ISTAT Jetrader - Autumn 2023 - 30

Date
Issuer
Jan-23
Nov-22
Oct-21
Jul-21
Sustainability-Linked Bonds With SPT Disclosure Examples
Sustainability Performance Target
Air France-KLM
Viva Aerobus
Volaris
British Airways
Reduction or Improvement
per Metric
It doesn't appear investors have yet overly questioned the
specific SPT of CO2 reduction per unit. If an airline states
it will reduce its CO2/RTK by x%, to date it seems many
investors, keen to bolster their ESG investments, accept
with few questions asked.
As more SLFs hit the market, we would expect to see
more focus on the SPT, how the reduction will be achieved
and also potentially more aggressive margin step ups.
Airlines will need to create and refine their pathways to net
zero; indeed, an increasing number of them are following
guidelines from SBTi,8
which assist in target setting.
Reduce jet fuel emissions intensity by 33.4% by 2024 vs. 2015
Reduce CO2/RPK by 21.54% by 2022 and by 35.42% by 2030 (i.e.,
3.3% avg. p.a.) both vs. 2015
Reduce CO2/RPK by 8.1% by 2025 vs. 2019
Ratchet (bps)
Reduce well-to-wake CO2/RTK emissions by 10% by 2025 vs. 2019 75 (3-year),
37.5 (5-year)
25
25
25
It is also worth mentioning that the SPT used in financing
should be as good as, if not better, than what the airline
markets publicly. For example, if an airline advertises that
it will reduce emissions by 25% by 2030 but then construct
an SLF that states (only) 10%, it is likely the airline will face
protests of greenwashing and even risks of legal action. To
address such issues, one law firm announced the formation
of a " Greenwashing Mitigation Team " at the end of June.
Baseline and Final Year
As regards baseline and final years, investors will want to
know why those specific dates were chosen. A cynic might
say that an airline will establish a start date that occurs
before a (significant) change in CO2/RTK; for example,
perhaps an airline removed older equipment from its fleet
or took out four-engine aircraft after the baseline year
was determined.
Airlines that consistently use only new(er) equipment
won't see the same initial improvement as an airline that
more recently updated its fleet. In order to avoid " the road
to hell is paved with good intentions " situations, operators
of new(er) equipment should not be penalized for being
relatively more efficient.
Margin Ratchet
Outside the scope of the SPT - but tied to it - is the
margin rachet: What is the increase/decrease should the
airline meet/beat or not to achieve their target?).
As mentioned earlier, few announced deals publicly
disclose the details of the SPT and the margin mechanics.
Air France, Viva Aerobus, Volaris and British Airways have
publicly disclosed detailed SPTs in the above table.
The Genie Is Out of the Bottle
Now that borrowers have issued SLLs and SLBs, does this
mean they won't issue them again? This is highly unlikely
and not advisable.
8. https://sciencebasedtargets.org/resources/files/SBTi_
AviationGuidanceAug2021.pdf
30 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT

http://www.internationalaircraft.com https://www.sciencebasedtargets.org/resources/files/SBTi_aviationguidanceaug2021.pdf https://www.sciencebasedtargets.org/resources/files/SBTi_aviationguidanceaug2021.pdf

ISTAT Jetrader - Autumn 2023

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2023