[Publication] Aviation Sector Strategic Action Plan

Study objectives

The competitiveness of the EU economy is a key element in the economic agenda for the EU, guided by the Draghi report on the future of EU competitiveness in 2024. This study assesses the current and future competitiveness of the EU aviation sector across its value chain (airlines, airports, aerospace, air navigation services, ground handling and aviation fuel), highlighting strengths, threats, and opportunities, comparisons with third country competitors, and an assessment of working conditions.

Competitiveness of the EU aviation sector

The EU aviation sector has several competitive strengths. Notably, the EU single aviation market provides an efficient internal market and has lowered barriers to entry for airlines and fares for consumers. The EU aerospace sector is among the world’s leaders in civil and military applications, with several world-leading firms and an extensive supply chain positively contributing to the EU economy and supporting its strategic autonomy. The EU’s SAF production industry is also strong, representing around 20% of global production in 2024 with production forecast to grow rapidly by 2030.

In addition, the EU’s aviation regulatory acquis is mature and more developed than in many third countries in providing a competitive EU aviation sector. EU external aviation policy aims to increase connectivity based on reciprocity and a level playing field between Member States and non-EU partners. Fair competition clauses and regulations (2019/712) are intended to support the achievement of these aims, although their use and effectiveness is unclear.

The EU aviation sector also faces threats to its competitiveness. Evolving global challenges (e.g. strong civil-military synergies in the USA, access to raw materials, and geopolitical developments) mean that boosting the aerospace industry’s strategic autonomy is relevant to ensure a sovereign and autonomous Europe, reduce dependencies on third countries, and support the industry’s ability to innovate and remain competitive.

The EU aviation sector has a high level of climate ambition relative to third countries. While this presents an opportunity for the EU to lead the way in decarbonising aviation, the differing levels of ambition lead to higher costs for EU carriers from complying with EU decarbonisation policy such as ReFuelEU Aviation and the EU Emissions Trading System (ETS).

Evidence is mixed on whether EU decarbonisation policies cause a diversion in air traffic to non-EU airports. The policies are estimated to increase costs for flights via EU hubs and for flights within the EEA by an estimated EUR 7.57 per passenger in 2025 (Steer, 2025[1]). However, research (Transport & Environment, 2022) has shown that the diversion to non-EU hubs is not always significant due to mitigating factors (i.e. longer routings and higher operating costs).

Other threats include high energy costs in the EU, which are around twice as high as in the USA and China. This increases production costs for both the energy-intensive EU aerospace and SAF production industries and impacts their cost competitiveness globally.

EU carriers cannot overfly Russian airspace due to EU sanctions imposed in 2022, but Chinese carriers can. EU carriers on routes to/from China must fly longer routes, increasing costs and causing longer journey times. Since these restrictions began in 2022, market share for EU carriers on routes analysed to China decreased by between -3 and -29 percentage points. There is little recourse for the EU to remedy this competitive distortion.

Working conditions in the EU aviation sector vary; the aerospace industry is highly skilled and well-remunerated, while the ground handling industry features low-paid, manual work with poorer working conditions. There are some skills and labour shortages (in aerospace, air navigation services, and ground handling), while a minority of employees in the airline industry use atypical employment forms which can lead to poorer working conditions for staff and lower costs for airlines. Ensuring the attractiveness of the aviation sector with sufficient skills underpins its competitiveness.

There are also opportunities to maintain and improve competitiveness, including leading the way in the decarbonisation of the aviation sector. Given the importance of SAF to decarbonisation, the EU could aim to achieve a leading role in its production, creating economies of scale to lower prices and boost EU competitiveness. SAF currently represents 0.3% of total aviation fuel production globally and the EU relies on imported feedstocks. Securing long-term access to SAF feedstocks will increase the resilience of production and boost the competitiveness of SAF producers.

The EU could also aim for a leading role in the commercialisation of synthetic aviation fuel (e-SAF), given the sub-mandate for synthetic aviation fuel in ReFuelEU Aviation. There is currently no commercial production in the EU due to high costs and financial risk for private investors; measures to de-risk investments such as revenue certainty mechanisms and double-sided auctions may be beneficial to leverage this opportunity.

Finally, technological developments such as electric or hydrogen aircraft propulsion technology, the use of artificial intelligence, and new air traffic management concepts could help to maintain and improve the EU aviation sector’s competitiveness in the medium- to long-term future. These opportunities to boost competitiveness could be supported through public funding and, in the case of AI, adaptations to regulatory frameworks to allow its benefits to diffuse through the sector safely.

Study recommendations

The study makes a number of recommendations, including to:

• Consider SAF policy options that may mitigate cost disadvantages for EU carriers and boost their competitiveness within the frameworks of ReFuelEU Aviation and EU ETS.
• Ensure feedstock supply for SAF is resilient across the EU, mitigating supply risks, as well as supporting the production of SAF and e-SAF within the EU.
• Develop an aerospace strategy to promote this important sector, notably ensuring the sector’s ongoing access to critical resources and supporting the synergies between civil and military aerospace technology.
• Address high energy costs faced by the EU aerospace and SAF production industries to reduce the cost differential versus third country competitors.
• Assess fair competition clauses and their use in ensuring a level playing field in aviation, identifying best practices.
• Develop aviation-specific skills policies for industries which are strategically important (aerospace) or which face skills and labour shortages (air navigation services, ground handling).
• Leverage opportunities to boost future competitiveness with public funding for new technologies in aviation, including new technological concepts in air traffic management, innovation funding to develop new propulsion technologies, use of AI, and commercial e-SAF production to reduce financial risks for private investors.

[1]      The data to calculate the per-passenger cost of compliance is not published in the Steer (2025) report, but was shared by its authors to be included in this study.