“CovidAir” ready for climate protection landing?

A case study of Austrian Airline’s CSR response referring to climate protection in relation to the COVID-19 pandemic

DIPLOMA THESIS

International Economic and Business Studies

Assoz.-Prof. Dr. Esther BLANCO Department of Public Finance The University of Innsbruck School of Management

Submitted by Ruth MACHREICH, BSc 01441696

Innsbruck, October 2020

Abstract In order to contain the outbreak of the COVID-19 virus borders were closed worldwide, forcing the airline industry to a global standstill. This study is a case study of Austrian Airline’s CSR response referring to climate protection in relation to the COVID-19 pandemic. Since the focus was on the Austrian Airlines, the Balance sustainability report of its parent company Lufthansa Group was examined for a qualitative content analysis. This included a closer look at the chapter on climate and environment and its most important environmental goals, initiatives and measures. The filtered out measures were further completed by the environmental measures, introduced by the Austrian government as a part of the COVID-19 financial rescue package for the Austrian Airlines, and the respective additions and changes were discussed. In addition, an expert interview with Ulla Rasmussen from the VCÖ was conducted and gives the opportunity to better classify the changes triggered by COVID-19 to improve climate protection inside the aviation. The linking of financial subsidies with ecological measures showed the commitment to climate protection and the awareness of both, the Austrian Government and the approving Austrian Airlines that an even more active role for climate protection and a sustainable aviation industry is essential today. Further, results show a concretisation of the ecological measures and clearer guidelines which must be pursued and achieved within a given timeframe so that, firstly, the financial subsidies do not have to be repaid and, secondly, the Austrian Airlines do not become state-owned. At this stage, however, it is not possible to make definitive statements on the overall impact of COVID-19 on CSR policies at the Austrian Airlines, as the global pandemic is not yet overcome. Table of Contents

Abstract

1 Introduction ...... 1

2 Literature review ...... 3

2.1 The impacts on health, society and economy of SARS ...... 3

2.2 COVID-19: Facts and insights ...... 6

2.3 Aviation industry: Its impacts and benefits ...... 8

2.4 CSR and COVID-19 in aviation...... 14

2.5 Lessons learned from past pandemics ...... 19

3 Methodology ...... 23

3.1 Content analysis ...... 23

3.2 Coding process ...... 26

3.3 Expert interview ...... 28

4 Results ...... 28

4.1 Sustainability conditions for Austrian Airlines defined by the government in the course of the COVID-19 pandemic ...... 28

4.2 Shifting short-haul flights to rail ...... 32

4.3 Reducing emissions and increasing fuel efficiency ...... 33

4.4 Voice and dialogue ...... 38

4.5 Sustainable technologies ...... 40

4.6 Further conditions ...... 41

4.7 Austrian Airline’s data on the second interim report 2020 ...... 45

Contribution ...... 47

Limitations ...... 47

Suggestions for future research ...... 48 Conclusion ...... 48

5 Bibliography ...... 50

Appendix ...... I

Affidavit ...... I

Expert interview ...... II

Factsheet Austrian Airlines ...... V

List of Tables

Table I: Data second interim report 2020 Austrian Airlines, Source: Lufthansa Group (2020), p. 17 ...... 45 Table II: Categories Environmental Management ...... VII Table III: Categories Fuel Consumption and Emissions ...... VIII Table IV: Passenger Transportation 2018 ...... VIII Table V: Categories Climate Protection, Technological Progress ...... X Table VI: Categories Climate Protection, Improved Infrastructure ...... XI Table VII: Project Profile, Network Collaborative Management ...... XII Table VIII: Categories Climate Protection, Operational Measures ...... XIV Table IX: Project Profile, Expanded Connex Info ...... XIV Table X: Project Profile, Optimised Filling of Fresh Water Tanks...... XIV Table XI: Project Profile, Development of Company Own Approaches Based on Most Modern Navigation ...... XV Table XII: Measures taken by the Austrian Airlines to reduce fuel consumption and thus CO2 emissions...... XV Table XIII: Categories Climate Protection, Economic Measures ...... XVI Table XIV: Categories Energy and Resource Management ...... XVII Table XV: Categories Active Noise Abatement ...... XIX

List of Figures

Figure I: Austrian aviation secures jobs, Source: Own presentation based on the factsheet of the Austrian Airlines attached in the appendix ...... 29 Figure II: Importance for industry and value creation, Source: Own presentation based on the factsheet of the Austrian Airlines attached in the appendix ...... 30 Figure III: Rescue Aid Package for the Austrian Airlines, Source: based on ORF.at (2020) 31 Figure IV: Direct and indirect CO2 emissions of the Lufthansa Group 2018 ...... IX 1 Introduction The Coronavirus Disease 2019 (COVID-19) outbreak has intensified the change in the aviation industry all over the world. The realisation that in times of climate change, unrestricted freedom in the air must be massively curbed is drawing wide circles. As greenhouse gas emissions from commercial aviation are rapidly increasing (Graver et al., 2019) flying will not be able to remain the mass phenomenon it has become. Nevertheless, more and more people are flying worldwide. An Environmental Awareness Study by the Umweltbundesamt (2019) in Germany found that in 2018, 4.3 billion passengers boarded an aircraft and that is more than ever before. Since the beginning of the 1990s, the number of passengers has more than doubled in a global context. Although the aviation industry regularly tries to reduce its share of global emissions, in Austria as well as globally, the studies shows that air traffic currently contributes 5–8% to the global climate impact (Umweltbundesamt, 2019). In an open letter, Austrian researchers address the federal government and note that the great crisis still lies ahead. Moreover they explicitly point out the urgency of seriously and consistently promoting climate neutrality by 2040 and demand that decisions have to be made now (Kaser & Kirchengast, 2020). The corona pandemic has shown that overnight transformational change is possible and it is an unprecedented opportunity to get away from unchecked growth and the old fossil fuel economy. Recent evidence declares that COVID-19, like other global events affecting the entire planet, could potentially change our view of the world, our way of thinking and our way of life (He & Harris, 2020). In an open letter to global leaders published by the Club of Rome, an association of experts from various disciplines in over 30 countries, it is argued that the recovery packages should include some strong economic incentives and conditions for companies and industries. They further call for a shift to a low-carbon, circular business model and point out, that the time to phase out fossil fuels and invest in nature and people is now and thus again demonstrate the urgency and topicality of this issue (Club of Rome, 2020).

COVID-19 brings the entire aviation industry to a standstill and entire fleets are worldwide remaining on the ground. According to Liu et al. (2020) it was the largest drop of emissions during the pandemic since the end of the Second World War, but quantitative analysis on the effects on energy use and CO2 emissions for all key sectors are still lacking. This finding is in compliance with Blachly (2020) who points out that with the impact of the novel coronavirus pandemic, averaging emissions data will result in a lower baseline than previously anticipated. 1 It is still unclear whether the virus and the associated reductions in emissions will be long- lasting, but He & Harris (2020) already state that regardless of the end of the pandemic, there will already be long-lasting and profound economic, social, political and cultural impacts.

The global network Stay Grounded, based in Vienna, suggests ten proposals (specified in 4.3) for concrete measures for the socio-ecological transformation of air traffic in view of the corona crisis. Furthermore, they demand that the government must invest in a climate-friendly restructuring of the transport system (Stay Grounded, 2020).

Corporate social responsibility (CSR) in aviation could become a further guarantee that the industry becomes more sustainable. Phillips (2006) examinations on CSR in aviation found that within the managerial world, corporate social responsibility is a subject of current interest. As there is no universal definition, he specifies it with the words “CSR is both the philosophy and practice of for-profit organizations voluntarily acting to positively assist society in ways beyond that required to obtain profit objectives” (Phillips, 2006, p.69). In addition can be seen that especially in recent years the importance of CSR in the aviation industry has risen. Along with the current climate change, the depletion of natural resources, human rights and environmental issues as well as fair trade, CSR policies are of more importance (Sheldon & Park, 2011). This new approach to business management puts society’s wellbeing first and economic development second. He & Harris (2020) investigated how this pandemic may affect the field of corporate social responsibility and noted that the current pandemic offers a wide range of significant opportunities for those who are more vigilant and astute about CSR. Pursuant to Karaman et al. (2018), one of the industries on the spot of sustainability research is the aviation industry. With the use of fossil fuels, hazardous emissions and the employment of large and diverse groups of employees, the aviation industry has a disastrous impact on the environment and as a consequence on human health. They state as well that “due to the international nature of the industry, these negative consequences are not limited to the home countries of the companies but also extend to other nations, eventually leading to global climate change” (Karaman et al., 2018, p. 363).

Due to the corona crisis and the resulting flight restrictions, airlines worldwide are facing financial problems. It is currently being discussed whether the financial subsidies of the respective states should be linked to socio-ecological conditions and whether the crisis should thus be taken as an opportunity to make air traffic more sustainable (Haße, 2020).

2 The present study, in which all data are based on the Austrian Airlines, a subsidiary of the Lufthansa Group, therefore proceeds in two ways: First, CSR policies described in the Balance sustainability report of the Lufthansa Group before and after the COVID-19 pandemic are examined. Thus, the impact of COVID-19 on the CSR policies at the Austrian Airlines is measured through a content analysis. Previous year’s initiatives regarding climate and environment protection are analysed and discussed with the new measures introduced by the Austrian Government as part of the COVID-19 rescue package for the Austrian Airlines. Second, an expert interview with Ulla Rasmussen from the Verkehrs Club Österreich (VCÖ) gives the opportunity to better classify the changes triggered by COVID-19 to improve climate protection inside the aviation. Thereby a case study of Austrian Airline’s CSR response referring to climate protection in relation to the COVID-19 pandemic is being conducted. The findings of these examinations will show the climate protection related changes caused by the pandemic in the aviation industry and might even go beyond the specific case of the Austrian Airlines, as it is a subsidiary of the Lufthansa Group.

2 Literature review 2.1 The impacts on health, society and economy of SARS In March 2003, the World Health Organization (WHO) issued a global alert about a deadly new infectious disease. Shortly after, the WHO named the disease severe acute respiratory syndrome (SARS). A few months later, by August 2003, the disease had spread to 29 countries and three regions, with a cumulative total of 8422 cases and 916 deaths. Back then the most severely affected areas were mainland China, Hong Kong, Taiwan, and Singapore (Siu & Wong, 2004).

The severe acute respiratory syndrome is an infectious disease that has been observed for the first time in November 2002, in the southern Chinese province of Guangdong. According to Siu & Wong (2004), the sudden outbreak in early 2003 started at that time in the Chinese province of Guangdong and was carried to Hong Kong. From there, SARS spread to other parts of the world, including Beijing and other parts of China. The SARS coronavirus is thought to be an animal virus originating from a previously unknown animal reservoir (perhaps bats) and is spreading to other animals (civet cats). In 2002, the virus spread to the first infected people in southern China. As the first pandemic of the 21st century, it aroused new fears among the population and was a warning example of the rapid spread of a disease in the networked, globalised world (Qiu et al., 2018). Siu & Wong (2004) therefore examined the economic impact of SARS in Hong Kong. They noted that the economic impact of SARS

3 on sectors such as consumption, tourism and travel-related services, as they were strongly affected by the negative demand shock, nevertheless proved to be relatively short-lived. Moreover, there was no evidence to indicate that SARS had negative effects on either domestic or foreign investment. Reflecting attempts by retailers, restaurants and others to persuade consumers to buy, the declines following the subsiding of the SARS outbreak were stronger than expected (Siu & Wong, 2004).

Qiu et al. (2018) have carried out a case comparison study and claim that epidemics such as SARS and H7N9 have a huge negative impact on the economy and public health and that SARS in particular has highlighted the global connectedness and the major threat of a potential pandemic. The aim of their study was to provide governments and practitioners around the world with a better understanding of how important improved management of the response to outbreaks of infectious diseases is for a country’s economy, its society and its place in the global community. Conducting a qualitative case study approach including literature review, document analysis, and in-depth interviews, their results show health, social and economic impacts of SARS in China in 2003. Health effects such as the infection of thousands of people caused widespread serious illnesses across a large population, and also many deaths. Furthermore, also the psychological impact of SARS was very serious. Distress was prominent among the groups of nurses who were working with patients infected with SARS, as well as studies showed that the SARS outbreak fostered negative impacts on people’s mental health.

As per Qiu et al. (2018), SARS caused - particularly in China - a very large impact on the society. Due to the lack of trustworthy official information, all kinds of rumours spread and aggravated the social chaos and panic. Among other things, the lack of understanding of SARS by the authorities or the media led to dissatisfaction among a number of experts and the health department was criticised for having concealed the situation of the SARS epidemic.

As the study carried out by Qiu et al. (2018) provided significant findings that SARS was a major public health crisis event in China and had a significant impact on health, society and the economy, the infectious disease SARS has exceeded the species limit for human infections. Also according to Wong & Leung (2007), the severe acute respiratory syndrome is a disease with pandemic potential. Their study examines the lessons learned from the spread of SARS in early 2003 in relation to avian influenza, which has been widely transmitted to

4 humans since 1997. Since 2003, there have been many small outbreaks of human cases worldwide with a reported mortality rate of over 50%. As with the outbreak of SARS, the development of sensitive and accurate screening tests is essential in avian influenza in order to successfully control the outbreak at source. The availability of isolation facilities, stockpiling of antiviral drugs and effective and safe vaccination are essential to minimise the damage of a new influenza pandemic. Furthermore, it is noted that the SARS outbreak has taught that effective isolation of infected cases and border control will be of paramount importance to minimise the impact of avian influenza or other viruses in human outbreaks (Wong & Leung, 2007).

These lessons can now be as well applied to the prevailing COVID-19 pandemic, as research carried out by Heymann (2004) already indicated parallels to it. He pointed out that SARS in 2003 was a new and poorly understood disease for which there was no vaccine or effective cure. The virus has had a negative impact on economic growth, trade, tourism, economic and industrial performance, political career and social stability in a closely intertwined and interdependent world. Another parallel to the dominant COVID-19 pandemic is that SARS has also highlighted some of the positive features of a globalised society: the benefits of rapid electronic communications and new information technologies in responding to emergencies and the willingness of the international community to form a united front against a common threat.

Y. Liu et al. (2020) examined the challenges and opportunities of a global health crisis regarding COVID-19 from an Asian perspective. They note that resilience is essential for effective crisis management and that adequate (and often new) organisational skills, innovation and entrepreneurship are needed to effectively seize the opportunities presented by a crisis. They declare the impact of resilience, strategic agility and entrepreneurship in the context of the fight against COVID-19:

i) Resilience for an from all Resilience is in great demand when unprecedented global health problems and major shocks occur. In dealing with a global health crisis, resilience requires not only psychological readiness, but also organisational support and preparation at the system level. Furthermore, they note that if people have the courage, willingness and ability to build and strengthen resilience and rebuild confidence in global health systems, they can as a whole become

5 stronger in the process of combating COVID-19 and introduce new standards for their organisations and societies.

ii) Strategic agility and organisational capabilities Strategic agility is critical for companies and organisations to successfully overcome major social challenges such as the prevailing COVID-19 health crisis. Flexibility and agility is as crucial as reinventing themselves with new strategies and business models. A focus should be on the creation of value for both, business and society just as on collaborating with the government to maximise the impacts of the various stimulus packages and crisis rescue schemes.

iii) Entrepreneurship and innovation for creative solutions In times of uncertainty related to the current global health crisis, it is important for entrepreneurs to offer creative solutions by bringing together the knowledge and wisdom of entrepreneurs and innovators across geographical boundaries. In particular, the crisis offers entrepreneurs new opportunities in various sectors - commercial, social and public - to find and create new ways to address the serious problems facing societies worldwide. International organisations around the world are currently in a race against time to find effective solutions to contain and defeat the spread of the virus. But despite its negative impact, the COVID-19 crisis offers a unique opportunity for entrepreneurs to find creative solutions for the benefit of individuals, organisations and society.

The conducted study by Y. Liu et al. (2020) with regard to the Asian area further found that “COVID-19 has accelerated two powerful trends for the future: the decoupling from China’s supply chains and the relocation of strategic manufacturing operations out of China” (Y. Liu et al., 2020, p.295).

2.2 COVID-19: Facts and insights Research carried out by McKinsey (2020) indicated that COVID-19 is foremost a global humanitarian challenge. Recent evidence suggests that public and private institutions invest in building a basic structure to drive basic resolution and resilience planning. The focus is on the continued protection of people (including workers and customers), the stabilisation of the supply chain and on ensuring sufficient cash and liquidity. In addition, some governments and companies are also beginning to look at what a return to work might look like. This return,

6 according to McKinsey (2020), depends on a number of factors:

• Ensuring that the local region is ready for a new start from a public health perspective • Assessment of the timing of the return of demand • Verifying that the nerve centre has an appropriate strategic focus in the form of a “Plan Ahead” team

To plan and manage COVID-19 responses and in order to facilitate the planning of the return to work, McKinsey (2020) proposes leaders to think and act across the following five horizons that could also be considered for the aviation sector:

1. Resolve “Address the immediate challenges that COVID-19 represents to the institution’s workforce, customers, technology, and business partners” 2. Resilience “Address near-term cash management challenges, and broader resiliency issues during virus- related shutdowns and economic knock-on effects” 3. Return “Create a detailed plan to return the business back to scale quickly, as the virus evolves and knock on effects become clearer” 4. Re-imagination “Re-imagine the “next normal” - what a discontinuous shift looks like, and implications for how the institution should reinvent” 5. Reform “Be clear about how the regulatory and competitive environment in your industry may shift”

The most affected sectors by COVID-19, based on their average stock price change, were according to McKinsey (2020) the commercial aerospace (-40%), air & travel (-36%), oil & gas (-34%), insurance carriers (-22%) and the automotive sector (-21%). The basis for a new beginning in all sectors listed above could be the lessons learned from other countries and recent innovations such as strict rules on social distancing, drive-through tests, off-the-shelf medicines to treat mild cases or telemedicine assisted home care.

7 Likewise, previous studies have shown that even before the WHO declared COVID-19 a global pandemic, Asia-Pacific policymakers began to provide fiscal incentives to save the aviation industry, which had virtually ground to a halt during the crisis due to the many closed borders and travel restrictions (Y. Liu et al., 2020).

2.3 Aviation industry: Its impacts and benefits An Environmental Awareness Study by the Umweltbundesamt (2019) examined that social awareness of the need for increased environmental and climate protection has grown strongly in recent years. Subsequently the aim among fliers to reduce their carbon footprint is lately noticing a growing interest. Several studies (Graver et al., 2019; Karaman et al., 2018; Kemp & Vinke, 2012) have shown that the aviation sector is a major contributor to the emissions of greenhouse gases and therefore their direct environmental impacts require reporting. A study on aviation and global climate change (Lee et al., 2009), points out that traffic emissions contribute to the radiation forcing (RF) of the climate. Not only carbon dioxide (CO2) emissions are important to consider, also emissions of nitrogen oxides (NOx), aerosols and their precursors (soot and sulphate), which at cruising altitudes are, among other things, responsible for the formation of contrails. It has to be noted that if the global aviation industry were treated as a nation, by 2015 it would have been the sixth largest source of carbon dioxide (CO2) emissions from energy consumption, emitting more than Germany (Air Transport Action Group [ATAG], 2019; Graver et al., 2019).

As in recent years, emissions from aviation have become the focus of increasing scientific interest, previous research by Vedantham & Oppenheimer (1998) have examined the long- term scenarios for aviation and further presented a dynamic system model for the models of demand in the aviation sector as well as the resulting CO2 emissions and NOx. To this end, they analysed the dynamics of demand growth in air transport, particularly in the emerging markets of developing countries. Furthermore, they present a model for subsonic air emissions that reflects the impact of industry projections on improving fuel efficiency and emission indices, and projections of global economic and population growth over the next century. Using the long-term model, they produce a series of projections of demand for air transport services, fossil fuel consumption and emissions of carbon dioxide (CO2) and nitrogen oxides (NOx) up to the year of 2100.

8 Vedantham & Oppenheimer (1998) indicate that from an aviation perspective, the atmosphere can be divided into three altitude zones:

1. The boundary layer 2. The upper troposphere and 3. The lower stratosphere

Due to the fact that the aviation sector is currently the only human-made producer of emissions in the upper troposphere and stratosphere, the depletion of the stratospheric ozone layer by chlorofluorocarbons (CFCs) and related chemicals has underlined the importance of addressing other potential damage to the ozone layer. The study points out that carbon dioxide (CO2), water vapour, nitrogen oxides (NOx), carbon monoxide, hydrocarbons, sulphur dioxide, sulphate particles and soot are emitted by aircraft at all altitudes and are explained in the following by Vedantham & Oppenheimer (1998):

Boundary-layer emissions: During take-off and landing, an aircraft emits emissions into the boundary layer, which is on average about one kilometre high in the mid-latitudes. When exposed to sunlight, the emitted gases react with other components of the atmosphere to form ozone and a variety of other compounds that create smog. Emissions from aircraft during take-off and landing are regulated in many countries (e.g. under the Clean Air Act in the USA); emissions at cruising altitude are not currently regulated.

Upper tropospheric emissions: In the upper troposphere, ozone acts as a potent greenhouse gas, so that any additional source is of interest from a climatic point of view, since the apparent build-up of ozone in the upper troposphere may have significantly enhanced the anthropogenic greenhouse effect of CO2 and other gases. Furthermore, anthropogenic NOx emissions at cruising altitudes may be more efficient than NOx emitted near the ground.

Stratospheric emissions: The troposphere and stratosphere are separated by the tropopause, which varies in altitudes from about 9 to 17 km. It acts as an invisible barrier to the vertical movement of gases. Since subsonic aircraft often fly in the stratosphere, they emit NOx and other gases directly into this

9 region. If NOx is emitted in the stratosphere, it can lead to increased or decreased ozone concentrations depending on altitude and latitude. Water vapour, sulphur dioxide and sulphate particles can also have important effects on the ozone content of the stratosphere, since ozone acts in the lower stratosphere as well as a greenhouse gas that affects the earth’s heat radiation balance.

Vedantham & Oppenheimer (1998) indicate to consider that the environmental effects of NOx emissions can be significantly different in the lower stratosphere than in the upper troposphere and the altitude of the tropopause varies considerably depending on latitude and season. For this purpose, a much more detailed analysis of the altitude effects as well as future flight paths and seasonal factors will be required to determine the exact environmental impacts. Moreover, the distribution of emissions in certain areas of the globe also needs to be further investigated. Additionally, their findings at that time were that proactive limitation of emissions from aviation at this stage will further reduce the risk to the global environment, while allowing more flexibility to deal with all sources of climate change and ozone depletion in the future. Thus, policies that facilitate the rapid spread of aviation improvements could also accelerate the improvement of engine efficiency and the reduction of fleet-wide NOx emissions (Vedantham & Oppenheimer, 1998).

For reasons of climate protection, the international aviation industry is increasingly required to present its emissions and environmental pollution transparently. This is why airlines use corporate sustainable responsibility (CSR) reports in which they publish their data and targets on an annual basis. Previous research on CSR in the US travel industry (Sheldon & Park, 2011) found that the travel industry is highly dependent on environmental and cultural resources and therefore in many countries the main drivers of CSR are environmental degradation and climate change. Inter alia, they draw attention to the fact that some sectors in the travel industry (e.g. airlines, ground transport and tour operators) are, due to their high consumption of fossil fuels, more critical to environmental problems than others (e.g. accommodation, travel agencies and restaurants). According to Lee et al. (2009), the air transport is a unique sector as, unlike other sectors, most of its emissions are injected at cruising altitudes of 8-12 km directly into the upper atmosphere, where they have an increased effectiveness to cause chemical and aerosol effects relevant to climate forcing. Based on current climate forecasts, climate protection is playing an increasingly important role in the global economy, irrespective of the sector. Business activities that are congruent

10 with sustainability principles are now part of the mainstream of business strategy and have become an important concern of companies and their stakeholders worldwide. In further consequence, CSR has become an inescapable priority for business leaders (Kramer & Porter, 2006).

Previous research by Gössling & Peeters (2007) analysing industry discourses on tourism, air travel and the environment shows that a substantial part of the population in Europe seems to be well informed about the phenomenon of climate change. However, there seems to be uncertainty about the seriousness of the situation, its consequences for society and the measures to be taken to prevent a “dangerous disruption of the climate system”. In particular, the strong growth of air traffic raises the question of the environmental awareness of air travellers and knowledge of environmental problems related to air travel. There are just a few studies confirming this, but awareness and knowledge in industrialised societies seems to be low.

Gössling & Peeters (2007) claim that in aviation, the fastest growing transport sector, a “psychology of denial” seems to be particularly pronounced. Thus they seek to understand this phenomenon by analysing the discourses surrounding air travel in their paper and identified four major industry discourses:

1) “Air travel is energy-efficient. Globally, it accounts only for marginal emissions of CO2”

A critical analysis shows that statements made by the aviation industry are a discourse, as the facts are often simplified or appear to be wrong for many reasons. One reason why facts appear incorrect is that emission comparisons are often made with small cars to show that energy use is low. In addition, the industry comparatively often uses examples of aircraft that do not have the highest fuel efficiency. Again, energy consumption seems to be lower. Gössling & Peeters (2007) conclude that the figures demonstrated by the aviation industry do not adequately reflect the environmental performance, efficiency and sustainability of air transport. Further, they criticise that figures are used to underline that air transport is no significant contributor to climate change and that the environmental impact of aviation on climate change is trivialised.

11 2) “Air travel is economically and socially too important to be restricted”

The consequence of environmental considerations would be restrictions on air traffic. Arguments often used by the aviation industry to demonstrate their importance are the relevance of economic growth and turnover, the impact on employment or the cultural exchange and “world peace”. Although air transport creates jobs and economic growth, the environment pays a high price in the long-term. Moving forward, the number of jobs in the aviation sector needs to be seen in comparison to jobs in other traffic sectors. In terms of the relevance of global and cultural exchange, not all cross-cultural contacts will have “positive” results and thus, there are reasons to caution about all too optimistic views on the cultural dimension of air travel (Gössling & Peeters, 2007).

3) “Environmental impacts exist, but technology will solve the problem”

According to Gössling & Peeters (2007), another argument is that of technological achievement. The environmental impact is generally acknowledged by the industry, but at the same time it is pointed out that technological improvements have already contributed to significant efficiency gains and future technologies will solve the remaining problems. That argument ignores that relative efficiency gains have decreased over time and that the projections given by the industry are optimistic. Fuel consumption per passenger kilometre would have to be reduced by 80-90% to make the sector sustainable. This cannot be achieved with current aircraft flying at high cruising speeds and at high altitudes. Sometimes alternative fuels are presented as a future solution to the problem, although the industry itself is not seriously engaged in developing this kind of technology (Holden & Høyer, 2005). Although biomass is available in large quantities worldwide and is a renewable resource, its extensive use would lead to an unacceptable increase in the ecological footprint, as it would require huge areas of land for production. Through a combination of more efficient resource use, substitution by less polluting fuels and less transport, the long-term sustainability goals can be achieved (Holden & Høyer, 2005).

4) “Air travel is ‘treated unfairly’ in comparison to other means of transport”

In terms of “unfair treatment” it has to be noted that there is no tax on aviation fuels while there are various taxes on fuel for private transport, and usually, though not always, public

12 transport as well. In addition, a value added tax (VAT) is levied on most international rail and bus tickets, while international air travel is exempt from VAT. Another inadequate comparison is the one of air transport with rail transport, since, for example, the European high-speed rail system is profitable. However, as rail transport systems accumulate losses over short distances and especially in rural areas, state subsidies in these areas are necessary to maintain public transport systems. Equally, air transport itself is often subsidised. For example, governments in many countries have invested considerable sums in national airlines. Gössling & Peeters (2007) conclude that the internalisation of environmental costs remains insufficient for all transport modes and further state that the significant misrepresentation of data by the aviation industry and its lobby organisations could serve the purpose of establishing the image of a “green”, economically and socially important industry. To a certain extent, the industry even takes the position of a victim of deliberate government policy, whose development is being hindered. The apparent lack of public awareness of the environmental impact of aviation could therefore be due to the fact that the aviation industry puts itself in a good environmental light. Indeed, their findings showed that the considerable discrepancy between the discourses and the reality of the environmental performance of air transport could partly explain the public’s controversial understanding of air transport and its environmental impact.

With regard to the advantages that aviation has over other transport sectors, it should be mentioned that there are numerous tax exemptions in favour of aviation, which, among other things, make flying often very cheap. He & Harris (2020) stated that kerosene taxation remains an unpopular measure for the aviation industry. Its prospect has led to some disagreement among some ICAO Member States, although the European Union considers taxation to be a viable mitigation option and most studies on taxation or charges conclude that emission savings could be achieved by reducing demand.

In its report “Klimafaktor Reisen”, the Austrian association for traffic VCÖ criticises the subsidisation of air traffic and notes that although air traffic causes high environmental and social costs, flying is practically tax-free in many parts of the world. The low taxation of kerosene, the abolition of ticket taxes and value added tax give climate-damaging air traffic a competitive advantage over rail. They mention as well that there is still a great need to improve international rail connections in Europe, in order to create attractive offers for both, holiday and business travel (VCÖ, 2020a). The VCÖ (2020e) further points out that alone in

13 the previous year the tax concessions for airlines in Austria amounted to more than 500 million euros, because kerosene is not taxed as highly as Eurosuper. Therefore, they call on the Austrian Federal Government to intensify its efforts for the rapid introduction of a kerosene tax at EU level.

Particularly in the wake of the current COVID-19 crisis, the call for the rapid introduction of a kerosene tax at EU level is becoming louder and louder. The fact that in the previous year the indirect support for air traffic in Austria amounted up to 560 million euros, because kerosene, unlike diesel and petrol, does not pay mineral oil tax, underpins this demand. Similarly, it is noted that air travel is practically untaxed today, and that due to the ecological cost honesty the ticket prices should naturally increase. A possible model of an “individual CO2 allocation” is proposed, which would also result in a “flight quota”. This should also allow low-income earners to travel by plane within certain limits set in the fight against global warming. Beyond these limits, prohibitive prices would then be payable (VCÖ, 2020d).

2.4 CSR and COVID-19 in aviation Due to the enormous environmental pollution caused by air traffic as described above, the aviation industry is forced to deal with the issue of corporate social responsibility (CSR) even more than many other industries. Previous studies conducted by Cowper-Smith & De Grosbois (2011) found that within the tourism industry, the aviation industry has received remarkable attention from both, the public and the scientific community, because of its role in tourism development and its significant environmental and social impact. Therefore, there is a growing interest in the scale and effectiveness of airlines’ efforts to mitigate their negative impacts and contribute to sustainable development. Cowper-Smith & De Grosbois (2011) define CSR as an evolving concept relating to the ethical behaviour of a company towards society.

The study carried out by Cowper-Smith & De Grosbois (2011) examined the corporate social responsibility (CSR) reports published in 2009 by airlines on the basis of a qualitative content analysis. Their findings showed that airlines tend to focus on environmental issues rather than on the social or economic dimensions of CSR. Of the seven major environmental issues examined (emissions, waste, energy, water, biodiversity, noise and other environmental initiatives), emission reduction programmes were predominant. Moreover, they found four social and economic results, such as employee wellbeing and engagement, diversity and social equity, community wellbeing and economic prosperity. For the airlines examined, their

14 investigation revealed a generally high level of commitment to achieving the main objectives within the CSR area. In conclusion they state that research on CSR efforts in the aviation industry is limited and usually on a high level. Cowper-Smith & De Grosbois (2011) expect that research in this area will increase and for that their study serves as a basis.

Dahlsrud (2008) recognised that the confusion of definitions in relation to CSR could pose a significant problem, since if competing definitions have diverging biases, people will talk about CSR differently and thus prevent productive engagement. To make things clear he conducted a study and analysed 37 CSR definitions through a review of literature to examine how corporate social responsibility is defined in existing definitions. The analysed definitions originated by 27 authors and covered a time period from 1980 to 2003, although most of the definitions were published from 1998 onwards. The definitions were mainly of European and American origin, but some definitions from India and Canada were also included. When conducting a content analysis of the definitions, it became clear that many of them refer to the same dimensions of CSR. After developing a coding scheme, the phrases referring to the same dimension were grouped together. In this coding process, five dimensions that were used consistently in the definitions were identified and named to reflect the content of the phrases: The environmental, the social, the economic, the stakeholder and the voluntariness dimension. Moreover, frequency counts from Google of all definitions referring to a specific dimension were added up and the relative usage of each dimension was calculated. This has made it possible to examine how CSR is defined in existing definitions.

The following is a list of five definitions that have according to Dahlsrud (2008) the highest frequency counts from Google. Furthermore, the source of the definitions and the dimensions into which each definition has been categorised are shown.

• Definition by the Comission of the European Communities, 2001 : “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” Frequency counts: 286 Dimensions: Voluntariness, Stakeholder, Social, Environmental, Economic

15 • Definition by World Business Council for Sustainable Development, 1999 : “The commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.” Frequency counts: 180 Dimensions: Stakeholder, Social, Economic

• Definition by World Business Council for Sustainable Development, 2000 : “Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.” Frequency counts: 156 Dimensions: Voluntariness, Stakeholder, Social, Economic

• Definition by the Comission of the European Communities, 2001 : “Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.” Frequency counts: 134 Dimensions: Voluntariness, Social, Environmental

• Definition by Business for Social Responsibility, 2000: “Business decision making linked to ethical values, compliance with legal requirements and respect for people, communities and the environment.” Frequency counts: 131 Dimensions: Voluntariness, Stakeholder, Social, Environmental, Economic

During the examination of 37 CSR analysis by Dahlsrud (2008), the environmental dimension received a significantly lower dimensional ratio than the other dimensions. A related reason could be that the environmental dimension is not explicitly included in the definition, although it is considered as a part of CSR. This is particularly evident in the World Business Council for Sustainable Development (WBCSD), which distinguishes between "corporate social responsibility" and “corporate environmental responsibility”. The WBCSD issues two definitions of CSR, none of which includes the environmental dimension (World Business Council for Sustainable Development, 1999, 2000). However, in deepening CSR, the

16 environmental dimension and the social dimension are equally emphasised. This shows that all dimensions are necessary to understand how CSR is defined. The analysis also points out that there is a 97% probability that at least three of the dimensions are used in a random definition. The specific definitions differ slightly in terms of the dimensions they use, but they do not seem to do so systematically. It is therefore not possible to divide the definitions into different schools of thought and this shows that the five dimensions are used consistently in the definitions. Although many definitions use different wording, they are mostly congruent, which makes the lack of a single generally accepted definition less of a problem than it might seem at first sight (Dahlsrud, 2008).

A recent study conducted by He & Harris (2020) provides an initial examination on how the COVID-19 pandemic may influence the developments of CSR. They discuss, among other things their ideas on how this pandemic could affect the field of corporate social responsibility, as well as its impact on the possibilities and trends in CSR and consumer ethics. They noted that many companies have fought against unethical business practices during this crisis, but have also been proactively involved in various CSR activities, especially those that can provide immediate help and support in the fight against the virus. In a broader sense, the pandemic also offers great opportunities for companies to actively participate in their CSR strategies and programmes in the future. Also governments around the world have put together economic aid packages to reduce the forthcoming pressure, especially on the most vulnerable companies, thus encouraging them to maintain ethical business practices and fulfil their CSR obligations towards their various stakeholders. They point out that on the one hand, however, companies may be deterred from investing in CSR because they need to focus on their core operational activities in order to survive in the short- term. On the other hand, history has shown that shifts in environmental forces (e.g. the oil crisis in the 1970s) have facilitated the development of CSR in the long-term. According to He & Harris (2020) it would be essential that more and more companies recognise the importance of the balance between profitability and harmony and thus investment in CSR for successful long-term growth. For them, the more relevant and urgent question is not if but how companies can invest in CSR and thus achieve mutually beneficial and interdependent social, environmental and economic objectives. Because, they state, the pandemic teaches us that “we are all in this together”, people’s expectations of companies to act in a more socially responsible way will increase. Then the thriving businesses in the post-pandemic period will be those with strong CSR commitments, effective CSR strategies and efficient

17 implementation. Through closer scrutiny of consumers, greenwash, pinkwash and lip service will not be viable in the long run. Conclusively it is noted that the COVID-19 pandemic offers significant opportunities for businesses to shift towards more genuine and authentic CSR and contribute to address urgent global social and environmental challenges (He & Harris, 2020).

As the outbreak of the coronavirus not only had an impact on the development of CSR, but also had a significant impact on human mobility on a global scale, it caused a crisis among international airlines (Mhalla, 2020). The International Air Transport Association (2020a) compared the air travel demand in China with previous years and stated that the demand declined by 40% by the end of January 2020. Moving forward it is noted that this downtrend is expected to continue in the next six months in case that previous trends prevail (IATA, 2020b).

Recent evidence suggests that, among the restrictive measures, the suspension of air traffic, while quite effectively reducing mobility at global level in the short-term, also has a high socio-economic impact in the long and short-term (Iacus et al., 2020). These long and short- term impacts are classified into four different types of impacts: the direct-, the indirect-, the inducted impact and finally the tourism catalytic. Therefore, Iacus et al. (2020) explain these different types of impacts as follows:

• The direct impact “is about the overall economic activity, jobs creation that directly serve passengers at airlines, airports and air navigation services providers” • The indirect impact “concerns the employment and economic activity generated by suppliers to the aviation industry: aviation fuel suppliers, etc.” • The inducted impact “is the spending of those directly or indirectly employed in the aviation sector supports additional jobs in other sectors such as retail outlets, companies producing consumer goods and a range of service industries” • Tourism catalytic “is related to air transport activities that affect multiple sectors of the economy, especially tourism and its value chain (hotels, restaurants, etc.).”

The aim of the study of Iacus et al. (2020) was to analyse the impact of travel ban on the aviation sector and they found that flight ban affects all of the mentioned above in the long and short-term. Mhalla (2020) also noted that a major impact on flight operations has been

18 identified. As a result, many flights in global air transport have been cancelled either by the airlines themselves or as a result of the closure of airports or routes by the authorities. These measures have a clear impact on the aviation industry as well as indirect consequences for sectors such as tourism, the economy as a whole and society (Iacus et al., 2020). Given that the tourism sector accounts for 10% of global GDP, the coronavirus pandemic threatens up to 50 million jobs in the global travel and tourism sector, with Asia likely to be hardest hit. Further it is estimated, that once the outbreak is over, it could take up to 10 months for the industry to recover (Faus, 2020).

Iacus et al. (2020) illustrates the current impact of the unprecedented COVID-19 crisis on air and travel and states that the initial demand shock was worse than after the 9/11 attack or the financial crisis in 2008. Furthermore, there were capacity reductions in April from 70% to 80% and flights to and from Europe, Middle East and Africa were among the hardest hit. A decline in demand for air travel is estimated at 31% to 45%, with the pre-crisis status quo being restored over a period of one to two years. The study provides initial thoughts on developments after the global health crisis: The convergence of remote working technologies as well as biosecurity issues and sustainability concerns could structurally shift the demand curves downwards in the future. Further, government interventions as part of the economic stimulus packages, to ensure that there is no liquidity crisis, could have an impact on the structure of the sector, as increasingly involved interventions could have an impact on strategy and operations (e.g. equity investments, conditions for support). Also the low oil price expectations in the short-term could reduce operating costs what could also affect the leading market for aircraft in the next step (McKinsey, 2020).

2.5 Lessons learned from past pandemics Past research conducted by Mhalla (2020) reported on lessons from the pandemic influenza A(H1N1) and the perspective of the research-based vaccine industry has been examined. It is noted that in June 2009, the WHO declared the first influenza pandemic in over 40 years. Consequently, the emergence of this new influenza virus triggered a robust and rapid response from public health partners around the world, including the research-based vaccine industry. Many aspects of the undertakings and the resistance to the virus were very positive, but Abelin et al. (2011) indicated that there is room for improvement despite the scale and speed of the response to the 2009 pandemic. Their lessons, which can also be applied to the prevailing COVID-19 pandemic, are explained below:

19 • Record levels of preparedness Extensive preparations to combat future influenza pandemics by public health partners and vaccine manufacturers over many years have accelerated processes, without which the response in 2009 would not have been possible. This clearly shows that the preparations for pandemics must continue to be given high priority.

• Scientific and technical collaboration With regard to collaboration, the spirit of voluntary cooperation and flexibility between partners in the health sector should be further developed to strengthen sustainability in this specific area. Likewise, industry scientists should continue to work closely with colleagues in the WHO network to improve virus yields and provide materials for vaccine standardisation, as well as sharing methods for the rapid development of high-yield reverse genetics vaccine virus strains.

• Vaccine safety monitoring The implementation of the previously established surveillance plans has confirmed the rapid confirmation of the safety of A(H1N1) vaccine. Therefore, future preparedness efforts should focus on ensuring vaccine safety through the use of flexible and efficient surveillance systems.

• Technical enhancements Systems that would allow the WHO network to evaluate several vaccine viruses in parallel and select those with optimal growth characteristics would both speed up and increase vaccine supply. Consequently, the introduction of alternative technologies to standardise vaccines, such as HPLC or mass spectrometry, could also allow earlier clinical trials and vaccine availability.

• Enhancing decision-making processes Assessments of the likely course and impact of future outbreaks could be underpinned by rapid pandemic-epidemiological research capacity. Subsequently, this could contribute to policy-making and improve the modelling of vaccine demand.

20 • Pre-establishing supply agreements At the time of the outbreak of the A(H1N1) pandemic, many countries did not yet have agreements on the supply of vaccines, so that complex negotiations had to be conducted in parallel under massive time pressure. Appropriate agreements prior to a pandemic would prevent this situation from arising and support health authorities and manufacturers in logistical planning.

• Streamlining regulatory processes Some regulatory procedures introduced to speed up the evaluation of pandemic vaccines have worked well, while others have led to duplication of work and additional bureaucracy. In particular, the recognition of existing regulatory approvals and increased cooperation would speed up the supply of vaccines while maintaining robust safety standards.

• Regional collaboration Although the occurrence of the first pandemic in decades offered a number of opportunities for supranational cooperation, these were not taken advantage of. For example, European- wide efficacy studies were not centralised and coordinated with European safety studies. Furthermore, the need to improve regional capacities for virus surveillance and epidemiology, especially in developing regions like Africa, was strongly emphasised.

• Overcoming communications challenges For the first time, modern electronic communication played an important role during a pandemic, as the new channels accelerated and extended communication. However, the dark side of modern communication was the rapid spread of unscientific and unbalanced information, which may have increased public concern about a pandemic vaccine. In the future it will therefore be important to use new communication approaches to address vaccine safety concerns and increase public confidence. Furthermore, new approaches should be used to convince people at risk of the importance of the vaccination.

As far as the aviation industry is concerned, a look at the past shows that before the COVID- 19 pandemic, SARS was the most serious epidemic affecting traffic volumes in recent years. In May 2003, at the peak of the outbreak, the monthly RPKs of Asia-Pacific airlines were approximately 35% below their pre-crisis levels. The loss of confidence and fear of global spread affected both, business and leisure travel in 2003, causing Asia-Pacific airlines to lose

21 8% of annual RPKs and $6 billion in revenue. Then again, the avian influenza epidemics of 2005 and 2013 had much milder and short-lived effects, and as fears of a global spread of the virus subsided, air travel recovered rapidly. However, in the case of MERS influenza, which was more concentrated in one single country, the first effect was a sharp slowdown, i.e. a 12% drop in monthly RPKs after to, from and within South Korea in the first month of the outbreak. Thus air travel volume began to recover after two months and had returned to pre- outbreak levels within six months. The aviation industry has proven to be resilient to shocks, including pandemics, in the past. Even during the outbreak of SARS, monthly international passenger volumes returned to pre-crisis levels within nine months. The very strong growth of the Chinese aviation market in recent years shows that 450 million more passengers fly to and from China every year compared to ten years ago. There is a risk that the COVID-19 outbreak could cause significant disruption, but any impact on air traffic in the past has been temporary (International Air Transport Association, 2020b).

22 3 Methodology The aim of the present case study is to identify the impact of the COVID-19 crisis on corporate social responsibility (CSR) policies at the Austrian Airlines. Especially the climate protection related changes in response to the pandemic are in the foreground. The case study examines the Austrian Airlines, as the current public finance debate - with the view to possible nationalisation - between the airline and the state gives a new weighting to environmental policy objectives. The environmental and climate aspects are filtered out of the Balance sustainability report published by the Lufthansa Group (2019). As Austrian Airlines is a subsidiary of this group and does not publish an annual CSR report itself, all data in the report also refer to their environmental goals and measures. The CSR goals and measures are therefore the same for all subsidiaries of the Lufthansa Group, but what influences the results of this case study are the different CSR responses of the individual airlines to the COVID-19 pandemic. For this reason, the Austrian Airlines (2020a) press release is used to ensure a specialised analysis. To provide a further insight into Austrian Airlines’ figures for the first quarter of 2020, the second interim report from the Lufthansa Group (2020) is also explained and analysed in a subsequent section.

According to McKinsey (2020), the Lufthansa Group, whose subsidiary Austrian Airlines is the focus of this study, is taking the lead in the threat of a global pandemic. The German airline wants to consolidate its position as far as possible in order to withstand the global crisis. It has therefore announced a recruitment freeze and several administrative measures to cut spending. In the following, the investigations of this study provide more detailed insights into the current situation and the impact of COVID-19 on the Lufthansa subsidiary Austrian Airlines.

3.1 Content analysis The content analysis conducted in the present study was based on Mayring (1994). The systematic, rule-guided approach to text analysis is the central characteristic of content analysis and Mayring (1994) builds it up on the following four fundamental principles:

1. The step-by-step approach to analysis is mentioned first. The procedure follows a pre- defined process model in which the decisive steps are described; this makes content analysis inter-subjectively comprehensible and distinguishes it from more open procedures of free text interpretation.

23 2. The most important instrument of content analysis is its categories. In the category system, the aspects to be evaluated in the material are operationalised and with them, the material is worked through. The category system should be as theoretically well founded as possible and, if feasible, allow clear material allocations. This central assignment process of material components to categories is called coding.

3. The content analysis units are also determined in advance. A distinction is made between three units in particular: - The analysis unit determines which text parts (words, sentences, paragraphs, pages, cases) are coded one after the other. - The coding unit determines what is the smallest material component that may be evaluated that can fall under a category. - Finally, the context unit determines the largest text component that can fall under a category.

4. Lastly, the evaluation of the analysis results on the basis of quality criteria is a central feature of content analysis procedures. Since the beginnings of modern technology development, the reliability of inter-coders has always been a top priority: the analysis is performed by several evaluators independently of each other, and an index is calculated to determine the degree of agreement of the results. Moreover, in classical content analysis, construct validity, i.e. above all the theoretical foundation of the category system, is of great importance. In qualitatively oriented content analysis, further quality criteria are discussed, such as argumentative generalisation, communicative validation and triangulation.

Surveys such as that conducted by Vimal & Subramani (2017) state as well that there are three different approaches to content analysis: the conventional approach, where coding categories are derived directly from data. The directed approach, where the analysis starts with a theory or existing knowledge as a guide for initial codes. And lastly, the summative approach which includes counts and comparisons and is usually based on numbers. They further mention that regardless of any approach used in the study, it is imperative to develop categories, codes or themes for the analysis.

24 Abernethy (2000) points out two major advantages regarding content analysis. The first advantage is that it is an unobtrusive and nonreactive measurement technique. The second advantage allows for a large amount of data to be coded for qualitative analysis. These advantages are also relevant for the present analysis.

According to Polit & Beck (2004) content analysis does not proceed in a linear fashion, because it is less standardised and formulaic, more complex and difficult than quantitative analysis. Stated by Weber (1990) content analysis is very flexible and that is why the researchers must judge what variations are most appropriate for their problems and concerns. This flexible and self-constant procedure makes the analysis process most challenging and interesting although an enormous amount of work is required during the process (Polit & Beck, 2004).

Earlier studies (Weber, 1990) also found that one of the characteristics of content analysis is that many words of the text can be divided into much smaller content categories, and this was also done in this study and can be seen in the appendix starting on page VII.

According to Mayring (1994), three basic forms of interpretation can be distinguished: Summary, explication and structuring. These are three independent analytical techniques that should not be understood as steps that are performed one after the other. Rather, it is important to select the appropriate analysis technique depending on the problem and material. Based on the available material, the structuring was chosen for this study. In structuring, the aim of the analysis is to filter out certain aspects of the material, to create a cross-section through the material under pre-defined order criteria, or to assess the material on the basis of certain criteria. The content structuring was chosen and the material on specific topics and content areas was extracted and summarised. In the structuring, various subgroups were distinguished and the main category system was determined in advance. Thus, deductive category formation was used in the prefabrication of the main categories in this study. In the next step, the structuring dimensions were broken down into individual characteristics and further differentiated. The dimensions and characteristics were then combined into a category system. The coding system will be described in further detail in the following section.

25 3.2 Coding process In this study, the coding process organises the qualitative data including open coding and creating categories. Pandey (2019) defines coding as a process of breaking down the text into manageable and meaningful units that assist in answering research questions or objectives. In the view of other studies and regarding to other research fields (e.g. marketing, sociology) no common ground could be established. For this reason, the first step was to develop a categorisation matrix to code the data into categories. The categorisation matrix was based on the study of Cowper-Smith & De Grosbois (2011), who also used the indicators “Themes, Goals and Initiatives” in their category system and was further complemented by two further indicators called “Measures and Savings”. The developed matrix attempted to break down the major categories, under which the text had to be analysed, into smaller categories. It was specially tailored to the existing topic areas regarding environmental and climate aspects that were filtered out of the Balance sustainability report published by the Lufthansa Group (2019). Further, each topic area was examined and analysed for the categories and subcategories created and these were filled with the appropriate content. At this point the categories were freely generated and the analysis was applied in a deductive manner, through moving from the general topic area to the specific goals, initiatives and measures. Recent evidence explains that “The deductive approach to content analysis is a top down approach that works with existing framed and theoretically rooted constructs and theories that guide data analysis; whereas inductive approach is a bottom up approach that develops constructs and theories, which later might have a link with existing literature” (Pandey, 2019, p. 147). According to this statement and also according to the study of Cowper-Smith & De Grosbois (2011), the deductive approach was considered more suitable in the present study.

The aim of grouping the data was to reduce the amount of text without reducing the content and to combine those passages that are similar in context and meaning. “Creating categories is not simply bringing together observations that are similar or related; instead, data are being classified as ‘belonging’ to a particular group and this implies a comparison between these data and other observations that do not belong to the same category” (Dey, 1993, p.111).

According to Weber (1990) the deductive analysis process has got three stages to get completed: preparation, organising and reporting. The preparation begins with the determination of the analysis unit. The researcher needs to know what is to be analysed in what detail, and whether the unit of analysis is a word or a topic (Polit & Beck, 2004). This

26 should further not lead to a fragmentation. Despite this, there are no systematic rules for analysing data; the key feature of all content analysis is that the many words of the text are classified into much smaller content categories (Weber, 1990).

To carry out a content analysis, the data is organised in tables. Each table represents a topic area, which is named the same like the individual chapters in the climate and environment section in the Balance sustainability report of the Lufthansa Group (2019). These five topic areas are the following:

- Environmental Management - Fuel Consumption and Emissions - Climate Protection - Energy and Resource Management - Active Noise Abatement

The topic areas were further divided in up to five (depending on how many measures are taken) categories. The names of the categories resulted on the one hand from the information given in the text and are on the other hand based on the study of Cowper-Smith & De Grosbois (2011). They are shown below. These categories were then filled with content regarding their topic areas, taken from the corresponding chapters of the Balance sustainability report.

- Goals - Initiatives - Measures - Savings

The tables should gain a complete impression of the Lufthansa Group’s CSR goals, initiatives, measures and savings and therefore all tables are shown in the appendix starting on page VII. Microsoft Excel (2019) was initially used for the evaluation, later the data was implemented and presented in Microsoft Word (2019) for graphical representation.

27 3.3 Expert interview An expert interview was conducted to give the opportunity to better classify the changes triggered by COVID-19 to improve climate protection inside aviation industry. Ulla Rasmussen from the Verkehrs Club Österreich (VCÖ) was chosen to be the expert. As Rasmussen is responsible for the theme field energy, climate, resources and health at the VCÖ, the interview assists among others to better classify the environmental measures for the Austrian Airlines that were demanded by the Austrian Government in the course of the financial support. A structured interview with open questions was carried out and the questions were, due to the current COVID-19 situation, sent in written form via e-mail to the expert. Rasmussen received ten questions in a specific order, however she was free to decide in which order the questions would be answered. To enable an individual answer, the expert had the possibility to answer the questions without any predefined response options. This opened up a further horizon of questions and allowed the expert to express her assessment without being influenced by possible answers in advance. Likewise, there were no restrictions or hints on the length of the answer. The three-page interview with Ulla Rasmussen referred to in this case study can be found in the appendix on page II to IV.

4 Results 4.1 Sustainability conditions for Austrian Airlines defined by the government in the course of the COVID-19 pandemic Due to the global corona virus crisis, the Austrian Federal Government, the Lufthansa Group and the Austrian Airlines have agreed on key points for a financial COVID-19 aid package amounting to 600 million euros for the domestic network carrier Austrian Airlines. As according to the Austrian Federal Economic Chamber, 2.7 billion euros of domestic value added, 17500 jobs and 1 billion euros in taxes and duties are linked to the Austrian Airlines and its hub function. Therefore, the financial aid should support the Vienna aviation hub with its connections to Central and Eastern Europe (CEE) and long-haul routes to be secured in the long-term.

According to Julia Kraft, Manager for International and Environment Affairs of Austrian Airlines in an email, the COVID-19 crisis has shown how important an airline is for tourism and the economic power of a country. Besides, she added that the greatest contribution to crisis management is not made by the state, but by the 7000 employees and workers. She further backed up her statement with the factsheet of the Austrian Airlines, in which the most important key facts about the Austrian Airlines and its importance for tourism and economic 28 power as of March 2019 are listed. Among other things, it shows the areas in which the Austrian aviation sector secures jobs. All data shown below was extracted from the factsheet of the Austrian Airlines, which is attached in the appendix on page V and VI, as well as from a press release from the Austrian Airlines (2020a).

Austrian Airlines Aviation in Austria

- 7083 employees, which is about 1/3 - 23600 direct jobs: people directly of the aviation direct employees employed in air transport (including - 54 apprentices airlines, airports, air traffic control) - 55% men - 22900 indirect jobs: employees of 45% women companies that provide "intermediate - 58 nations services" for air transport (including catering)

- No. 1 business location Vienna International Airport: largest employer in Eastern Austria

Figure I: Austrian aviation secures jobs, Source: Own presentation based on the factsheet of the Austrian Airlines attached in the appendix

A second table is intended to reflect the importance for industry and value added in Austria on the basis of the figures published by the Austrian Airlines. This confirms the statement made by Julia Kraft in her e-mail, that the crisis in particular has shown how important an airline is for tourism and the economic power of a country.

29 Austrian Airlines Aviation in Austria

- 6250 suppliers, thereof 1700 in - 4.6 billion direct production value Austria - 4 billion in total economic value - 1.6 billion in spending on suppliers, added (about 1.4% of Austria's gross 40% of which is in Austria value added) - 29% of total expenditure relates to - 50% of the value of domestic exports fees are transported by air freight - 60000 tonnes of freight, of which 56% is intended for export

Figure II: Importance for industry and value creation, Source: Own presentation based on the factsheet of the Austrian Airlines attached in the appendix

The importance for tourism of Austrian Airlines is shown by:

- GO WEST: Only Austrian Airlines connect the USA (six destinations) non-stop with Austria - FOCUS ON CEE: Austrian serves 35 cities in Central and Eastern Europe - FAR EAST: With Austrian nonstop to China, Japan and Thailand - 155000 Travellers come annually to Austria with Austrian from North America - myAUSTRIAN HOLIDAYS: 61 holiday destinations from Vienna and the provinces - AIRail: Innovative train and flight cooperation from Linz and Salzburg to Vienna

As part of the financial rescue package, the Austrian Airlines will receive a 150 million euros subsidy from tax money and 300 million euros in the form of a loan, 90% of which is secured by the Republic of Austria. The Austrian Airline’s parent company Lufthansa is investing a further 150 million euros. If the airline is unable to repay the loan, the - then insolvent - Austrian Airline and its non-leased aircrafts become the property of the state. However, there will be no state participation in Austrian Airlines or its parent company for now (ORF.at, 2020).

30 Rescue Package Austrian Airlines

150 million € Equity subsidy republic Austria 600 million €

150 million € 300 million € Equity subsidy Bank loan, 90% state guaranteed

Figure III: Rescue Aid Package for the Austrian Airlines, Source: based on ORF.at (2020)

150 million euros are provided by the Republic of Austria to cover damages resulting from the COVID-19 crisis. In return, the government receives long-term, bindingly secured location commitments that are tied to strict ecological measures. This financing package is depending on the state support for the Lufthansa in Germany, the approval of all bodies and the approval of the EU Commission. The location requirements also aim to enable Austrian Airlines to reposition itself in the wake of the global COVID-19 crisis and thus generate sufficient funds to repay the loan.

In the following, the individual measures agreed between the Austrian Government and the Austrian Airlines as part of the financial rescue package are described and analysed. In addition, the measures are discussed on the basis of various media reports and the expert interview conducted with Ulla Rasmussen from the VCÖ.

31 4.2 Shifting short-haul flights to rail In 2014, the cooperation project “AIRail” between the Austrian Airlines and the Austrian Federal Railways (ÖBB) was launched and passengers were able to shift their short-haul flights between the Vienna Airport and Linz Central Station to rail (Austrian Airlines, 2014). In the fall of 2018, the Vienna - Linz connection was finally removed from the Austrian Airlines timetable, as the route had been loss-making for years. Since then, up to 16 trains run daily from Linz Central Station to Vienna Airport and back (ORF.at, 2018). Due to the climate debate, the Austrian Airlines were already considering the possibility of cancelling all short connections within Austria sooner or later in 2019. According to the Austrian Airlines CEO Alexis von Hoensbroech at the end of 2019, there will be no more Austrian Airlines flights from Salzburg - Vienna in a few years (ORF.at, 2019).

Due to the outbreak of the COVID-19 crisis in the first quarter of 2020 and the measures adopted as part of the financial rescue package, the Austrian Government demanded the immediate cancellation of the short-haul flights Salzburg - Vienna. As part of the rescue package, the Austrian Airlines will therefore shift their short-haul flights to the railways, provided that an adequate infrastructure is available and direct access to the Vienna Airport is guaranteed in less than three hours. However, it is intended to ensure that all provincial capital airports remain connected to a Lufthansa hub.

The emphasis of this required measure is clearly on climate protection, as according to the Federal Environment Agency, 719.5 grams of greenhouse gases per passenger kilometre are caused by a domestic flight in Austria, which is 50 times as much as a train journey. In addition, fuel consumption is very high during take-off and climb, which is particularly noticeable on short-haul flights, both domestic and to neighbouring countries. For this reason alone, the reduction of short-haul flights plays a central role (VCÖ, 2020b). Ulla Rasmussen responded the question in the interview whether the cancellation of short-distance flights would have also occurred without COVID-19, as this was already an issue raised by the Austrian Airlines itself even before the pandemic, that the step to actually officially cancel all these very short distance flights within Austria would probably not have been taken without the bail-out package from the Austrian Government. Further, she noted that the more competitive train connections are (time, money, comfort) the more likely it is that people will prefer trains to airplanes. In return, the tourism spokeswoman of the SPÖ (Social Democratic Party of Austria) criticises the discontinuation of the Salzburg - Vienna short-haul route with

32 the Austrian Airlines. She is in favour of resuming the flight connection, as this is very important for Salzburg as a location for business and tourism. According to her, it would make perfect sense and give a boost to the ailing tourism industry (Salzburger Nachrichten, 2020). Nevertheless, many passengers had already shifted from flights to trains on fast connections such as Vienna - Salzburg or Vienna - Linz. As a result of the conditions of the Covid-19 rescue package, AIRrail is also running between Vienna and Salzburg in the meantime (Grün, 2020). VCÖ (2020e) announces the potential for shifting short-haul flights to the railways as great and the investments to improve night train connections are considered positive. Finally, the climate crisis can only be overcome if air traffic is limited to an ecologically compatible level. In the future, Europe needs a much more climate-friendly travel behaviour than before the COVID-19 pandemic, and this can only be achieved with more rail- and less air traffic (VCÖ, 2020d). Moreover, the “1-2-3 Ticket”, which will finally be put on track with an additional 240 million euros in 2021, is proving to be a major milestone in this area. With this ticket limited to Austria, it is possible to travel for one year with all public transport in one federal state for one euro (365€), in two federal states for two euros (730€), and in all federal states throughout Austria for 3 euros (1095€). In addition, 500 million euros will be invested in new and comfortable night trains. Here, according to climate expert Heinz Schellhorn, the big wheels are turned and massively reversed (Hodoschek, 2020a).

4.3 Reducing emissions and increasing fuel efficiency At the end of the year of 2019, the Austrian Airlines announced in a press release that it intends to grow in a CO2-neutral manner starting next year. The airline has committed itself to this in the context of the so-called “CORSIA* agreement”. From 2021 onwards, CO2 emissions from international air traffic are to be offset by investments in climate protection projects (Austrian Airlines, 2019). However, in the wake of the corona crisis, some targets were accelerated because they were demanded as part of the Austrian Government’s COVID- 19 rescue package. Newly introduced measures with a focus on sustainability should firstly halve domestic CO2 emissions by 2030 and secondly reduce CO2 emissions by 30% by 2030 compared to 2005. The Austrian Airlines therefore undertake to increase its fuel efficiency by 1.5% per year and to reduce the average CO2 emissions per 100 passenger kilometres across the entire Austrian fleet from 9.55 kg to 8.5 kg by 2030. In doing so, they place clear emphasis on climate protection and try to make air traffic more environmentally friendly piece by piece.

33 Responding the question whether the now adopted climate protection measures by the Austrian Airlines are sufficient enough to make an appropriate contribution to the pan- European and Austrian goal of halving CO2 emissions by 2030, Ulla Rasmussen from the VCÖ answered, that there are still some open questions. For example what kind of advanced biofuels will qualify, or what the statement means that this is only the case if it is possible without economic disadvantages. According to Rasmussen, it is very likely that the details are such that the measures are mainly voluntary rather than efficient. Another thing, she says, is that it depends on which emissions the airline is referring to - intra-European aircraft emissions are covered by the ETS, the rest are not part of the European targets. In his article Grebenjak (2020) states that the aviation industry regularly tries to reduce its share of global emissions, both at the global level and as well in Austria. According to the Umweltbundesamt (2019), its share is currently around 5-8% of the greenhouse gases emitted. Since in addition to CO2, which is even more harmful at higher altitudes, other substances emitted by aircraft such as nitrogen oxides and water vapour also contribute to global warming, he adds that the amount of CO2 emitted during a flight must be multiplied by two to five times, depending on the type of aircraft, route and altitude, to arrive at the total climate impact. In order to achieve a better CO2 balance of air traffic in the medium-term, Rasmussen demands a stop to the free allocation of emission rights. Furthermore, a reduction of these allowances would be demanded, which is in line with the goal of limiting global warming to 1.5 degrees. She also expects a European introduction of a kerosene tax with a CO2 element. Likewise, she added that in case airlines choose advanced biofuels or synthetic fuels, regulation would have to be safeguarded in so far as the standards for biofuels could not be more lax than those in the Renewable Energy Directive.

With a view to this, the VCÖ (2020c) points out, that Austria emitted about three million tonnes greenhouse gases last year, and that is more than ever before. This means that the emissions have increased by about 14% compared to 2018. However, the global COVID-19 crisis has reduced air traffic by about 90%. With regard to possible state aid to the Austrian Airlines because of the crisis, this should be linked to a right to a say and to clear ecological criteria. In addition, the existing tax exemptions for air transport should be abolished (VCÖ, 2020c). But the EU Commissioner for Transport, Adina Vălean, had spoken out against such instruments in an EURACTIV interview. The Commissioner did not specifically refer to the Austrian plans, but generally spoke out against green conditions in the corona of state aid for airlines, claiming that one should be careful when talking about investing in green measures

34 while companies are facing bankruptcy. She added that she would not necessarily support tightening these conditions now that aviation is one of the most competitive industries and it is a fact that it is needed (Grün, 2020). According to Lukas Hammer, member of the national parliament and spokesperson for climate protection and energy, such statements are irresponsible and the commissioner is thus undermining the commission president’s green deal. According to him, it is counterproductive to invest in climate protection with one hand and do something in the opposite direction with the other (Grün, 2020). Julia Kraft, Austrian Airlines Manager for International and Environmental Affairs, states that the Austrian Airlines are involved in several research projects in the hunt for more sustainable fuel. For example, since 2018, a cooperation with OMV, Austria’s largest oil and gas company, has been running in which plastic is reprocessed into oil. The airline is also working with several scientific stakeholders in Austria on research into synthetic fuels. She also emphasised that the Austrian Airlines would like to fly with alternative fuels, as this could reduce CO2 emissions by up to 80%. However, too little is still being produced, only 0.1% of the worldwide kerosene demand could be covered by biofuels and the production of synthetic kerosene is currently still in the research stage (Grün, 2020).

Although air travel accounts for only about three percent of the European Union’s total CO2 emissions, the industry is still considered a problem child of environmental policy. Although emissions have been significantly reduced in recent years through more efficient aircraft technology - fuel consumption per passenger fell by almost a quarter between 2005 and 2017 - the number of flights is rising sharply at the same time. The European Commission estimates that by 2040 the volume of air traffic could increase by 42% compared to 2017. In order to comply with the Paris climate agreement, the aviation sector will have to decarbonise almost completely over the next 30 years to become climate-neutral. Since neither hydrogen nor electrically powered aircraft are technologically mature, there is still a lack of alternatives. The European Union is primarily focusing on liquid biofuels and e-fuels, i.e. fuels generated by renewable electricity. Both can reduce the greenhouse gas emissions of an aircraft by more than 80%, but so far they account for only 0.05% of the European market. Without help from politicians, the meagre share of sustainable fuels would increase to just 2.8% by 2050, the EU Commission estimates, noting that the aviation sector lacks immediate alternatives for powering commercial aircraft (Schulz, 2020).

35 Rasmussen stated in the conducted interview that most of the airlines follow the energy and climate debates and notice that it is getting ever closer to the aviation industry to consider reducing the emissions. Due to the now implemented measures because of COVID-19 and the will to their realisation over the years, the Austrian Airlines show an understanding for the urgency of reducing fuel consumption and emissions and this demonstrates the company’s will to make significant cuts in this area. The commitment to protect the climate and build on a more sustainable and environmentally friendly future is thus communicated.

An article published in the German edition of LE MONDE diplomatique, explains the results of the group Supaéro Décarbo, which is working for a more environmental friendly air traffic. The results are clear, namely that aviation is one of the few sectors for which there is no carbon-free technological alternative in the short or medium-term. According to them, this sector will therefore inevitably fall victim to the transition to a low-carbon economy. Sooner or later this will affect many workplaces, work areas and companies and postponing this point in time will only increase the shock (Descamps, 2020). The Supaéro report lists all the options for reducing the climate-damaging effects of air transport: Electrification of the vehicle fleet on the ground, replacement of turbine aircraft by propeller aircraft for regional airlines, fuel transport restrictions and optimisation of flight routes. However, the calculations do not add up, explains Pascal Schmidt, an engineer for information technology and robotics. Since the analysis shows what contribution technology can make, it also shows where its limits lie. According to him, it becomes clear that sustainable growth cannot work in the long-term. The author also makes clear that the desire to fly less and more environmental friendly is something very European. In the USA or South America, for example, there is no other way to travel than to fly. The current health crisis makes the damage caused by mass tourism even more obvious and brings it back into people’s consciousness. It is noted that we must therefore not return to the growth of the past, but rather think about a change. To this end, public aid should create incentives for innovation and change, rather than promising a cure (Superaéro Décarbo & The Shift Project, 2020).

In Austria, more kerosene was filled up in the previous year than ever before and the greenhouse gas emissions from aviation have thus risen to a record level of almost three million tonnes (VCÖ, 2020b). Kaser & Kirchengast (2020) point out that the scientific facts are much clearer on climate change than on the corona issue. According to the scientists, the next five years are the period that will determine the future of humanity. Through consistent

36 climate protection measures, the climate crisis can now be mitigated to such an extent that we can avoid major and irreversible changes and their catastrophic consequences. It is therefore necessary to push ahead with climate neutrality until 2040 and thus above all to decide on the long-term future of Austria. They demand that decisions have to be taken now and demand that the support now planned as a result of the COVID-19 crisis will be linked to clear climate protection goals. Their demands include binding targets for the short-term reduction and medium-term phase-out of greenhouse gas emissions, as well as the expansion of climate- neutral and greatly reduced-emission public, local and long-distance transport, fossil-free individual and freight transport and the reduction of short-haul flights. In accordance with the demands of the scientists, the network Stay Grounded (2020) also proposes the ten following measures in connection with state aid for Austrian Airlines:

1. Abolition of domestic flights 2. Discontinuation of all short-haul flights to neighbouring countries 3. State participation only with active participation 4. Ban on the distribution of dividends 5. Corporate strategy for decarbonisation in line with the 1.5 degree limit 6. Work Foundation for a just transition 7. Introduction of a kerosene tax 8. Introduction of a progressive frequent flyer levy 9. End of the sales tax exemption for tickets 10. Introduction of an industry collective agreement and legal provisions against dumping prices

The environmental organisation Greenpeace describes the package concluded between Austrian Airlines and the Austrian Government as a “climate policy crash landing”. According to Greenpeace, the measures do not go far enough, as the aim is not to replace old aircraft with new ones or to save a few percent of CO2, but to introduce an immediate ban on short-haul flights, as well as to promote cost truth through kerosene tax and investments in climate-friendly instead of climate-damaging mobility. Fridays for Future is also sharply critical, as the rescue is being carried out without being tied to a new corporate strategy that is in line with the Paris climate goals. Although the environmental protection organisation Global 2000 considers this to be a first step in the right direction, it nevertheless calls for more far-reaching measures such as the increased expansion of the railways and the reduction

37 of tax privileges for air travel. Global 2000 calls for a rapid resumption of the work on an eco- social tax reform that began in February (ORF.at, 2020).

According to Stay Grounded (2020), the aviation industry has made massive profits in the recent decades with growth rates far above average at the expense of the climate. Already today, air traffic, including the non-CO2 effects, is responsible for 5-8% of climate warming. An article that declares why rich people use so much more energy explains that the richest 10% of the world’s population uses 75% of the energy used in air transport (Roberts, 2020). According to the study by the VCÖ (2020d), one third of the population in Austria never flies, and only one sixth of the population flies several times a year. Furthermore, it is estimated that only between 5-20% of the world’s population has ever flown in an airplane and mostly even among those who do fly a small percentage takes the bulk of flights (Stainforth, 2019).

Since, according to the VCÖ (2020e), the lack of a kerosene tax in Austria promotes air traffic with several hundred million euros per year. In addition to the state aid to the Austrian Airlines, a stronger commitment of Austria to the rapid introduction of a kerosene tax at EU level and the expansion of the railway network in Europe is demanded.

4.4 Voice and dialogue In order to supervise compliance with all measures imposed by the Austrian Government in the wake of the crisis, the Österreichische Beteiligungs AG (ÖBAG) gets the first time the opportunity to appoint two persons to the Österreichische Luftverkehrs-Privatstiftung (ÖLP), the majority shareholder of the Austrian Airlines (via the Austrian Air Transport Holding). Thus, they now ensure a better insight into internal matters of the Austrian Airlines. Moreover, one of these two persons will also receive a seat on the Supervisory Board of Austrian Airlines AG. This assures that compliance with all requirements is monitored and that the company can play a role in shaping the future of aviation. However, there will be no state participation in Austrian Airlines or in the parent company Lufthansa until now.

Both, the social democratic party SPÖ on the one, and the liberal party FPÖ on the other hand, have voiced criticism because Austria is not participating in Austrian Airlines or Lufthansa in return for financial state aid. It is talked about a massive discrimination against Austrian taxpayers and demanded that there must be a participation of the Republic to save the airline. This would at least allow a share in possible profits, states the SPÖ. Norbert Hofer, head of the FPÖ, also describes state aid without real protection of the location through

38 participation to the extent of the blocking minority as a fatal mistake (ORF.at, 2020). Federal Chancellor Sebastian Kurz commented that the priority was to secure the hub and not a few percent of a German company. However, Finance Minister Gernot Blümel confirmed that Austrian Airlines would become the property of the Republic if the loans will not be repaid until 2026 (Hodoschek, 2020a).

In addition to the measure, that more insight into internal matters of the Austrian Airlines must be provided, a dialogue of all relevant stakeholders to promote Austria as an air transport location is planned twice a year. The goal of the air traffic dialogue is to continuously develop and improve the general conditions to strengthen the hub at Vienna International Airport.

According to Smith (2011), stakeholder dialogues in all industries pose an enormous challenge. He notes that a functioning stakeholder management system works like a radar: On the one hand, companies can position themselves and send signals through open communication, and on the other hand they learn about new developments, trends and tendencies from external discussion partners. Previous research by Golob & Podnar (2014) examined as well the roles of dialogue in the process of communication with stakeholders. According to them, the conceptual framework of CSR and stakeholder relations often presents the initiation of a dialogue with stakeholders as a way to respond to criticism of an organisation’s social and environmental policies and actions. Dialogue is often seen as an instrument of strategic management and is treated as an instrument for achieving corporate goals (Golob & Podnar, 2014), and therefore, also in the aviation industry, dialogue with stakeholders as well as with residents near the airport is a very useful tool demonstrating the willingness of both sides to cooperate.

39 4.5 Sustainable technologies Already in the past, Austrian aviation companies have been setting priorities for years, especially with regard to climate protection measures. Underfloor refuelling, photovoltaics, noise-reducing approach and take-off procedures, groundwater protection, energy efficiency and alternative fuels, for example by using natural gas vehicles on the apron - environmental protection measures are taken wherever possible. According to them, they are aware of their responsibility towards the environment and make an important contribution to reducing the impact of air traffic by, among the other things listed above, constantly modernising their fleet (Austrian Airlines, 2008).

The COVID-19 financial rescue package for Austrian Airlines is intended to strengthen equity capital with a further 300 million euros from the state and Lufthansa. This should ensure the traceability of the bank financing and also secure the ability to invest in sustainable technologies in the medium-term. The existence of the Austrian Airlines as a system-relevant partner for the Vienna hub can thus be ensured.

Since the location requirements also aim to ensure that the Austrian Airlines reposition itself in the wake of the COVID-19 crisis and thus generates sufficient funds to repay the loan, a special emphasis is being placed on the environment and sustainability as part of its ongoing fleet modernisation programme. As fleet modernisation is the most effective way to reduce aircraft noise, cut fuel consumption and CO2 emissions (Lufthansa Group, 2019), it is important for Austrian Airlines to take this modernisation step, to achieve, among other things, the goal of reducing aircraft noise by 60% by 2030. In her sustainability report Blachly (2020) states that Lufthansa Cargo aims to reduce specific CO2 emissions by 25% by 2020 compared to 2005 levels. To achieve this objective, Lufthansa Cargo is reducing CO2 emissions by modernising its fleet and engines, using lighter containers, improving energy and resource consumption in ground operations, operational improvements such as increasing load factors and optimising flight routes, investing in innovation projects and cooperating with customers on environmental issues.

Stimac et al. (2006) also note that while noise is one of the factors within a number of negative factors that are connected to air traffic, there is another negative factor that should not be forgotten and that is the air pollution. They further declare that the solution to the mentioned problem is to find a way to harmonise the development and modernisation of air

40 traffic and therefore the modernisation of the fleet is a first step in the right direction, in terms of both, noise and emissions control. In an interview with Der Standard, however, the CEO of Austrian Airlines, Alexis von Hoensbroech, says that there is no money available in the short- term for fleet modernisation, but that the deadline of 2030 will be reached. Prior to that, Lufthansa CEO Carsten Spohr announced that Austrian Airlines would not buy any new planes in the near future (Grabner, 2020).

According to Rasmussen in the interview, climate friendly travelling will not to extent reconcile with flying. But with time, she is sure that there will be technological progress to reduce the CO2 emissions. However, she states that every solution will be energy-dependent (either advanced biofuels or synthetic fuels based on renewable power) and will not be available to the low costs and in the abundance needed to keep the high level of flying that we know today.

4.6 Further conditions Further conditions that have been adopted as part of the Austrian Airlines rescue package include an anti-dumping regulation and a minimum price for air tickets, as well as the introduction of a ticket tax for all flights below 350 kilometres (ORF.at, 2020). As these conditions are neither mentioned nor described in the Austrian Airlines press report, other sources were used. First, an additional ticket tax was agreed on as an ecological condition. Thus, a 150 million euro investment commitment was fixed with the focus on climate- efficient technologies. For ultra-short distances of up to 350 kilometres there will be an additional ticket tax of 30 euros. Second, the government is planning an anti-dumping regulation to include passenger-related taxes and charges in the airfare. The newly introduced minimum airfare is to be 40 euros. According to Vice Chancellor Werner Kogler of the green party, this regulation is intended to push back unfair cheapest air travel practices (Hodoschek, 2020b). Rasmussen leaves the question of how and whether it can be justified from an economic and social point of view to use tax money to save an airline to politicians. Nevertheless, she notes that the attempt to introduce the so-called anti-dumping rules is a step in the right direction.

However, the anti-dumping regulation does not meet with much approval from the federal party leader Norbert Hofer. Since other airlines, such as the German Austrian Airline parent Lufthansa, will of course serve the Salzburg - Vienna or Graz - Vienna routes, this regulation

41 will not help the environment, he says. However, it will distort competition and weaken the economic regions around Salzburg and Graz. Furthermore, he criticises the fact that the location guarantee for the Austria Airline base in Vienna is only valid for ten years, and believes that this company location will be history afterwards (Der Standard, 2020a).

Likewise, Ryanair CEO Michael O’Leary declares the plans of the domestic government, to legally prescribe a minimum price for flight tickets of around 40 euros, as completely illegal, against the EU law, hostile to consumers and as an example of how the Austrian Government, in addition to short-time work and state aid, is supporting the German airline Austrian Airlines. O’Leary announced that they will continue to offer tickets for 9.99 euros in Vienna, as these fares represent a key component of the marketing strategy of the airline group with its Austrian subsidiary Lauda. The aviation State Secretary Magnus Brunner from the ÖVP clarifies that it is not a minimum price, but rather that the taxes and fees will be passed on to the end customers. These costs would amount around 40 euros per ticket. However, such a regulation amounts to a minimum price. In addition to that he adds, that one has to look closely at how this regulation can work. Already in a first step there is an expert opinion of a renowned international law firm available, presenting a concept that such a regulation is possible. In a second step, it should be clarified by the end of the year how this binding handover to airline customers can be implemented in conformity with EU law. It is argued that it is a matter of establishing a cost truth, presenting taxes and fees transparently and achieving fairness on the market in the long-term (Hodoschek, 2020c).

In conclusion, the response to the measures has been both, positive and negative in different ways. The 450 million euro state rescue package for the German airline Austrian Airlines has also met with fierce criticism. The Political Institute of the University of Vienna misses a consideration for the subsidy part of 150 million euros and also the southern states feel grossly disadvantaged by the capping of short-haul flights. The deal is further criticised by the opposition parties (Der Standard, 2020a). According to Julia Kraft, Manager for International Environmental Affairs, in an e-mail, the corona crisis has shown how existentially important an airline is for the tourism and economic power of a country. See therefore in further detail the Austrian Airlines factsheet description in chapter 4.1 as well as figure 1 and 2.

In accordance with Kraft, an article in the magazine Austrian Wings underlines numerous reasons for keeping the red-white-red traditional carrier in Vienna. It is stated that the rescue

42 is not only about preserving as many of the current 7000 jobs as possible, but the Austrian Airlines are also systemically relevant for Austria. Furthermore, according to the Austrian Chamber of Commerce, the airline contributes almost three billion euros to the Austrian gross domestic product and passengers and tourists make up a total of more than 850 million euros. But there are also other important points that should not remain unmentioned: Austrian Airlines was available at every crisis to bring Austrians home from abroad. Moreover, only this airline is in a position to maintain the current airlift in its current form to supply Austria with medical protection equipment from Asia. None of the low-cost airlines based in Vienna would be able to do so in any way. One should also consider how Austrian Airlines lives its social responsibility towards its workforce. Although all employees are on short-time work, there have not been any major layoffs due to the corona crisis to date. Even if this step is probably unavoidable in the near future, the airline has always shown voluntary generosity in the past in the form of social packages when it had to part with employees. Keyword voluntary severance pay or work foundation. In addition, all employees with regular contracts in Austria are covered by social insurance and there is a staff representation. In view of this overall picture, there is no way around a rescue of Austrian Airline - however implemented - if we want to prevent lasting damage to Austria as a business location. This country needs a strong network home carrier that connects it with the world and the history of the airline over the past 60 years has clearly shown this (Huber, 2020). A very substantial part of the corona aid comes from the airline’s employees, as the almost 7000 employees are shouldering a cumulative crisis contribution of around 300 million euros by, among other things, waiving their salaries. Equally significant is the share of the more than 1000 business partners and suppliers of Austrian Airlines. In new agreements, the order volume was reduced by more than 150 million euros, partly through new agreements, partly by waivers (Austrian Airlines, 2020a; ORF.at, 2020).

Transport and Climate Minister Leonore Gewessler (green party) defended the completed Austrian Airlines rescue package and rejected criticism from climate protectionists that the climate conditions agreed with the airline do not go far enough. The criticism is mainly based on the fact that the measures would not go far enough to meet the threat of climate change and that they are voluntary for the airline.

Gewessler said that at the beginning of the negotiations there were only two alternatives - either the airline would be rescued or it would go bankrupt. The latter would have led to the loss of more than 7000 jobs, and low-cost airlines would have filled the gap. According to

43 Gewessler, this cannot be the future of the airline industry. She further justified the criticism of the climate conditions with the clearly agreed emission reduction targets. Although certain measures are voluntary for the airline, Austrian Airline CEO Alexis von Hoensbroech announced that he would implement measures such as the cancellation of short-haul flights like Vienna - Salzburg. Apart from that, this deal was only part of a comprehensive package that includes measures such as an anti-dumping guideline or a new version of the air ticket tax, which must be enacted as legal requirements by the government (Der Standard, 2020b). From the point of view of the VCÖ, the rescue package for Austrian Airlines casts light and shadow. Although the presented package contains points that could set an example for other countries, the climate crisis can only be overcome if air traffic is limited to an ecologically compatible level. The first steps in the right direction have been taken, but the Austrian Federal Government is still called upon to intensify its efforts to promote the rapid introduction of a kerosene tax at EU level (VCÖ, 2020d). In summary, arguments for as well as against the rescue of the German airline Austrian Airlines by, among others, state aid of the Republic of Austria are put forward and only the coming years will show how the situation will develop and which side is right.

44 4.7 Austrian Airline’s data on the second interim report 2020 The data of the second quarter from 2020 are shown in the interim report. The listed key figures thus demonstrate the immediate impact of the corona pandemic on the airline. The data was taken from the on the 6th August published second interim report of the Lufthansa Group (2020).

Key figures Jan-Jun 2020 Jan-Jun 2019 Changes in % Revenue €m 322 973 -67 Operating €m 598 1,065 -44 expenses Adjusted EBITDA €m -153 32 Adjusted EBIT €m -235 -53 -343 EBIT €m -299 -55 -444 Employees of 31 6,756 6,999 -3 Mar Flights number number 23,645 66,419 -64 Passengers thousands 1,986 6,711 -70 Available seat- millions 4,598 13,560 -66 kilometres Revenue seat- millions 3,132 10,585 -70 kilometres Passenger load 68,1 78,1 -10,0 pts factor Table I: Data second interim report 2020 Austrian Airlines, Source: Lufthansa Group (2020), p. 17

The fact that Austrian Airlines completely discontinued their regular flight operations between 18 March and 14 June 2020 in response to the coronavirus crisis is reflected in the key figures for the second quarter. Only repatriation flights for Austrian citizens worldwide continued to be operated in close cooperation with the Austrian Foreign Ministry, as did cargo flights for urgently needed medical equipment. Since the resumption of flight operations, capacities are now being gradually increased again. In the wake of the pandemic, the current restructuring programme at Austrian Airlines is to be intensified, including a reduction in the size of the fleet. Three Boeing 767-300s and 13 Bombardier Dash8-400s have already been decommissioned earlier. The table above shows that Austrian Airline’s revenue fell by 67% to 322 million euros as a result of the coronavirus and the associated travel restrictions. Further, the operating revenue fell by 64% to 363 million euros and the operating expenses of 598 million euros were also 44% lower than in the previous year. This was mainly due to the volume-related decline in expenses for fuel, fees and charges and lower personnel costs.

45 According to Wolfgang Jani, CFO of the Austrian Airlines, the corona crisis has hit the aviation industry with full force and global travel restrictions brought operations to a virtual standstill in the second quarter of 2020. The business is only slowly recovering since the resumption of the flight operations on 15 June. As a result of the pandemic and the almost three-month suspension of Austrian Airlines flight operations, the domestic airline recorded adjusted earnings before interest and taxes (adjusted EBIT) of -99 million euros in the second quarter of 2020, compared with +46 million euros in the previous year. The pandemic also reduced the number of passengers by 70% to just below two million. A further result of the crisis and the associated travel restrictions in the first half of 2020 is the Austrian Airline’s revenue collapse of 67% to 322 million euros. In comparison, the revenue in the first half of 2019 was 973 million euros. Moreover, the operating revenue fell by 64% to 363 million euros and the operating expenses of 598 million euros were also 44% lower than in the previous year. The press release makes clear that the COVID-19 crisis and the associated travel restrictions, which affected Austrian Airlines through no fault of its own, continue to require a high degree of flexibility in the planning of its operative business. The landing bans, which were in effect from July 16 to 31, triggered flight cancellations and reduced the airline’s load factor from an average of around 70% to 60%. Nevertheless, Austrian Airlines recorded a large number of short-term bookings in July, which makes them confident about the future. Holiday destinations in particular are well booked. Routes such as Athens, Larnaca or Thessaloniki, for example, show an average seat load factor of around 90%, and in the neighbourhood traffic, flights to Germany and Switzerland have an average load factor of between 60% and 70%. CFO Wolfgang Jani also makes clear that business travel and also tourist travel will gradually return. Nevertheless, the aviation industry is only expected to recover slowly, as the crisis is far from being over and this will also be reflected in the full- year figures (Austrian Airlines, 2020b).

According to Lufthansa CEO Carsten Spohr we are currently experiencing a caesura in global air traffic. He does not expect a return to pre-crisis levels until 2024 and that is one year later than initially assumed. As expected, the Austrian Airline Group’s parent company Lufthansa also closed the second quarter with a loss running into billions. The net loss at the Lufthansa Group amounted up to 1.5 billion euros. With only four percent of passengers still using the airport compared with the same period last year, the revenue slumped by 80% to 1.9 billion euros (Der Standard, 2020c).

46 Contribution In this study, the topic of environmental and climate protection in the aviation industry is examined and analysed from a variety of perspectives. Since the content of the Lufthansa Group’s CSR report is analysed and also presented in a categorised version in tables in the appendix, it is possible to gain an overview of what the group has done for the environment to date through various measures. The study illustrates the impact of the aviation industry on the environment and also explains the advantages this industry has compared to other transport sectors. Furthermore, a general overview of CSR in aviation is given and allows as well a better insight into this field. Throughout the case study, the impact of COVID-19 on the CSR measures of the Austrian Airlines are identified, described, analysed and discussed. All this contributes to a better understanding of the importance of environmental protection at the Austrian Airlines and as well in the entire aviation industry. In addition, the study shows that there is an awareness in Austria of how harmful air traffic is to the environment and that important government measures are therefore needed to achieve environmental goals.

Limitations As the COVID-19 pandemic is still a worldwide problem at the time of writing, it is not yet possible to determine all the effects of COVID-19 on CSR policies regarding climate protection in the aviation industry. However, the ecological measures introduced as a result of COVID-19 at Austrian Airlines are showing signs of success in terms of climate protection. But, the extent to which these measures will be implemented, how quickly and consistently as well as the long-term climate-relevant effects of COVID-19 on CSR policies in the aviation industry can only become fully visible within the next years. Another limitation could be that the Lufthansa sustainability Report Balance 2019 only contains information on initiatives and measures taken by the parent company and subsequently by the subsidiary Austrian Airlines to protect the climate. For this reason, besides the financial data out of the second interim report of 2020, no precise environmental indicators could be included in the study as a basis for comparison. The before-and-after comparison could therefore only be carried out with existing initiatives and those newly acquired through the COVID-19 pandemic. Further, the Austrian Airlines do not publish its own sustainability report annually, but follows the guidelines of its parent company Lufthansa. Although the section “ecological responsibility” can be found on the company’s own homepage, no annual CSR report specifically tailored to the Austrian Airlines is published and this could also be seen as an additional limitation.

47 Suggestions for future research In the course of the study a number of questions arose which would be worth additional or separate future research. The first question to ask is whether a more detailed analysis of the Lufthansa Group and all its subsidiaries as the Lufthansa itself, Swiss, Austrian Airlines, Eurowings and Brussels Airlines would produce more meaningful results. As in this study the focus was on the Austrian Airlines, it would be interesting to add the other subsidiary airlines to the analysis and thus compare the different approaches to crisis management of the COVID-19 pandemic. Just as it would be interesting to analyse the different measures introduced by the respective airlines in the course of the pandemic to protect them from bankruptcy, and to further compare their results in terms of climate protection and similar or different CSR policies. Furthermore, it is still open whether COVID-19 will slow down air traffic in the long-term. The question that would be interesting for future research is whether the peak of the aviation industry was already reached before the current pandemic and whether air traffic will ever return to this level after the COVID-19 pandemic is fully over. In addition, the question arises whether COVID-19 will lead to a long-term rethinking in the aviation industry, or whether everything will return to the old way of thinking afterwards. The effects of this rethinking could, for example, lead to a general reduction in air traffic, to the abolition of all short-haul flights, to a Europe-wide implementation of kerosene tax or even to a general switch to sustainable power, bio or synthetic fuels. Above all, the question arises whether the measures now agreed on as a result of COVID-19 will be fully implemented by Austrian Airlines in the future and whether they will possibly set a good example for other airlines worldwide. The implementation of these measures and the resulting successes in climate protection will become apparent in the coming years. All these questions are questions future research should focus on, as it is too early to answer them completely at this stage.

Conclusion In conclusion, it can be said that the measures introduced at the Austrian Airlines as a result of the COVID-19 pandemic have not led to any decisive results. Weighing the results and comparing them with previous CSR measures, no significant difference can be seen, as the Austrian Airlines will shift their short-haul flights to rail, halve their domestic CO2 emissions in Austria by 2030 and reduce their CO2 emissions by 30% by 2030 compared to 2005, mainly existing measures are implemented more explicitly. Further, they undertake to increase their fuel efficiency by 1.5% per year and to reduce average CO2 emissions per 100

48 passenger kilometres across the entire Austrian fleet from 9.55 kg to 8.5 kg by 2030. For ultra-short distances of up to 350 kilometres there will be an additional ticket tax of 30 euros and the government is planning an anti-dumping regulation to include passenger-related taxes and charges in the airfare, where the newly introduced minimum airfare is to be 40 euros. Although the measures are first steps in the right direction, almost no new measures to the industry are introduced, as there is no legal approval for the ticket tax and anti-dumping regulation yet. Further, the Austrian Airlines do partially have the option to implement the measures on a voluntary basis and this can have strong impacts on future results. With regard to the initial questions as to whether “CovidAir” is ready for climate protection landing, it remains to be said that the industry needs even more drastic requirements and regulations in order to become as climate-friendly as is somehow possible.

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53 Appendix

Affidavit

I hereby declare that this Diploma thesis has been written only by the undersigned and without any assistance from third parties. I confirm that no sources have been used in the preparation of this thesis other than those indicated in the thesis itself.

This Diploma thesis has heretofore not been submitted or published elsewhere, neither in its present form, nor in a similar version.

Innsbruck, 04.10.2020

Place, Date Signature

I Expert interview

Interview Questions Answered by Ulla Rasmussen, VCÖ

1. Would the cancellation of short-distance flights (e.g. Vienna - Salzburg) also have occurred without COVID-19, as this was already an issue raised by the Austrian Airlines itself even before the pandemic?

The more competitive train connections are (time, money, comfort) the more like it is that people will choose train. Thus, many passengers had already shifted from flights to trains on fast connections such as Vienna-Salzburg or Vienna Linz. The step to actually officially cancel all these very short distance flights would probably not have been taken without the bail-out package from the Austrian Government. However, the details to the plans including timeframe (when will Austrian Airlines stop the flights and what happens if they don’t?) has still to be presented.

2. How can it be economically and socially justified to use billions of taxpayers’ money to economically rescue state-owned airlines?

This is a question for the politicians taking the decision. However, the attempt at introducing the so called anti-dumping rules is a step in the right direction.

3. Why should states operate their own airlines for economic reasons?

I don’t think they should.

4. Is the newly introduced minimum price of €40 per flight ticket sufficient enough as a guidance effect? For comparison: A train journey from Salzburg to Vienna costs €56.80, without an advantage card

Probably not, but at least it is a step in the direction of as a minimum passing on the taxes to the passengers. To my understanding, this rule is not so much aimed at the short-distance flights as at the low-cost carriers often selling their tickets below the 40€.

II

5. Are the now adopted climate measures by the Austrian Airlines sufficient to make an appropriate contribution to the pan-European and Austrian goal of halving CO2 emissions by 2030?

Since the actual deal with Austrian Airlines has not yet been published (at least I haven’t seen it), it is difficult to judge on the measures. E.g. which kind of advanced biofuels will qualify? What is meant by the statement that it is only if it can be done without economic disadvantages? It is highly likely that the details are such that there deal is mostly voluntary and not efficient. Another thing is, that is depends on which emissions you are referring to – the inner- European aviation emissions are regulated in the ETS, the rest is not part of the European targets.

6. Does the impact of COVID-19 in the medium and long term will have a greater impact on tourism flights (more domestic holidays) or business flights (more online conferences)?

I am sure there will be a long term effect on business flights, as businesses have experienced the pro as well as the limitations of online meetings. Whether or not the effect on tourism will last depends very much on accompanying measures. Will a European-wide tax on kerosene come in place? How soon will the European train connections be expanded (including more night-trains)?

7. Can climate-friendly travel behavior be reconciled with flying - and if so, how?

Not to extent in which we travel presently. With time, I am sure there will be technological progress reducing the CO2-Emissions. However, every solution will be energy-dependent (either advanced biofuels or synthetic fuels based on renewable power) and will not be available to the low costs and in the abundance needed to keep the high level of flying we know today.

8. What was the reason for the Lufthansa Groups' climate measures prior to COVID-19, as reported in the CSR Report: National or European climate protection

III

requirements? Public pressure? Economic thinking? Other reasons?

My guess is that most airlines follow the energy and climate debates and notice that it is getting ever closer to the aviation industry to consider reducing the emissions. And the more you do yourself the less likely it is that you will be forced to take measures.

9. What effects do you expect the anti-dumping regulations and minimum ticket price coming into force in Austria to have on demand in the airline industry?

Not much effect but a signal that all air travels do have a cost.

10. What measures do you expect or demand for a better CO2 balance of air traffic in the medium term? Biofuels? Other aircraft types?

First of all, a stop to the free allocation of emission permits. Then a reduction of these permits which is in line with the target of restricting global warming to 1,5 degrees. And the European introduction of a kerosene tax including a CO2-element. Whether the airlines go for advanced biofuels or synthetic fuels will depend on the scientific progress. But both of course need to be regulatory safe-guarded in the sense that the standards for biofuels can’t be more lax than the ones in the renewable energy directive.

IV

Factsheet Austrian Airlines

V

VI

Topic areas and categories In the following the topic areas and the category system are presented in tables. They represent the content of the environmental and climate chapter of the Balance sustainability report from the Lufthansa Group (2019). In addition, each project profile from the report is inserted into the appropriate topic area and is as well displayed and explained in a table. Each topic area represents a chapter of environmental and climate section of the report and was examined on the basis of the following categories: Goals, Initiatives, Measures and, if apparent Savings. Equal to them were the categories, into which the data were divided, named. The names of the categories resulted on the one hand from the information given in the text and on was on the other hand based on the study of Cowper-Smith & De Grosbois (2011). The tables thus show the environmental and climate related topics on which the Lufthansa Group and thus also Austrian Airlines generally focused on the most before the COVID-19 crisis.

All tables are an own presentation based on the data of the Balance sustainability report from the Lufthansa Group (2019).

Environmental Management Goals Initiatives Measures I. Measures II.

Continuous expansion of Operative activities and Analysing increasing Implementing further the environmental technical maintenance to stakeholder demands control parameters at the management systems in procurement, facility with regard to climate Group level wherever the Group companies management and and environmental possible and administration protection; incorporating environmental care is to these in a new strategic be interconnected even environmental more strongly with Group programme strategy

Linking entrepreneurial Environmental experts risks related to climate continuously monitor, change and noise analyse and manage the emissions into environment-related multidisciplinary, Group- opportunities and risks by wide risk management means of environmental programmes and the environmental management systems

Table II: Categories Environmental Management

VII

Fuel Consumption and Emissions Goals Initiatives

Worldwide: Fuel efficiency is to be increased by 1.5% per year by Participation in numerous working groups of the 2020 International Air Transport Association (IATA), such as Environmental Committee and the Industry Affairs From 2020, growth in civil aviation is to be realized in Committee and the Board of Governors CO2-neutral ways

By 2050, the net-CO2 emissions of civil aviation are to decline by 50%, compared to 2005

Lufthansa itself: Reduce specific CO2 emissions by 25% by 2020, Already 67% of this goal were achieved by the end of compared to 2006 values 2018

Continuously improving the Lufthansa Group’s fuel Modernisation of the fleet efficiency

Table III: Categories Fuel Consumption and Emissions

Specific Fuel Consumption In the year under review, the Lufthansa Group set a new efficiency record: in 2018, the aircraft in its passenger fleets required an average of only 3.65 litres of kerosene over a distance of 100 kilometres. By comparison, in 2017 they needed 3.68 litres per 100 passenger kilometres and that is an improvement of 0.8%.

Passenger Transportation 2018 The specific fuel consumption and CO2 emissions of the Austrian Airlines

Total Long- Medium- Short-Haul 3.79 3.10 4.09 5.33 9.55 7.82 10.31 13.42

Table IV: Passenger Transportation 2018

Values for specific fuel consumption in litres per 100 passenger kilometres (l/100pkm) Values for specific CO2 emissions in kilograms per 100 passenger kilometres (kg/100pkm)

VIII

The share of fuel consumption by traffic areas at the Austrian Airlines: - Long-haul: 40% - Medium-haul: 40% - Short-haul: 20%

The fuel efficiency is to a large extent the result of the long-term fleet modernisation programme and numerous operational measures to save kerosene. Nevertheless, the Group's CO2 emissions increased by 6.6% compared to the previous year.

On the basis of the Greenhouse Gas Protocol (GHG Protocol), the Lufthansa Group determines its CO2 emissions and divides them into three main scopes. All direct and indirect emissions of the Lufthansa Group are shown in the figure below as “direct and indirect CO2”. They were determined and verified on behalf of the aviation group in accordance with the specifications of the European emissions trading system. The so called CO2 footprint helps the Lufthansa Group to identify and assess its main environmental impacts more precisely and pursues the goal of developing more effective reduction options in the next step.

Direct and indirect CO2 emissions of the Lufthansa Group 2018

Scope 2 indirect 25.02% 11.089.327 tonnes

Scope 3 indirect 0.4% 194.059 tonnes

Scope 1 direct 74.4% 32.790.778 tonnes

Figure IV: Direct and indirect CO2 emissions of the Lufthansa Group 2018

IX

Scope 1 shows the direct CO2 emissions from flight operations and ground traffic of the Lufthansa Group with their own vehicles and power generation facilities. This was audited with the result High Assurance. Scope 2 shows the indirect CO2 emissions of electricity and energy purchases for ground operations, including catering and maintenance. This was audited with the result Limited Assurance. Scope 3 shows further indirect CO2 emissions along the supply chain and from purchased services. Here, essentially the emissions from the kerosene supply chain and those related to the manufacturing of aircraft and engines are pointed out. Likewise audited with the result Limited Assurance. The data presented in the diagram was obtained from the Balance sustainability report of the Lufthansa Group (2019).

Climate Protection Goals Initiatives Measures I.

Technological Progress Investing in modern and fuel- Delivery of 29 new aircraft in the efficient air craft and engine course of the reporting year technologies

Researching and testing alternative fuels in flight operations

Sustainability in production and supply chains and cost effectiveness

Launch and build an international alliance to develop the future strategic importance of synthetic renewable energy sources

Signing and joining a declaration of intent at the beginning of 2019 concerning the future production and delivery of synthetic kerosene, which is to be produced with green electricity

Table V: Categories Climate Protection, Technological Progress

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Goals Initiatives Measures I. Measures II.

Improved infrastructure Establish a standardised The airlines of the airspace above Europe, Lufthansa Group alone the so-called Single would be able to reduce European Sky (SES) their CO2 by three million tonnes per year

Supporting the EU’s SES Standardisation and initiative and working modernisation of the through the European European aviation airline association infrastructure Airlines for Europe (A4E) for the creation of a reliable and efficient EU air space

Optimise conditions on Develop intelligent links Feeder services to and the ground and adapt the between different from airports by ICE airports’ infrastructure to transport modes → high-speed trains, modern actual needs that allows intermodal transport long-distance buses and efficient flight operations concepts that car-sharing systematically interlink air, rail and road traffic

Table VI: Categories Climate Protection, Improved Infrastructure

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Project Name Initiatives Topic Area Goal Duration

NETWORK Demonstrating how Air traffic Making data from February 2018 to COLLABORATIVE maintaining or management. all system January 2020. MANAGEMENT increasing landscapes efficiency in flight generally available operations through and exchanging it improved in a coordinated cooperation in the and standardised event of way. bottlenecks and Removing disturbances inefficiencies and (weather, strike, to improving and etc.) is possible. stabilizing traffic flows.

Avoiding delays Testing new and emissions and concepts, reducing procedures and unnecessary long technical routes and the innovations under related fuel burn. the conditions of everyday flight operations.

Table VII: Project Profile, Network Collaborative Management

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Goals Initiatives Measures I. Savings

Operational measures 21 fuel-saving projects Including “Expanded The Group sustainably were underway connex info”, the avoided more than comprising activities “Development of 24,000 tonnes of CO2 relating to weight Company-own emissions in addition to reduction, flight route approaches based on the reductions achieved optimization and most modern area in 2017 technical developments navigation” and the “Optimised filling of Developing a broad- fresh water tanks” ranging catalogue of measures aimed at Continuously working on reducing the CO2 alternatives for its emissions of its freighter loading devices allowed fleet already a replace of 75% of all standard containers with more lightweight models

Testing the use of more Tests with an aluminium- light-weight palettes for foam palette were already freight stowage successful

Evaluating the use of Heavy-duty floors and lightweight structural beams made of heavy- elements made from weight wood are replaced recycled cardboard-fibre by more lightweight composite material in materials loading air freight palettes

Pursuing the goal of Reducing significant digitalizing air freight effects on the and implementing environment by fully paperless handling of all digitalizing the delivery related processes step-by- chain and rolling out step more documents which transfer security-related information and provide data on hazardous shipments

Participating in numerous MRO specialist research and developed a unique development projects engine wash process with the aim of using CO2 dry ice and improving the efficiency achieved another of flight operations milestone with the first sustainability automated steam cleaning system for engine heat exchangers worldwide

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Thereby reduction of Testing low-drag surfaces kerosene consumption on aircraft fuselages for many years

Table VIII: Categories Climate Protection, Operational Measures

Project Name Initiatives Topic Area Goal Duration

EXPANDED Pilots receive Systemic operations Avoiding up to Available step-by- CONNEX INFO information about management, cross- 6000 tonnes of CO2 step from July connecting flights functional control emissions over the 2019. and the number of logic in the areas long-term. connecting flight control, group passengers so they control and can evaluate if they operations control, need to accelerate and deployment to catch up with a control to reduce delay. delays and fuel costs. Table IX: Project Profile, Expanded Connex Info

Project Name Initiatives Topic Area Goal Duration

OPTIMISED On the basis of Weight savings. Lower departure Introduced on FILLING OF route characteristics weights are to all long-haul FRESH WATER and passenger reduce Lufthansa’s TANKS numbers, the filling CO2 emissions by flights in the of fresh water tanks about 3200 tonnes third quarter is optimised. Data per year. 2019. collected by new aircrafts helps recording the filling level of the fresh water tanks for later analyses.

Table X: Project Profile, Optimised Filling of Fresh Water Tanks

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Project Name Initiatives Topic Area Goal Duration

DEVELOPMENT The increased Flight procedures. Lower emissions Some projects are OF COMPANY- precision of and improved almost completed; OWN advanced avionics punctuality. others are pursued APPROACHES and navigation long-term. BASED ON MOST sensors, which MODERN AREA enable accurate NAVIGATION navigation to any geographic point and more economical flight routes, has a positive impact on fuel efficiency and also increases safety by reducing the workload of pilots.

Table XI: Project Profile, Development of Company Own Approaches Based on Most Modern Navigation

Measure Expected Fuel Expected CO2 Project fuel savings savings CO2 savings completed 2018 savings 2018 Austrian A weight saving is 667t 500t 2100t 1575t 2018 Airlines realised on the entire Boeing long-haul fleet with the introduction of Premium Economy Class seats. Table XII: Measures taken by the Austrian Airlines to reduce fuel consumption and thus CO2 emissions

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Goals Initiatives Measures I. Measures II.

Economic measures Growth-related CO2 Agreement on climate Paying the corresponding emissions in international protection (CORSIA – CO2 compensation costs civil aviation are to be Carbon Offsetting and from 2021 for increases compensated from 2021 Reduction Scheme for in CO2 emissions by CO2 savings achieved International Aviation) - by climate protection adopted in October 2016 projects in the context of the International Civil Aviation Organization (ICAO)

Passengers of Lufthansa, In the future, customers Cooperation with various SWISS and Austrian will be able to climate protection Airlines as well as compensate CO2 foundations to offer customers of AirPlus emissions even more customer the possibility compensated a total of conveniently as the to compensate their CO2 6539 tonnes of carbon Group airlines are to emissions by making a dioxide in the reporting integrate the option into donation in favour of year their reservation’s masks; selected climate already more than protection projects 127.404 euros were donated to climate protection projects in 2018

Table XIII: Categories Climate Protection, Economic Measures

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Energy and Resource Management Goals Initiatives Measures I. Measures II.

Waste and recycling Reducing waste Initiative “Flygreener” Correct stowage on board management on board quantities on board or contributes Group-wide helps reduce waste and increasing its recycling to reducing waste makes recycling possible ratio volumes continuously as well as optimizing the and to make the loading of beverage processes on board more trolleys means weight sustainable reductions on specific flights of 10.3 kilos per trolley at Austrian Airlines

Reduction of disposable Improving sustainability Continually analysing all A future-oriented project plastic packaging on on board products and processes through which plastic board by experts for product cups used by passengers management and have been used to operational efficiency produce synthetic crude oil and, in this way, up to 100 tonnes of disposable waste annually can be avoided

Electromobility: Project By using the initiative E- Placing an emphasis on Switching individual Airport eMove PORT AN, the Lufthansa advancing projects aimed vehicle types step-by-step successfully concluded Group is switching its at reducing the to electric propulsion vehicles to CO2-neutral consumption of gasoline technologies as the mode by 2030 in their or diesel by ground “eTug” helps avoiding up home countries vehicles to 75% of emissions in comparison with conventional, diesel- powered aircraft tugs

Switching vehicles to Using 100% electricity electric and other Establishing a dedicated from renewable sources emissions-free propulsion project management at the earliest possible systems time and using this eco- electricity as power supply for all buildings of the Lufthansa Group

Table XIV: Categories Energy and Resource Management

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Active Noise Abatement Goals Initiatives Measures I. Measures II.

Investments in quieter Fleet modernization Cooperating with aircraft In 2018, the aviation aircraft manufacturers and group put 29 new aircraft actively influencing the into service, all equipped shaping of specifications with modern engines and the technical status of new aircraft

Noise-reducing Retrofitting the existing At the beginning of 2014, The Lufthansa Group has technologies for the fleet with vortex Lufthansa was the first retrofitted all aircraft of existing fleet generators airline worldwide to start the A320 family operated operations with an Airbus by Lufthansa and SWISS A320 equipped with with these vortex noise-reducing vortex generators that are up to 4 generators, thus setting decibels quieter during an industry standard the approach phase

Participation in noise Being committed to noise In 2017, the project The existing evaluation research research via various “EffFlug” (Efficiency methods are to be projects and helping to increases in flight expanded and deepened create the foundations for operations) was added → successful active noise analysing the efficiency protection measures more precisely with regard to their noise reduction potential compared with previous solutions

Shaping the steady cycle Conducting research into of intensive research as New generations of options for optimizing well as new technologies quieter aircraft and existing fleets by and products in order to engines → Fairings on the German Aerospace achieve further efficiency landing gears and Center (DLR) improvements in aircraft innovative exhaust and engines nozzles on engines

Optimisation of approach Optimising flight Cooperating with In the framework of the and departure procedures and flight international partners project EMAS 1 (Early procedures routings such as Morning Arrival Stream) EUROCONTROL Frankfurt, the time during which approaching aircraft are in the airport’s close range could be reduced by up to 20%

Dialogue with residents Actively and Participating at the Working actively in some near airports and other continuously “Alliance for Noise of the German aircraft stakeholders participating in Abatement” noise commissions measurement packages stipulated by Germany’s

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aimed at noise abatement Civil Aviation Act in the framework of dialogue forums, since 2001 Opening up new 17 additional measures to perspectives, such as the reduce the noise burden The new package of precision navigation in the areas surrounding measures “Active Noise system Frankfurt Airport or to Abatement” builds on the enable an improved 12 noise protection political and legal measures that were framework for the implemented in the past expedited implementation in standard operations of measures by the Airport and Region Forum (FFR)

Agreeing on a voluntary upper noise limit at Additional incentive for Sealing the voluntary Frankfurt Airport flying even more quietly introduction of noise → reliable, clear and breaks in an “Alliance for long-term regulatory Noise Breaks” between framework that creates the state of Hesse and the investment and planning aviation industry, in May security for future growth 2016 and fleet decisions

Table XV: Categories Active Noise Abatement

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