The Coalitions Agreement and the Impact on the German Aviation Industry

In light of global challenges and in the context of profound digital and ecological change, the German aviation sector is at a historic turning point. In view of international competitiveness and climate compatibility, strategic decisions have been the subject of continuous discussion in various political documents over past legislative periods. The focus is now on the coalition agreement presented on 9 April 2025, which, at least in part, addresses key demands raised by aviation industry stakeholders. For example, the industry demands a sustainable reduction in state-related location costs, a reform of the EU climate protection package “Fit for 55” and significant investments in climate-friendly technologies. The following analysis examines on the basis of the current coalition agreement, which of the sometimes ambitious demands of the aviation sector have been met or at least acknowledged. The emphasis is placed on two main topics: the competitiveness of aviation in Germany and Europe, and climate-compatible aviation. This division reflects the dual aim of strengthening the economic location through targeted relief measures on the one hand and raising ecological standards on the other.

A. Competitiveness of Aviation in Germany and Europe

The competitiveness of the aviation sector forms the foundation upon which all further investments in future technologies and ecological innovations must be built. The aviation industry calls for measures regarding two central aspects, both of which the coalition agreement addresses at least in part.

1. Reduction in State-Related Location Costs

A major point of criticism from the industry has been – and remains – the high tax and fee burden that further increases the operating and expansion costs of air traffic in Germany. In response, the coalition agreement includes measures designed to expand the financial flexibility of the stakeholders, notably by reducing the air transport tax and by relieving air navigation fees.

a) Abolition or Significant Reduction of the Air Transport Tax

For years, the air transport tax has been criticised as an impediment to international competition. The call to either completely abolish this tax or at least significantly reduce it has repeatedly been voiced in a cross-sector appeal by various associations and unions in the aviation industry. In the coalition agreement of 9 April 2025, this issue is identified as a key area of action. The provisions aim to reduce the aviation-specific taxes, fees and charges and to reverse the recent increase in the air transport tax that occurred in the previous legislative period – with the objective of making Germany a more attractive location for airlines and service providers. Essentially, these measures correspond to the industry’s core demand to significantly reduce the tax burden while simultaneously enhancing its international competitive edge.

b) Relief for Air Navigation Fees

Air navigation fees, which represent a considerable cost block and thereby contribute to the overall expense of air traffic, are at least addressed in the planned reforms. The coalition agreement foresees, among other measures, further support for regional airports with regard to air navigation costs, whilst also strengthening connectivity within Germany. These relief measures are intended not only to ease the financial pressure on operators but also to create incentives for the implementation of innovative and more efficient processes within the air navigation sector. In doing so, the government is responding to the aviation industry’s call to establish a more sustainable cost structure through close cooperation between operators and state institutions.

2. Reform of the EU Climate Protection Package “Fit for 55” through Competitive-Neutral SAF Quotas

At the same time – albeit within the tension between competitiveness and ecological objectives – the reform of the EU climate protection package “Fit for 55” is at the centre of discussions. The German aviation industry has long demanded that the framework conditions be designed in a way that is both competitive-neutral and innovation-promoting, without hampering the sector’s economic performance.

a) Introduction of a European, End-Goal-Oriented and Earmarked Climate Levy or SAF-Rebalancing Charge

One of the central demands is the proposal to introduce a European, end-goal-oriented and earmarked climate levy instead of implementing general measures that are often deemed to distort competition. Alternatively, the aviation industry has proposed – particularly in the context of using sustainable aviation fuels (SAF) – the introduction of a SAF-rebalancing charge, which would provide a financial offset on those flight routes not subject to the European SAF quota. The coalition agreement, however, does not take up this proposal for the concrete development of an end-goal-oriented climate levy in collaboration with European partners. Rather, it promises to ensure that European airlines are not at a disadvantage compared to non-European carriers in relation to the SAF quota.

b) Increase in ETS Certificates and Extension of the Regulation Compensating for Additional Costs in SAF

Another aspect regarding the climate reforms concerns the European Emissions Trading System (ETS). The aviation industry criticises the current number of ETS certificates as being insufficient to offset the higher costs of using sustainable fuels. In the view of the industry, it is crucial to ensure that the economic burdens associated with the shift to sustainable technologies are mitigated, thereby creating investment incentives. However, the coalition agreement does not envisage an increase in the authorised certificates, meaning that the aviation industry cannot expect a boost in ETS certificates in the near future. Nevertheless, the agreement generally calls for advancing the emissions trading scheme at both European and international levels and pursuing an economically sustainable price development.

c) Abolition of the Power-to-Liquid Quota in Sec. 37a of the BImSchG

The so-called power-to-liquid quotas had long been a controversial issue, as they were criticised by the industry for being non-compliant with European law and insufficiently adaptable. Accordingly, the coalition agreement of 9 April 2025 resolves to abolish the power-to-liquid quota in Sec. 37a of the Federal Immission Control Act (BImSchG). This measure directly corresponds to the aviation industry’s demand, as the quota represented a significant bureaucratic hurdle and restricted the use of innovative and sustainable technologies. Its abolition is intended to create a more flexible and innovation-friendly regulatory environment, in which new technologies can achieve their breakthrough without impediments.

d) Reduction of Bureaucracy

Last but not least, the comprehensive reduction in bureaucracy has been formulated as part of the coalition agreement’s package of measures – a point that has been repeatedly demanded by the entire industry. In addition to targeted tax and fee relief, a broader measures package has been announced that includes the reduction of administrative hurdles and the simplification of approval processes. In particular in cooperation with European institutions it is intended to develop uniform standards that allow for the synchronous and efficient implementation of reforms. This reduction in bureaucracy not only serves as an instrument of competitiveness but also signals to international investors that the German market is being optimised and made attractive.

B. Climate-Compatible Aviation

In view of the pressing challenges of climate change, it is inevitable that the aviation industry also contributes to a more climate-friendly economy. At the same time, the sector’s economic success must not be forgotten. Regarding sustainable innovations and a green transformation, the coalition agreement defines measures designed to promote climate-compatible aviation.

1. Support for National Aviation Research

The role of research and development in the aviation industry is recognised as a central driving force for innovation and competitiveness. The coalition agreement explicitly commits to the continuous advancement of aviation research and to intensifying research activities aimed at decarbonising aviation. This commitment enables research institutions and companies to advance pioneering projects in areas such as aircraft technology, emissions reduction and alternative power systems. Through these measures, the aim is to successfully bridge the gap between cutting-edge research and commercialisation.

2. Support for the Production of Sustainable Aviation Fuels (SAF)

The shift to sustainable aviation fuels lies at the heart of the aviation sector’s future-orientated climate strategy. The transition from fossil to renewable fuels is of essential importance not only from an ecological perspective, but also from an economic point of view, as it is key to securing long-term competitive advantages.

According to the coalition agreement, the use of alternative fuels, including biofuels, is to be promoted. Support for SAF production is also included. It is planned that half of the national revenues from the aviation-induced European emissions trading system will be used to promote the market implementation of SAF. Furthermore, the coalition agreement provides for the following forms of support:

• Financial Support Programmes: The climate adaptation strategy is to be implemented by making efficient use of, and, where necessary, adapting the existing support programmes.

• Creation of Innovation Clusters: By bringing together companies, research institutions and state agencies in regional innovation clusters, knowledge exchange is to be intensified and the development of new technologies promoted. These clusters could then serve as a framework in which pilot projects for testing and optimising SAF technologies can be realised.

• Regulatory Adjustments: Alongside the support measures, the coalition agreement also points to the need for adapting regulatory frameworks. In particular, bureaucratic hurdles are to be reduced and approval procedures accelerated so as not to unnecessarily delay the production process.

These measures contribute to the nationwide integration of sustainable aviation fuels into operations and thus significantly improve the CO₂ balance of air transport.

3. Expansion and Integration into a Hydropower Ecosystem

Climate-compatible aviation can be supported not only through the use of sustainable fuels but also by the development of a comprehensive and integrated energy system. A key focus of the debate has been the establishment and expansion of what is termed a hydropower ecosystem.

The coalition agreement highlights that Germany – as a country with excellent conditions in the field of renewable energy – intends to increasingly rely on hydropower as a stable and low-emission energy carrier. This includes:

• Infrastructure Measures: The existing potential in so-called small and large-scale hydropower and pumped storage plants is to be expanded. These investments could also benefit the aviation sector by providing a constant energy supply during periods of fluctuating input from wind or solar power plants.

• Integration of Renewable Energies: In addition to expanding hydropower, efforts will be made to accelerate the overall expansion of renewable energies, so that an energy system is created which, in its entirety, meets the requirements of climate-compatible aviation.

The integration into such an ecosystem has the potential not only to transform the aviation sector ecologically but also to generate economic benefits through lower energy costs and enhanced supply security.

4. Dialogue between the Aviation Industry and State Institutions

Another crucial demand from the aviation industry for ensuring the future of the aviation sector is the intensified integration of the entire sector into political decision-making processes. The dialogue – which the coalition agreement does not explicitly prioritise – is regarded by the aviation industry as essential in order to shape reforms that are pragmatic and future-orientated.

Regular consultations between the state and the aviation industry could enable new legislative proposals and reform initiatives to be reviewed for their practical feasibility at an early stage and adjusted if necessary. This would ensure that the aviation industry can influence key strategic decisions.

An open dialogue would also build trust between the state and the economy. Involving industry in the decision-making processes would help ensure that challenges are recognised collectively and that innovative solutions are developed. Furthermore, continuous exchange would allow for flexible responses to changing market conditions and technological advancements. For example, reforms in the area of air navigation or the introduction of new technologies could be implemented in a timely and practical manner.

Such a dialogue format is regarded in the aviation industry as essential for creating an inclusive and innovation-promoting framework in which all stakeholders work together. This is an area where the coalition agreement falls short.

C. Summary and Outlook

The coalition agreement of 9 April 2025 represents a package of measures that, at least partially, addresses key demands and appeals from the German aviation industry – albeit not in their entirety or with the desired speed. The reduction in state-related location costs, for instance through lowering the air transport tax and the targeted relief for air navigation fees, is presented as a clear competitive advantage. In the face of international competition and a perpetually evolving regulatory environment, these measures are crucial for maintaining Germany’s attractiveness as a hub for airlines and service providers on the long run.

Furthermore, the ongoing debate over the EU climate protection package “Fit for 55” is also addressed. The abolition of the controversial power-to-liquid quota signals that the state is prepared to balance ecological challenges with economic competitiveness, even though reforms – such as the introduction of a targeted climate levy or SAF-rebalancing charge and the increase in ETS certificates – are initially absent. It is clear, however, that the aviation industry – as one of the sectors most affected by global climate change – is being placed at the centre of state planning for the future.

In the area of climate-compatible aviation, the ambition to shape the sector in a green and future-proof manner is reaffirmed through numerous measures. The continuous support for national aviation research and the promotion of the market implementation of SAF form key building blocks. Through collaboration between the state, industry and research institutions, the basis is being laid to ensure that technological innovations are not only developed but also rapidly implemented in practice. Moreover, the expansion of an integrated hydropower ecosystem provides the framework to meet the sector’s high energy demand in a sustainable manner while simultaneously creating synergies with other sectors.

Nonetheless, the analysis of the coalition agreement reveals several challenges. While the substantive reform promises and the political discourse point in the right direction, uncertainties remain regarding the practical implementation and the resulting effects. For example:

• Implementation Deadlines and Transitional Arrangements: Many of the announced measures, such as the gradual reduction of the air transport tax, are linked to multi-year schedules. These transitional arrangements carry the risk that short-term competitive disadvantages may not be fully offset. Critics contend that although the reforms appear visionary on paper, in practice they are often characterised by lengthy coordination processes and political compromises.

• European Coordination: In particular, the reform of the EU climate protection package requires close coordination with European partners. Divergent national interests and competitive conditions necessitate that reform processes at the European level are transparent and well-coordinated. There is a risk that national reform proposals may be diluted or blocked in the European context if there are divergent views on the actual measures.

• Technological Challenges: Despite continuous research funding, technological progress remains an unpredictable factor. The development and implementation of new technologies – whether in the field of low-emission power systems or the production of sustainable aviation fuels – is often associated with high investment costs and long development periods. Success will therefore largely depend on the industry’s ability to bring these technologies to market and scale them.

• Competitive Pressure from International Markets: The German aviation industry operates in a global marketplace. While domestic reforms aim to enhance competitiveness, the challenge remains that international competitors often benefit from more flexible conditions and lower state interventions. This can result in ongoing competitive disadvantages on the international stage, despite domestic reforms.

The coalition agreement of 9 April 2025 marks a political turning point. The measures set out in the agreement – from the reduction in state intervention to the intensified support for research and innovation – demonstrate that the state has, at least in part, conceded to the demands of the aviation industry. The abolition of the power-to-liquid quota, in particular, is a step towards a more innovation-friendly regulatory framework. At the same time, however, the agreement also signals that reform processes are complex and subject to lengthy coordination procedures. The challenge will be to ensure that the promised measures are implemented not only on paper but also in practice over the long term. For the aviation industry, this means that, despite positive impulses and initial tangible relief, work must continue on the practical realisation of these measures. It is essential that an open dialogue among all relevant stakeholders is established to flexibly respond to new challenges. The coming years will reveal whether and to what extent the objectives formulated in the coalition agreement can be achieved, thereby laying the foundations for Germany to establish itself as a future-orientated aviation hub on the international stage. The coalition agreement can therefore only be described as a first step in the right direction.