Grant Shapps told EasyJet it would not face environmental levy in a private meeting last year – now gives it a £600 million loan
The UK’s Transport Secretary, Grant Shapps, during a meeting in September 2019, assured easyJet that an environmental tax on flights is “not the way forward.” This has come to light in documents obtained by Greenpeace’s Unearthed. Shapps had agreed with easyJet that they did not want taxes aimed at reducing the aviation sector’s CO2 emissions. But now the UK government has given easyJet a £600 million loan, with no climate conditions attached, to help them during the Covid crisis. Meanwhile the EU is reportedly looking to make compliance with the Paris Agreement, and lower carbon emissions, a requirement for cash help. The French government has announced the terms of the €8 billion bailout for Air France, that will include deep (albeit non-binding) decarbonisation targets. Across the world, the aviation sector is lobbying aggressively to get government funding, as demand for air travel has been drastically reduced. It is deeply questionable whether scarce government funds should be spent on such an environmentally damaging sector, taking no account of its impact on climate breakdown.
Minister told EasyJet it won’t face environmental levy in a private meeting last year
By Zach Boren (Unearthed – by Greenpeace) @zdboren
In a meeting with the airline’s CEO Johan Lundgren in September last year, Grant Shapps agreed with criticism of European governments for introducing new taxes aimed at curbing the sector’s carbon emissions
The documents, obtained using freedom of information rules, have emerged weeks after the low-cost airline received a £600m loan from the British government without any climate conditions attached.
Meanwhile the European Union is reportedly looking to make compliance with the Paris Agreement a requirement for cash injections, and the French government has announced the terms of the €8bn bailout for its national airline will include deep (albeit non-binding) decarbonisation targets.
It follows an Unearthed investigation into the airline industry’s self-described “aggressive global campaign” for tax breaks, subsidies and voucher programmes as the coronavirus crisis sent finances on a tailspin.
Green MP Caroline Lucas told Unearthed: “These worrying revelations suggest that the transport secretary is more concerned about airline profits than the increasing risks of devastating harm to human lives caused by climate breakdown.”
“Rather than caving into the climate-destroying demands of airline bosses, the government should urgently develop a just transition plan to downsize the aviation sector whilst protecting and reskilling workers. That should start with watertight climate conditions on any support made available to the airline industry in response to the impacts of coronavirus.”
A spokesperson for easyJet said: “We recognise that we have a responsibility to minimise the impact of our flights and so are focused on both operating efficiently now and on the development of electric aircraft in the future and, since the technological solution is not yet available, in the interim we offset the carbon emissions from the fuel used for all of our flights on behalf of all of our customers.
“We have always said that taxing passengers is not the right approach as this provides no incentives for airlines to improve the carbon efficiency of their flying, it simply acts as a revenue raiser for governments. The way for aviation to address climate change is to invest in new technology and a tax will simply reduce the funds available to airlines for investment while only having a very marginal effect on emissions.”
A DfT spokesperson said: “Aviation contributes around £14 billion to the economy and creates half a million jobs. It is only right that we champion this sector, while continuing our work to make UK aviation the cleanest and greenest in the world.
“The sector must play its part in reaching the UK’s net zero by 2050 target. That’s why we are working with industry to develop new technologies and fuels to cut emissions and are taking a leading role driving international action for the sector.”
Instead of paying taxes, easyJet’s Lundgren was bullish in the meeting about the firm’s plans for carbon off-setting, saying it would “look to gold plate.”
The airline claims it will – on behalf of its passengers – ‘offset’ the carbon from the fuel in its flights “by investing in projects that include tree planting and protecting against deforestation and renewable energies,” though the environmental merit of such schemes is controversial.
Recent reporting has revealed that satellite data shows deforestation is actually increasing at the site of some high-profile projects run by airlines and energy companies.
According to the meeting notes, Lundgren then went on to criticise the Dutch government for introducing a tax on flights.
Though green campaigners have long called for such a tax, the British government has never appeared to seriously entertain the notion.
Cait Hewitt, deputy director at the Aviation Environmental Foundation, explained that “Airlines have, for many years, preferred offsets over other environmental measures because they’re cheap, and don’t require any actual changes in the aviation industry.”
Addressing criticism of such schemes, she said: “At best, offsets might be able to do some good somewhere in the world but they won’t stop CO2 coming out of the back of the aircraft. Offsets often pay for emissions reductions in other sectors, but this just can’t work in the long term; all countries and all activities need to be at net zero emissions within 30 years so those reductions will have to happen anyway.
“It’s a similar story with offsets that pay for tree planting – reforestation has to happen anyway, and there’s no way we can absorb all the emissions from aviation, every year, by planting trees in addition to those needed to soak up the CO2 already in the atmosphere.”
Proactively promoting aviation
In both this meeting and a month earlier in a private conversation with executives from Heathrow airport – the notes from which were also obtained by FOI – Shapps said he intends to “reorient the department [for transport] so that it is much more proactive in promoting aviation.”
In a statement last month Shapps said the UK will have to shift from cars to public transport to address climate change — but that aviation emissions can be tackled by technology.
To this, Leo Murray, director of innovation at climate organisation Possible and a key advocate for a frequent flyer levy, pointed out that Shapps is a known flying enthusiast and has taken several steps that benefit the industry.
He said: “For Heathrow expansion superfan and hobby pilot Grant Shapps, finally getting his hands on the joystick at the DfT is clearly a dream come true, and he’s going to crank it for all he’s worth.”
“But every credible assessment finds the same thing – that air travel cannot continue to grow unconstrained if we actually plan to meet our commitments to keep global warming to manageable levels in the coming years.
“Instead of more airport expansion, a frequent flyer levy is urgently needed to keep demand within safe limits. When we eventually emerge from the frying pan of the coronavirus crisis, we can’t let an aviation anorak Minister fly us straight back into the fire of the climate crisis.”
EasyJet secures £600m coronavirus loan from UK Treasury and Bank
Airline also plans to borrow £400m from creditors to ensure liquidity during shutdown
By Gwyn Topham Transport correspondent
Mon 6 Apr 2020
EasyJet has secured a £600m loan from the Treasury and Bank of England’s emergency coronavirus fund, as the airline’s founder and biggest shareholder, Sir Stelios Haji-Ioannou, claimed it would run out of cash by the year end regardless.
The airline said it would also borrow another $500m (£407m) from commercial creditors to ensure its liquidity, with its fleet grounded for at least April and May due to the pandemic.
The announcement came as Haji-Ioannou, who with his family owns just over a third of easyJet shares, demanded an emergency general meeting and called for the sacking of two directors.
The Cypriot tycoon relaunched his attack on the airline’s management and its order for 107 “useless” planes from Airbus, saying his “main objective is to terminate the £4.5bn Airbus contract”.
In a statement issued before confirmation of easyJet’s government loan, Haji-Ioannou had claimed that even remaining solvent until August – based on financial analysis that assumed flying would be quickly embraced again by holidaymakers this summer – could prove “wildly optimistic”.
When international travel eventually restarts, he said, the airline would “feel more like a startup trying to find a few profitable routes for a few aircraft”.
After news of the new financing, a spokesman for Haji-Iannaou said that it did not change the underlying situation, without cancellation of the Airbus order: “Given the current cash burn – that probably pushes the insolvency boundary back from August to late-autumn, early winter.”
EasyJet is understood to be in talks with Airbus to review the £4.5bn contract and reduce its ongoing spend.
The chief executive of easyJet, Johan Lundgren, said: “We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure easyJet is in the best position to resume flying once the pandemic is over.”
He said the airline had now reached agreements with unions to furlough UK-based pilots and crew. About 4,000 of 9,000 will be furloughed during April and May.
Lundgren added: “Our current priority is to safeguard short-term liquidity … in the event of a prolonged grounding of the fleet.”
EasyJet has used the government’s Covid-19 corporate financing facility, which allows UK businesses to apply for loans at pre-crisis commercial rates.
The aviation sector had called for special government measures to help it survive, but the Treasury has been unwilling to assist airlines until wealthy shareholders dig deep.
The chancellor, Rishi Sunak, said he would consider companies on a case-by-case basis, “only if all commercial avenues have been explored, including raising capital from existing investors”.
However, Haji-Ioannou, whose family received a near £60m share of £171m paid in dividends last month, said: “For the avoidance of doubt, I will not inject any fresh equity in easyJet whilst the Airbus liability is in place.”
EasyJet is likely to explore ways of resisting his calls for an emergency meeting, which it said would be “an unhelpful distraction”.
Air France must cut CO2 emissions, and domestic flights as condition of state aid: says France’s Finance Minister
France’s Finance Minister, Bruno Le Maire, has told Air France that it will have to cut its carbon emissions and domestic flights, as conditions for government financial support. The French government has offered the airline a €7 billion package of state-guaranteed bank loans, and loans directly from the state. This is on condition that the airline map out a path to profitability and set the goal of “becoming the most environmentally friendly carrier in the world.” [Whatever that means]. Air France will have to halve its CO2 emissions per passenger, and per kilometre – compared to their 2005 level – by 2030. The CO2 emissions from domestic flights in France will have to be halved, and that means cutting the numbers drastically. Another condition is that 2% of the fuel used by its planes would have to be derived from alternative, sustainable sources by 2025. [Problem is there are almost no properly environmentally “sustainable” fuels, and pushing for them is likely to increase deforestation and loss of land for food growing, and for wildlife]. Air France also have to buy new planes, with lower CO2 emissions, from Airbus.
Haji-Ioannou says EasyJet £600m government loan is ‘biggest scandal in British corporate history’
EasyJet has secured a £600m loan from the Bank of England’s Covid Corporate Finance Facility, as the airline’s founder and biggest shareholder, Sir Stelios Haji-Ioannou, claimed it would run out of cash by the year end regardless. The loan scheme allows UK businesses to apply for loans at pre-crisis commercial rates. EasyJet said it would also borrow another £407m from commercial creditors to ensure its liquidity. Its planes are now all grounded. Haji-Ioannou said even if the airline resumes flying fairly soon, hopes it would be solvent by August were probably “wildly optimistic” because it is wasting money on buying new planes. He said it is a scandal for EasyJet to be getting government funds, as if it cancelled the plane order, the loan would not be needed. The £600m will be to pay Airbus. He said when international travel eventually restarts, the airline would “feel more like a startup trying to find a few profitable routes for a few aircraft”. EasyJet is meant to be buying order for 107 planes from Airbus, costing some £4.5bn, which it now cannot afford. EasyJet has now reached agreements with unions to furlough about 4,000 UK-based pilots and crew during April and May, out of a total of about 9,000. Haji-Ioannou’s family received a near £60m share of £171m paid in dividends last month.