Aviation sector faces up to sustainability challenge

The aviation industry has been and still is severely hit by the restrictive measures introduced during the pandemic. The current challenges facing the sector and its future prospects were the subject of a recent webinar held by the Italian Association of Risk and Insurance Managers (Anra) and insurance company AXA XL. The restrictive measures on mobility imposed to limit the spread of Covid-19 have brought to light the vulnerabilities of the unique European market and, in particular, the air transport sector. As reported by lawyer Pietro Nisi, partner at RP Legal & Tax, 2020 was the worst year ever for civil aviation, with global losses of $126.4bn. However, this crisis may represent an opportunity for the sector to address environmental issues related to the climate crisis, through the adoption of long-term sustainability measures. According to research from the University of Birmingham, the civil aviation sector still produces about 2% of total global emissions and 12% of emissions generated in the transport sector. Furthermore, CO2 levels of the average airline passenger are seven times that of a passenger in a car – 285 grams per km, compared to 42. Energy transition and the improvement of environmental sustainability are fundamental elements for the economic recovery of the aviation sector. Industry forecasts specifically indicate that improvement in technologies and engines would result in a 37% reduction in emissions, the use of sustainable aviation fuels would reduce it by 34%, and improvements in traffic management would reduce it by 6%. These forecasts have led European institutions to develop different strategies to achieve the objectives set by the European Commission’s (EC) Green Deal, which calls for a 55% reduction in emissions by 2030 and aims to make Europe the first carbon-neutral region in the world by 2050. For the transport sector, the EC issued the Sustainable and Intelligent Mobility Strategy, which sets intermediate milestones at ten, 15 and 30 years, so that each mode of transport can contribute to the ecological transition objectives. The measures proposed to achieve these objectives are: carbon pricing, meaning the attribution of an economic cost to CO2 as an incentive to monitor and reduce emissions; the reduction of emission quotas assigned to airlines as part of the European Emissions Trading System (ETS); the revision of the ETS Directive (Directive 2018/410/EU) to optimise the emissions trading system; and the promotion of the ReFuelEU Aviation initiative to encourage the production and dissemination of sustainable fuels. As for Italy, the country’s National Recovery and Resilience Plan allocates €25.4bn to the transport sector, of which almost all (€24.77bn) will be dedicated to investments in the railway network. The airline sector will receive only €110m, which will be divided into four actions: the use of satellite technologies and artificial intelligence to facilitate the decongestion of traffic in flight and on runways; the allocation of incentives for the use of sustainable fuels; the optimisation of communications between air navigation services providers; and the use of high-level automation technologies to promote security and cybersecurity in the operation of unmanned aircraft in the country’s airspace. This transition will have an impact on the insurance and risk management aspects of the aviation sector, as explained by Federica Bisetti, aviation underwriter at AXA XL in Italy. The increase in the complexity of risks will raise the likelihood of more expensive claims, and therefore of the exposure of insurers in terms of capacity. Furthermore, new technologies will reduce the reliance on historical and statistical data but will increase exposure in terms of cybersecurity.

Aviation sector faces up to sustainability challenge

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