Airline industry not cash cow, IATA knocks group’s proposal for domestic revenue drive for developing nations

The International Air Transport Association (IATA) has expressed its deep disappointment at the recommendation of the Global Solidarity Levies Task Force (GSLTF) to target air transportation with its aim to “improve domestic revenue mobilization of developing countries and support international solidarity (in particular with regards to climate change mitigation and adaptation, pandemics and other development challenges).”

A visibly upset Director-General of IATA, Willie Walsh said the airline industry is an economic catalyst, not a cash cow, yet governments casually suggest a tax on flyers that is three times the airline industry’s annual profit without considering the real-world side effects for an industry that is a lifeline for remote communities, invigorates tourism markets and links local products to global markets.

Moreover, he noted that while the modalities for the GSLTF proposal are not specified, history shows us that these taxes simply go to the general exchequer, with little, if any, of the revenues generated going to climate change adaptation.

An initial assessment of the GSLTF’s proposals reveals severe deficiencies, including that the competitive airline industry does not generate excessive Profits.

The GSLTF announcement, while lacking any meaningful detail, quotes a CE Delft estimation that a premium flyer levy could generate EUR 78 billion (over $90 billion) per year.

That is approximately three times the airline industry’s global estimated profit of $32.4 billion in 2024. Airlines’ structurally thin net profit margin (estimated at an average of 3.4% industrywide for 2024 and approximately half the global average for all industries) must also be considered in any policy deliberation.

Airlines have committed to achieving net zero carbon emissions by 2050—an effort that is expected to cost $4.7 trillion over the period 2024-2050. This will ensure that aviation can deliver its direct contribution of 3.9% of global GDP and 86.5 million jobs globally while addressing its estimated 2.5% share of global carbon emissions. Increasing aviation taxes on airlines as proposed will limit the industry’s ability to invest in solutions that deliver long-term emissions reductions.

The GSLTF’s proposal disregards the role of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which was agreed through the International Civil Aviation Organisation and is the world’s first globally agreed mechanism to manage carbon emissions from an industrial sector—in this case, international aviation.

The GSLTF states were among those that created CORSIA under the principle that it would be the single harmonized market-based measure to manage international aviation’s carbon emissions.

Overlapping measures, such as the Solidary Levy, would undermine CORSIA and lead towards a fragmented, inefficient and inconsistent global policy framework. It is essential that all states (those in the GSLTF included) focus on making CORSIA successful rather than advancing overlapping measures. Topping the agenda of critical support needed for CORSIA is states making available the carbon credits so that airlines can fulfil their CORSIA obligations and states can realize their climate financing value.

In addition, the GSLTF has not released any assessment of the impact that such a levy would have on the economies of the very states to which it aims to funnel the funds or the broader impact it will have on all travellers. It has also not detailed how such funds would be used.

Although the GSLTF is positioning its proposal as targeting premium travel, it fails to recognize the critical importance of this segment to making route networks viable. Punishing premium travelers or burdening the sector with excessive taxes would upend route dynamics which enable the connectivity that nearly five billion travellers will rely upon this year.

The impact of the GSLTF’s proposal would make airlines less efficient and more financially strained. This would mean higher costs for all travellers and items shipped by air. Such reduced affordability for a sector that is an indispensable economic catalyst ultimately brings the unintended consequence of weaker economic growth.

“The GSLTF says that their solidarity levies won’t increase the cost of living for ordinary citizens or impact things like household bills. This is untrue. The bottom line is that, if followed, the GSLTF’s recommendations will increase the cost of air travel for all travellers and do more harm than good. Extracting tens of billions from aviation will cripple its ability to invest in achieving net zero by 2050, change route dynamics to the extent that connectivity will suffer, and short-change countries on the critical economic support that air transportation provides,” said Walsh.

“To be clear, airlines are not evading doing their part to mitigate the impacts of climate change. The industry is doing everything possible to achieve net zero carbon emissions with Sustainable Aviation Fuels (SAF), more efficient operations, and better technology. The last thing these efforts need is a $90 billion gut punch of a tax. Concerning air transportation, the aims of the GSLTF could best be realised by supporting investments in SAF production so airlines can deliver prosperity by connecting people and businesses to global opportunities,” Walsh added.

Wole Shadare