Artificially cheap ticket prices
The result of subsidies is artificially cheap ticket prices, which serves to drive up demand and reduce incentives for more sustainable aviation. Removing these subsidies is key to creating a more sustainable aviation sector.
Some of the subsidies include aid given to airports by local, regional or national authorities. Oftentimes this aid is in breach of EU guidelines concerning state aid. Aid is also granted to aircraft manufacturers, including at EU and national level. This aid is provided despite the absence of meaningful CO2 efficiency standards, resulting in a missed opportunity to mandate greater CO2 savings from new aircraft.
Airlines pay zero duty on their fuel
But perhaps the biggest subsidy is the aid enjoyed by airlines through tax exemptions on their fuel and tickets. Airlines, unlike motorists across Europe, pay zero duty on their fuel. Plane tickets sold are exempt from VAT. These subsidies total tens of billions of euro each year, money which could be reinvested in greening the economy or lowering labour taxes. In addition, Europe’s carbon market for aviation – the Emissions Trading System (EU ETS) – exempts the majority of flights departing from Europe and provides generous free allowances to airlines.
Use our tax calculator to work out how much revenue each member state could earn from reforms to tax laws and EU ETS.
In the past year, the Covid-19 crisis has led to a new source of subsidies through bailouts provided to airlines. Our bailout tracker tracks the billions which have been provided to airlines, with very few conditions attached.