- ReFuelEU mandates and EU ETS are creating competitive distortions for European airlines
- Passengers connecting through European hubs face ETS charges and SAF mandates to final destination
- ETS extension 5,000 kilometres from Frankfurt would increase taxes without levelling SAF playing field
- SAF-type mechanism required to ensure competitive parity with non-EU carriers
- European carriers face cost disadvantages compared to international competitors
Ben Smith of Air France-KLM is warning that existing European legislation is creating competitive distortions that threaten airline jobs and security. The ReFuelEU mandates and EU ETS are imposing costs that European carriers are struggling to absorb. Smith has presented analysis at the Brussels briefing showing how passengers connecting through European hubs face ETS charges and SAF mandates on entire journeys.
Smith shared that sustainable aviation fuel mandates were essential for decarbonisation but required effective level-playing-field mechanisms. The Nice to Tokyo example demonstrated how customers connecting through Paris, Amsterdam, Frankfurt, Munich, Zurich or Rome faced ETS taxes and SAF mandates to final destination. He shared that an ETS extension 5,000 kilometres from Frankfurt would increase taxes for European carriers without addressing the non-level playing field on SAF mandates.
The briefing heard that a SAF-type mechanism was required to ensure competitive parity. Smith shared that the situation required urgent attention from policymakers. European carriers were facing cost disadvantages compared to non-EU competitors operating on similar routes.
Ben Smith of Air France-KLM shared: Today we have a combination of existing European legislation which is already creating competitive distortions, which are set to increase over time, referring to ReFuelEU and of course the EU ETS.
These distortions threaten our jobs and our security. On ReFuelEU specifically, the SAF mandates are essential to kick-start the aviation sector’s decarbonisation. We agree with that. However, they need to be accompanied by an effective level-playing-field mechanism both to support the global decarbonisation of aviation and to protect European airlines across their entire network. So this slide in front of you, I think, is extremely important. I’ve shown this before; now there’s one additional element that we’ve added here. If you take the Nice to Tokyo example, where today there does not exist a non-stop flight, the customer has various options to get between Nice and Tokyo.
The customer can connect over a European hub, so one of our hubs in Paris or Amsterdam, or over one of Carsten’s hubs in Frankfurt, Munich, Zurich or Rome. And if the customer chooses to transfer today over those hubs, they’re subject to the ETS tax and the SAF mandate all the way to final destination, because the SAF mandate is on flights that originate in Europe and of course the ETS today only covers flights within Europe.
If there is an ETS extension 5,000 kilometres from Frankfurt, that is basically an increase in taxes for European carriers, an increase or a new tax, you could describe it. It does not address the non-level playing field when it comes to SAF mandates. So what we need, and we have said this over and over, is a SAF-type mechanism to be put in place to make sure we have a level playing field. This is the situation in which we find ourselves today and we definitely would like a SAF mechanism to address it as quickly as possible.
L:uis Gallego of IAG shared: The challenge is clear. European aviation must decarbonise without becoming less competitive, and SAF is essential to meeting that challenge. But as you know, there is too little available and it is very expensive. So decarbonisation is imposing a cost burden on European aviation through the SAF mandate and also through the ETS, as you can see in the graph.
The effect is that today we have an increasing competitive gap with non-EU airlines, and the problem is that this gap is going to get bigger over the coming years, making sustainability the third-largest cost for a European airline after personnel and fuel. Our non-EU competitors will enjoy this advantage and they are going to carry more passengers to and from Europe, taking aviation jobs with them. We recognise that SAF has a role in aviation decarbonisation.
The problem is that the mandate is moving much faster than the market. In the 2025 market report, ASA found that no European power-to-liquid plant has moved beyond the pilot stage. A deadline is not going to create fuel on its own. Investment must come first. And in these circumstances we reiterate that the 2030 e-SAF mandate must be postponed until we have enough and affordable e-SAF. The ambition should remain, but the timetable must also reflect reality.
Thirdly, Europe must make all forms of SAF more available and more affordable. SAF supplies are already carrying a very, very high price. If Europe wants the 2030 target to remain credible, it must act now to increase production and also to reduce the cost sharply. Otherwise, the cost of a market that has not developed will fall on airlines and ultimately passengers. And that leads to the fourth point: passengers should not pay for a failure to build the market. Fining airlines for fuel they cannot buy will add cost without cutting one additional tonne of carbon. A4E estimates that penalties from a failing e-SAF market could reach €7 to 9 billion. Airlines will have little choice but to pass much of that cost to passengers in the internal market and become less competitive versus non-European airlines.
Policies should reward new supply and lower prices. You should not punish passengers because producers have not developed enough capacity. And finally, and most importantly, Europe cannot decarbonise aviation by making its airlines less competitive or by making flying less affordable. The Draghi Report estimates that aviation will need about €61 billion a year from 2030 to stay on a path to net zero. Airlines and passengers cannot fund that alone. Connectivity supports trade, tourism, jobs and growth. The choice is not climate action or competitiveness. Good policy must deliver both. That means using ETS revenues to build supply, narrowing the SAF price gap and supporting a global approach through CORSIA. So in summary, Europe needs to delay the e-SAF mandates and use ETS revenues to close this competitiveness gap and protect EU jobs.
