The local media has been flooded with comments and declarations from tourism stakeholders’ representatives on the proposed EU rules intended to introduce a new taxation regime on aviation fuel.
As is often the case, however, we have not heard a single comment on the issue from official sources directly involved.
One wonders about the aim and official position of the European Parliament and the European Commission on the matter since, as usual, their respective representative offices in Malta act as if deaf and dumb despite the fat salaries.
It is particularly when aviation issues come to the fore that one becomes conscious of the fact that, despite all the loud claims as to the pivotal role of the aviation industry to Malta’s socio-economic well-being, Malta remains possibly the only country in the world without a civil aviation authority that would regulate the industry and bring under one roof all facets of Aviation Malta. In recent years, under both administrations, Malta has seen the setting up of hundreds of authorities or agencies large and miniscule but still lacks a civil aviation authority. My crusade on this issue has repeatedly fallen on deaf ears.
I endorse all the concerns expressed by stakeholder representatives that the new EU rules meant to introduce a tax on aviation fuel will lead to a disproportionate rise in the operating costs of flights between Malta and EU, whose destinations are the backbone of our tourism flows.
This even more so since we are witnessing a clear post-COVID development in which Italy has become our largest tourism source market, ahead of post-Brexit Britain.
The longer the flight distance the higher the fuel consumption and so the harder it is for Malta to penetrate lucrative winter-sun Nordic markets such as Sweden, Finland and Norway. A flat tax would be competitively neutral as it would impact all EU tourism destinations equally. A percentage tax regime would be to our disadvantage.
The case has been made that Malta did not take a strong enough position against the imposition of an EU-wide tax on aviation fuel at an early stage. This may be factually correct.
Stakeholder representatives, such as MHRA president Tony Zahra, have underscored that the hospitality sector is conscious of the climate challenge and is a strong believer in climate action both in terms of mitigation and adaptation. One should extol the efforts made by the hospitality sector to invest heavily in energy-reducing programmes and measures to reduce carbon footprints.
On the other hand, what have we, as a nation, especially as an aviation-dependent island, done to reduce greenhouse gas (GHG) emissions? Hand on heart, can we make a strong argument with Brussels that a derogation on an eventual aviation fuel tax for Malta is warranted?
Aviation is a primary polluter, at about 3.5 per cent of global pollution. Over the past 15 to 20 years, the global aviation industry has achieved massive reductions in emissions, to the tune of 25-30 per cent per flight, with aircraft engines that consume less fuel. And, yet, the percentage share of global pollution produced by aviation increases instead of decreases.
The paradox is simply that, ignoring a two-year glitch due to the pandemic, passenger numbers and flights operated continue to increase at a rate of eight to nine per cent per annum.
What have we, as an aviation-dependent island, done to reduce greenhouse gas emissions?- Alfred Quintano
The global aviation industry, under the stewardship of two mammoth bodies ‒ ICAO (a UN agency) and IATA (a global airline lobby group) ‒ is proud to be largely self-regulating.
Where industry self-regulation is deemed to be lacking, particularly at the local level as in Malta, supranational bodies such as the EU find fertile ground. In its Fit-for-55 process, the EU recognises that the quickest route to cut aviation fuel emissions is via the extensive use of sustainable aviation fuel, or SAF, a non-fossil jet fuel very similar to traditional fuel.
Longer-term solutions being actively researched by the aviation industry are hybrid electric aircraft and the use of hydrogen driven engines. SAF is the evident quick step forward if it were not for two crucial issues: limited supply and its price being three times that of fossil-based aviation fuel.
Notwithstanding, the EU has already mandated that, to slash aviation emissions by 55 per cent by 2030, a mix of SAF with fossil-based fuel of two per cent by 2025, rising in steps to 63 per cent by 2050, is the mandated step forward.
SAF is already available, albeit in limited stocks, in all major European airports, with Malta being a glaring exception. Aircraft departing Malta cannot use SAF simply because it is not available.
Moreover, the monopolistic aviation fuel supply situation at our one and only airport results in fuel rates being among the highest in Europe and also compared to our competing tourism destinations.
The industry globally is also pledging to cut down on GHG emissions produced by airport terminals and ground handling equipment via electrification.
It has been claimed that the imposition of an aviation fuel tax by the EU is “another tourism storm brewing on Malta’s horizon”. But there is a far worse tsunami that could be on Malta’s horizon.
Nothing has been said of the fact that, up till now, international air travel in the EU is VAT zero-rated whereas domestic air travel is VAT rated at the prevalent country VAT rate. For example, the current VAT rate in Italy is 22 per cent. It is, therefore, not surprising that a one-hour Rome to Milan flight is more expensive than a two-hour Malta to Milan flight.
Let us agree that the aviation industry is critical for Malta’s socio-economic development and that it should be given the attention that it deserves. It is not for the faint of heart and that is why when the going gets rough, the tough need to put all their forces together and get going.
Alfred Quintano is an aviation and tourism consultant and lectures aviation operations at MCAST.