Climate Ambition and Competitiveness: Getting Aviation Decarbonisation Right for Europe

Introduction

TUI embraces the ‘Green Transition’ and supports the EU Green Deal and the objectives of the Fit-for-55 package. Achieving climate neutrality is not optional – it is essential. But as Europe leads in aviation decarbonisation, we must also confront a hard truth: current implementation of the green transition weakens the global competitiveness of EU-based airlines and the tourism sector as a whole.

Aviation is central to Europe’s tourism economy, connectivity and trade. However, rising regulatory costs combined with an uneven global playing field threaten to shift emissions, passengers and business away from Europe, undermining both climate and economic objectives. A smarter more holistic policy approach is urgently needed to ensure the green transition strengthens rather than erodes the position of Europe in global aviation and tourism as a force for good.

European Airlines Face Unique Pressures

European carriers today operate in a highly competitive international market, but face an increasingly disproportionate regulatory burden compared to non-EU airlines. Several overlapping challenges result from this growing imbalance:

• Regulatory Asymmetry: EU airlines must purchase EU Emission Trading System (ETS) allowances for intra-European flights. In contrast, long-haul carriers from non-EU countries often face no equivalent climate-related costs, even when they compete on similar routes.
• The High Cost of Compliance: Sustainable Aviation Fuel (SAF) is a cornerstone of decarbonisation but it remains up to five times more expensive than conventional jet fuel. With ReFuelEU introducing mandatory SAF blending, EU carriers face soaring costs, while many non-EU carriers remain exempt.
• Technological Gaps: Long-term solutions like hydrogen and electric aircraft are still decades away from commercial viability. In the meantime, airlines must invest in costly interim solutions, without clear guarantees of technological readiness.
• An Uneven Competitive Landscape: Many non-EU carriers benefit from substantial state support and operate under looser environmental regulations. As a result, EU carriers face both higher costs and weaker access to investment capital, a disadvantage that could increase as climate regulations tighten.

Implications for Tourism and the European Economy

The consequences go far beyond the aviation industry. Tourism accounts for nearly 10% of EU GDP and relies heavily on air-connectivity, particularly to and from southern and island regions. As climate-related costs increase, leisure travellers, who are traditionally price-sensitive, may opt for non-EU destinations, or routes through non-EU hubs to save money.

This shift is already visible: a passenger flying from Stockholm to Bangkok will find cheaper options through Istanbul or Doha which avoid EU climate charges. This leads to both carbon and economic leakage: emissions are simply relocated rather than reduced, while Europe loses out on tourism revenue, jobs and investment.

Intra-European leisure routes are equally at risk. The SAF blending mandate applies uniformly within the EU and raising costs on high-volume leisure routes like Düsseldorf-Palma and Hamburg-Gran Canaria. Given the price sensitivity of holidaymakers, even modest increases in ticket prices can lead to a significant drop in demand, which impacts destinations that depend on tourism as a key economic driver.

A Holistic Strategy for Aviation Decarbonisation

Europe’s climate policies for aviation must be environmentally ambitious but also economically and socially sustainable. This means moving away from piecemeal regulation and towards a coherent coordinated policy mix that ensures fair competition, avoids leakage and supports investment.

Key recommendations include:

• A CBAM Tailored to Aviation: A Carbon Border Adjustment Mechanism (CBAM) for aviation, such as a SAF rebalancing charge, could level the playing field by ensuring that all carriers – EU and non-EU – face comparable climate costs on competing routes. Unlike the existing CBAM focused on goods, such a mechanism must reflect the unique dynamics of aviation.
• No Kerosene Tax: Taxing aviation fuel in Europe without global alignment would further tilt the playing field and incentivise traffic to flow through non-EU hubs, which would exacerbate carbon and business leakage. A new tax would come on top of existing EU and national financial burdens (i.e. national passenger taxes, the EU ETS, SAF requirements etc.) and would be likely to not be earmarked for decarbonising the aviation sector.
• Flexible, Technology-Neutral Targets: Policymakers must recognise that no single path to decarbonisation exists. Targets should remain open to multiple technologies and allow realistic timelines, while acknowledging that hydrogen and electric aviation are not near-term solutions.
• Dedicated Green Financing: The green transition requires public and private capital. The EU should step up support for SAF production, fleet renewal and sustainable infrastructure.
• Innovative Incentives: Financing tools like Carbon Contracts for Difference (CCfDs) and targeted instruments resembling tax credits can attract investment in emerging aviation technologies and bridge the cost gap for SAF.

Conclusion

Climate aims are not in conflict with competitiveness – they can be mutually reinforcing. However, this requires policies that are fair, feasible and globally coordinated. Europe cannot afford to pursue its climate ambition in isolation, especially in a globally mobile industry like aviation.

If implemented in a vacuum, today’s fragmented climate measures risk driving passengers, emissions and investment out of the EU. To avoid this, Europe must adopt a holistic approach – one that supports innovation, ensures a level playing field and protects tourism and air connectivity as engines of growth.

The future of sustainable aviation depends on more than environmental ambition – it requires strategic, balanced and globally informed policymaking.

Read the full Policy Brief on Carbon Leakage and Mitigating Measures for more information.