A key element of the EU regulation concerns the carrying of kerosene on return flights from countries outside the European Union. Starting this year, airlines departing from the EU will be allowed to carry a maximum of 10 percent of the kerosene from their home country for the return flight. This regulation is intended to prevent so-called “fuel tankering” – a practice in which airlines fill up aircraft in non-EU countries to benefit from lower fuel prices and thus save costs. According to the regulation, the annual quantity of fuel delivered to an airport within the EU must cover at least 90 percent of the respective airline’s annual requirements.
The regulation aims to optimize fuel consumption and reduce unnecessary greenhouse gas emissions. According to the EU, so-called tankering leads to higher fuel consumption, as aircraft typically fly with more fuel than they need for the respective route. This not only leads to higher emissions but also to more inefficient flights, which runs counter to the Union’s environmental protection efforts.
Another reason for this measure is to promote fairer competition between airlines. Airlines based in countries with lower fuel prices could otherwise gain an unfair competitive advantage by meeting their fuel needs at a lower price and carrying unnecessarily more fuel on longer routes. This would exacerbate the competitive disadvantage for airlines operating in countries with higher fuel costs.
Reporting and proof obligations for airlines
The regulation requires airlines and their fueling providers to provide detailed documentation by March 31, 2023, at the latest. This documentation includes not only the quantity and origin of the kerosene used, but also detailed documentation of the fuel purchase. Airlines must provide, among other information, the name of the fuel provider, the quantity purchased in tonnes, the conversion process, and the lifecycle emissions of the SAF used. These reports must be verified by independent auditors to ensure proper compliance with the regulations.
In addition to providing evidence of kerosene transport, airlines must also document the use of sustainable aviation fuel (SAF). Since the beginning of the year, a minimum quota of two percent SAF has been in effect for all departures from airports in the EU. This quota will continue to increase until 2030, and synthetic fuels, so-called e-fuels, will also be mandatory in the future. The exact quantity and origin of the SAF used must also be documented in detail.
Penalties for non-compliance with SAF quotas
If airlines and refueling providers fail to meet the established SAF quotas, they face severe penalties. The regulation stipulates that in such cases, the refueling providers will be held primarily accountable, which in some cases could also affect the airlines themselves. The German Aviation Association (BDL) has already pointed out this development and criticized the additional financial burden that the new regulations could impose on the aviation industry. According to the BDL, compliance with the quotas could lead to a significant competitive disadvantage for smaller airlines that do not have the same financial resources as large corporations.
Another BDL demand concerns the financing of SAF quotas. The industry association proposes that passengers should be required to finance the more expensive sustainable kerosene alternatives through a levy across Europe. This should offset the higher costs incurred by airlines due to the mandatory use of SAF. This levy could help cover the higher production costs of SAF while ensuring fair competition.
Challenges for airlines
The new regulations pose several challenges for airlines. On the one hand, they must adapt to the amended regulations and provide the necessary documentation, which entails additional bureaucratic effort. On the other hand, the restriction on the carriage of kerosene also leads to a change in operational processes, especially on routes where “tankering” of cheap kerosene was previously a common business model. The SAF quotas that must be implemented could also pose a financial risk for smaller airlines if prices for sustainable fuels remain higher than for conventional kerosene.
Nevertheless, the new regulations also offer opportunities for innovation in fuel technology and aviation logistics. Some airlines may increasingly focus on developing their own SAF producers or partnering with major fuel suppliers to reduce the costs of sustainable fuels. The development of synthetic fuels, which may be more cost-effective and readily available in the future, could also represent a long-term solution for the aviation industry.
EU Regulation 2023/2405 presents the aviation industry with new requirements that bring both opportunities and challenges. While the limitation of fuel tankering and the introduction of SAF quotas are intended to encourage the aviation industry to become more sustainable, the financial and administrative burdens could put smaller airlines at a competitive disadvantage.
The coming years will show how well the industry is able to adapt to the new requirements while operating economically. What is clear, however, is that the aviation industry is facing a crucial phase in which it must reorient itself both ecologically and economically.
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