainable claims about sustainability.</p><img src="https://counter.theconversation.com/content/219591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Higham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Airlines and airports face increased scrutiny – and possibly legal action – over the contradictions between their sustainability claims and the reality of their high-emissions businesses.James Higham, Professor of Tourism, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1599492021-05-02T16:22:03Z2021-05-02T16:22:03ZFrance’s elite schools and their alumni networks: a flaw in the governance of French companies<figure><img src="https://images.theconversation.com/files/397545/original/file-20210428-25-1f90pc4.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1024%2C683&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students at Ecole Polytechnique. Their alumni network is one of the most powerful and may lead some to the top of a large French company. </span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Les_élèves_de_l%27Ecole_polytechnique_(26855463710).jpg">J. Barande/École Polytechnique</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>As everyone knows, connections matter, particularly so in the access to top management positions. The power of alumni networks, first and foremost those of Polytechnique and ENA, is well documented in the literature regarding the French elites. Rigorously selected and lavishly trained to serve the country’s public interest, these graduates often occupy the <a href="https://www.cairn-int.info/article-E_SOPR_021_0035--becoming-a-cac40-french-ceo.htm">upper-management layers of large French companies</a>. </p>
<p>The French state’s involvement in nearly every aspect of the economy is an obvious facilitator. It creates gateways allowing those who so wish to cash in on their experience in the higher administration, often punctuated with a stint in a ministerial cabinet, by directly vaulting into the higher echelons of a company before aiming for the CEO seat. In the United States, the term <a href="https://www.opensecrets.org/revolving/">“revolving door”</a> refers to a similar process in which powerful individuals cycle between the public and private sectors, making use of their connections and influence on both sides.</p>
<h2>A commanding share of CEO positions</h2>
<p>The result is an over-representation of Polytechnique and ENA alumni at the head of large French companies. No less than 13 CEOs of CAC 40 companies come from these two schools. By contrast, only <a href="https://www.forbes.com/sites/kimberlywhitler/2019/09/07/a-new-study-on-fortune-100-ceos-what-undergraduate-institutions-did-they-attend/?sh=1d8f577c3308">11 CEOs of America’s top 100 listed companies</a> were educated at an Ivy League university. One of the rare examples is Amazon’s Jeff Bezos, who graduated from Princeton. Regardless of their reputation, <a href="https://www.theguardian.com/world/2013/may/14/france-power-elitism-peter-gumbel">Oxford and Cambridge come nowhere close</a> to matching the dominance of their French counterparts. Given that most directors are also CEOs, boards often include members who share the same education as the CEO and who therefore belong to his network.</p>
<p>At first glance, one might think that this concentration of brainpower is a strength for the company. But wait a second, is the team with the best players always the best team? In sport, we know that this is not true. Real Madrid proved in 2004 that a team of star players comprising David Beckham and Zinedine Zidane among others can end the season without winning any trophies. Over and above individual talent, it is critical to achieve an optimal balance between different sets of skills. The strength of a team is not just the sum of each member’s strength.</p>
<h2>Some adverse effects on the firm’s governance</h2>
<p>By analyzing the <a href="https://doi.org/10.1016/j.jfineco.2016.01.013">performance of co-investments in venture capital</a>, researchers at Harvard have uncovered another fascinating result. While managers with a degree from a top university are associated with a higher investment performance, when both co-managers are alumni of the same highly prestigious university, investment performance is significantly worse. The study does not elaborate on the reasons for this disappointing outcome; however, it is likely that the lack of critical assessment of someone who is a mirror of oneself must play a key role.</p>
<p>Similarly, one can expect that the presence of directors with the same profile as the CEO by virtue of sharing the same education is associated with detrimental consequences for the company. The insidious threat is that the board of directors does not push the CEO hard enough to question the merits of his strategy. The risk is then that the company takes the wrong turn and finds itself in a dead end.</p>
<p>The failures of well-established companies can be traced down to blunders that might have been avoided if the board of directors had been more critical of the CEO’s decisions. As it happens, the biggest losses suffered by French companies come from firms whose board of directors comprised members of the CEO’s alumni network.</p>
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<img alt="" src="https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/397305/original/file-20210427-19-tbfx3b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Directors who come from the same school as their manager seem to be less able to control the latter.</span>
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<p>Among them, Vivendi stands out with a loss of 23.3 billion euros in 2002. The company was then <a href="https://www.theguardian.com/media/2002/jul/01/citynews.vivendi1">headed by Jean-Marie Messier</a> whose background features degrees from Polytechnique and ENA. The trouble is that Vivendi’s board of directors also comprised three alumni of Polytechnique and four alumni of ENA, also members of the prestigious Inspection of Finances like Messier himself. It is therefore quite plausible that the directors’ affinity with the brightest of their kind did not help them to detect burning issues early enough and find solutions before it was too late.</p>
<h2>Unfavorable consequences for the company</h2>
<p>When some directors have close ties with the CEO, the ability of the board to hold the CEO to account is effectively hampered. This fact is accepted in the AFEP-MEDEF governance code to define director independence, with respect to financial or family ties. However, social ties, such as those that stem from belonging the same alumni network, are utterly ignored. Yet, these connections affect just as much the ability of the board of directors to control the CEO.</p>
<p>In the absence of adequate oversight, the CEO may choose to quietly run the business <a href="https://www.journals.uchicago.edu/doi/abs/10.1086/376950">without exerting too much effort</a> or <a href="https://doi.org/10.1016/j.jfineco.2016.08.002">taking too much risk</a>. This seemingly over-the-top statement has been convincingly demonstrated in the context of US companies. An obvious consequence is the lower performance of these companies.</p>
<p>In the long run, this leads to a loss of competitiveness. An early warning indicator is the company’s greater sensitivity to economic fluctuations. <a href="https://www.cairn.info/revue-d-economie-politique-2021-2.htm">Our analysis</a> shows more specifically that companies whose boards of directors are connected to the CEO exhibit stock returns that are highly correlated with market returns. When the state of the economy is poor, the stock market drops, and the value of these companies drops even more.</p>
<p>Academic studies also show that when the CEO is entrenched, in other words when he does not have to fear losing his job, the company tends to invest less in research and development, whose outcome is highly uncertain. It tends therefore to be less innovative. The results we obtain point to the same conclusion, which suggests that social networks in the boardroom contribute to managerial entrenchment.</p>
<p>Two other consequences arise from this situation. The first is that the company tends to be less transparent. It discloses less useful information. Jean-Marie Messier even famously claimed that “Vivendi is doing better than well” just before announcing shattering losses. Investors have thus every reason to be wary and to require a higher risk premium to hold the company’s shares. We demonstrate <a href="https://www.cairn-int.info/journal-accounting-auditing-control-2021-1-page-111.htm">in a recently published paper</a> that the educational ties between directors and the CEO result in a higher cost of equity. In addition, the company’s growth rate is much lower.</p>
<h2>Aggravating factors and potential remedies</h2>
<p>All these problems are exacerbated by the concentration of powers in the hands of the CEO, such as when the latter combines the role of chairman of the board with that of CEO. A typical example is that of Carlos Ghosn, whose contentious decisions were never seriously questioned by Renault directors <a href="https://www.theguardian.com/business/2019/apr/03/carlos-ghosn-former-nissan-chairman-getting-ready-tell-truth-twitter">until after his spectacular downfall</a>.</p>
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<span class="caption">Carlos Ghosn, an alumnus of Ecole Polytechnique, then CEO of Renault-Nissan, back to his Alma Mater and talking with current students.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Conf%C3%A9rence_de_Carlos_Ghosn_(X_1974),Pr%C3%A9sident-Directeur_G%C3%A9n%C3%A9ral_de_l%E2%80%99alliance_Renault-Nissan_%C3%A0_l%27Ecole_polytechnique_(18739078575).jpg">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>Several external governance mechanisms can, however, mitigate the weakness of board control. Large shareholders have the means and incentives to make themselves heard. They can also threaten to sell their shares, which would be a scathing rejection of the CEO’s policy. Monitoring by financial analysts can also prevent connected directors from being too complacent. By expounding the company’s strategy and highlighting its financial implications, analysts decrease the prospect of a dysfunctional board. The detrimental effects of CEO-board ties are thus considerably alleviated.</p>
<p>Other factors may also play a beneficial role. Further internationalization of French companies is expected to bring about a greater diversity of executive profiles, which should reduce the influence of old boys’ networks. Large companies like Axa and Air France-KLM are now run by CEOs (Thomas Buberl and Ben Smith) who have completed their education and gained most of their experience overseas. The increasing <a href="https://theconversation.com/conseils-dadministration-plus-de-femmes-mais-toujours-aussi-peu-de-jeunes-140452">proportion of female directors</a> following the Copé-Zimmermann act is another factor expected to lead to better governance. We know, for instance, that the presence of female directors decreases the incidence of fraud. </p>
<p>Greater competition, with the opening-up of national and hitherto protected markets, such as that of rail transportation and electricity supply, may require different skills, which would thus undermine the appeal of former senior civil servants. On the other hand, <a href="https://www.theguardian.com/world/2021/apr/08/macron-close-france-elite-finishing-school-ena-elite-presidents">President Macron’s recent decision to close ENA</a>, his very alma mater, may not curb the tendency of France’s most elite graduates to maintain close ties with one another and make decisions with their own interests in mind.</p><img src="https://counter.theconversation.com/content/159949/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>When the directors of a company are graduates of the same school as the executive, their ability to hold the executive accountable for his or her decisions becomes compromised.Pascal Nguyen, Professeur de finance, Université de MontpellierCédric Van Appelghem, Maître de conférences en sciences de gestion - Chercheur au LITEM, Université d’Evry – Université Paris-SaclayLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1353652020-04-21T15:01:27Z2020-04-21T15:01:27ZWhat future do airlines have? Three experts discuss<p>Airlines face an unprecedented international crisis in the wake of the coronavirus pandemic. The International Air Transport Association (IATA) estimates that the global industry will lose <a href="https://www.iata.org/en/iata-repository/publications/economic-reports/covid-19-delivers-unprecedented-shock/">US$252 billion</a> in 2020. Many airlines are cutting up to <a href="https://www.forbes.com/sites/geoffwhitmore/2020/04/11/what-airline-routes-are-still-active/#3a04d26c2794">90%</a> of their flight capacity. On March 1, more than two million people in the US were flying per day. A month on, <a href="https://www.tsa.gov/coronavirus/passenger-throughput">fewer than 100,000</a> people are going through airport security daily. </p>
<p>Some climate activists have welcomed the emptied skies, pointing to the <a href="https://www.energylivenews.com/2020/04/06/coronavirus-could-see-38-drop-in-airline-co2-emissions/">dramatic fall</a> in <a href="https://www.theguardian.com/environment/2020/apr/12/global-carbon-emisions-could-fall-by-record-25bn-tonnes-in-2020">carbon emissions</a>. But <a href="https://www.nationalgeographic.co.uk/environment-and-conservation/2020/04/carbon-emissions-are-falling-sharply-due-coronavirus-not-long">others worry</a> that the bounce back and attempts to take back some of the losses might mean that an opportunity for fundamental, sustained change <a href="https://www.airport-technology.com/news/sustainable-aviation-2050-goal">may be missed</a>. </p>
<p>In the US, a federal government <a href="https://www.businessinsider.com/american-airlines-delta-united-jetblue-reach-agreement-on-coronavirus-bailout-2020-4?r=US&IR=T">US$50 billion</a> bailout fund – part of which will fund cash grants going towards airline workers, and the other part loans for the airlines themselves – was rolled out piecemeal in March, with <a href="https://www.nytimes.com/2020/04/14/business/coronavirus-airlines-bailout-treasury-department.html">revisions announced</a> on April 14.</p>
<p>More than 200 airlines applied. American Airlines will get US$5.8 billion, Delta US$5.4 billion, and Southwest US$3.2 billion, among others. Donald Trump, the US president, stated that the airline bailout was needed to return the industry to “good shape” and was “not caused by them.” Another US$4 billion is available for cargo airlines and US$3 for contractors.</p>
<p>In the UK, it was <a href="https://www.theguardian.com/uk-news/2020/mar/24/uk-airlines-and-airports-told-not-to-expect-industry-wide-covid-19-bailout">initially announced</a> that no industry-wide bailout would be offered. Instead, the industry would have to rely on broader aid packages covering 80% of salaries (below a cap) for furloughed employees. But subsequently, the government quickly gave easyJet a <a href="https://www.theguardian.com/business/2020/apr/06/easyjet-secures-600m-coronavirus-loan-from-uk-treasury-and-bank">£600 million</a> loan (US$740 million). Flybe, a smaller regional or “secondary” airline with pre-crisis financial issues, was not bailed out and collapsed. Many money-making routes Flybe ran have since been picked up by others.</p>
<p>Continental Europe is in worse shape. Italy has re-nationalised <a href="https://www.forbes.com/sites/jamesasquith/2020/04/01/could-airlines-be-nationalised-as-italy-takes-full-ownership-of-alitalia-will-more-airlines-follow/#10ad02c377df">Alitalia</a>, forming a <a href="https://onemileatatime.com/alitalia-italian-government/">new state-owned entity</a> and investing €600 million (US$650 million). France has <a href="https://www.bloomberg.com/news/articles/2020-04-08/france-expects-to-give-massive-support-to-air-france-klm">indicated</a> it will do whatever it takes to bailout Air France/KLM (France owns 15% and the Dutch 13%), with a possible €6 billion <a href="https://www.nytimes.com/reuters/2020/04/16/business/16reuters-health-coronavirus-france-airfranceklm.html">bailout package</a> (US$6.5 billion). </p>
<p>Meanwhile, Australia’s Qantas secured a <a href="https://www.airlineratings.com/news/qantas-boosts-liquidity-1-05-billion-loan/">A$1 billion loan</a> (US$660 million). Debt-laden Virgin Australia, meanwhile, was denied a A$1.4 billion loan (US$880 million) and has subsequently plunged into <a href="https://theconversation.com/voluntary-administration-isnt-a-death-sentence-for-virgin-australia-or-for-competition-136832">voluntary administration</a>. Singapore Airlines, however, got a <a href="https://economictimes.indiatimes.com/news/international/business/singapore-airlines-obtains-13-billion-rescue-package-amid-coronavirus-shock/articleshow/74854750.cms">US$13 billion</a> aid package.</p>
<p>The airline industry has faced many crises before – 9/11 and the 2010 Icelandic volcano eruption, for example. But these pale in comparison to the <a href="https://edition.cnn.com/2020/04/07/business/lufthansa-shuts-germanwings-on-coronavirus/index.html">economic hit</a> that airlines are currently facing. Some are asking: <a href="https://www.airfinancejournal.com/articles/3578388/coronavirus-liquidity-report-who-will-be-the-survivors">can it recover</a>? Is this an economic crisis that could reshape how we travel and live? Or will it turn out to be more of a pause, before returning to business as usual? And what role does the climate crisis play in all this – how will sustainability figure in any rebooting of the industry going forward? </p>
<p>We are all experts in the airline industry. Darren Ellis (Lecturer in Air Transport Management) considers these questions first, looking at the industry’s structure and response. Jorge Guira (Associate Professor in Law and Finance) then explores bailout options and likely future scenarios for the industry. Finally, Roger Tyers (Research Fellow in Environmental Sociology) considers how the industry might just be at a turning point in terms of how it tackles climate change.</p>
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<p><strong><em>This article is part of Conversation Insights</em></strong>
<br><em>The Insights team generates <a href="https://theconversation.com/uk/topics/insights-series-71218">long-form journalism</a> derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.</em> </p>
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<h2>A global problem</h2>
<p><em>Darren Ellis, Lecturer in Air Transport Management</em></p>
<p>Most of the global airline industry is currently grounded. Although some routes are still managing to operate, and there is evidence of a gradual <a href="https://centreforaviation.com/analysis/reports/covid-19-recovery-air-china-files-may-holiday-sched-at-2019-levels-520264">domestic air market rebound</a> in China, 2020 will certainly not see the <a href="https://www.theguardian.com/business/2019/jun/02/airline-industry-cuts-profit-forecasts-fifth-us-china">4.6 billion</a> annual passengers of 2019. The long-term trend of ever-rising air passenger numbers year on year has been brought to a dramatic and rapid halt.</p>
<p>What this means for the global airline industry is vividly on display at airports around the globe as terminals <a href="https://www.independent.co.uk/travel/news-and-advice/airport-runway-closed-flight-coronavirus-atlanta-hartsfield-jackson-a9421881.html">remain empty</a> and aircraft occupy any available parking space. </p>
<p>Like the predominately national response to the virus, so the airline industry is also seeing a wide range of policies and practices tailored and implemented almost exclusively at the national level. This means that some airlines, thanks to well-chosen national policies, will fare better, while others will flounder.</p>
<p>This is because beyond the multilateral single air market of Europe, the global industry remains firmly structured on a bilateral system. This web of country to country <a href="https://www.cambridge.org/core/books/principles-and-practice-of-international-aviation-law/7660D2C7ECDCCD3234E719BD55B3899A">air service agreements</a> (ASAs) is basically made up of trade treaties which governments sign with one another to determine the level of air access each is willing to permit. Even in Europe, the single air market essentially acts as one nation internally, while externally, individual European countries continue to deal with many countries on a bilateral basis. </p>
<p>The bilateral system is based on a bundle of rules and restrictions, including airline ownership (typically, a minimum of 51% of an airline must be owned by people from the country where the airline is based), national control, single airline citizenship and home base requirements. This effectively locks airlines into a single country or jurisdiction. </p>
<p>Despite this structure, global cooperation in aviation is strong, particularly across safety standardisation, but less so on the economic front. A lot of this cooperation happens via the <a href="https://www.icao.int/Pages/default.aspx">International Civil Aviation Organization</a> (ICAO), the industry’s specialised UN agency. Meanwhile, the <a href="https://www.iata.org/">IATA</a> supports and lobbies on behalf of member airlines.</p>
<p>Likewise, international mergers and acquisitions are rare – aside from in Europe, where partial mergers have created dual and multiple brands like <a href="https://www.dw.com/en/france-netherlands-seek-to-douse-air-france-klm-controversy/a-47738444">Air France/KLM</a>. Where single airline brands have been created with cross border mergers – such as LATAM Airlines in South America – national aircraft registration and other restrictions remain in place, thereby reflecting <a href="https://eu.usatoday.com/story/todayinthesky/2015/08/07/so-long-lan-and-tam-airlines--soon-fly-under-latam-brand/31293475/">multiple airlines</a> in these respects. </p>
<p>Consequently, national responses will be front and centre as the industry responds to the current pandemic. In countries where a single flag carrier is based, such as Thailand and Singapore, governments are unlikely to let their airlines fail. While in others, where multiple airlines operate, a <a href="https://australianaviation.com.au/2020/03/virgin-group-asks-for-1-4bn-bailout-reports/">level playing field</a> of assistance and support is more likely, even if outcomes <a href="https://www.smh.com.au/business/companies/virgin-australia-set-for-voluntary-administration-20200420-p54lcd.html">differ widely</a>. This is not to say that all airlines will necessarily survive what is likely to be an extended <a href="https://www.theguardian.com/business/2020/mar/15/prepare-for-the-coronavirus-global-recession">U-shaped crisis</a>, unlike the more V-shaped crises of the past, such as 9/11 and the 2008 global financial crisis.</p>
<p>The national structure of the industry also highlights why major airlines failing is relatively rare. Yes, airlines have merged in domestic air markets like the US, and individual brands have disappeared as a result, but few major airlines have gone out of business because they failed. Even Swissair, which was famously <a href="https://www.nytimes.com/2001/10/02/business/much-of-swissair-seeks-bankruptcy.html">bankrupt</a> and defunct in late 2001, soon reappeared as <a href="https://www.ft.com/content/e1d4e966-fa89-11dc-aa46-000077b07658">Swiss International Airlines</a>. </p>
<p>And so, although airline brands have come and gone, the industry had remained on a growth path for decades. It will take time to recover from the pandemic. Some airlines will fail. But widespread changes to the industry’s structure are unlikely to occur. People will, of course, need and want to travel by air again when this pandemic is over. Which airlines survive – and which go on to thrive – will largely depend on how successful individual countries’ economic support packages turn out to be.</p>
<h2>Bailout essentials</h2>
<p><em>Jorge Guira, Associate Professor in Law and Finance</em></p>
<p>The global outcomes of the crisis, then, are firmly anchored in national responses. The airline industry is cyclical: it is used to peaks and valleys. Bailouts have repeatedly been <a href="https://www.wfw.com/articles/covid-19-aviation-restructuring-report/">vital for airlines</a>, so many countries have some sort of precedent to go by.</p>
<p>In any bailout, the <a href="https://www.airfinancejournal.com/articles/3578388/coronavirus-liquidity-report-who-will-be-the-survivors-?">key question</a> is whether this is a solvency or liquidity crisis. Solvency means that the airline will be very unlikely to ever remain financially viable. Liquidity means that the airline has a high risk of running out of cash flow but should be solvent soon, if supported. Assessing this is sometimes complex. </p>
<p>Cash is king. “Streamlining” – a fancy word for cost cutting – can help. Unencumbered assets such as aeroplanes can be sold, or used as collateral for loans. But many planes are often leased, so this may be problematic. </p>
<p>Existing contracts must be reviewed. Breach of covenants, which are legally binding promises to do (or to refrain from doing) things in a certain way, may need to be waived. For instance, lease agreements for the planes often require flights to carry on, and business as usual is suspended at present. Other agreements require flights to maintain landing spaces in airports – leading to the “<a href="https://www.businessinsider.com/coronavirus-airlines-bailout-empty-flights-requirement-2020-4?r=US&IR=T">ghost planes</a>” many were appalled by earlier on in the crisis, and that still continue.</p>
<p>Certain financial tests may not be met, such as how much debt there is compared to earnings. These can alarm creditors. And this can lead to deterioration in bond credit ratings, reflecting increased financial distress. Other triggers may <a href="https://www.barrons.com/articles/airline-stocks-arent-a-buy-yet-heres-watch-to-watch-for-51584145003">also arise</a>. Defaulting on one financial contract usually requires informing other creditors. This can trigger defaults on other agreements, creating a domino effect.</p>
<p>So renegotiating operating and financial contracts is crucial. Airlines may have to pick and choose who to pay first. Unions must be kept happy, and other stakeholders must focus on recovery.</p>
<p>All this means that state bailouts, help and other guarantees are crucial for the industry to survive. In the US, for example, net operating losses are carried forward and used to shield revenues and offset these from tax for when things return to normal.</p>
<p>If liquidity is the problem, the real issue is time: how long will it take for the airline to get back on its feet and resume flying more normally? If solvency is the problem, the company cannot survive the demand collapse it is facing. The COVID-19 pandemic is such a fraught time for airlines because of the difficulty in predicting when the crisis will end. This can complicate determining whether it is a more temporary liquidity crisis or a deeper solvency concern.</p>
<p>After 9/11, the airline industry completely shut down in the US. People witnessing the horrifying scenes of the Twin Towers’ collapse were hardly eager to board a plane. So, the government chose to step in to restore confidence. And it did so, successfully, by offering aid including loans and used warrants, which involves investing in airlines when the stock is at a reduced or rock bottom price and waiting for it to go up again. The US government’s COVID-19 financial rescue package <a href="https://www.nytimes.com/2020/03/17/business/dealbook/coronavirus-airline-bailouts.html">parallels this approach</a>.</p>
<p>The US approach is noteworthy because of its size and scale, and the fact that it is built on the 9/11 case and has been modified for the unique present circumstances. It is also an interesting counterpoint to the strategy of the strongly free market-oriented UK, and Australia, which has been more restrained in its approach.</p>
<p>Airline norms suggest that 25% of revenues should be kept in case of any emergency, but this <a href="https://www.airfinancejournal.com/articles/3578388/coronavirus-liquidity-report-who-will-be-the-survivors-?">has tended not to happen recently</a>. Corporate earnings have generally not been held for a rainy day, and now that rainy day has arrived. This creates a classic moral hazard problem: many airlines seem to act as if they are too important to fail, because in the end, they believe they will be bailed out. And regulation does not otherwise hold any excesses in check.</p>
<p>Compounding this, some US airlines have recently been accumulating cheap debt, due to low interest rates and lots of credit availability. The five big US carriers, instead of paying off debt, have been spending <a href="https://markets.businessinsider.com/news/stocks/airline-bailout-coronavirus-share-buyback-debate-trump-economy-aoc-2020-3-1029006175">96%</a> of available cash on <a href="https://www.bloomberg.com/news/articles/2020-03-16/u-s-airlines-spent-96-of-free-cash-flow-on-buybacks-chart">stock buybacks</a>. Many <a href="https://www.forbes.com/sites/kathrynjudge/2020/04/15/the-covid-19-bailouts/amp/">question</a> whether airlines should be bailed out in <a href="https://clsbluesky.law.columbia.edu/2020/04/14/large-corporations-did-not-need-a-bailout/amp/">these circumstances</a>. Limits on paying dividends, buyback of stock, and other terms would logically apply here, as in the earlier US bailout measures <a href="https://fortune.com/2020/04/15/airline-bailout-terms-stock-buybacks-dividends-ceo-pay-salaries-american-delta-united-southwest/">announced in March</a>. </p>
<p>While the US case may provide a helpful initial focus, the UK approach is likely to be highly influential, perhaps more so given the reduced resource level – and greater level of climate awareness – there. As Darren pointed out earlier, one model does not fit all but this may offer a useful comparative framework for other approaches that favour national champions or nationalisations. </p>
<p>The UK is reportedly considering partial nationalisation, such as in the case of <a href="https://www.thetimes.co.uk/article/british-airways-faces-bailout-as-coronavirus-crisis-engulfs-airlines-m50j2dvjn">British Airways</a>. British Airways has furloughed 35,000 employees, with many pay packets supported by the government – for now. British Airways appears better placed to cherry pick key routes, assets and companies as it ranks in the top group <a href="https://home.kpmg/xx/en/blogs/home/posts/2020/04/covid-19-and-the-global-aviation-industry.html">for liquidity</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/328656/original/file-20200417-152563-1xzxcox.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>If Virgin Atlantic were to collapse, its size means it may fit in the too important to fail category. It appears that bailout talks are ongoing but Richard Branson’s life as an <a href="https://www.bbc.co.uk/news/business-52354865">offshore UK resident</a>, and Delta’s ownership of a 49% stake, present potential political clouds. Questions about <a href="https://www.twobirds.com/en/news/articles/2020/global/state-aid-and-the-covid-19-pandemic-in-the-aviation-sector">whether it should get state aid</a> given current crisis conditions also arise. This is generally forbidden, although the EU has temporarily indicated a <a href="https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html">COVID-19 relaxation</a> of the rules. No environmental strings have apparently been attached, as former EU officials and others <a href="https://www.theguardian.com/environment/2020/apr/01/financial-help-for-airlines-should-come-with-strict-climate-conditions">have suggested</a> should be the case.</p>
<p>Overall, the survival of the global industry therefore depends on bailouts, not only to keep airlines afloat but also for the wider travel and leisure ecosystem. </p>
<p>The lack of of sustainability conditions in UK and indeed US bailouts appears to be mirrored globally. But a <a href="https://www.theguardian.com/commentisfree/2019/jun/04/climate-change-world-war-iii-green-new-deal">Green New Deal</a> in a second recovery phase of aid could provide this. And <a href="https://www.vox.com/the-highlight/2019/7/25/8881364/greta-thunberg-climate-change-flying-airline">greater awareness</a> of the issue thanks to the likes of Greta Thunberg, an increased culture of working from home, and ongoing measures to increase accountability and reporting of emissions means this aspect may well play a vital role in the repackaging of airlines going into the future. Much of it begins with how emissions targeting interacts with the COVID-19 crisis.</p>
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Read more:
<a href="https://theconversation.com/coronavirus-how-economic-rescue-plans-can-set-the-global-economy-on-a-path-to-decarbonisation-135909">Coronavirus: how economic rescue plans can set the global economy on a path to decarbonisation</a>
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<h2>Aviation and climate change</h2>
<p><em>Roger Tyers, Research Fellow in Environmental Sociology</em></p>
<p>As Jorge says, for the growing number of people concerned by aviation’s rising carbon emissions, this pandemic may be a rare chance to do things differently. When air travel is eventually unpaused, can we set it on a more sustainable trajectory?</p>
<p>Even before this pandemic hit, aviation faced increasing pressure in the fight against climate change. While other sectors are slowly decarbonising, international aviation is forecast to <a href="https://www.iata.org/en/pressroom/pr/2018-10-24-02/">double</a> passenger numbers by 2037, meaning its share of global emissions may increase tenfold to <a href="https://www.europarl.europa.eu/RegData/etudes/STUD/2015/569964/IPOL_STU(2015)569964_EN.pdf">22% by 2050</a>. </p>
<p>Most flights are taken by a relatively well-off <a href="https://www.vox.com/energy-and-environment/2020/3/20/21184814/climate-change-energy-income-inequality">minority</a>, often for leisure reasons, and of questionable <a href="https://www.dailymail.co.uk/sciencetech/article-7520409/Nearly-HALF-flights-deemed-unimportant-pointless-people-taking-them.html">necessity</a>. We might wonder whether it is wise to devote so much of our remaining carbon “allowance” to aviation over sectors like energy or food which – as we are now being reminded – are fundamental to human life.</p>
<p>Regulators at the UN’s <a href="https://www.icao.int/Pages/default.aspx">ICAO</a> have responded to calls for climate action with their Carbon Offset and Reduction Scheme for International Aviation <a href="https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx">(CORSIA)</a> scheme. Under this, international aviation can continue to expand, as long as growth above a 2020 baseline is “net-neutral” in terms of emissions.</p>
<p>While critics cite numerous <a href="https://flightfree.co.uk/post/behind-the-veil-what-the-aviation-industry-really-thinks-about-climate-change/">problems</a> with it, the idea is to reduce emissions above the 2020 baseline through a combination of fuel efficiencies, improvements in air traffic management and biofuels. The remaining, huge shortfall in emissions will be covered by large-scale carbon offsetting. Last year, IATA estimated that about <a href="https://www.iata.org/contentassets/fb745460050c48089597a3ef1b9fe7a8/paper-offsetting-for-aviation.pdf">2.5 billion tonnes</a> of offsets will be required by CORSIA between 2021 and 2035.</p>
<p>This plan has been thrown into disarray by the COVID-19 crisis. The emissions baseline for CORSIA was supposed to be calculated based on 2019-20 flight figures. But given that the industry has come to a standstill – demand may take a <a href="https://go.updates.iata.org/webmail/123902/1132265093/0f71e0a5afb5eda4c820a327d343e19139c83ac83cbba4afa4ed25e5e8177474">38%</a> hit in 2020 – that baseline will be much lower than expected. So once flights resume, emissions growth post-2020 will be much higher than anyone predicted. Airlines will need to purchase many more carbon offset credits, raising operating costs and passing these onto customers.</p>
<p>Airlines trying to get back on their feet will be hostile to any such additional burdens, and will probably seek <a href="https://www.edf.org/sites/default/files/documents/Coronavirus_and_CORSIA_analysis.pdf">methods</a> to recalculate the baseline in their favour. But for environmentalists, this might be an opportunity to strengthen CORSIA, which despite its flaws is the only current framework for tackling aviation emissions globally.</p>
<p>Some still consider CORSIA to be an elaborate sideshow. The real game-changer for sustainable aviation would be fuel tax reform, which might receive more scrutiny when attention shifts onto how to repay the eye-watering levels of public debt incurred during lockdown.</p>
<p>Since the 1944 Chicago Convention, which gave birth to ICAO and the modern aviation industry, putting VAT on flight tickets and tax on kerosene jet fuel has been effectively illegal. This is the primary reason why flying is relatively cheap compared to other transport modes, and arguably why the industry has <a href="https://twitter.com/rutherdan/status/1202761468241793024">under-invested</a> in research into cleaner fuels.</p>
<p>With the <a href="https://www.bbc.co.uk/news/science-environment-49349566">most-polluting</a> form of transport enjoying the lowest <a href="https://www.sciencedirect.com/science/article/abs/pii/S0966692314001586?via%3Dihub">taxes</a>, this regime has long been questionable in terms of emissions. It may soon become untenable in terms of tax justice, too. In 2018, France’s Gilets Jaunes movement was partly motivated by <a href="https://www.greeneconomycoalition.org/news-analysis/green-hearts-and-gilets-jaunes">anger</a> at increased fuel tax for cars and vans, while air travel continued to benefit from historic tax exemptions. This anger may return when governments inevitably raise taxes to repay their multi-billion-dollar COVID-19-related debts. </p>
<p>Campaigners are already <a href="https://stay-grounded.org/250-organisations-demand-red-lines-for-aviation-bailouts/">demanding</a> that any airline bailout be linked to tax reform, and there is huge potential there. <a href="https://www.transportenvironment.org/publications/leaked-european-commission-study-aviation-taxes">Leaked</a> EU papers in 2019 suggest that ending kerosene tax exemptions in Europe could raise €27 billion (US$29 billion) in revenues every year. Such sources of revenue may soon become irresistible, and national governments might seek to collect them unilaterally, with or without a coordinated ICAO response. </p>
<p><a href="https://www.aef.org.uk/2005/02/09/blair-rules-out-cheap-flight-tax/">Tony Blair</a>, the former UK prime minister, once said that no politician facing election would ever vote to end cheap air travel. But – to state the obvious – these are unprecedented times, and public attitudes to flying may well change. </p>
<p>On the demand side, once borders reopen, there could be a short-term travel boom as postponed flights are rebooked and stranded people fly home. But even after an official virus “all-clear”, those considering holidays may think twice before sharing cramped plane cabins with strangers. Business travellers, crucial to airline <a href="https://www.investopedia.com/ask/answers/041315/how-much-revenue-airline-industry-comes-business-travelers-compared-leisure-travelers.asp">profits</a>, may find that they’ve got so used to using Zoom, they don’t need always to fly to meetings in person.</p>
<p>As <a href="https://www.theguardian.com/business/2020/apr/06/easyjet-secures-600m-coronavirus-loan-from-uk-treasury-and-bank">members</a> of the industry admit, by the time passengers return to air travel in significant numbers, the airlines, routes and prices they find may look very different. Governments will face huge industry pressure to safeguard jobs and return to business as usual as soon as possible. But managed properly, this could be the start of a just and sustainable transition for aviation.</p>
<h2>The future’s up in the air</h2>
<p>All three of us feel the airline industry is at a key turning point. The size and scale of bailouts will vary. Government political will and philosophy, access to capital, and the viability of the industry itself are key factors that will inform whether a company is worth saving.</p>
<p>Any future must be based on the premise of preserving economic vibrancy while reducing climate risk. But not all governments will factor this in.</p>
<p>Events are moving fast, with Emirates in Dubai <a href="https://www.bloomberg.com/news/articles/2020-04-15/emirates-starts-rapid-testing-passengers-for-virus-before-flight">starting to</a> test passengers for COVID-19 before boarding. Meanwhile, easyJet is considering <a href="https://www.theguardian.com/business/2020/apr/16/easyjet-weighs-up-empty-middle-seats-once-coronavirus-rules-are-eased">social distancing</a> on planes as part of a “de-densification” policy, with fewer passengers and higher prices, albeit across more routes. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/328658/original/file-20200417-152607-126gxio.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Up in the air.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/zNQr2ijkVQQ">Hudson Hintze/Unsplash</a>, <a class="license" href="http://artlibre.org/licence/lal/en">FAL</a></span>
</figcaption>
</figure>
<p>Longer term, there are various ways this could play out. All depend upon the duration of the crisis and the confluence of political, legal and economic factors. </p>
<p>It is possible that market structure remains unchanged, with ownership of airlines staying relatively stable, supported by bailouts. Under this business-as-usual scenario, sustainability would incrementally be enhanced through airlines retiring older, less carbon efficient planes and replacing them with better ones. But this scenario is subject to tremendous uncertainty. </p>
<p>Or, sustainability might become more important after the crisis, thanks to increased environmental awareness, demand loss, and new green investment. This would take place at different speeds, with Europe perhaps being more proactive through government incentives and serious emissions targeting. The US would lag behind, but making some advances due to increased stakeholder concerns. In this scenario, there is some scaling down of travel to meet demand, which is <a href="https://fortune.com/2020/04/15/coronavirus-business-travel-covid-19/">reduced</a>. Increased sustainable investment emerges. Due to partial recovery, a new normal emerges.</p>
<p>It is also possible that prolonged, severe shortage of capital and an awareness of the climate crisis could, hypothetically, lead to massive change. But governments’ concern for jobs is likely to crowd out environmental concerns. Political forces on the left and right would have to mend fences and agree that, in a depression-like scenario, a new world is needed, not just a new normal.</p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=112&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=112&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=112&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=140&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=140&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=140&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><em>For you: more from our <a href="https://theconversation.com/uk/topics/insights-series-71218?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">Insights series</a>:</em></p>
<ul>
<li><p><em><a href="https://theconversation.com/lockdown-lessons-from-the-history-of-solitude-134611?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">Lockdown lessons from the history of solitude</a></em></p></li>
<li><p><em><a href="https://theconversation.com/what-will-the-world-be-like-after-coronavirus-four-possible-futures-134085?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">What will the world be like after coronavirus? Four possible futures</a></em></p></li>
<li><p><em><a href="https://theconversation.com/the-end-of-the-world-a-history-of-how-a-silent-cosmos-led-humans-to-fear-the-worst-120193?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">The end of the world: a history of how a silent cosmos led humans to fear the worst</a></em></p></li>
</ul>
<p><em>To hear about new Insights articles, join the hundreds of thousands of people who value The Conversation’s evidence-based news. <a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK"><strong>Subscribe to our newsletter</strong></a>.</em></p><img src="https://counter.theconversation.com/content/135365/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Darren Ellis owns Qantas Airways (QAN) shares. He is a member of the Royal Aeronautical Society (MRAeS). </span></em></p><p class="fine-print"><em><span>Roger Tyers is an unpaid member of the FlightFree2020 campaign.</span></em></p><p class="fine-print"><em><span>Jorge Guira does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The airline industry has faced many crises before. But these pale in comparison to the economic hit that airlines are currently facing.Darren Ellis, Lecturer in Air Transport Management, Cranfield UniversityJorge Guira, Associate Professor of Law and Finance, University of ReadingRoger Tyers, Teaching and Research Fellow in Sociology, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1342052020-03-20T16:37:28Z2020-03-20T16:37:28ZCoronavirus: your guide to winners and losers in the business world<figure><img src="https://images.theconversation.com/files/321948/original/file-20200320-22610-1cabhtx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Netflix and lockdown. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/girl-using-laptop-header-568193977">Patat</a></span></figcaption></figure><p>As we adjust to life with the new coronavirus around us, our behaviours and habits are quickly changing. What will be the impact of these changes on the organisations and industries around us?</p>
<p>We broadly see three business categories:
</p><ul>
<li> The winners: sectors that will benefit; </li>
<li> The losers: sectors that will suffer; </li>
<li> The inbetweeners: sectors that could go either way depending on how they respond. </li>
</ul><p></p>
<p>The third category is the most interesting, as actions they take now will move them into one of the first two categories. Let’s look at each in turn.</p>
<h2>The winners</h2>
<p>These sectors have found themselves serendipitously on the right side of history. By applying a basic level of competence, they should thrive. The natural strategy for these companies is to aggressively invest in opportunities and growth.</p>
<p><strong>Ecommerce marketplaces</strong></p>
<p>People are moving online to do their shopping. Already, Amazon <a href="https://www.cnbc.com/2020/03/16/amazon-to-hire-100000-warehouse-and-delivery-workers.html">is adding</a> 100,000 new jobs to manage the extra demand. Some other marketplaces are struggling to add capacity. For example, online grocer Ocado <a href="https://www.bbc.com/news/business-51941987">has suspended</a> new orders until it can clear its backlog of deliveries. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/321953/original/file-20200320-22610-1snktza.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ocado: up to its eyeballs.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-january-2019-ocado-delivery-truck-1282943800">Willy Barton</a></span>
</figcaption>
</figure>
<p>Some marketplaces are turning to technology for help. Chinese ecommerce giant JD.com <a href="https://technode.com/2020/02/07/jd-completes-first-unmanned-delivery-for-coronavirus-aid-in-wuhan/">is using</a> unmanned vehicles to deliver food and medical supplies in Wuhan.</p>
<p><strong>Pharmaceuticals</strong></p>
<p>Pharmaceutical companies are inevitably playing a large role in the crisis. Gilead, which owns the rights to treatment drug Remdesivir; Moderna, actively working on a vaccine; Roche, a major supplier of testing kits; and Fujifilm, with existing treatment drug Avigan, are all poised to benefit.</p>
<p><strong>Logistics/delivery</strong></p>
<p>As people around the world are blocked from leaving their homes, products and services will need to be delivered. Cainiao, Alibaba Group’s logistics arm, launched the <a href="https://www.alizila.com/cainiao-green-channel-speeds-medical-supply-delivery-coronavirus/">Green Channel initiative</a> on January 25 in response to the increased demand for protective clothing and medical supplies, especially for front-line medical staff in Hubei province. In just nine days, Cainiao received more than 7,000 calls and shipped over 5 million medical products to Wuhan and neighbouring cities. </p>
<p>Meanwhile, UK food delivery app Deliveroo has <a href="https://www.independent.co.uk/topic/deliveroo">launched a</a> “no-contact drop-off service”. This provides restaurants with additional packaging and seals for orders to be left on customers’ doorsteps.</p>
<p><strong>Video conferencing</strong></p>
<p>Videoconferencing start-up Zoom has benefited massively. The <a href="https://www.fool.com/investing/2020/03/04/zooms-q4-earnings-crush-estimates.aspx">company’s sales</a> and <a href="https://finance.yahoo.com/quote/ZM/">share price</a> are already up over 50% in 2020. <a href="https://blog.node4.co.uk/blog/the-rise-and-rise-of-cisco-webex">Webex</a> from Cisco and <a href="https://news.microsoft.com/2020/02/26/microsoft-update-on-q3-fy20-guidance/">Skype and Teams</a> from Microsoft are also seeing major upticks in sales. Most are offering special deals for their conferencing services during the outbreak.</p>
<p><strong>Entertainment streaming and gaming</strong></p>
<p>Platforms like <a href="https://www.forbes.com/sites/greatspeculations/2020/03/13/will-coronavirus-really-help-or-hurt-netflix-stock/#313202d922aa">Netflix</a>, <a href="https://www.rollingstone.com/product-recommendations/lifestyle/hidden-amazon-prime-features-967087/">Amazon Prime video</a>, and <a href="https://nypost.com/2020/02/28/how-coronavirus-benefits-netflix-and-other-in-home-services/">Disney+</a> all report increased viewership. Online gaming platforms <a href="https://edition.cnn.com/2020/02/13/intl_business/gaming-china-coronavirus/index.html">are also experiencing</a> record volumes.</p>
<h2>The losers</h2>
<p>For the losers, their managements will need a Herculean effort to pull them through the crisis. Even if they succeed, many will be seriously damaged. The natural strategy in these sectors will be to cut costs, de-risk operations and be ready to return when conditions improve.</p>
<p><strong>Airlines, trains and cruise ships</strong></p>
<p>The global airline industry <a href="https://www.scmp.com/business/companies/article/3075730/global-airline-industry-needs-aid-us200-billion-survive">has said it will need</a> up to US$200 billion (£171 billion) in emergency support, and Boeing <a href="https://www.businesstimes.com.sg/transport/boeing-calls-for-us60b-lifeline-for-us-aerospace-industry">has called for</a> US$60 billion (£51 billion) in assistance for aerospace manufacturers as the international travel industry bleeds cash. Norwegian <a href="https://media.uk.norwegian.com/pressreleases/norwegian-to-cancel-85-percent-of-its-flights-and-temporarily-layoff-approximately-7300-colleagues-2982294">has already cut</a> 85% of its routes and laid off 90% of its staff. Virgin Atlantic <a href="https://thehill.com/policy/transportation/487852-virgin-atlantic-reducing-flights-by-80-percent-asking-staff-to-take">intends to</a> park up to 85% of its fleet during the month of April and is asking staff to take up to eight weeks unpaid leave over the next three months to avert job losses. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/321954/original/file-20200320-22614-siuxjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Grounded.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hong-kong-10-august-2016-boeing-474857812">EQRoy</a></span>
</figcaption>
</figure>
<p>IAG, parent company of British Airways, Iberia, Aer Lingus, Level and Vueling, <a href="https://www.businesstraveller.com/business-travel/2020/03/16/willie-walsh-to-delay-retirement-as-iag-sets-out-coronavirus-response/">will cut capacity</a> by 75% in April and May, while the Air France-KLM group <a href="https://www.businesstraveller.com/business-travel/2020/03/16/coronavirus-air-france-klm-to-cut-capacity-by-up-to-90-per-cent/">is set to</a> cut capacity by between 80% and 90%. Most cruise ship operators <a href="https://www.telegraph.co.uk/travel/cruises/articles/cruise-lines-suspending-operations-over-coronavirus/">have ceased</a> operations, and bankruptcy is likely for some. </p>
<p><strong>Tourism</strong></p>
<p>The US Travel Association <a href="https://thehill.com/policy/transportation/488063-tourism-industry-predicts-46-million-travel-related">is projecting</a> that close to 5 million travel-related American jobs will be lost. This is more than 25% of the 15.8 million Americans who work in the sector. The situation is equally dire elsewhere. For example, <a href="https://www.telegraph.co.uk/travel/news/france-ski-resorts-close-coronavirus/">all ski resorts</a> in Italy, France, Austria and Switzerland are effectively closed for the season. </p>
<p><strong>Oil and gas</strong></p>
<p>On January 1, a barrel of crude oil sold for US$67.05 on New York’s NASDAQ exchange. At the time of writing, it was <a href="https://www.bbc.co.uk/news/topics/cmjpj223708t/oil">trading at</a> around US$26 per barrel. So companies’ oil reserves are worth less than half that of the start of the year. The value of giants like BP reflects this – on March 19, it <a href="https://www.hl.co.uk/shares/shares-search-results/b/bp-plc-ordinary-us$0.25">was worth 51%</a> of what it was at the start of January. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/321955/original/file-20200320-22636-to7tus.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Oil demand has cratered.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/offshore-oil-installation-683873674">Lucasz Z</a></span>
</figcaption>
</figure>
<p><a href="https://www.iea.org/news/global-oil-demand-to-decline-in-2020-as-coronavirus-weighs-heavily-on-markets">According to</a> the International Energy Agency, global oil demand is set for its first annual drop since 2009. Contrast this with the agency’s <a href="https://www.offshore-technology.com/news/opec-cuts-oil-price-russia-summit/">February prediction</a>, when it expected annual growth of 825,000 barrels per day.</p>
<p><strong>Investment banking</strong></p>
<p>Hundreds of London and New York investment bankers are set to lose their jobs amid a slump in deal-making. Shares of leading US banks <a href="https://www.cnbc.com/quotes/?symbol=JPM">JPMorgan Chase</a>, <a href="https://www.cnbc.com/quotes/?symbol=BAC">Bank of America</a> and <a href="https://www.cnbc.com/quotes/?symbol=C">Citigroup</a> are all down more than 30% from January highs.</p>
<p><a href="https://www.fnlondon.com/articles/bankers-set-to-lose-jobs-as-ma-activity-tumbles-on-coronavirus-fears-20200316">Financial News</a> spoke to senior London investment bankers who predicted a drop in fees of up to 50% in the first six months of 2020. That would mean around <a href="https://www.fnlondon.com/articles/bankers-set-to-lose-jobs-as-ma-activity-tumbles-on-coronavirus-fears-20200316">US$10.7 billion (£9 billion)</a> in lost revenues across equity deals – the worst first half of a year since 2009. </p>
<p><strong>Traditional retail</strong></p>
<p>With people confined to their homes, there isn’t much point keeping traditional retail stores open. The largest US mall owner, Simon Property Group, <a href="https://eu.usatoday.com/story/money/2020/03/18/coronavirus-mall-closings-simon-closing-malls-starting-wednesday/2867904001/">announced on</a> March 18 that it would close all its malls across the country. Similar decisions have been made across Europe and Asia. Apart from grocers and pharmacies, it will take a long time for traditional retail to recover.</p>
<p><strong>Professional sports and entertainment</strong></p>
<p>Italy, Europe’s worst-hit country, <a href="https://www.bbc.co.uk/sport/51605235">cancelled</a> all sporting events until at least April 3. <a href="https://www.france24.com/en/20200313-sporting-events-around-the-world-cancelled-due-to-coronavirus">France</a>, <a href="https://www.bbc.co.uk/sport/football/51853524">Spain</a>, <a href="https://www.dw.com/en/coronavirus-chaos-forces-widespread-sporting-cancelations/a-52328912">Germany</a> and <a href="https://www.telegraph.co.uk/sport/0/coronavirus-cancelled-premier-league-six-nations-london-marathon-2020-postponed/">the UK</a> quickly followed suit. This year’s Copa America and Euro 2020 football tournaments <a href="https://www.nytimes.com/2020/03/17/sports/euro-2020-postponed.html">have been postponed</a> until 2021. </p>
<p>North America’s Major League Soccer, the National Basketball Association and National Hockey League <a href="https://www.nytimes.com/2020/03/12/sports/coronavirus-sports.html">have suspended</a> their seasons, and restricted locker room access to players and “essential staff” only. The African Nations Championship 2020 soccer tournament scheduled for April in Cameroon <a href="https://nationalpost.com/pmn/health-pmn/african-nations-championship-2020-postponed-due-to-coronavirus">has been postponed</a> indefinitely. Long cancellations mean major losses for sports channels and the traditional cable TV ecosystem, as live sports has kept millions of viewers from cutting the cord on cable.</p>
<p><strong>Cinemas</strong></p>
<p>Analysts <a href="https://www.hollywoodreporter.com/news/film-industry-facing-5-billion-loss-coronavirus-outbreak-1282038">predict that</a> the global film industry is facing a US$5 billion (£4.2 billion) loss from diminished box office revenues and production restrictions. That could grow if more countries force people to remain at home or order public space to close.</p>
<h2>The inbetweeners</h2>
<p>These sectors will probably struggle if they continue as is. Many companies will fail, though a few will adapt their business models to take advantage of new and emerging opportunities. In some cases, this will build a solid foundation for continued success.</p>
<p><strong>Banking</strong></p>
<p>Most banks will lose money as individuals and businesses struggle to pay back loans. If the world economy enters a recession, which <a href="https://edition.cnn.com/2020/03/16/economy/global-recession-coronavirus/index.html">seems very likely</a>, the market for financial products will also fall.</p>
<p>Banks can, however, generate goodwill with businesses that need assistance, and create relationships with new customers. Several UK incumbents, including Barclays, Santander and RBS, <a href="https://e.businessinsider.com/click/19644859.4/aHR0cHM6Ly93d3cudGhlZ3VhcmRpYW4uY29tL3dvcmxkLzIwMjAvbWFyLzAzL2JhbmtzLWlzc3VlLWVtZXJnZW5jeS1sb2Fucy10by1maXJtcy1oaXQtYnktY29yb25hdmlydXMtY3Jpc2lz/5d233c18f730436f2414784fBec4debd6">are already</a> offering emergency loans and overdrafts to at-risk business customers. Many consumers will need temporary solutions, which could yield a spike in demand for small and medium-sized loans. </p>
<p><strong>Healthcare</strong></p>
<p>Some players in this sector emerge with new ideas that could improve healthcare. Others will be pushed past breaking point and will never return. </p>
<p>Chinese digital firm Baidu is among those that has been quick to innovative. It <a href="https://www.cnbc.com/2020/03/04/coronavirus-china-alibaba-tencent-baidu-boost-health-tech-efforts.html">launched a</a> Fight Pneumonia app to help the public get accurate and useful information about the epidemic in real time. It is also offering its online medical advice platform free to users seeking COVID-19 consultations. This has seen over 100,000 doctors across China responding to tens of millions of inquiries. </p>
<p>Baidu has also released an intelligent healthcare unit that responds to common questions through a conversational chatbot. This so-called “call bot” makes automated phone calls to ask people about their recent travels, health condition and contacts.</p>
<p><strong>Manufacturing</strong></p>
<p>Many manufacturers will struggle as the goods they produce are no longer in demand, but more agile operators will shift to making different products. For example, Chinese car manufacturer BYD <a href="https://www.energylivenews.com/2020/03/20/chinese-ev-maker-byd-builds-worlds-biggest-coronavirus-face-mask-factory/">has opened up</a> production lines for surgical masks and hand sanitisers. It was one of 2,500 Chinese companies to respond to a <a href="https://www.inkstonenews.com/business/coronavirus-china-ramps-mask-production-and-reminds-world-it-manufacturing-king/article/3074900">call from</a> President Xi Jinping for a “people’s war” against the virus. </p>
<p>GM, Ford and Tesla are <a href="https://edition.cnn.com/2020/03/19/business/ford-gm-ventilators-coronavirus/index.html">talking about</a> producing ventilators. LVMH, the French luxury goods company behind Louis Vuitton, Christian Dior and Givenchy, <a href="https://www.theguardian.com/world/2020/mar/15/perfume-giant-lvmh-to-make-hand-sanitiser-to-give-to-french-hospitals">is also shifting</a> to produce hand sanitisers, and aims to make 12 tonnes within the first week of production. LVMH is giving the product to French authorities to distribute at hospitals at no charge.</p>
<p><strong>Education</strong></p>
<p>Most schools, universities and private education providers have closed their doors, but not necessarily their operations. As more and more people are confined to their homes, there is a golden opportunity for education institutions to expand the scale and scope of their operations online.</p>
<p>In China, Kuaishou, a social video platform valued at US$28 billion (£23.5 billion), has <a href="https://hbr.org/2020/03/how-chinese-companies-have-responded-to-coronavirus">promoted online education offerings</a> to compensate for school and university closures. The company and other video platforms have partnered with the ministry of education to open a national online cloud classroom to serve students.</p>
<p>Zhejiang University, one of China’s leading universities, officially started online teaching on February 24 in line with the term calendar. This covers all ZJU students, although many courses are open to learners worldwide. Two weeks in, the university was offering more than <a href="https://www.weforum.org/agenda/2020/03/coronavirus-china-the-challenges-of-online-learning-for-universities/">5,000 courses</a>. 2,500 graduate students are expected to defend their theses in the spring, and will also be able to do an online oral defence to graduate as planned.</p><img src="https://counter.theconversation.com/content/134205/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thanks to independent scholar Heidi Bjerkan for co-writing this article.</span></em></p>A sector-by-sector look at who is benefiting, who is in trouble and who could go either way.Michael Wade, Professor of Innovation and Strategy, Cisco Chair in Digital Business Transformation, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1278002020-02-16T18:57:03Z2020-02-16T18:57:03ZMajor airlines say they’re acting on climate change. Our research reveals how little they’ve achieved<p>If you’re a traveller who cares about reducing your carbon footprint, are some airlines better to fly with than others?</p>
<p>Several of the world’s major airlines have announced plans to become “carbon neutral”, while others are trialling new aviation fuels. But are any of their climate initiatives making much difference?</p>
<p>Those were the questions we set out to answer a year ago, by analysing what the world’s largest 58 airlines – which fly 70% of the total <a href="https://airlinegeeks.com/2015/12/28/airline-metrics-available-seat-kilometers/">available seat-kilometres</a> – are doing to live up to their promises to cut their climate impact.</p>
<p>The good news? Some airlines are taking positive steps. The bad news? When you compare what’s being done against the continued growth in emissions, even the best airlines are not doing anywhere near enough.</p>
<h2>More efficient flights still drive up emissions</h2>
<p><a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">Our research</a> found three-quarters of the world’s biggest airlines showed improvements in carbon efficiency – measured as carbon dioxide per available seat. But that’s not the same as cutting emissions <em>overall</em>.</p>
<p>One good example was the Spanish flag carrier Iberia, which reduced emissions per seat by about 6% in 2017, but increased absolute emissions by 7%.</p>
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<hr>
<p>For 2018, compared with 2017, the collective impact of all the climate measures being undertaken by the 58 biggest airlines amounted to an improvement of 1%. This falls short of the industry’s goal of achieving a <a href="https://www.iata.org/en/policy/environment/climate-change/">1.5% increase</a> in efficiency. And the improvements were more than wiped out by the industry’s overall 5.2% annual increase in emissions. </p>
<p>This challenge is even clearer when you look slightly further back. <a href="https://www.iata.org/en/iata-repository/pressroom/fact-sheets/fact-sheet---industry-statistics/">Industry figures</a> show global airlines produced 733 million tonnes of CO₂ emissions in 2014. Falling fares and more people around wanting to fly saw airline emissions rise 23% in just five years. </p>
<h2>What are the airlines doing?</h2>
<p>Airlines reported climate initiatives across 22 areas, with the most common involving fleet renewal, engine efficiency, weight reductions and flight path optimisation. Examples in <a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">our paper</a> include:</p>
<ul>
<li>Singapore Airlines modified the Trent 900 engines on their A380 aircraft, saving 26,326 tonnes of CO₂ (equivalent to 0.24% of the airline’s annual emissions);</li>
<li>KLM’s efforts to reduce weight on board led to a CO₂ reduction of 13,500 tonnes (0.05% of KLM’s emissions).</li>
<li>Etihad reports savings of 17,000 tonnes of CO₂ due to flight plan improvements (0.16% of its emissions). </li>
</ul>
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<p>Nineteen of the 58 large airlines I examined invest in alternative fuels. But the scale of their research and development programs, and use of alternative fuels, remains tiny.</p>
<p>As an example, for Earth Day 2018 <a href="https://aircanada.mediaroom.com/2018-04-19-Air-Canada-to-Save-160-Tonnes-of-Carbon-on-Earth-Day-through-Innovative-Biojet-Fuel-Project-at-Toronto-Pearson-Airport">Air Canada announced</a> a 160-tonne emissions saving from blending 230,000 litres of “biojet” fuel into 22 domestic flights. How much fuel was that? Not even enough to fill the more than 300,000-litre capacity of just one A380 plane.</p>
<h2>Carbon neutral promises</h2>
<p>Some airlines, including Qantas, are aiming to be <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-group-to-slash-carbon-emissions/">carbon neutral by 2050</a>. While that won’t be easy, Qantas is at least starting with better climate reporting; it’s one of only <a href="https://www.fsb-tcfd.org/tcfd-supporters/">eight airlines</a> addressing its carbon risk through the systematic <a href="https://www.fsb-tcfd.org/">Task Force on Climate-related Financial Disclosures</a> process. </p>
<p>About half of the major airlines engage in carbon offsetting, but only 13 provide information on measurable impacts. Theses include Air New Zealand, with its FlyNeutral program to help restore native forest in New Zealand. </p>
<p>That lack of detail means the integrity of many offset schemes is questionable. And even if properly managed, offsets <a href="https://theconversation.com/flying-home-for-christmas-carbon-offsets-are-important-but-they-wont-fix-plane-pollution-89148">still avoid</a> the fact that we can’t make <a href="https://www.sciencedirect.com/science/article/abs/pii/S0969699716302538">deep carbon cuts</a> if we keep flying at current rates.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/flight-shame-wont-fix-airline-emissions-we-need-a-smarter-solution-127257">Flight shame won't fix airline emissions. We need a smarter solution</a>
</strong>
</em>
</p>
<hr>
<h2>What airlines and governments need to do</h2>
<p>Our research shows major airlines’ climate efforts are achieving nowhere near enough. To decrease aviation emissions, three major changes are urgently needed. </p>
<ol>
<li><p>All airlines need to implement all measures across the 22 categories covered in <a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">our report</a> to reap any possible gain in efficiency.</p></li>
<li><p>Far more research is needed to develop alternative aviation fuels that genuinely cut emissions. Given what we’ve seen so far, these are unlikely to be biofuels. E-fuels – liquid fuels derived from carbon dioxide and hydrogen – may provide such a solution, but there are challenges ahead, including high costs.</p></li>
<li><p>Governments can – and some European countries do – impose carbon taxes and then invest into lower carbon alternatives. They can also provide incentives to develop new fuels and alternative infrastructure, such as rail or electric planes for shorter trips. </p></li>
</ol>
<h2>How you can make a difference</h2>
<p>Our research paper was released late last year, at a World Travel and Tourism Council event linked to the <a href="https://theconversation.com/au/topics/cop25-79570">Madrid climate summit</a>. Activist Greta Thunberg famously sailed around the world to be there, rather than flying.</p>
<p>Higher-income travellers from around the world have had a disproportionately large impact in driving up aviation emissions. </p>
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<p>This means that all of us who are privileged enough to fly, for work or pleasure, have a role to play too, by:</p>
<ol>
<li>reducing our flying (<a href="https://theconversation.com/people-hate-flight-shame-but-not-enough-to-quit-flying-130614">completely</a>, or <a href="https://theconversation.com/flight-shame-flying-less-plays-a-small-but-positive-part-in-tackling-climate-change-125440">flying less</a>)</li>
<li><a href="http://www.offsetguide.org/avoiding-low-quality-offsets/">carbon offsetting</a></li>
<li>for essential trips, only flying with airlines doing more to cut emissions.</li>
</ol>
<p>To really make an impact, far more of us need to do all three.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-explained-how-much-does-flying-contribute-to-climate-change-127707">Climate explained: how much does flying contribute to climate change?</a>
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<img src="https://counter.theconversation.com/content/127800/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susanne Becken is on the Sustainability Advisory Panel of Air New Zealand. Her report, Airline initiatives to reduce climate impact, was co-written with Paresh Pant. This research paper was done in partnership with travel technology company Amadeus.</span></em></p>We analysed what the world’s top 58 airlines – such as American Airlines, British Airways and Qantas – are doing about climate change. Even the best airlines are not doing anywhere near enough.Susanne Becken, Professor of Sustainable Tourism and Director, Griffith Institute for Tourism, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1173502020-02-14T16:01:45Z2020-02-14T16:01:45ZPlane, train, or automobile? The climate impact of transport is surprisingly complicated<p>The 2020s will have to involve some very big decisions about transport – <a href="https://www.independent.co.uk/environment/air-pollution-uk-transport-most-polluting-sector-greenhouse-gas-emissions-drop-carbon-dioxide-a8196866.html">the UK’s most polluting sector</a>. The UK government’s response so far has been erratic, choosing to <a href="https://news.sky.com/story/flybe-set-for-crunch-whitehall-talks-over-bailout-terms-11932524">intervene to prevent the collapse of Flybe</a> (Europe’s biggest regional airline) and give the <a href="https://www.theguardian.com/uk-news/2020/feb/11/hs2-to-go-ahead-boris-johnson-tells-mps">green light for the high-speed rail project, HS2</a>.</p>
<p>Decarbonising transport would eliminate <a href="https://theconversation.com/decarbonising-britains-railways-demands-urgent-action-heres-how-it-could-be-done-124905">26% of UK CO₂ emissions</a> that come from how people get around. But Prime Minister Boris Johnson recently said that doing this poses “<a href="https://www.theguardian.com/uk-news/2020/feb/11/hs2-to-go-ahead-boris-johnson-tells-mps">difficult and complicated</a>” questions. On this, Johnson is almost certainly right.</p>
<p>The <em><a href="https://theconversation.com/uk/topics/gilets-jaunes-62467">gilets jaunes</a></em> protests against fuel duty rises in France show <a href="https://theconversation.com/emmanuel-macrons-carbon-tax-sparked-gilets-jaunes-protests-but-popular-climate-policy-is-possible-108437">the delicate balancing act</a> between decisive climate action and continued economic growth and convenience. But shouldn’t the government allow a regional flight operator to fail and invest in high-speed rail instead? The answer is not so simple.</p>
<h2>Carbon footprints can be misleading</h2>
<p>Aviation is one of the <a href="https://agupubs.onlinelibrary.wiley.com/doi/pdf/10.1002/grl.50161">fastest growing fossil fuel consumers</a>, with airlines contributing about <a href="https://www.sciencedirect.com/science/article/pii/S1352231009004956#tbl1">3.5% of all man-made greenhouse gas emissions</a>. This might seem small, but a single transatlantic flight from London to New York can grow your personal <a href="https://ec.europa.eu/clima/policies/transport/aviation_en">carbon footprint</a> by as much as the entire heating budget of the average European.</p>
<p>At high altitudes, contrails – the white lines we see in the sky – are formed in the wake of aircraft. These high altitude clouds are too thin to reflect much sunlight, but the ice crystals inside them can trap heat. Unlike low-level cloud, which has a net-cooling effect, contrails contribute significantly to global warming, effectively boosting the aviation industry’s share of greenhouse gas emissions to around <a href="https://www.sciencedirect.com/science/article/pii/S1352231009004956#tbl1">4.9%</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/315513/original/file-20200214-11011-8hr434.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Flights warm the atmosphere by more than the contribution of their CO₂ emissions alone.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/airplane-big-four-engines-aviation-airport-597813428">Aapsky/Shutterstock</a></span>
</figcaption>
</figure>
<p>For the most part, the environmental benefit of high-speed rail is taken for granted. Most, but not all, research suggests that <a href="https://theconversation.com/with-planning-high-speed-rail-could-reduce-flight-demand-21687">high-speed rail can offset emissions from aviation</a> if it can attract enough passengers from alternative air routes. But the relative climate impacts of aviation to other modes of transport depend on more than just engines and altitude.</p>
<p>We can compare the emissions of different forms of transport by calculating the emissions produced by each one when moving <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Passenger-kilometre">one passenger one kilometre</a>. This effectively compares how much CO₂ leaves each vehicle’s exhaust, but it ignores greenhouse gas emissions from the building and maintenance of the vehicles, the infrastructure – such as tracks, runways and airports – and the production of fuel.</p>
<p>The warming effects of different greenhouse gases <a href="https://pubs.acs.org/doi/pdf/10.1021/es9039693">happen over different time periods</a>, from a few days of short intensive warming to centuries of gentle influence. In order to provide a common unit to measure the impact of different gases, warming effects are standardised over a given time period. The time period normally used is <a href="https://www.epa.gov/ghgemissions/understanding-global-warming-potentials">100 years</a>. </p>
<p>But if it were five years, the effect of contrails would account for more global warming than all the cars in the world. They raise the temperature of the atmosphere in short, intense bursts. On longer timescales, like 20 years, the short term effects are less important and make aviation look considerably better – with flying looking potentially less damaging than some cars over the same distance.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/315510/original/file-20200214-10995-1vqbls4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Most comparisons only consider the emissions that come from vehicles while they’re in use.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-car-exhaust-pipe-1144696811">Khunkorn/Shutterstock</a></span>
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<p>This is still not the whole story though. The energy inputs for different modes of travel vary. The direct burning of fossil fuels in engines, for example jet kerosene in aircraft, emits greenhouse gases. In electrically powered high-speed rail, operating the train produces no emissions, except from the fossil fuels used to generate that electricity elsewhere. </p>
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Read more:
<a href="https://theconversation.com/electric-cars-wont-save-the-planet-without-a-clean-energy-overhaul-they-could-increase-pollution-118012">Electric cars won't save the planet without a clean energy overhaul – they could increase pollution</a>
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<p>Developing HS2 will mean deploying stations, tracks and centres of communication, and they’ll need ongoing maintenance. These all need energy and material investments, which will create further greenhouse gas emissions through manufacture, transport, and use. That could <a href="https://iopscience.iop.org/article/10.1088/1748-9326/4/2/024008/pdf">increase the carbon footprint of rail by between 1.8 and 2.5 times</a>, over just accounting for the operation of the trains. For aviation, the same infrastructure requirements are relatively small, and are responsible for a 1.2–1.3 increase, with road transport showing a 1.4–1.6 increase.</p>
<h2>Comparing life cycles</h2>
<p>A life cycle approach gives a better understanding of where emissions are occurring and compares transport modes on a much more level playing field. This helps us understand that most greenhouse gas emissions in <a href="https://iopscience.iop.org/article/10.1088/1748-9326/4/2/024008/pdf">air and road travel come from flying and driving</a>, whereas in rail travel, the climate effects are dominated by those emissions produced building the infrastructure itself. Emissions from operating trains are generally lower because of the heavy reliance on electricity. But there are still emissions from the manufacture and maintenance of <a href="http://www.world-nuclear.org/uploadedFiles/org/WNA/Publications/Working_Group_Reports/comparison_of_lifecycle.pdf">renewable energy technologies</a> to consider.</p>
<p>All modes of high-speed travel come with a <a href="https://www.sciencedirect.com/science/article/pii/S1361920911001155#b0075">cost to the environment</a>. Being able to accurately compare the energy requirements and emissions of different transport options is the first step towards addressing their climate impact.</p>
<p>Governments often try to encourage people to change their behaviour and <a href="https://www.sciencedirect.com/science/article/pii/S0959652610003549">reduce the number of flights they take</a>. But in the case of HS2, the continued availability of regional flights means that only <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/365065/S_A_1_Economic_case_0.pdf">4% of drivers and only 1% of aeroplane passengers</a> are likely to change their behaviour. </p>
<p>It’s easy to point the finger at aviation and view rail as a low carbon alternative. But governments need to consider and carefully balance the true climate impacts of a transport project, in every phase of its development.</p><img src="https://counter.theconversation.com/content/117350/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Laurie Wright is affiliated with the American Center for Life Cycle Assessment (ACLCA) and the Forum for Sustainability through Life Cycle Innovation (FSLCI) . He receives funding from the EU Interreg program.</span></em></p>All modes of high-speed travel come with a cost to the environment.Laurie Wright, Senior Lecturer, Warsash School of Maritime Science and Engineering, Solent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1303342020-01-22T15:22:31Z2020-01-22T15:22:31ZCould sleeper trains replace international air travel?<figure><img src="https://images.theconversation.com/files/311434/original/file-20200122-117927-152ikmd.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5395%2C3214&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/railway-line-night-train-motion-electric-767205820">Artmans/Shutterstock</a></span></figcaption></figure><p>Dutch airline KLM recently launched a new advertising campaign called “<a href="https://www.youtube.com/watch?v=L4htp2xxhto">Fly Responsibly</a>”. Remarkably, it seems to encourage viewers to fly less. “Do you always have to meet face-to-face?”, the advert asks. “Could you take the train instead?”.</p>
<p>The influence of climate campaigner Greta Thunberg likely explains why airlines feel obliged to say these things. <a href="https://theconversation.com/flight-shame-flying-less-plays-a-small-but-positive-part-in-tackling-climate-change-125440">Flight shame</a> – or “<em>flygskam</em>” – has gripped many regular flyers with a sense of unease about the aviation industry, which <a href="https://www.sciencedirect.com/science/article/abs/pii/S1352231014004889">consumes five million barrels of oil a day</a> and is predicted to account for around <a href="http://www.europarl.europa.eu/RegData/etudes/STUD/2015/569964/IPOL_STU(2015)569964_EN.pdf">22% of global carbon emissions</a> by 2050.</p>
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Read more:
<a href="https://theconversation.com/travel-the-world-without-destroying-it-imagine-newsletter-5-121269">Travel the world without destroying it – Imagine newsletter #5</a>
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<p>European high-speed rail networks already offer an alternative to air traffic between European countries for distances shorter than 1,000 kilometres. For longer journeys, sleeper trains are becoming increasingly popular. These services run through the night and offer passengers a berth to sleep in. As more and more consumers question the ethics of their next flight, rail companies see an opportunity – and competition with airlines is heating up. </p>
<p>But can night trains help offset the international journeys that most people currently make by aeroplane?</p>
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<img alt="" src="https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/311384/original/file-20200122-117938-1gi386a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Because of the altitude at which aeroplanes fly, their carbon emissions have more of an immediate warming effect than ground transport.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/large-four-engine-plane-cruising-altitude-740298673">Peter Gudella/Shutterstock</a></span>
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<h2>The renaissance of European night trains</h2>
<p>From 2009 until 2018, the European night train network shrank steadily. The same is true for conventional intercity train networks, especially in southern and western Europe. This made air travel the only alternative on many routes. But that <a href="https://www.theguardian.com/world/2020/jan/20/brussels-vienna-night-train-returns-as-europe-eyes-flying-alternatives">appears to be changing</a>.</p>
<p>When German Rail decided to withdraw its network of overnight passenger trains in 2015, Austrian Federal Railways (ÖBB) decided to take over some of its services. In 2017, ÖBB’s Nightjet services carried around <a href="https://www.railjournal.com/in_depth/obb-expands-abroad">1.4 million passengers</a>, more than doubling its total passengers from the previous year. </p>
<p>In 2018, ÖBB achieved another 10% increase in passenger numbers. ÖBB CEO, Andreas Matthä, said that “<a href="https://www.railjournal.com/passenger/main-line/nightjet-passenger-traffic-up-10-says-obbs-ceo/">overnight services are a viable alternative to short-haul flights</a>” and committed to continue investing in new services. As a result, ÖBB is expanding its routes on the <a href="https://www.nightjet.com/en/">NightJet network</a> of sleeper trains. From January 2020, night trains will once again run between Vienna and Brussels, 16 years after the service closed.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1219198861618696197"}"></div></p>
<p>In the UK, <a href="https://www.nationalrail.co.uk/tocs_maps/tocs/GW.aspx">Great Western Railway</a> plans to <a href="https://www.gwr.com/travel-updates/planned-engineering/west-cornwall">renovate</a> the sleeper trains it runs to Cornwall. <a href="https://www.scotrail.co.uk/plan-your-journey/travel-connections/caledonian-sleeper">The Caledonian Sleeper</a>, which runs between London, Edinburgh, Glasgow and Aberdeen has been revamped with a £150 million investment in new trains. </p>
<p>In response to a public petition, the Swedish government plans to <a href="https://back-on-track.eu/swedish-draft-night-train-report-will-set-night-trains-on-the-tracks-from-scandinavia-in-2022/">reintroduce night train services</a> to other European countries. A sleeper train service <a href="https://www.independent.co.uk/travel/news-and-advice/sweden-london-train-sleeper-malmo-amsterdam-cologne-munich-rail-a9288206.html?fbclid=IwAR3hXu2UX4z0wRqFiuCr1yTIfXJLlDM5sq0ExrgVxmxTlqRpXaEVzu0sMrI">from Malmö in southern Sweden to London</a> has been planned for 2022 at the earliest. The service could set off in the evening and arrive in the English capital at lunchtime the next day. At almost 1,300 kilometres, the trip is typical of the many rail journeys that could offset those currently taken between European countries by aeroplane.</p>
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Read more:
<a href="https://theconversation.com/transport-emissions-have-doubled-in-40-years-expand-railways-to-get-them-on-track-122794">Transport emissions have doubled in 40 years – expand railways to get them on track</a>
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<h2>An alternative to air travel?</h2>
<p>Aviation industry CEOs are worried that flight shame could <a href="https://aviationanalyst.co.uk/2019/08/02/exclusive-domestic-air-travel-could-shrink-because-of-flight-shaming-lufthansa-munich-ceo/">threaten passenger traffic</a> and in some countries this already seems to be happening. Swedavia, an airline which operates ten of Sweden’s busiest airports, <a href="https://www.swedavia.com/about-swedavia/swedavias-newsroom/#gref">reported a 4% fall</a> in passengers in 2019 compared with the previous year. The decrease was primarily in domestic travel, while the number of international passengers fell to a lesser extent. Despite this, European air traffic still <a href="https://go.updates.iata.org/l/123902/2019-07-11/83d46z?utm_source=IATA.org&utm_medium=product-page&utm_campaign=BIS007-MonthlyStats-2019">grew by 4.2% in 2019</a>. </p>
<p>It’s too soon to say whether the night train revival is a permanent trend prompted by <em>flygskam</em>. Nevertheless, environmental awareness still motivates the choices of travellers. </p>
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<img alt="" src="https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/311435/original/file-20200122-117954-1x4tcrj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Sleeper train operators promise comfort to entice would-be flyers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-tired-girl-sleeps-her-sleeper-1510918502">Flystock/Shutterstock</a></span>
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<p><a href="https://www.westminster.ac.uk/research/groups-and-centres/transport-studies-research-group">Researchers</a> who study consumer profiles in different markets recently identified a new one: the “<a href="https://dataset2050.eu/">environmental traveller</a>”. People who fall into this market segment try to maintain a lifestyle that is as environmentally friendly as possible – and that includes reducing the number of flights they take. </p>
<p>But the researchers found that awareness of the environmental crisis doesn’t automatically translate into behaviour changes, such as choosing other transport modes over air travel. Most often, distance or cost are more powerful motivations, particularly for short and medium-haul routes.</p>
<p>A <a href="https://repository.tudelft.nl/islandora/object/uuid%3A21e9731a-6ec3-4230-847f-38ffa364ba8a">recent study</a> from the Netherlands found that passengers who travel for leisure purposes seem to be most attracted to the option of night trains. It’s possible that night train services could simply generate new demand from these customers instead of substituting existing airline passengers. The researchers found that 40% of business travellers still opted to fly the day before and stay in a hotel instead, though many thought the relative comfort of sleeper trains was appealing. </p>
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<img alt="" src="https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/311380/original/file-20200122-117954-1mlw0vj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Sleeper trains might appeal to backpackers, but can they offer an alternative to frequent flying businesspeople?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/male-female-backpackers-resting-while-travelling-1238782927">Flystock/Shutterstock</a></span>
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<p><a href="http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_STU(2017)601977">Research</a> conducted on behalf of the European parliament is much more pessimistic, concluding that there are more challenges than opportunities for night trains to grow in Europe. Chief among them is the continued growth of low-cost airlines. <a href="http://www.nachtzug-retten.de/wp-content/uploads/2016/05/2013-04-30_uic_study_night_trains_2.02.pdf">Infrastructure costs</a> currently prohibit long-distance night trains which might be able to tempt more passengers out of these aeroplanes. Subsidy and investment to expand rail networks may be necessary for the sector to compete with aviation. <a href="https://www.aef.org.uk/issues/economics/taxation/">Making airlines pay fuel duty</a> could also help.</p>
<p>In the meantime, <em>flygskam</em> could still be effective if it means people keep the pressure on the aviation industry to reform and reduce its growing carbon footprint.</p>
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<img alt="" src="https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><a href="https://theconversation.com/imagine-newsletter-researchers-think-of-a-world-with-climate-action-113443?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=Imagineheader1130334">Click here to subscribe to our climate action newsletter. Climate change is inevitable. Our response to it isn’t.</a></em></p><img src="https://counter.theconversation.com/content/130334/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Enrica Papa does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Since 2019, night train networks have seen a remarkable revival across Europe.Enrica Papa, Reader in Transport Planning, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1295952020-01-17T13:59:52Z2020-01-17T13:59:52ZAirbus again becomes the world’s leading aircraft manufacturer<figure><img src="https://images.theconversation.com/files/309165/original/file-20200108-107231-y5h1jt.jpg?ixlib=rb-1.1.0&rect=0%2C86%2C3626%2C2420&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Airbus A321 XLR, one of Airbus' centerpieces.</span> <span class="attribution"><a class="source" href="https://www.airbus.com/aircraft/passenger-aircraft/a320-family/a321neo.html">Airbus</a></span></figcaption></figure><p>After eight years of Boeing leadership, Airbus has again become the world’s leading aircraft manufacturer. The European group surpassed <a href="https://www.aerospace-technology.com/comment/airbus-boeing-aircraft-top/">1,000 aircraft orders in 2019</a> and broke its record of aircraft delivered with <a href="https://www.reuters.com/article/us-airbus-deliveries-exclusive/exclusive-airbus-beats-goal-with-863-jet-deliveries-in-2019-ousts-boeing-from-top-spot-idUSKBN1Z01Q8">863 units</a>. By comparison, Boeing delivered a <a href="https://www.telegraph.co.uk/business/2020/01/02/boeinhttps://www.aerospace-technology.com/comment/airbus-boeing-aircraft-top/g-surrenders-crown-worlds-biggest-plane-maker-airbus-737/">mere 345</a>. </p>
<p>The A320, launched in 1988, became the bestselling aircraft of all time, outnumbering the Boeing 737, which is 20 years older. In addition, from January 2020, Boeing suspended production of the 737 Max, once a bestseller but currently banned from flying because of <a href="https://theconversation.com/boeing-737-max-air-safety-market-pressures-and-cockpit-technology-113580">two crashes in October 2018 and March 2019</a>.</p>
<p>According to Airbus commercial director Christian Scherrer, Boeing’s difficulties are <a href="https://aviationweek.com/air-transport/airbus-not-benefiting-boeings-max-crisis-exec-says">not benefiting its European competitor</a> – the firm’s production capacity does not allow it to deliver new customers before four years. However, <a href="https://www.reuters.com/article/us-boeing-deliveries/boeing-orders-sink-as-customers-opt-to-swap-max-idUSKBN1XM24M">Airbus continues to accumulate orders</a>, including from customers once loyal to Boeing. In addition, it is likely that the 10% tax on aircraft imports into the United States is a <a href="https://www.tourmag.com/Christian-Scherrer-Airbus-Passer-de-la-batterie-a-la-production-d-electricite-embarquee-_a101632.html">direct result of Boeing’s troubles</a>.</p>
<p>Suppliers General Electric and Safran have been heavily affected by the 737 Max crisis, an aircraft exclusively equipped with the LEAP engine that they co-developed. The joint subsidiary CFM International has <a href="https://www.wsj.com/articles/ge-agrees-on-deal-to-build-more-airbus-engines-to-help-offset-max-shutdown-11576860015">negotiated with Airbus</a> to increase the percentage of A320neo aircraft that use this engine to compensate for the losses associated with the 737 Max. Hundreds of European suppliers that also work for Airbus are also <a href="https://www.ft.com/content/016189b4-6dac-11e9-80c7-60ee53e6681d">financially affected</a>.</p>
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<figcaption><span class="caption">Presentation of the LEAP (Leading Edge Aviation Propulsion) high-bypass turbofan that power A320neo airplanes.</span></figcaption>
</figure>
<h2>Relative successes for Airbus</h2>
<p>Although 2019 was marked by the end of the A380, considered a <a href="https://theconversation.com/airbus-a380-from-high-tech-marvel-to-commercial-flop-112086">commercial flop</a>, Airbus has exceeded the symbolic mark of the 20,000 planes sold since its creation. The company also won many battles against Boeing last year. The A320, A320neo, A321, A321neo and A350 models are particularly popular with airlines. <a href="https://www.forbes.com/sites/samuelengel1/2019/12/18/uniteds-new-aircraft-order-nudges-boeing-and-airbus-toward-environmental-sustainability/#624f31304199">The A321 XLR is part of a sustainable development strategy</a>: it consumes a third less of kerosene, which gives it a much greater radius of action and reduces costs per passenger.</p>
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<figcaption><span class="caption">The A321 XLR will replace the A380 on the aircraft market.</span></figcaption>
</figure>
<p>United Airlines ordered <a href="https://www.forbes.com/sites/michaelgoldstein/2019/12/04/united-airlines-to-buy-50-ultra-long-range-airbus-a321xlr-aircraft-in-estimated-6-billion-deal/">50 ultra-long-haul Airbus A321 XLRs</a> for about $6 billion. These aircraft are intended to replace Boeing 757s and are expected to enter service in 2024. Thanks to this innovative plane, which as presented by Airbus at the <a href="https://theconversation.com/aeronautique-la-menace-sino-russe-plane-sur-le-duopole-airbus-boeing-118638">2019 Paris Air Show</a>, the company will be able to reduce significantly its carbon footprint and <a href="https://www.aviationtoday.com/2019/12/05/united-airlines-buying-airbus-a321xlrs-replace-boeing-757-fleet/">benefit from the long-range capabilities to add new destinations</a>.</p>
<p>Cebu Pacific Air, the leading airline in the Philippines, confirmed an order for <a href="https://www.channelnewsasia.com/news/business/philippines--cebu-air-orders-15-a320neo-jets--pushing-airbus-toward-sales-milestone-12196784">five A320neo and ten A321 XLR on December 19</a>, after having finalized another of 16 A330neo, which makes a total of 21 aircraft for approximately $6.8 billion in 2019. This is nothing compared to the <a href="https://www.airbus.com/newsroom/press-releases/en/2019/10/indigo-signs-for-300-a320neo-family-aircraft.html">record order from one of the fastest-growing airlines in the world</a>: the low-cost Indian company IndiGo. In October, it ordered 300 A320s, including several A321 XLRs, worth $33 billion. When delivered, IndiGo will reach a total of 730 A320s, making it the <a href="https://www.aerotime.aero/rytis.beresnevicius/24127-indigo-300-airbus-a320-aircraft-order">largest customer for this model</a>.</p>
<p>Airbus has also been <a href="https://www.bbc.com/news/business-50753718">selected by Quantas</a> to operate the longest flight in the world: 20 hours to cover the 10,500 miles (17,000 km) between London and Sydney. In December 2019, after launching a tender to the two manufacturers, Quantas announced that it was choosing the A350-1000 rather than the Boeing 777X.</p>
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<figcaption><span class="caption">New touch-screens cockpit displays in Airbus A350 XWB.</span></figcaption>
</figure>
<p>Airbus’s situation seems solid and the future looks bright. The group may hire between 1,500 and <a href="https://www.en24.news/2020/01/toulouse-airbus-expected-to-hire-nearly-2000-people.html">2,000 people in France, and potentially 5,000 worldwide</a>. The group has exceeded US$100 billion in market valuation, Airbus shares rose 59% in 2019](https://www.lefigaro.fr/conjoncture/ces-entreprises-qui-font-flamber-le-cac-40-20191229) and the company begins 2020 at the top of the French stock market index CAC40. </p>
<p>Still, Airbus’s leadership position <a href="https://www.aerospace-technology.com/comment/airbus-boeing-aircraft-top/">remains fragile</a>. If <a href="https://www.aerospace-technology.com/comment/airbus-boeing-aircraft-top/">the symbolic threshold of 1,000 aircraft ordered</a> may seem satisfactory, it is already the sixth time that the group has exceeded it, and this remains well below <a href="https://www.telegraph.co.uk/finance/newsbysector/industry/10580384/How-Britain-lifts-Airbus-to-record-sales-high.html">the record set in 2013 with 1,503 orders</a>. Production is <a href="https://www.wsj.com/articles/airbus-slashes-delivery-target-as-it-struggles-with-production-woes-11572417894">struggling to keep up with sales</a>, as the most popular models are victims of their success. Some current deliveries are late and the increase from 60 to 63 aircraft per month between 2019 and 2021 will not significantly improve things.</p>
<h2>A multidimensional crisis for Boeing</h2>
<p>Boeing is currently going through the <a href="https://www.flightglobal.com/analysis/why-boeing-faces-worst-crisis-in-its-history/135000.article">worst crisis since it was founded</a> in 1916. This crisis is deep, lasting and multidimensional. Above all, it is a reputational crisis, the group having entered a spiral of failures and an era of suspicion. Multiple charges of negligence and willful intention to deceive the authorities could be confirmed by <a href="https://www.usatoday.com/story/news/nation/2019/12/24/boeing-reveals-new-very-disturbing-documents-737-max-jetliner-faa-house/2743402001/">internal documents transmitted to the US Congress</a> in December 2019.</p>
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<figcaption><span class="caption">Boeing to halt 737 Max production after damaged reputation.</span></figcaption>
</figure>
<p><a href="https://theconversation.com/boeing-737-max-air-safety-market-pressures-and-cockpit-technology-113580">After two 737 Max crashes</a> that left 346 dead, many passengers have completely lost confidence in the plane: 40% of travelers are <a href="https://www.washingtonpost.com/business/when-will-boeing-737-max-fly-again-and-more-questions/2019/12/16/251d2b02-2039-11ea-b034-de7dc2b5199b_story.html">ready to pay more or take less practical flights</a> to avoid it. New theories question the <a href="https://www.nytimes.com/2020/01/05/business/boeing-737-max.html">safety of other software-independent parts</a> of the aircraft. </p>
<p>The crisis is also technological, Boeing has had <a href="https://www.cnbc.com/2019/10/22/the-year-that-changed-boeing-airplane-maker-struggles-to-regain-footing-since-first-737-max-crash.html">significant difficulties finding reliable solutions</a> to the various <a href="https://theconversation.com/boeing-737-max-air-safety-market-pressures-and-cockpit-technology-113580">dysfunctions</a> of its planes. This in turn led to an industrial crisis: after severely <a href="https://www.businessinsider.com/boeing-studies-737-max-output-slowdown-among-scenarios-source-2019-4">slowing down the production</a> of the 737 Max, <a href="https://www.theverge.com/2019/12/16/21025081/boeing-737-max-production-halt-stop-crash-faa-airplane">Boeing stopped it completely</a> in January 2020. Although 12,000 people work directly in the production of the 737 Max, Boeing <a href="https://www.cnbc.com/2020/01/06/boeing-reassigs-thousands-of-737-max-workers-while-supplier-spirit-mulls-layoffs.html">does not plan to lay off</a> workers for the time being. The consequences may be particularly difficult for the suppliers most dependent on Boeing to bear.</p>
<p>Boeing also faces a legal crisis: <a href="https://www.reuters.com/article/us-boeing-737max-lawsuit-board/lawsuit-against-boeing-seeks-to-hold-board-liable-for-737-max-problems-idUSKBN1XS2I3">lengthy and costly lawsuits</a> from victims and airlines could well further tarnish the company’s image. The financial consequences are already considerable with 10 billion euros of cash provisioned to deal with the direct and indirect consequences of the crashes. If the manufacturer had <a href="https://www.foxbusiness.com/markets/boeing-debt-raise-737-max">US$20 billion in funds a few months ago</a>, it would consider <a href="https://www.wsj.com/articles/boeing-considers-raising-debt-as-max-crisis-takes-toll-11578308401">increasing its debt by at least US$5 billion</a> to meet expected costs in the first half of 2020.</p>
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<figcaption><span class="caption">Turkish Airlines reach 737 Max aircraft compensation deal from Boeing.</span></figcaption>
</figure>
<p>To cope with the managerial dimension of the crisis, a financial expert, <a href="https://www.forbes.com/sites/georgebradt/2019/12/23/why-david-calhouns-onboarding-as-ceo-of-boeing-is-a-work-in-progress/#66ed9d754a32">David Calhoun, was chosen to succeed the engineer Dennis Muilenburg</a> as CEO of Boeing from January 13, 2020. Muilenburg was <a href="https://www.ft.com/content/457dfcf2-25dc-11ea-9a4f-963f0ec7e134">severely criticized for his handling of the crisis</a> and had to resign. Among other things, he was accused of not respecting the independence of air-transport regulatory authorities and not reacting quickly enough.</p>
<h2>Major geopolitical issues</h2>
<p>Naturally, Boeing’s difficulties and Airbus’ success are <a href="https://www.nytimes.com/2019/10/06/business/boeing-airbus-world-trade-organization.html">not to the liking</a> of US president Donald Trump, who saw a <a href="https://edition.cnn.com/2019/12/18/economy/boeing-gdp-impact/index.html">large part of the GDP of the United States evaporate</a>. The competition between the two has fueled the trade war between EU and US, which in October 2019 decided to apply a 10% tax on imports of European aircraft. Airbus management denounces an unfair decision directly linked to the current fragility of the Boeing group.</p>
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<figcaption><span class="caption">WTO sides with US in Airbus subsidy case, allowing US to target $7.5B in EU imports.</span></figcaption>
</figure>
<p>Airbus and Boeing must prepare for <a href="https://theconversation.com/aeronautique-la-menace-sino-russe-plane-sur-le-duopole-airbus-boeing-118638">the entry into the market of a strong competitor</a>. In 2017, the Chinese group Comac (Commercial Aircraft Corporation of China) and the Russian consortium UAC (United Aircraft Corporation) created the joint venture CRAIC (China-Russia Commercial Aircraft International Corporation) in order to launch aircraft they claim are as <a href="https://www.youtube.com/watch?v=cZzbgfidzvI">efficient as those of Airbus and Boeing, but less expensive</a>.</p>
<p>For presidents Xi Jinping and Vladimir Putin, this alliance is part of a major strategic move toward <a href="https://www.ainonline.com/aviation-news/air-transport/2019-06-14/sino-russian-cr929-has-room-high-tech-input-west">Sino-Russian collaboration</a>. The friendship between the two presidents has led them to join forces against the United States and the trade policy of the government of Donald Trump. The <a href="https://www.youtube.com/watch?v=cZzbgfidzvI">CR929</a> will be a direct competitor to the <a href="https://www.youtube.com/watch?v=jGIIGQPUecg">A350 and the B787</a>. With a budget of US$20 billion, this aircraft is scheduled to enter service between 2025 and 2028.</p><img src="https://counter.theconversation.com/content/129595/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oihab Allal-Chérif ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>If Airbus has once again become the world’s leading aircraft manufacturer, it is mainly thanks to a favorable economic context and Boeing’s 737 Max crisis.Oihab Allal-Chérif, Business Professor, Neoma Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1272572020-01-14T19:08:13Z2020-01-14T19:08:13ZFlight shame won’t fix airline emissions. We need a smarter solution<figure><img src="https://images.theconversation.com/files/304186/original/file-20191128-176661-109rmrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Swedish airport operator Swedavia reported passenger numbers at its ten airports in October 2019 were down 5% on the previous year. </span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>“Fake news”, the chief executive of Lufthansa <a href="https://simpleflying.com/lights%20ansa-ceo-flight-shaming-fake-news/">has called it</a>. But his counterpart at Air France calls it the airline industry’s “<a href="https://fortune.com/2019/11/18/flight-shame-air-france-anne-regail/">biggest challenge</a>”. So does the <a href="https://www.bbc.com/news/business-50481107">president of Emirates</a>: “It’s got to be dealt with.”</p>
<p>What they’re talking about is “<a href="https://www.abc.net.au/triplej/programs/hack/flygskam-swedish-flying-shame-environment/11297138">flight shame</a>” – the guilt caused by the environmental impacts of air travel. Specifically, the carbon emissions. </p>
<p>It’s the reason teen climate-change activist Greta Thunberg refused to fly to New York to address the United Nations Climate Action Summit in September, taking a <a href="https://www.abc.net.au/news/2019-08-29/swedish-teen-greta-thunberg-un-summit-new-york-boat-arrival/11459966">14-day sea voyage</a> instead.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/304203/original/file-20191128-178066-qe8kgs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A publicity photo of Greta Thunberg on her way to New York aboard the yacht Malizia II in August 2019. The phrase ‘skolstrejk för klimatet’ means school strike for climate.</span>
<span class="attribution"><span class="source">EPA</span></span>
</figcaption>
</figure>
<p>In Thunberg’s native Sweden, flight shame (“<em>flygskam</em>”) has really taken off, motivating people to not take off. Last year 23% of Swedes reduced their air travel to shrink their carbon footprint, according to a <a href="https://www.wwf.se/pressmeddelande/wwfs-klimatbarometer-allt-fler-valjer-bort-flyg-och-kott-och-kvinnorna-gar-fore-3241404/">WWF survey</a>. Swedish airport operator Swedavia <a href="https://www.swedavia.com/about-swedavia/swedavias-newsroom/">reported</a> passenger numbers at its ten airports in October were down 5% on the previous year. </p>
<p>The potency of this guilt is what put Lufthansa’s head, Carsten Spohr, on the defensive at <a href="https://simpleflying.com/lufthansa-ceo-flight-shaming-fake-news/">an aviation industry conference</a> in Berlin in November. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/flight-shame-flying-less-plays-a-small-but-positive-part-in-tackling-climate-change-125440">Flight shame: flying less plays a small but positive part in tackling climate change</a>
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</em>
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<hr>
<p>“Airlines should not have to be seen as a symbol of climate change. That’s just fake news,” he declared. “Our industry contributes 2.8% of global CO₂ emissions. As I’ve asked before, how about the other 97.2%? Are they contributing to global society with as much good as we do? Are they reducing emissions as much as we do?”</p>
<p>Does he have a point? Let’s consider the evidence.</p>
<h2>How bad are aviation CO₂ emissions?</h2>
<p>The <a href="https://theicct.org/publications/co2-emissions-commercial-aviation-2018">International Council on Clean Transportation</a> (the same organisation that exposed <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">Volkwagen’s diesel emissions fraud</a>), estimates commercial aviation accounted for 2.4% of all carbon emissions from fossil-fuel use in 2018.</p>
<p>So it’s true many other <a href="https://www.eea.europa.eu/data-and-maps/daviz/change-of-co2-eq-emissions-2#tab-dashboard-01">sectors contribute more</a>.</p>
<p>It is also true airlines are making efforts to reduce the amount of carbon they emit per passenger per kilometre. Australia’s aviation industry, for example, has reduced its “emissions intensity” by <a href="https://www.infrastructure.gov.au/aviation/environmental/emissions/files/Managing-the-Carbon-Footprint-of-Australian-Aviation.pdf">1.4% a year</a> since 2013.</p>
<p>However, the ICCT estimates growth in passenger numbers, and therefore total flights, means total carbon emissions from commercial aviation have ballooned by 32% in five years, way faster <a href="https://www.theguardian.com/business/2019/sep/19/airlines-co2-emissions-rising-up-to-70-faster-than-predicted">than UN predictions</a>. On that trajectory, the sector’s total emissions could triple by 2050.</p>
<h2>Alternatives to fossil fuels</h2>
<p>A revolution in aircraft design could mitigate that trajectory. The International Air Transport Association suggests the advent of hybrid electric aircraft propulsion (similar to how a hybrid car works, taking off and landing using electric power) by about 2030-35 could reduce fossil fuel consumption by up to 40%. Fully electric propulsion after that could eliminate fossil fuels completely. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/get-set-for-take-off-in-electric-aircraft-the-next-transport-disruption-114178">Get set for take-off in electric aircraft, the next transport disruption</a>
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<p>Even with the advent of electric airliners by mid-century, the huge cost and <a href="https://www.bts.gov/content/average-age-aircraft">long lifespan of commercial jets</a> means it could still take decades to wean fleets off fossil fuels.</p>
<p>A shorter-term solution might be replacing fossil fuels with “sustainable aviation fuels” such as biofuels made from plant matter. But in 2018 just <a href="https://www.iea.org/commentaries/are-aviation-biofuels-ready-for-take-off">15 million litres of aviation biofuel</a> were produced – less than 0.1% of total aviation fuel consumption. The problem is it costs significantly more than standard kerosene-based aviation fuel. Greater use depends on the price coming down, or the price of fossil fuels going up.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307575/original/file-20191218-11914-156ecvj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Research into biofuels made from algae and other plant matter could prove a viable alternative to fossil fuels. Right now, though, cost is a major hurdle to uptake.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Pricing carbon</h2>
<p>This brings us to the role of economics in decarbonising aviation.</p>
<p>An economist will tell you, for most goods the simplest way to reduce its consumption is to increase its price, or reduce the price of alternatives. This is the basis of all market-based solutions to reduce carbon emissions. </p>
<p>One way is to impose a tax on carbon, the same way taxes are levied on alcohol and tobacco, to deter consumption as well as to raise revenue to pay the costs use imposes on society.</p>
<p>The key problem with this approach is a government must guess at the price needed to achieve the desired reduction in demand. How the tax revenue <a href="https://energypolicy.columbia.edu/research/report/distributional-implications-carbon-tax">is spent</a> is also crucial to public acceptance.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-our-carbon-emission-policies-dont-work-on-air-travel-99019">Why our carbon emission policies don't work on air travel</a>
</strong>
</em>
</p>
<hr>
<p>In France, <a href="https://www.sbs.com.au/news/the-fuel-tax-rise-is-dead-so-why-are-the-yellow-vests-protests-escalating-in-france">opposition to higher fuel taxes</a> led the government to instead announce an “<a href="https://www.lonelyplanet.com/articles/france-airline-eco-tax">eco-tax</a>” on flights. </p>
<p>This proposed tax <a href="https://www.aljazeera.com/ajimpact/france-eco-tax-flights-criticised-airlines-activists-190709143311915.html">will range from</a> €1.50 (about A$2.40) for economy flights within the European Union to €18 (about A$29.30) for business-class flights out of the EU. Among those who think this price signal is too low to <a href="https://www.wired.co.uk/article/plane-tax-eco-france-sweden">make any real difference </a> is Sam Fankhauser, director of the <a href="http://www.lse.ac.uk/GranthamInstitute/">Grantham Research Institute on Climate Change and the Environment</a> in London.</p>
<h2>Trading and offsets</h2>
<p>Greater outcome certainty is the reason many economists champion an emissions trading scheme (also known as “cap and trade”). Whereas a tax seeks to reduce carbon emissions by raising the price of emission, a trading scheme sets a limit on emissions and leaves it to the market to work out the price that achieves it.</p>
<p>One advantage economists see in emissions trading is that it creates both disincentive and incentives. Emitters don’t pay a penalty to the government. They effectively pay other companies to achieve reductions on their behalf through the trade of “carbon credits”. </p>
<p>The European Union already has an <a href="https://ec.europa.eu/clima/policies/ets_en">emissions trading scheme</a> that covers flights within the <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:European_Economic_Area_(EEA)">European Economic Area</a>, but it has been criticised for limiting incentives for companies to reduce emissions because they can cheaply buy credits, such as from overseas projects such as tree-planting schemes. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307576/original/file-20191218-11904-wjctk7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Stockholm Arlanda Airport: Swedish data suggests voluntary action motivated by shame is unlikely to lead to any significant reduction in demand for international air travel.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<p>This led to the paradox of scheme delivering a reported <a href="https://ec.europa.eu/clima/policies/ets/allowances/aviation_en">100 million tonnes</a> of “reductions/offsets” from Europe’s aviation sector between 2012 and 2018 even while the sector’s emissions <a href="https://www.eea.europa.eu/themes/climate/trends-and-projections-in-europe/trends-and-projections-in-europe-2019/the-eu-emissions-trading-system">increased</a>. </p>
<p>A better solution might come from a well-designed international trading scheme. The basis for this may be the global agreement known as the <a href="https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx">Carbon Offsetting and Reduction Scheme for International Aviation</a>. Already 81 countries, representing three-quarters of international aviation activity, have <a href="https://www.icao.int/environmental-protection/CORSIA/Pages/state-pairs.aspx">agreed to participate</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/carbon-offsets-can-do-more-environmental-harm-than-good-26593">Carbon offsets can do more environmental harm than good</a>
</strong>
</em>
</p>
<hr>
<p>What seems clear is that guilt and voluntary action to reduce carbon emissions has its limits. This is suggested by the data from Sweden, the heartland of flight shame. </p>
<p>Behind the 5% reduction in passenger numbers reported by Swedavia is a major difference between domestic passengers (down 10%) and international passengers (down just 2%). That might have something to do with the limited travel alternatives when crossing an ocean.</p>
<p>For most of us to consider emulating Greta Thunberg by taking a sailboat instead, the price of a flight would have to be very high indeed.</p><img src="https://counter.theconversation.com/content/127257/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Tracey Dodd receives funding from Junction, an Australian not for profit working to eliminate homelessness and is a board member of Green Industries South Australia.
</span></em></p><p class="fine-print"><em><span>Duygu Yengin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“Fake news”, the chief executive of Lufthansa has called it. But his counterpart at Air France calls it the airline industry’s “biggest challenge”. So does the president of Emirates: “It’s got to be dealt…Duygu Yengin, Associate Professor of Economics, University of AdelaideTracey Dodd, Research Fellow, Adelaide Business School, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1133102019-03-12T10:00:49Z2019-03-12T10:00:49ZAir France–KLM: when cooperation becomes confrontation<figure><img src="https://images.theconversation.com/files/263203/original/file-20190311-86707-1ik0es1.jpg?ixlib=rb-1.1.0&rect=0%2C241%2C2300%2C1483&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Air France planes await their passengers (2010).</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Air_France_liveries.jpg">Mathieu Marquer/Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>On February 27, the unexpected acquisition by the Netherlands of 14% of Air France–KLM’s capital seemed to trigger a <a href="https://www.express.co.uk/news/world/1093907/France-news-air-france-klm-netherlands-eu-news">diplomatic conflict between the two nations</a>. Because the French state holds 14.29%, this <a href="https://www.youtube.com/watch?v=_0fe6PjcR2Q">rebalancing of power may seem legitimate</a>. Indeed, to defend its interests, the Dutch state will probably join the company’s board to <a href="https://www.forbes.com/sites/martinrivers/2019/02/27/why-are-air-france-klm-shareholders-so-scared-of-the-dutch-government/">influence strategic decisions</a>. So the move can be seen as a normalization of previously unbalanced relations between the two partners.</p>
<h2>A powerful European alliance that significantly evolved</h2>
<p>Air France acquired KLM 15 years ago but it has remained relatively autonomous – the goal was to maintain two strong national brands within a European alliance <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2142915">rather than a merger</a>. The fleets of Air France, 305 aircraft, and KLM, 169, are <a href="https://www.sciencedirect.com/science/article/abs/pii/S0969699716304070">interdependent and complementary</a>, each with a powerful brand image. However, increasing globalisation has made it difficult for both companies to maintain a <a href="https://www.cairn.info/revue-herodote-2004-3-page-56.htm">strong national identity</a>, and their separate management has proven to be <a href="https://simpleflying.com/air-france-klm-ceo-demands-a-proper-merger-big-changes-to-disjointed-airlines/">financially problematic</a>. </p>
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<figcaption><span class="caption">French and Dutch authorities hold talks to defuse Air France-KLM dispute.</span></figcaption>
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<p>Since the alliance began, KLM has doubled in size and although it remains smaller than Air France, it contributes four times more to the overall operating profit. Air France’s <a href="https://www.bloomberg.com/news/features/2018-08-22/the-future-of-air-france-depends-on-becoming-less-french">instability, poor performance and labor conflicts</a> have not helped things. Despite the changing financial situation, the <a href="https://journals.sagepub.com/doi/abs/10.1177/0149206313488209">group’s governance is still the same</a>. The situation is reminiscent of how the Renault-Nissan alliance was managed, with Renault remaining supreme despite Nissan’s recovery.</p>
<p>Meanwhile, <a href="https://www.taylorfrancis.com/books/9781317138259">the aviation sector is facing several challenges</a>, the competitors are seeking to strengthen their positions. The other major European airlines, Lufthansa, Iberia and British Airways, want to increase their international activity. <a href="https://www.taylorfrancis.com/books/e/9781351559638/chapters/10.4324/9781315091617-10">Low-cost airlines are putting considerable pressure on prices</a>. American, Chinese, and subsidized Gulf airlines have launched aggressive strategies. <a href="https://www.flightglobal.com/news/articles/delta-china-eastern-to-take-air-france-klm-stakes-439743/">Delta and China Eastern each own 8.76% of Air France–KLM, and they will both have 18% of the voting rights</a>.</p>
<h2>The reasons for Dutch frustration</h2>
<p>In Europe, the Netherlands disagrees with France in many budgetary and military areas, and <a href="https://www.reuters.com/article/us-netherlands-nato/dutch-pm-rutte-nato-remains-cornerstone-of-european-defense-idUSKCN1NL1RH">regularly opposes French proposals</a>. Regarding the Air France–KLM alliance, <a href="https://www.bloomberg.com/news/articles/2019-02-16/tensions-rise-at-air-france-klm-over-fate-of-dutch-unit-s-ceo">tensions had arisen over the future of Pieter Elbers</a>, KLM’s CEO since 2011. The group <a href="https://www.bloomberg.com/news/articles/2019-02-08/air-france-klm-is-said-to-weigh-changing-dutch-head-for-new-era">hesitated to renew his mandate</a>, despite his performance and achievements. The board finally reappointed him on February 19. The French Ministry of Economy now insists that the board offered to make him CEO of the group, but that he refused.</p>
<p>If France considers it can hold shares in strategic assets to influence decisions concerning them, it is surprising that it denies <a href="https://www.bloomberg.com/news/articles/2019-02-26/dutch-government-buys-air-france-klm-stake-aims-to-match-france">another country to have the same right</a>. Given the importance of Schiphol airport to the national economy, the Netherlands want to prevent it being relegated to a secondary position, which may happen given the group’s strategy favoring Charles de Gaulle Airport in Paris. Their reaction is therefore quite understandable.</p>
<p>Since taking office on September 17, 2018, <a href="https://uk.reuters.com/article/uk-air-france-klm-ceo-france/france-to-back-ben-smith-as-new-air-france-klm-ceo-source-idUKKBN1L117O">Ben Smith, the new group CEO</a>, has seemed to favor French interests. As a Canadian citizen, he is supposed to be <a href="https://www.bloomberg.com/news/features/2018-08-22/the-future-of-air-france-depends-on-becoming-less-french">independent and non-partisan</a>, but his readiness to sit on the board aroused suspicions. Then, the French stakeholders took several decisions without informing the other partners, which could have triggered the Dutch reaction, spectacular in its execution, but measured in its proportions.</p>
<p>The recent strategy of wanting to <a href="https://www.youtube.com/watch?v=xbE8AIlwqcI">distinguish between the two brands</a> by making Air France more upmarket than KLM could have hurt Dutch pride. Thus, their desire to return to an <a href="https://www.neweurope.eu/article/dutch-government-buys-into-air-france-klm-to-counter-french-influence/">equal partnership between KLM and Air France seems justified</a>.</p>
<h2>An unfriendly but legitimate financial transaction</h2>
<p>However, the French state was informed only one hour from the official announcement, just before the deadline allowed for this type of stock market operation. This cover-up may be particularly <a href="https://www.politico.eu/article/dutch-government-purchase-of-air-france-klm-shares-sparks-french-outrage/">surprising and vexing for the French authorities</a>, who repeatedly, but unsuccessfully, asked the Dutch government to buy Air France–KLM shares during the summer of 2017, when Delta and China Eastern announced they would be doing so.</p>
<p>Bruno Lemaire, the French Minister of the Economy, considers the Dutch government’s decision <a href="https://twitter.com/BrunoLeMaire/status/1100767457374072832">“incomprehensible and unexpected”</a>. He talks of an <a href="https://www.reuters.com/article/us-netherlands-air-france-klm-france/dutch-acted-like-corporate-raider-on-air-france-klm-french-government-source-idUSKCN1QG1OU">“unfriendly” operation, “trader’s techniques,” and a “value destructive” decision</a>. He was deeply disappointed that he had met his Dutch counterpart, Wopke Hoekstra, the week before, and discussed the alliance without the long-planned approach being mentioned. Bruno Lemaire also denounced the operation as “deceptive” and “secret.” It could not be improvised, requiring decisions at the highest level of state, the complicity of important stakeholders, and careful planning to avoid alerting financial markets. <a href="https://www.youtube.com/watch?v=B2mENMLUyWA">Both ministers vowed to focus on the future</a>, but their visions may not be the same.</p>
<p>Even the French president Emmanuel Macron made a statement, <a href="https://nltimes.nl/2019/02/28/nl-must-make-intentions-air-france-klm-clear-french-president-says">asking the Netherlands to clarify their intentions</a> and recalled, “What matters is that the firm’s interests are maintained.” This is probably an indirect warning to Dutch leaders not to use this type of approach to attract voters in the run-up to important elections in the Netherlands. <a href="https://www.ft.com/content/37745592-3c3b-11e9-b72b-2c7f526ca5d0">Protectionism is popular among Dutch citizens</a>, who see it as reaffirming their country’s sovereignty.</p>
<h2>Deep and lasting consequences</h2>
<p>The talk of treason and disloyalty shows that the breakdown in trust between the two European partners will probably last for some time. This is a new step in the trend away from a European approach to industrial interests and back to a national approach. <a href="https://www.thetimes.co.uk/article/french-fury-after-dutch-buy-stake-in-air-france-klm-gc9grbphv">This trend is symptomatic of more brutal, opportunistic, and interventionist relations</a>, as evidenced by <a href="https://www.youtube.com/watch?v=gz0lRyrMMrE">the recent conflicts between France and Italy</a>. It is also a new form of isolationism in the defense of economic interests, like Brexit.</p>
<p>Although France’s position does not appear to be jeopardized because of its double voting rights on some of its shares and the 4% held by Air France employees, it could decide to invest in more capital. Otherwise, the French state might soon be outvoted by an alliance between the Dutch and another non-European nation, USA or China. An accumulation of strategic disagreements <a href="https://www.youtube.com/watch?v=y4iIceAsa60">could lead to irremediable conflict and the end of the alliance</a>.</p>
<p>The Netherlands spent <a href="https://www.ft.com/content/37745592-3c3b-11e9-b72b-2c7f526ca5d0">744 million euros on Air France–KLM shares</a>, so presumably they consider the investment one of major economic interest. The Dutch airline’s <a href="https://www.forbes.com/sites/martinrivers/2019/02/27/why-are-air-france-klm-shareholders-so-scared-of-the-dutch-government/">recovery, good management, and profitability testify to its knowhow</a>. Ben Smith may well resign if he considers himself unable to implement the <a href="https://www.ainonline.com/aviation-news/air-transport/2019-02-19/air-france-klm-strengthens-group-structure">strategy of a full merger</a>, and thus the <a href="https://skift.com/2019/02/14/its-time-to-let-air-france-klms-new-ceo-take-charge-of-the-company/">loss of KLM’s autonomy</a>, which he feels the group needs.</p><img src="https://counter.theconversation.com/content/113310/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oihab Allal-Chérif ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The surprise acquisition by the Netherlands of 14% of Air France–KLM, which triggered a dispute between the two nations, reveals a trend toward more of a national approach to industrial interests.Oihab Allal-Chérif, Full Professor, Information Systems and Purchasing Management, Neoma Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1120862019-02-19T15:29:00Z2019-02-19T15:29:00ZAirbus A380: from high-tech marvel to commercial flop<figure><img src="https://images.theconversation.com/files/259728/original/file-20190219-43273-w16gs4.jpg?ixlib=rb-1.1.0&rect=0%2C26%2C968%2C592&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The final deliveries of the A380 are anticipated for 2021.</span> <span class="attribution"><span class="source">Mike Fuchslocher/Shutterstock</span></span></figcaption></figure><p>This time it really is over. Airbus chief executive, Tom Enders, recently announced the <a href="https://www.youtube.com/watch?v=6T4nijoSdyk">end of the A380</a>, the largest commercial aircraft ever built. Despite reported investments of more than <a href="https://www.bloomberg.com/news/articles/2015-04-26/airbus-a380-haunted-by-lack-of-orders-marks-decade-in-the-skies">€14 billion</a>, this iconic European project has not been as successful as was originally hoped. With only <a href="https://www.airbus.com/aircraft/market/orders-deliveries.html">234 units delivered out of 313 ordered</a> over 13 years, it is far from the break-even point – originally estimated at 1,200 aircraft over 20 years. With orders drying up and production already running at a minimum, it was time for Airbus to stop the damage.</p>
<p>Long before its launch date, the A380 appeared to represent the future of Airbus, which anticipated that <a href="https://www.cnbc.com/id/16882170">air traffic would double in the next 20 years</a>. That’s why it is both big – it can carry anywhere from 550 to more than 800 passengers on two full decks – and luxurious, with options such as private rooms, restaurants and bars – even an <a href="https://www.dailymail.co.uk/travel/travel_news/article-6700789/The-amazing-story-A380-told-incredible-pictures.html">in-flight casino</a>. Its engines are on average <a href="https://www.rolls-royce.com/products-and-services/civil-aerospace/airlines/trent-900.aspx">30% more powerful than those of the Boeing 747</a> and are worth €13 million each – the value of a ton of gold for all four.</p>
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<figcaption><span class="caption">National Geographic dedicated an episode of its series ‘Megastructures’ to the A380.</span></figcaption>
</figure>
<p>To keep the overall weight down, the A380’s designers used <a href="https://www.ingenia.org.uk/Ingenia/Articles/b48c6ee4-965a-4a55-a3fc-b8c2619fa6ec">groundbreaking composite structure</a>, including carbon ribs within aluminium wings. Equipped with the most advanced navigation system in commercial aviation, it can operate for more than 13 hours and fly more than 9,000 miles. </p>
<p>The aircraft is built on a continental scale: the wings are made in Wales, engines are made in England (Rolls Royce) or the US (Engine Alliance), the fuselage and the vertical stabiliser is built in Germany and the horizontal stabiliser in Spain. Final assembly is carried out in France. Each wing weighs 6.5 tons and is composed of <a href="https://captaindave.aero/2017/09/02/the-a380-wing-a-complex-work-of-art/">tens of thousands of components</a>, carrying the fuel, supporting the fuselage and channelling the power of the engines.</p>
<h2>Niche market</h2>
<p>If the A380 is undeniably one of the most impressive aircraft of all time, its unique design and distributed production system created numerous <a href="https://books.google.fr/books?hl=fr&lr=&id=KcaYjPhRnWUC&oi=fnd&pg=PA6&dq=A380+program+cost&ots=rmv403X072&sig=Yst8-nwpx2dv8bZs2hSjEj6S9wM#v=onepage&q=A380%20program%20cost&f=false">technical and coordination problems</a>. The initial launch was delayed 18 months by a range of difficulties, and the ability of airlines to customise the aircraft proved to be an additional source of delays. </p>
<p>While the A380’s first flight – on April 7 2005 – was a success, the market was already changing. Airlines that initially favoured big hubs such as <a href="https://www.sciencedirect.com/science/article/abs/pii/S0969699708000963">Singapore and Dubai</a> began to offer more direct flights from a significant number of middle-sized airports. The rise of low-cost airlines brought in influential new players and weakening the long-time leaders that had been seen as big prospects for the A380.</p>
<p>Most importantly, the 2008 economic crisis seriously cut into the growth in air traffic. <a href="https://skift.com/2018/09/14/10-years-later-how-the-travel-industry-came-back-from-the-financial-crisis/">While growth has returned</a>, the market is smaller than expected, making it harder to fill a wide-body aircraft, much less a double-deck one. It is simply not profitable for an airline to have flights with less than 80% of the seats filled. Emirates, which owns half of all operating A380s, has the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0969699711000160">financial resources to take on this risk</a>, but not other carriers.</p>
<p>It was Airbus’ mimicry of its historic competitor, Boeing, that led to the gap between supply and a considerably evolved demand. While some experts claimed that the A380 was 10 to 20 years ahead of the market, Airbus executives now admit that the plane was <a href="https://www.youtube.com/watch?time_continue=7&v=5rh1Jj8P9t8">10 years too late</a>. As Enders said when announcing the A380’s demise: “What we are seeing here is the end of the large four-engine aircraft.”</p>
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<figcaption><span class="caption">Airbus CEO Tom Enders on the decision to end the A380’s production (AeronewsTV).</span></figcaption>
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<p>With A380 sales lagging, Airbus launched its new mid-size flagship, <a href="https://www.airbus.com/aircraft/passenger-aircraft/a350xwb-family/a350-900.html">the A350</a>, in 2014. It and Boeing’s 787 Dreamliner, both of which have only two engines yet can fly great distances, were preferred because they had <a href="https://edition.cnn.com/travel/article/ultra-long-haul-planes/index.html">lower costs and fewer constraints</a> than the A380.</p>
<p>A380 orders started to dry up in 2015 and persistent rumours suggested that the end was near. There were no orders from US carriers, few in Asia and even Air France <a href="https://www.forbes.com/sites/michaelgoldstein/2018/11/27/if-air-france-no-longer-wants-the-airbus-a380-will-anyone/">halved its anticipated A380 fleet</a>. On January 15 2018, John Leahy, Airbus’ chief commercial officer, declared that if Emirates didn’t order at least 30 more A380s, it wouldn’t be possible to <a href="https://www.forbes.com/sites/michaelgoldstein/2018/01/17/does-anyone-really-need-the-airbus-a380/#7c7237f27eb1">keep the program alive</a>. British Airways, which owns a dozen A380s, has suggested that it could acquire others, but only if Airbus was <a href="https://thepointsguy.com/news/ba-could-save-the-a380-program/">“aggressive on the pricing”</a>. Whatever the result of those discussions, they are unlikely to alter the company’s decision.</p>
<h2>An inevitable disaster?</h2>
<p>Today, the very design of the A380 is being questioned – that it was in many ways a delusion of grandeur by Airbus, which wanted at all costs to <a href="https://www.cnbc.com/id/49974666">beat the Boeing 747</a>. But its four engines consumed too much fuel, and being able to carry more passengers wasn’t enough to make up the difference. The A380’s immense size and double-deck layout also require airport investments <a href="https://www.ingentaconnect.com/content/lse/jtep/2005/00000039/00000003/art00006">not needed for other airliners</a>. </p>
<p>Without the support of Emirates, which has made the A380 its flagship and is probably the only company that will regret its end, the decision to cease production would have been made a long time ago. Emirates has agreed to convert part of its latest order to <a href="https://www.airbus.com/newsroom/press-releases/en/2019/02/airbus-and-emirates-reach-agreement-on-a380-fleet--sign-new-widebody-orders.html">A330neo and A350 aircraft</a>, remaining faithful to Airbus. The last delivery is scheduled for 2021 and there will be no new versions brought into service. Meanwhile, the <a href="https://www.bbc.com/news/av/uk-england-london-43009119/celebrating-50-years-of-the-boeing-747">Boeing 747 celebrates 50 years of service</a> – though it too is ending production, <a href="https://www.flightglobal.com/news/articles/boeing-747s-production-run-could-outlast-a380s-455772/">marking the end of an era for airline behemoths</a>.</p>
<p>The end of the A380 is not necessarily good news for Boeing: it releases Airbus from a weight that has long prevented it from <a href="https://www.researchgate.net/publication/265787531_Competition_evolves_to_simplicity_The_strategies_for_the_conquer_of_the_skies_and_the_announced_battle_between_the_Airbus_A380_and_the_Boeing_777">delivering its full potential</a>. Resources and skills can be better allocated and thousands of workers may be offered jobs on <a href="https://www.theguardian.com/business/2019/feb/14/a380-airbus-to-end-production-of-superjumbo">other production lines</a>. If the end of the A380 is a hard blow, the end of the story has yet to be written for Airbus.</p><img src="https://counter.theconversation.com/content/112086/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oihab Allal-Chérif ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The shifting market for air travel has forced Airbus to abandon the production of one of the most impressive aircraft of all time, the super-jumbo A380. Was it folly, bad luck or both?Oihab Allal-Chérif, Full Professor, Information Systems and Purchasing Management, Neoma Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/602892016-06-07T11:53:06Z2016-06-07T11:53:06ZWhy Brexit spells turbulence for airlines<figure><img src="https://images.theconversation.com/files/124824/original/image-20160601-1964-eppeug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Brexit bound?</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?autocomplete_id=&language=en&lang=en&search_source=&safesearch=1&version=llv1&searchterm=arrivals%20board&media_type=images&media_type2=images&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=376596709">www.shutterstock.com</a></span></figcaption></figure><p>The creation of a common airline market in the 1990s is one of the European Union’s most significant achievements. It has allowed for unfettered competition <a href="http://www.efta.int/eea">throughout the European Economic Area, or EEA</a> and opened the door to low cost carriers such as Ryanair and easyJet. </p>
<p>You might have your own opinions about these airlines (and their customer service), but one thing is undeniable: they have made air travel affordable to millions of people who had never flown before.</p>
<p>The liberalisation of the airline market, as a result of the EU, was also an important precursor to the establishment of the <a href="http://ec.europa.eu/transport/modes/air/international_aviation/country_index/united_states_en.htm">Transatlantic Open Aviation Area</a>. In operation since 2008, it removed all entry barriers for US and EEA airlines wishing to fly across the Atlantic. And it allows airliners such as <a href="http://www.norwegian.com/uk/?gclid=CNnDr4HRhM0CFfAy0wodhLEOxQ">Norwegian</a> to fly nonstop between London and various US airports – this service would not have been possible under the previous regulatory regime on the transatlantic market.</p>
<p>As with many other industries, the effect of Brexit on air travel to and from the UK will depend on what Brexit will actually look like and what trade deals the UK negotiates with the EU after leaving. If the UK remains in the common European market, nothing will change. If it does not, however, much may. </p>
<h2>Bad news for Ryanair?</h2>
<p>The UK’s departure from Europe’s common market will, in the worst case scenario, mean a return to having numerous <a href="https://www.transportation.gov/policy/aviation-policy/international-relations/air-service-agreements">bilateral agreements</a> between the UK and each individual country it has flights to. These agreements are unlikely to be as restrictive as in the 1960s or 1970s, when they meticulously specified which airlines could fly on which routes between the two countries, how frequently and using which aircraft. This was an era when airfares were often set at cartel-like conferences run by the <a href="http://www.iata.org/Pages/default.aspx">IATA</a>, the trade association of the world’s airlines, resulting in expensive air travel for customers.</p>
<p>These days, more liberal agreements are the norm. Fares can be as low as the market can bear and most airlines can service routes so long as there is an agreement in place between the two countries in question. The only rule that remains is that an airline flying between two countries cannot typically be based in a third country – what’s known as the “nationality clause”. </p>
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<img alt="" src="https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/124779/original/image-20160601-1925-1pi6uhz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Grounded.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/search/?license=2%2C3%2C4%2C5%2C6%2C9&advanced=1&text=ryanair">Pauls Imaging Photography/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>This means, for instance, that if we move away from a single European airline market to a series of UK-country agreements with nationality clauses wired into them, Ryanair may not necessarily be allowed to fly directly from the UK to countries other than Ireland. </p>
<p>EasyJet will not be affected on routes to and from the UK, as it is a UK-based airline. But it will likely be banned from flying within the EEA, unless it is via the UK. Airlines outside the EEA are not granted access to the single European airline market. </p>
<p>Such a regulatory arrangement can significantly disrupt air travel not only to/from the UK, but also on the continent. However, I think that such an apocalyptic scenario is unlikely to materialise. First, both Ryanair and easyJet could relatively easily avoid the likely new restrictions by setting up subsidiaries in the UK and the EU respectively. </p>
<p>Second, we cannot exclude the possibility of a liberal UK-EU air services agreement, similar to a deal the EU currently has with Morocco and the US. Given what is at stake (over 140m passengers per year travel between the UK and the rest of the EU) both the UK and the “new” EU would likely be interested in ensuring the deal goes through.</p>
<h2>Transatlantic trouble</h2>
<p>The transatlantic market is more likely to be disrupted in the case of a Brexit. I am pessimistic that a free market US-UK deal can be reached here, as access to London’s Heathrow airport was the main hurdle at the time the Open Aviation Area between the US and Europe was negotiated (a deal that took years to seal). Analysis of the US Department of Transportation data that I’ve been working on clearly shows that Heathrow is the most important gateway in the transatlantic market, with over a quarter of all passengers crossing the pond landing there.</p>
<p>Prior to this, there was a UK-US agreement which imposed that transatlantic flights out of Heathrow could only be performed by two UK and two US airlines. Other carriers (mostly US-based ones) had to use Gatwick for their transatlantic services to London. <a href="http://www.jstor.org/stable/20111979?seq=1#page_scan_tab_contents">Research</a> I carried out at the time showed that carriers flying into Heathrow charged up to 8% more than the airlines that had to use Gatwick. So a post-Brexit deal could lead to higher prices.</p>
<p>Outside of the current US-EU treaty there has never been a truly liberal UK-US air services agreement. The treaty opened up the market, allowing any EEA based airline to fly nonstop across the ocean from countries other than the ones in which they are based. </p>
<p>Admittedly, few carriers were successful in establishing such services. Some did try – for instance, Air France opened nonstop flights between Los Angeles and London around 2009, but did not last long on this route. But more recently, Norwegian has worked to build a transatlantic network out of Gatwick. This could stop in the event of Brexit, as such services will not conform to the old UK-US agreement.</p>
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<img alt="" src="https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/124819/original/image-20160601-1923-19z66u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Ready for take off.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/gallery-2051897p1.html?cr=00&pl=edit-00">www.shutterstock.com</a></span>
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<p>Plus, Brexit will likely create an uneven playing field for British Airways. Looking at the data, BA appears to be the biggest winner from the transatlantic market liberalisation. My analysis of the US Department of Transportation data shows that from 2008 to 2013, BA’s market share (as measured by the total passengers carried across the Atlantic) increased by nearly 2% – a larger increase than for any other major market player. Return to the more restrictive regulatory environment cannot be good news for it.</p>
<p>So Brexit could have a big effect on both UK-EU and UK-US air travel. Flights will of course continue, but do not be surprised if more restrictions are put in place and prices go up as a result, especially if no agreement is reached to join the <a href="http://www.history.com/this-day-in-history/common-market-founded">common market</a>.</p><img src="https://counter.theconversation.com/content/60289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach is affiliated with IATA as an External Instructor for its Training and Development Institute. </span></em></p>It’s not just European travel that will be affected, but transatlantic flights too.Volodymyr Bilotkach, Senior Lecturer in Economics, Newcastle UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/528272016-01-06T15:53:43Z2016-01-06T15:53:43ZAndré Turcat: the test pilot who took Concorde supersonic<p>Last year it was reported that a design for <a href="http://www.independent.co.uk/news/uk/new-concorde-2-will-fly-at-45-times-the-speed-of-sound-and-do-london-to-new-york-in-an-hour-flat-a6692216.html">a successor to Concorde</a>, which would fly between London and New York in one hour at more than 4.5 times the speed of sound, had been patented by Airbus. This would have been thrilling news to French test pilot André Turcat, the man who first took Concorde supersonic in the 1960s – and who recently passed away at the age of 94. </p>
<p>Turcat, who served in the French air force as a transport pilot and later as a test pilot, is perhaps the airman most identified with the 100-seater supersonic jet. He was a graduate of the prestigious <a href="https://www.polytechnique.edu/en">Ecole Polytechnique</a>, the most selective French Grande Ecole (though his grades limited his options when he left the school and he “accidentally” opted for a career in the Air Force).</p>
<p>Towards the end of World War II, Turcat joined the (Free) French Air Force and, in 1947, became certified as a pilot. He was quickly noticed for his flying abilities, notably on board the Dakota C-47. After serving in the Indochina War, he graduated as a test pilot in 1951, tested for the Air Force and later for Nord-Aviation, flying the Nord 1500 Griffon II (a supersonic scram-jet aircraft) and later winning the <a href="https://en.wikipedia.org/wiki/Harmon_Trophy">Harmon Trophy</a> for his feats in 1958 with that aircraft.</p>
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<span class="caption">André Turcat on the flight deck of the first Concorde.</span>
<span class="attribution"><span class="source">Concorde</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>In 1962, as the Concorde programme was starting, Turcat joined the state-owned Sud-Aviation. He went on to become Concorde’s first test pilot as well as the company director of flight testing. On March 2 1969 he flew Concorde on her maiden flight and on October 1 1969, he took her supersonic for the first time.</p>
<h2>Flying high</h2>
<p>This was the beginning of a great era for Turcat (who instantly became a household name in France) and for the European aerospace industry more generally as Concorde was developed out of the Anglo-French collaboration between Aérospatiale and the British Aircraft Corporation (BAC). </p>
<p>Concorde demonstrated significant technological progress, on wing design notably and also on engines, flight controls and avionics. Air compression at Concorde’s high speeds of travel also posed material and structural challenges leading to potential fatigue issues and to the expansion of the aircraft body and structures, which needed to be addressed. At take-off, the rotation from flat to a steep 18 degrees also meant significant stress on the wing structure and on the landing gears. </p>
<p>The aerospace industry made a monumental leap forward with this aircraft. Speaking in <a href="http://www.lemonde.fr/disparitions/article/2016/01/05/mort-d-andre-turcat-le-pilote-d-essai-du-concorde_4841813_3382.html">2009</a>, Turcat said his March 2 1969 flight marked “a significant acceleration in the history of (civil) aerospace”. The interest of other nations, in particular America and Russia, was piqued by this early European technological success – it challenged them, as did the emergence of Airbus in later years.</p>
<p>Sadly the technical success that was Concorde did not translate into commercial success, though it laid some of the groundwork for the establishment of the modern industrial giant Airbus, through Aérospatiale notably, which had worked alongside BAC to build Concorde. Aérospatiale was also engaged with Deutsche Airbus, which eventually led to the constitution of the “Airbus economic interest group”, with Hawker Siddeley and Fokker, in 1970.</p>
<p>Concorde’s economics were also problematic, making assumptions on fuel costs that were later dispelled by the 1973 oil crisis. A supersonic Concorde consumed more fuel but could also fly more sorties; this economic model was viable only while fuel costs were a smaller component of the overall operational costs. Concorde’s first operational flight took place in 1976 (<a href="http://www.concordesst.com/history/eh5.html">certification was granted on December 4 1975</a>) but by February 1973, most airlines who had expressed an interest in acquiring it had cancelled their orders. </p>
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<p>In the end British Airways and Air France were the only two airlines to take them on – and then only with government subsidies. The Americans also objected to the aircraft – mainly on environmental grounds. As a result Concorde had a limited, if prestigious, career. On April 10 2003 Air France and British Airways <a href="http://www.concordesst.com/retire/announcements.html">announced Concorde’s retirement</a> and the great supersonic aircraft completed its final commercial flight on October 24 2003.</p>
<h2>Feet on the ground</h2>
<p>As Concorde started its career in 1976, Turcat was in the process of writing his first book: Concorde: Essais et Batailles and ending his flying career. He was also preparing for his future as a politician, in local government in Toulouse and, as an MEP in Europe. Following his retirement from the aviation sector, he went back to university, obtaining a PhD on Christian art in 1990. </p>
<p>In his later years, Turcat was always keen to talk about Concorde and came out of retirement to defend the aircraft and its designers after <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/july/25/newsid_2797000/2797965.stm">the 2000 crash in Gonesse, France</a>, but he was also personally very shaken by the accident and the loss of the aircraft – and depressed at the outcome of the inquiry.</p>
<p>It is undeniable that the life of André Turcat and the technological history and prowess of Concorde are closely intertwined. It is also clear that his passion for technology and Concorde echoes that experienced during the formative years of the programme in France and in Britain, with the renewed pride and heritage that came with it.</p><img src="https://counter.theconversation.com/content/52827/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Herve Morvan is affiliated with the Midlands Aerospace Alliance and sits on the Special Advisory Group (Propulsion) for the ATI. He is also a key member of one of Rolls-Royce's University Technology Centres.</span></em></p>The renowned aviator’s name became synonymous with Concorde and the era of supersonic flight.Herve Morvan, Professor in Applied Fluid Mechanics and Director, Institute for Aerospace Technology, Faculty of Engineering, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/519582016-01-04T10:43:23Z2016-01-04T10:43:23ZBig is beautiful: why the A380 could still have a bright future<p>The Airbus A380 is a marvel of technology; a majestic aircraft. It is beloved by passengers and it also is an environmental asset for airlines operating out of airports in built-up areas such as Heathrow with its low noise signature. But no new A380 order was taken in 2015 – and the current order book stands at 317 units, with the cost break-even point for Airbus now believed to be standing at as high as 420 units (from 270 initially) as a result of delays in production and detrimental currency fluctuations between the euro and the US dollar.</p>
<p>The A380 is heir and rival to the Boeing 747 jumbo jet in the so-called Very Large Aircraft (VLA) family, for which the maximum combined market size is believed to be between 700 and <a href="http://aviationweek.com/commercial-aviation/opinion-mega-transports-hobbled-their-size">1,700 aircraft</a>. This aircraft is built to capitalise on an air transport model that is based on large “hub” airports. </p>
<p>In such a model it is expected that aircraft such as the A380 would ferry a large number of customers at once thereby helping reduce airport congestion in the process. But the dispersion of routes and traffic and greater competition between carriers means the so called “<a href="http://blogs.cornell.edu/info2040/2011/09/14/hub-and-spoke-vs-point-to-point-transport-networks/">point-to-point</a>” model of air travel is growing more rapidly, at the expense of the hub-and-spoke model.</p>
<p>This also poses the issue of capacity on some routes. Though large carriers such as British Airways have been able to replace three daily Boeing 777 flights from London to Los Angeles with two A380 flights, some destinations simply do not carry the capacity required to successfully deploy the A380. Combined with the dispersion of the routes, this challenges the raison d’être of the aircraft.</p>
<p>Where the A380 was meant to deliver a significant reduction in fuel burn and cost efficiency, the figures that are reached – <a href="http://airinsight.com/2015/11/20/the-a380s-future/">while nearly half that for the 747</a> – are on a par with those of the most successful twin-engine airliners currently on the market. More twin-engine aircraft also provide greater flexibility for airlines. The Boeing 777, and the 777-300ER in particular, have proven particularly successful and this trend is being continued by the 787 Dreamliner.</p>
<p>Perversely maybe, the current low cost of fuel means that in spite of ever greater appetite to fly and a need for competitive ticket pricing, it is currently economical to keep using older aircraft, when taking the cost of acquisition or leasing into account. Air France is only just retiring old Boeing 747s now (the last scheduled flight, AF747, takes place in January 2016). </p>
<p>As most of its 42 747-400s were built in the early 1990s, British Airways still seems to plan a further ten-year service life before retiring them. British Airways has 11 A380s in service today, from a total order book of 12 to date. </p>
<p>Airbus is refreshing its twin-engine offering and compete very seriously against Boeing and its ground-breaking 777 and more recent 787, with the new A350. The aircraft appears to be very competitive and is already taking on the 787. As of end of November 2015 the order book for the A350 showed 775 orders. Based on figures updated in early December 2015, the orders for the 787 Dreamliner stand at 1,142.</p>
<p>Both A350 and 787 are technologically more advanced than the A380 – one indicator can be taken to be the amount of electrical power on the Dreamliner. This shows a step change in aircraft design and the move towards a <a href="http://www.moreelectricaircraft.com/">More Electric Aircraft</a> (MEA), with the flexibility and economy that this offers in service. </p>
<p>Is it therefore possibly the case that the A380 missed its window and came too late or was designed to satisfy a market that is small and an air travel model that has shifted?</p>
<h2>Fighting the naysayers</h2>
<p>The A380 still has its champions; starting with <a href="http://atwonline.com/interviews-video-print/interview-emirates-airline-president-tim-clark">Emirates and its CEO and president, Tim Clark</a>. Emirates is bringing the A380 to a number of so-called secondary and tertiary airports and routes. Clark is fighting the nay-sayers and showing that the A380 works for his company and should be attractive to others. This clearly indicates that the issue is complex and not simply technological but probably financial and commercial too. </p>
<p>While Emirates owns the largest fleet of A380s in the world (it has 67 and is committed to acquiring a further 73) it has also cancelled its order for 70 A350s and Clark has been a vocal proponent for a re-engining of the A380, inviting others, including Qatar Airways and Singapore Airlines, to get behind an A380neo (new engine option). <a href="http://airwaysnews.com/blog/2015/11/13/the-a380neo-no-one-seems-to-want/">The case for an A380neo is heavily disputed</a>, not least because reliance on one customer (Emirates), even for 100 new aircraft, does not make for the strongest business case in light of the investment required. </p>
<p>However, it seems that such support may have <a href="https://www.flightglobal.com/news/articles/dubai-case-for-a380-is-inevitable-leahy-418884/">rekindled Airbus’ spirits</a> to continue with the A380, when it may have been considering the aircraft’s future. Clark sees it as a moneymaking plane and hopes for a further reduction in operational costs of up to 10% with the neo. For him the A380 is a serious and competitive proposition.</p>
<p>With the successful entry-into-service of the A350, the commercial achievements of other aircraft such as the A330 and the commitments of customers such as Emirates to the A380, Airbus may well be sitting on a unique product for the future. Some airlines, such as Virgin Atlantic, are still deferring their decision on the A380 but, should they consider a new very large aircraft in the future, to replace its 747 fleet for example, Airbus would be in a unique position of strength.</p>
<p>The A380 remains a magnificent technological and environmental achievement, the full commercial value of which is yet unclear but is far from written off. And I, personally, remain excited as ever when I see a low flying A380 – such a gentle, quiet and agile giant.</p><img src="https://counter.theconversation.com/content/51958/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Herve Morvan is affiliated with the Midlands Aerospace Alliance and sits on the Special Advisory Group (Propulsion) for the ATI. He is also a key member of one of Rolls-Royce's University Technology Centres.</span></em></p>Demand for the A380 appears to have stalled, but it’s still the best Very Large Aircraft out there.Herve Morvan, Professor in Applied Fluid Mechanics and Director, Institute for Aerospace Technology, Faculty of Engineering, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/54352012-02-19T19:38:25Z2012-02-19T19:38:25ZQantas cuts jobs, Air Australia collapses: how can we save our airlines?<figure><img src="https://images.theconversation.com/files/7797/original/jx39c67x-1329635352.jpg?ixlib=rb-1.1.0&rect=79%2C63%2C2682%2C1848&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Stranded international passengers struggle to get home as Air Australia collapses.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>As stranded Air Australia customers continued to scramble to get home over the weekend, many may well be asking themselves: who’d run an airline? </p>
<p>On Friday, just a day after Qantas announced 500 job cuts, news broke that the Brisbane-based budget airline, had entered into <a href="http://www.kordamentha.com/creditor-information/australia/97">voluntary administration </a> after just four months of operation. </p>
<p>Administrator Mark Korda has suspended Air Australia’s ticket sales and called for immediate expressions of interest in the sale of the business.</p>
<p>He said it was “too early to predict the ultimate position of Air Australia or to be precise about the reasons for the Group’s problems”. </p>
<p>But there have been suggestions that Air Australia may have suffered some self-inflicted losses, with <a href="http://www.couriermail.com.au/business/egos-come-crashing-down-after-high-life/story-fn7kjcme-1226274279610">media reports </a> suggesting the airline spent large on sporting endorsements and lavish parties. </p>
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<img alt="" src="https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=358&fit=crop&dpr=1 600w, https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=358&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=358&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=450&fit=crop&dpr=1 754w, https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=450&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/7795/original/j2q57b43-1329635323.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=450&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The party’s over: Air Australia will be sold, according to its Administrators.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>Previously known as Air Charter Logistics, Air Australia at first specialised in oversize cargo and charters back in the 1990s. It then turned its operations to Defence Force contracts before launching its commercial airline arm in 2009, Strategic Airlines - which would then become Air Australia. </p>
<p>Management spent large, with offices in Melbourne, London and Paris. It built its brand associating itself with the 2009 Australian Masters Golf, the Brisbane Broncos, and a few racing events, as well as large celebrity-studded parties and trips to Bali and Hawaii. </p>
<p><a href="http://www.abc.net.au/news/2012-02-18/air-australia-passengers-left-in-limbo/3837814">Reports are now emerging</a> that people in the industry knew the company wasn’t going to survive.</p>
<p>In the same week, Qantas chief executive Alan Joyce announced Qantas would a review of its catering and maintenance operations, amid a staggering 83% fall in profits in first-half net profit.</p>
<p>Qantas announced losses of $194 million over the year-long industrial battle, including $70 million lost over the well-documented debacle when it grounded its entire fleet.</p>
<p>But Australian airlines are hardly the only ones facing challenges around the world. The recent collapses of long-established carriers such as the 66-year old Hungarian carrier <a href="http://www.guardian.co.uk/business/2012/feb/03/hungary-malev-bankruptcy-airline-grounded">Malev</a>, the 24-year old Spain’s <a href="http://edition.cnn.com/2012/01/28/world/europe/spain-airline-spanair/index.html">Spanair</a>, and venerable, 78-year old <a href="http://www.reuters.com/article/2011/11/30/us-americanairlines-idUSTRE7AS0T220111130">American Airlines</a> underscore the grim financial reality the industry faces. </p>
<p>In India, Kingfisher Airlines (India’s third-largest airline) <a href="http://online.wsj.com/article/SB10001424052970204792404577228401080817464.html">has not been profitable</a> for a single quarter since it started operations in 2005, reporting a $90 million loss in the December 2011 quarter.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/7799/original/r3brkfch-1329636626.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Spanair employees protest the the closure of the 24 year-old Spanish airline.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<h2>Are airlines a lousy investment?</h2>
<p>The aviation industry is notoriously difficult with large capital and operating costs, high fuel costs and faces increasing competition at a global scale. In Australia, it is also particularly exposed to the rising dollar, despite having the <a href="http://www.ausbt.com.au/sydney-melbourne-is-world-s-fourth-busiest-air-route">world’s fourth busiest air route </a>(Sydney-Melbourne). </p>
<p>Yet, there seems to be no conventional explanation for an industry that seems to perpetually lose money. </p>
<p>According the International Air Transport Association (IATA), the global aviation industry has <a href="http://www.bangkokpost.com/learning/learning-from-news/279650/global-airline-industry-unprofitable">finished in the red</a> for six of the past nine years. Following the GFC and record-high oil prices in 2008, it showed a return of -4.6%. </p>
<p>Given the weak global economy, IATA is forecasting a return of -1.4% for 2012. In the United States, passenger airlines reported <a href="http://www.ausbt.com.au/sydney-melbourne-is-world-s-fourth-busiest-air-route">aggregate net losses</a> of $14 billion in 2008-09. </p>
<p>To sum it up, in the past nine years, airlines as a whole suffered an aggregate loss of US$47.9 billion.</p>
<p>Berkeley economist and commercial aviation expert <a href="http://faculty.haas.berkeley.edu/borenste/">Severin Borenstein</a> points out in a paper released last year that high taxes and fuel costs play a minor role in airline operations. </p>
<p>The major drivers are actually related to fluctuations in demand and the large cost differential between what he refers to as “legacy airlines” (old, well established airlines) and new low-cost carriers (LCCs). </p>
<p>LCCs have been gradually chipping away market share from legacy carriers that have much higher costs. Legacy carriers responded with mergers and alliances in an effort to expand their network and services. However, unless legacy carriers find a way to close the gap, it is likely they will have difficulty earning consistent profits over the long term. </p>
<p>Qantas has positioned itself in the LCC market by creating Jetstar in Australia and <a href="http://www.theaustralian.com.au/business/aviation/jetstar-japan-cleared-for-early-take-off/story-e6frg95x-1226266133725">Japan</a> to capitalise on the growing Asian airline market, but it may not be enough to rescue its bottom line.</p>
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<img alt="" src="https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=324&fit=crop&dpr=1 600w, https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=324&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=324&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=407&fit=crop&dpr=1 754w, https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=407&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/7798/original/s2yt6z4x-1329635369.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=407&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A model of success: Dubai airport is on track to be the world’s largest, with UAE airlines enjoying staggering success.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<h2>The Middle Eastern success model</h2>
<p>Despite the worrying numbers worldwide, Middle Eastern airlines seem to have found the winning formula. They have experienced unprecedented growth at an annual rate of nearly 20% over the past few years. Dubai airport is rapidly closing the gap on London’s Heathrow in its <a href="http://media.economist.com/images/images-magazine/2010/23/bb/201023bbc564.gif">number of passengers </a>and its new airport, planned to open in the early 2020s, will make Dubai <a href="http://www.smh.com.au/travel/travel-news/dubai-opens-new-airport-set-to-become-worlds-largest-20100628-zd2u.html">the biggest airport in the world</a>.</p>
<p>The success of UAE airlines is simply staggering.
Since its second year of operation, Emirates (wholly owned by Dubai’s sovereign-wealth fund) has made a profit every year while doubling in size every three to four years. It recently placed a <a href="http://finance.yahoo.com/news/emirates-airline-orders-50-more-114953099.html">huge order</a> for 50 Boeing 777 jets. </p>
<p>Etihad (the Abu Dhabi airline set up by royal decree in 2003) has shown its first sign of <a href="http://www.flightglobal.com/news/articles/etihad-posts-first-ever-full-year-profit-368001/">profit this year</a>, growing its revenue by 36% in the past 12-month period. Last December, it put <a href="http://www.reuters.com/article/2011/12/12/uk-etihad-idUSLNE7BB01F20111212">an order for 12 Boeing jets</a> with options for 25 787 Dreamliner aircrafts. </p>
<p>By contrast, Air France-KLM’s <a href="http://online.wsj.com/article/SB10001424052970203806504577182293516238790.html">net debt widened to €6.5 billion</a> last year and <a href="http://www.bbc.co.uk/news/business-10813680">British Airways</a> report a £164m loss in 2010.</p>
<p>The success of airlines from the Gulf is partly due to their geographical location, becoming a hub between West and East. However, it’s not the only reason. Emirates (which basically provides the blueprint for Qatar Airways and Etihad) had early support from Dubai which encouraged other countries to open routes to the Gulf. </p>
<p>It reviewed its immigration laws making it easier for visitors to pass through. Its pilots and engineers are paid at globally competitive rates but most cabin crew and other staff are recruited on low pay. </p>
<p>The airlines also cashes in on a highly profitable cargo market with revenue strongly helping the airlines’ bottom line. The success of Etihad is also partly due to <a href="http://www.theaustralian.com.au/business/aviation/etihad-chief-james-hogan-lands-maiden-net-profit/story-e6frg95x-1226267085066">Australian James Hogan</a> who worked at a British Airline and Gulf Air before being hired by Abu Dhabi’s government to run Etihad. </p>
<p>Surprisingly airlines from the Gulf actually <a href="http://www.economist.com/node/16271573">pay more for fuel</a> at their home base due to the lack of refining capacity in the region. Their employees do not pay tax but those savings are largely offset through staff programs providing schools, health care and accommodation. </p>
<p>The Gulf airlines have certainly been blessed with an ideal geographical location but they remain well-oiled and highly efficient businesses defying the overall trend of the industry.</p>
<h2>Should the government get more involved?</h2>
<p>In <a href="http://faculty.haas.berkeley.edu/borenste/airreg08o.pdf">a 2008 report</a>, Borenstein points out that government policy has had a greater influence than market forces on airline operations in almost all markets over the past six decades. </p>
<p>Following World War I, strong national air carriers were promoted across the world through government subsidies. Deregulation of the airline industry began in the mid-1970s and led to privatisation of state-owned domestic “flag carriers”. </p>
<p>Most countries still consider domestic airline operations as part of the national identity and governments implemented restrictive bilateral agreements limiting foreign ownership of domestic airlines as well as mergers across borders.</p>
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<img alt="" src="https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=351&fit=crop&dpr=1 600w, https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=351&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=351&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=441&fit=crop&dpr=1 754w, https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=441&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/7796/original/ncd2p2tc-1329635336.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=441&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A bad week for Australian aviation as Qantas announces job cuts.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>The Qantas shutdown last year showed us that many Australians hold a strong emotional bond to what they consider to be their “national carrier”. This raises questions about whether the Federal Government should be more involved in businesses strongly associated with national identity. Unions involved with Qantas argue that the company has a corporate responsibility as the national carrier to not offshore jobs. </p>
<p>With only a handful of airlines operating in Australia, large distances between capital cities, and Qantas still holding monopoly of a number of routes, the flying kangaroo is essentially part of the backbone of the economy – with the power to literally <a href="http://www.theage.com.au/travel/travel-news/airline-that-stops-a-nation-20111029-1mpgc.html">stop a nation</a>.</p>
<p>In a similar vein, The Economist recently discussed the emerging trend of “state capitalism” whereby the state is heavily involved in the operations of some parts of its business sector. </p>
<p>For instance, state-backed companies account for <a href="http://www.economist.com/node/21543160">80% of the value of China’s stock market</a> and 62% of Russia’s. In the airline industry, variants of this model can be found with Singapore Airlines and in the Gulf airlines previously discussed (Emirates, Etihad and Qatar Airways). </p>
<p>President Barack Obama <a href="http://www.washingtonpost.com/national/at-boeing-plant-obama-to-urge-congress-to-keep-supporting-agency-that-promotes-us-exports/2012/02/17/gIQAPvfyIR_story.html">acknowledges</a> the unfair advantage that some companies do get through government support and similarly, Western politicians are starting to complain that state-capitalist powers rig the system in favour of their own companies. </p>
<p>However, as The Economist <a href="http://www.economist.com/node/21542926">rightly points out</a>, when government favours one lot of companies, the others suffer - which makes it an unsustainable model over the long term as it asphyxiates innovation and competition.</p>
<h2>What now?</h2>
<p>Despite the grim outlook of the industry, demand to use airways has been steadily <a href="http://media.economist.com/sites/default/files/imagecache/original-size/20110924_WOC639.gif">increasing</a> since the 1970s. The rapid growth in Asia will translate to an anticipated need of around <a href="http://atwonline.com/airline-finance-data/news/airbus-asiapacific-leads-demand-new-aircraft-0216">9,370 new aircraft</a> over the next 20 years, according to Airbus forecast. </p>
<p>Boeing just took the <a href="http://www.forbes.com/sites/greatspeculations/2012/02/16/boeing-bags-biggest-commercial-aviation-order-in-its-history-from-lion-air/">biggest commercial aviation order</a> in its history with a delivery of 230 planes (worth a combined $22.4 billion) to Indonesian carrier Lion Air. Boeing also believes that demand in the Asia-Pacific region will grow more than in any other part of the world over the next two decades. </p>
<p>In terms of airline performance, Borenstein argues that much of the instability in carriers comes from experimentation with flight scheduling, pricing, loyalty programs and so on. Lessons are bound to be learned and new strategies emerge.</p>
<p>Some sectors of the Australian economy are going through some rough changes at the moment, especially in automotive and aerospace. Jobs may be lost but valuable skills remain and can potentially be transferred to other industries. </p>
<p>Australia has to stop itself from <a href="http://newsfeed.time.com/2011/01/04/poll-the-french-are-the-worlds-most-pessimistic-people/">going “French”</a> as it becomes <a href="http://news.ninemsn.com.au/national/8421067/carbon-tax-a-factor-in-job-fears-abbott">increasingly pessimistic</a> about its future despite the fact that all the signs lead to economic expansion and growth in the long term. </p><img src="https://counter.theconversation.com/content/5435/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hamza Bendemra does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As stranded Air Australia customers continued to scramble to get home over the weekend, many may well be asking themselves: who’d run an airline? On Friday, just a day after Qantas announced 500 job cuts…Hamza Bendemra, Doctoral Candidate, Engineering, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/31922011-10-17T19:36:27Z2011-10-17T19:36:27ZThe most powerful companies you’ve never heard of: EADS<figure><img src="https://images.theconversation.com/files/4353/original/EADS.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">EADS is one of the world's biggest weapons manufacturers, but has a very low profile.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p><em>Welcome to “The most powerful companies you’ve never heard of” – an ongoing series from The Conversation that sheds light on big companies with low profiles. Today, Monash University’s Remy Davison examines European aircraft and weapons manufacturer EADS.</em> </p>
<hr>
<p>You may have never heard of the European Aeronautic Defence and Space Company (EADS), but it is likely that you have travelled on an aircraft manufactured by its high-profile subsidiary, Airbus.</p>
<p>The Airbus A320 shuttles thousands of passengers daily on short-haul flights throughout Australia and around the world. </p>
<p>Qantas took its first deliveries of the Airbus A380 in late 2008, with its superjumbo fleet now totalling 10 aircraft. The planes have cost the airline about $350 million each. </p>
<p>But civil aviation isn’t EADS’s only business.</p>
<p>The company, headquartered in the Dutch city of Leiden, is listed simultaneously on six European stock exchanges, including the London, Paris, Frankfurt and Madrid bourses. </p>
<p>EADS is also seriously cashed-up: as of last month, it had $US16 billion in cash.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=853&fit=crop&dpr=1 600w, https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=853&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=853&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1072&fit=crop&dpr=1 754w, https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1072&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/4358/original/qantasa380.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1072&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Qantas A380.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>It is also perhaps the only truly transnational, integrated firm in the European Union. It draws its engineering talent and management from throughout Europe, and employs well over 100,000 workers. </p>
<p>Less well known are EADS’s other major products: weapons.</p>
<p>With almost $US16 billion in sales in 2009, it is one of the world’s largest armaments manufacturers. Its Dornier aircraft and Euromissile subsidiaries account for a considerable proportion of its anual revenue of $US50 billion. </p>
<p>A merger deal in 2003 saw Euromissile come under the control of trans-European weapons manufacturer MBDA, which used to be known as Messerschmitt-Bölkow-Blohm. Yes, that’s the same Messerschmitt that lit up London’s skies during the Blitz. </p>
<p>Among other things, MBDA builds guided missile systems and state-of-the-art anti-tank missiles. </p>
<p>MBDA is 37.5% owned by EADS, with BAe Systems – better-known as British Aerospace – taking another 37.5%. </p>
<p>Italy’s partly state-owned Finmeccanica, a major aerospace and defence conglomerate, controls the remaining 25%.</p>
<h2>Ownership obscured</h2>
<p>Who controls EADS? Well, it’s complicated. </p>
<p>Most of EADS’s stock is not publicly listed on financial markets. Instead there is a “gentlemen’s agreement” that sees the company rest firmly under the control of two Franco-German conglomerates. </p>
<p>SOGEADE, a holding company that is majority-controlled by the French government and media firm Lagardère, has 22.5% of EADS, while German giant Daimler holds 22.5%. </p>
<p>That’s right – Daimler. Better known for its Mercedes-Benz cars, Daimler has been in the aerospace business for decades. But in August this year, Daimler indicated it was seeking to <a href="http://www.spiegel.de/international/business/0,1518,787163,00.html">divest itself</a> of EADS shares, with German private investors likely to have first refusal. </p>
<p>EADS’s piece de resistance is the Spanish-assembled <a href="http://www.airbusmilitary.com/A400M.aspx">Airbus A400M</a>, a long-haul military transporter designed to eliminate the EU’s dependence upon US-owned <a href="http://www.boeing.com/defense-space/military/c17/">Boeing C-17</a>s and rented Ukrainian <a href="http://www.antonov.com/index.html">Antonovs</a>. </p>
<p>The A400M’s principal customers are the French, German and British governments, although smaller orders have been received from other countries.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=369&fit=crop&dpr=1 600w, https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=369&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=369&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=464&fit=crop&dpr=1 754w, https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=464&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/4354/original/airbusmillitary.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=464&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">EADS’s flagship A400M has been beset by delays.</span>
<span class="attribution"><span class="source">astirn</span></span>
</figcaption>
</figure> <p></p>
<p>But while the A400M is EADS’s military flagship, it has also proved its bugbear. </p>
<p>In 2005, 17 EADS executives from Daimler and Lagardère, together with then-CEO Thomas Enders, cashed out their considerable stock holdings. They reaped significant gains from EADS’s share price, which was fattened largely on the basis of prospective A400M orders and the announcement of the A380 superjumbo. </p>
<p>But shortly afterwards, the A400M – no more than a cardboard model in 2005 – faced delay after frustrating delay. From 192 “firm” orders in 2007, 400M confirmed sales plummeted to 174. </p>
<p>Germany cut its order from 73 to 53, while France plans to take 50. More more than 50% of orders rely upon Berlin and Paris. South Africa cancelled its eight-aircraft order, while Airbus lost out to Boeing in Canada. Chile, which showed early interest, has gone for Brazilian aircraft instead. </p>
<p>Following the stock sales, it was revealed that the A380 was the victim of significant engineering problems, of which EADS shareholders were unaware in 2005. Further A380 delivery delays were announced in 2006, causing a stock collapse of over 25% in 24 hours. </p>
<p>Few Europeans would ever have heard of EADS until before this affair. But the executives’ stock sales in 2005 elicited widespread condemnation from shareholders and media accusations of millions of dollars in unlawful gains, triggering a 2009 investigation of alleged insider dealing.</p>
<p><figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=914&fit=crop&dpr=1 600w, https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=914&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=914&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1148&fit=crop&dpr=1 754w, https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1148&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/4356/original/thomasenders.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1148&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former EADS boss Thomas Enders, now CEO of Airbus.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
</p><p>Although the regulator called for substantial fines of the executives, all were cleared by a subsequent French inquiry.</p>
<h2>Into space</h2>
<p>Perhaps the most controversial EADS project is its space subsidiary’s involvement in the EU’s GPS program, Galileo. </p>
<p>China has invested €230 million in Galileo, which is a 30-satellite program. This means that China could acquire satellite guidance systems for air-to-ground ordnance for a mere $US18,000 a piece, making the country entirely independent of the United States’ satellite system. </p>
<p>The loophole that makes Galileo’s infrastructure available to China relates to the notion that, under EU rules, satellite systems are “dual use” – for civilian and military purposes. This is despite a longstanding EU embargo on arms and military-related exports to China, in place since 1989. </p>
<p>Given that China is also developing laser systems capable of destroying satellites, this could not only render US guidance systems inoperable, but mean that China would retain its own use of Galileo, making it entirely autonomous of the US GPS system. </p>
<p>Let us not forget that nuclear and conventional missiles are GPS-guided. </p>
<p>Quite publicly, American officials have stated that in the event of armed conflict with China, US forces would have no other option but to destroy Galileo entirely. </p>
<p>If China blew the US GPS out of the sky, the US would have no satellite capability, while China would still have Galileo. The EU may protest Galileo is a civilian system, but the Pentagon clearly views its military deployment capabilities as a threat to US national security.</p>
<h2>The battle for aerospace</h2>
<p>Back in 1987, the EU initiated the ambitious European Single Market program, of which the euro is a concomitant part. </p>
<p>By 2002, both the euro and the Single Market were firmly established. But what Europe lacked was an integrated single market in defence procurement, with British, German, French, Italian and Spanish firms engaging in product duplication. Economies of scale were non-existent. </p>
<p>In 1999, the EU promulgated the European Security and Defence Policy (ESDP), a thinly-veiled rival to NATO. But ESDP relied – and still does, largely – upon NATO military assets. </p>
<p>And although the EU has the world’s second-largest defence budget, it imports 40% of its defence materiel from the US.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=536&fit=crop&dpr=1 754w, https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=536&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/4357/original/galileo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=536&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">EADS is heavily involved with the controversial Galileo project, which has caused friction with the US.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure> <p></p>
<p>To realise efficiencies in defence procurement, Brussels created the European Defence Agency (EDA), an office designed to encourage mergers, acquisitions and joint R&D defence projects. </p>
<p>By far the biggest beneficiary of an integrated EU armaments market has been EADS. Without ESDP, neither the Airbus A400M nor the <a href="http://www.ausairpower.net/Analysis-Typhoon.html">Eurofighter Typhoon</a> would have come to fruition (the latter spent most of the 1990s in limbo as EU governments fought over its funding). </p>
<p>The bottom line is that the EU would have lost both the civil and military aviation war to the US had it not sought to beat Boeing through industrial integration and subsidies. </p>
<p>EADS became the trans-European conglomerate that made EU aerospace viable and competitive in global markets, albeit via significant government intervention and massive defence contracts. </p>
<p>Abortive attempts by President Chirac and former German Chancellor Gerhard Schroeder to remove the EU arms embargo on China in 2005 also angered Pentagon officials, who view the EU’s relations with Beijing as too cosy by half. </p>
<p>And, as EADS branches out into more controversial joint projects with China, such as Galileo, EU-US defence relations are likely to remain mired in a mutuality of suspicion.</p>
<p><strong>Is there a big company with a low profile that you think more people should know about? If so, <a href="mailto:pat.mcgrath@theconversation.edu.au">email the editor</a>.</strong></p><img src="https://counter.theconversation.com/content/3192/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Remy Davison receives funding from the European Commission.</span></em></p>Welcome to “The most powerful companies you’ve never heard of” – an ongoing series from The Conversation that sheds light on big companies with low profiles. Today, Monash University’s Remy Davison examines…Remy Davison, Jean Monnet Chair in Politics and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.