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MarketScreener Homepage  >  Equities  >  Nasdaq  >  American Airlines Group Inc.    AAL

AMERICAN AIRLINES GROUP INC.

(AAL)
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Coronavirus redraws battle lines on airline emissions

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03/24/2020 | 06:00pm EDT
FILE PHOTO: American Airlines passenger planes crowd a runway where they are parked due to flight reductions to slow the spread of coronavirus disease (COVID-19), at Tulsa International Airport in Tulsa

European airlines crippled by the coronavirus have demanded lasting relief from environmental taxes - in a move that pits their immediate survival against longer-term emissions goals.

The looming tax tussle underscores shifting environmental battle lines and a broader question for governments injecting billions into their afflicted economies: Should bailouts come before climate objectives or rather be used to advance them?

The airline sector has been fighting a losing battle against tax in Europe. Governments have imposed new levies to slow growth in traffic and emissions, while the European Union plans to begin taxing jet fuel.

"This industry is going to have more taxes, not less taxes, and I think you all know it," top EU transport official Henrik Hololei told airline CEOs in Brussels this month.

"So you can indulge yourselves with a study of what it would be like if there were no taxes - but the reality is unfortunately much harsher."

That reality is being put to the test.

Within days of the meeting, the pandemic had dramatically worsened, forcing airlines to suspend most flights, lay off thousands of staff and seek government aid to avert collapse.

Besides public cash, airlines are pushing to defer or waive a swath of European taxes and duties.

"After the crisis we hope governments will understand that the fragility of this industry is due to low margins and heavy cost of capital," the head of the International Air Transport Association (IATA) said.

"And that it is not economically and financially wise to increase taxation on a sector that is structurally fragile and financially weak," Alexandre de Juniac told reporters.

BAILOUT CONDITIONS

With airlines at the front of bailout queues, green advocates fear climate action may lose momentum, just as it did after the 2008 financial crisis. Collapsed oil prices also work against pricier aviation biofuels.

Some are calling for aid to depend on emissions cuts.

"Public money should support the technologies of the future and not reinforce the mistakes of the past," said Andrew Murphy of Transport & Environment. The campaign group wants airlines to be forced to use more low-carbon fuel and pay tax on kerosene and international ticket sales, in return for bailouts.

"Airlines calling for public support in bad times should accept they need to start paying taxes in good times," he said.

U.S. Democratic lawmakers have also proposed requiring airlines to cut emissions by 25% within 15 years and 50% by 2050 in return for $40 billion in grants.

In Australia, any Qantas rescue would likely require faster progress on carbon, sources with knowledge of the matter told Reuters.

The coronavirus shutdown is likely to result in a full-year decline in emissions from aviation and other industries. Some experts say that could dilute public support for climate action.

CO2 BLIP

IATA said on Tuesday it now expects 2020 air traffic to fall by 38% before embarking on a recovery later this year. That could cut carbon dioxide emissions by several hundred million tonnes, based on earlier forecasts and data.

Any "short-term blip" in emissions should not prevent governments from using coronavirus stimulus to achieve longer-term reductions, Fatih Birol, head of the International Energy Agency, said in a recent commentary.

"Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them," Birol wrote.

Aviation emissions account for 2.5% of the global total but are expected to triple by 2050. Under a U.N.-backed scheme, the industry plans to use carbon offsets to counter their growth beyond 2020.

Airlines caught in the crisis remain determined to get a long break from taxes including the proposed European fuel duty. The region's carriers pay 6 billion euros ($6.4 billion) in annual tax, according to lobby group Airlines for Europe.

"We in Europe are worse hit than airlines in some other regions," said a government relations executive at a major European carrier, who declined to be identified.

The airline is pressing its government for a moratorium on new taxation, "in particular the tax being discussed within the European Green Deal", the executive said. "It could seriously weaken European airlines against the global competition."

The fate of European attempts to rein in airline emissions is among many such trade-offs yet to play out across economies ravaged by the coronavirus pandemic.

Policymakers need to "sit back, make the right choices and not lock in the fossil-fuel economy," said Laurence Tubiana, who helped broker the 2015 Paris Agreement as France's climate ambassador. "It's a make-or-break moment."

By Laurence Frost and Kate Abnett

Stocks mentioned in the article
ChangeLast1st jan.
AIR FRANCE-KLM 6.70% 4.364 Real-time Quote.-58.79%
AMERICAN AIRLINES GROUP INC. 16.16% 13.44 Delayed Quote.-59.66%
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BYD COMPANY LIMITED -4.30% 79 End-of-day quote.103.35%
DEUTSCHE LUFTHANSA AG 9.73% 9.316 Delayed Quote.-48.26%
EASYJET PLC 6.40% 691.6 Delayed Quote.-54.37%
HOPE, INC. 3.43% 3470 End-of-day quote.7.76%
JUST GROUP PLC -3.32% 49.84 Delayed Quote.-34.75%
LONDON BRENT OIL 0.00% 43.64 Delayed Quote.-36.11%
QANTAS AIRWAYS LIMITED 4.30% 3.64 End-of-day quote.-48.80%
RYANAIR HOLDINGS PLC 9.84% 11.83 Delayed Quote.-26.38%
SEEK LIMITED 2.04% 21.56 End-of-day quote.-4.39%
THE GLOBAL LTD. 2.84% 217 End-of-day quote.-53.93%
UNITED AIRLINES HOLDINGS, INC. 14.59% 36.37 Delayed Quote.-63.97%
WILL GROUP, INC. 2.87% 646 End-of-day quote.-48.40%
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Financials (USD)
Sales 2020 19 618 M - -
Net income 2020 -7 760 M - -
Net Debt 2020 29 976 M - -
P/E ratio 2020 -0,78x
Yield 2020 1,04%
Capitalization 6 829 M 6 829 M -
EV / Sales 2019
EV / Sales 2020 1,88x
Nbr of Employees 131 500
Free-Float 98,7%
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Technical analysis trends AMERICAN AIRLINES GROUP IN
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Mean consensus HOLD
Number of Analysts 20
Average target price 12,39 $
Last Close Price 13,44 $
Spread / Highest target 101%
Spread / Average Target -7,78%
Spread / Lowest Target -92,6%
EPS Revisions
Managers
NameTitle
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
David G. Seymour Senior Vice President-Operations
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP
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