Show US the money

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This story is sourced from Flight International
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In its first ever issue dated January 2, 1909, Flight, that editorial repository of all things related "to the Interests, Practice, and Progress" of aviation, fairly brimmed with excitement as the new era of "aerial locomotion" dawned.

Nestled among reports of Wilbur Wright's Boxing Day attempt at the Michelin Cup and the first real exhibition in December of practical flying at the Paris Automobile Salon are brief announcements detailing the latest prize money available for early aviation pioneers.

One, the Loriet Prize, offered a 1kg (2.2lb) gold ingot to an aviator taking off from a Tarbes field in France and completing a 10km (5.4nm) journey. Another, the Dufayel Prize totalling FFr20,000, trumpeted that the reward would be increased by FFr5,000 should the airman "carry a lady passenger".

money money money
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Apart from being fascinating historically, this underlines how enterprising solutions to "the grave and serious problem of mechanical flight" were from their infancy wholly dependent on incentives from an external source.

There are no such prizes to meet the 21st century challenge. The only imperative is to meet the needs of an airline customer base struggling to cope with rocketing oil prices, a credit crunch and a green lobby that refuses to countenance any claim that air travel is far more efficient kilometre for kilometre than any other combustion-based transport technology.

The challenge a century ago was to achieve powered flight safely and reliably. The challenge now is to keep those aircraft airborne as cheaply and cleanly as possible.

So the news that Europe has only recommended that revenue raised from the auctioning process of the European emission trading scheme (ETS) "should" go towards funding clean aircraft research and development failed to excite the industry's R&D community.

Member states - as tax collectors - could instead express their green fiscal munificence by funding anti-deforestation measures in the developing world and general climate change alleviation projects - ignoring aviation.

British Airways's estimate that it will need to find an annual £200 million ($400 million) in the early years of the scheme indicates the level of cash going straight out of the industry and straight into the Exchequer's pockets - money that could have been established as a dedicated tax targeted at speeding up the retirement of old, less efficient aircraft.

POLITICAL MARKETING

Hypothetical dedication - effectively the political marketing of tax - has never been popular with politicians who live in fear of its primary attributes: transparency, independence and essentially freedom from their control.

At last year's Royal Aeronautical Society Greener By Design conference former UK transport minister Steven Norris, discussing whether it was regulation, market-based options or incentives that would accelerate a step change in aircraft performance, said all governments were sceptical about such specific earmarking for technological improvement.

"Despite the obvious appeal to industry, it should not expect any cash help. The last thing you do as a government is to legislate for technology. You do legislate, however, for technological outcomes," said Norris.

Dr Peter Liese, the European Parliament's rapporteur charged with steering ETS legislation through, says the money should be used to tackle climate change and not disappear somewhere into a general budget.

At the recent Transatlantic Aviation Issues conference in Brussels, Liese said member states would have a reporting obligation about where they directed the money. "If they do not spend to tackle climate change research and development, but spend it elsewhere, that would need to be addressed at International Civil Aviation Organisation level," he said.

European aviation is understandably cynical of the implied obligation for governments to plough back that money, given the move by Dutch and UK governments to introduce so-called environmental taxes on aviation that merely amount to administative opportunism.

Olivier Jankovec, director general of the Airports Council International in Europe, says the industry wants the wording of this particular aspect of the scheme to be much stronger. "It needs to unequivocally commit member states to investing the money made from auctioning into more research for sustainable aviation. It would be disappointing, demoralising and embarrassing if the EU let the ambitions of ETS get hijacked in the same way."

MONEY DRAIN

How much could be drained from the industry? The European Regions Airline Association says there will be a €7 billion ($11 billion) burden on European airlines over the first two years and €90 billion over the first 10 years.

While ERA decries the lack of what it believes is a thorough assessment of the scheme's economic and social impact, Europe maintains that the initial cost estimates are accurate and that they will be successfully borne by the customer, meaning air ticket hikes of €5-40 by 2020 depending on the length of the flight.

Others argue that the inclusion of the initial 15% auctioned allowances will increase the overall demand for emission credits by 25-40 million tonnes in 2012, driving up the price of carbon as a commodity and effectively pricing airlines out of the market.

Boeing is already forecasting environmental and fuel price pressures will take a greater toll on the in-service fleet, meaning that significantly more aircraft will be retired over the 20-year period than previously thought with most retired aircraft exiting in the first 10 years.

The risk of an airline industry hindered in its ability to invest in more fuel-efficient aircraft has also forced the global aerospace manufacturing base into action. At this year's Aviation & Environment Summit in Geneva the chiefs of Airbus and Boeing led a clarion call for governments to "do their part by supporting an appropriate regulatory framework, and ensuring sufficient R&D funding is available."

That was seen by some as a universal move to secure recognition that if there is ever a possibility of a globally effective emissions trading scheme, governments need to start thinking about a dedicated tax regime where airlines would be incentivised centrally to retire aircraft early.

As Rolls-Royce director of engineering and technology Colin Smith pointed out at a sustainable aviation summit at this year's Farnborough air show: "We are not asking for handouts, but give us some of the revenues to support our efforts in sustainable aviation. Governments need to open their eyes. They raise a lot of tax from airlines and should be investing some of that back into the industry."