Air Malta says aviation fuel tax could destroy jobs as costs soar and prices rise

Taxing aviation fuel for intra-EU flights will negatively impact Malta’s economy, “destroy jobs” and put Air Malta at a disadvantage, the national carrier has warned.

Aviation fuel will become 90% more expensive to buy by 2033 if the current EU proposals are approved, the airline said on Wednesday.

Air Malta called for aviation fuel to remain outside the scope of the Energy Tax Directive, saying that preliminary costings showed that Malta, Cyprus and Iceland will be the worst affected.

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“A tax on aviation fuel will not result in a modal shift to another mode of transport but will merely have a negative impact on the Maltese islands’ economic and social cohesion while isolating the country,” Air Malta warned.

It added that as a peripheral country highly dependent on tourism, the imposition of a tax on aviation fuel will put Malta at a disadvantage with neighbouring leisure destinations outside the EU.

The directive proposed by the European Commission deals with various aspects and not just aviation fuel. The proposal is to introduce a progressive tax on aviation fuel supplied in the EU for intra-EU flights.

The tax will start from a minimum rate of 0% in 2023, gradually increasing by a yearly 10% to reach 100% over a period of 10 years.

Sustainable Aviation Fuels (SAFs) would benefit from a zero-tax rate to promote their uptake in the first 10 years. The taxation of fuel for cargo flights is optional and member states within the context of air service agreements could extend the taxation to non-EU flights. 

The proposal requires unanimous approval of all member states since it concerns taxation and talks at European Council level are expected to ramp up in view of the January 2023 target for entry into force of the directive.

Air Malta is warning that the imposition of the fuel tax on intra-EU flights only will lead to serious distortion of competition among carriers by putting at a disadvantage those which serve the intra-EU market only.

“Very hard hit will be the regional carriers, such as Air Malta, which provide the critical connectivity from the peripheries, outermost regions, islands, and small island member states to mainland Europe where they feed into the larger hubs to enable passengers to reach their destination or connect to the rest of the world,” the carrier said.

It noted that the extra costs will have a ripple effect on the economies of these territories, which are highly dependent on air transport for their connectivity.

“Air Malta is of the view that taxation is not the answer to aviation sustainability and the reliance on taxation as the solution for cutting aviation emissions in the EU’s ‘Fit for 55’ is counterproductive to the goal of sustainable aviation – a tax will merely siphon much needed funds from the industry that could support emissions reducing investments in fleet renewal, clean technologies and the transition to SAFs,” Air Malta said.

It called for the proposal on taxing aviation fuel to be replaced by production incentives for SAFs, which reduce emissions by up to 80% compared to the traditional jet fuel.

“Taxation will destroy jobs whilst incentivising the production of SAF will improve energy independence and create sustainable jobs,” the airline added.

The national carrier reiterated its commitment to achieve net-zero carbon emissions from its operations by 2050. Air Malta started the renewal of its fleet in 2018, moving from old Airbus A320ceo to greener A320neo and by 2024 the entire feel will consist of a single-type aircraft.

The airline said that with the deployment of the new energy-efficient aircraft, it will significantly reduce fuel consumption, CO2 emissions and noise footprint.