Air France-KLM and Accor in 2025 failed to meet emissions reduction targets associated with sustainability-linked bonds and, as a result, will have to pay penalties to bondholders.
Air France-KLM in its 2025 earnings report last week stated that its airlines did not meet a target of reducing jet fuel emissions per revenue tonne kilometre by 10 per cent in 2025, compared to 2019 levels, a goal linked to €1 billion in sustainability bonds issued in January 2023. The sister airlines in 2023 also signed two credit facilities with financial terms linked to achieving certain sustainability and other ESG targets.
The aviation group said it “faced some headwinds to its GHG intensity progression” in 2025 due to supply chain constraints, engine issues affecting Airbus A220 aircraft and higher fuel consumption “due to longer flight time on certain routes caused by different geopolitical circumstances”.
The group’s earnings report states that the bond issuance is split into two tranches: €500 million maturing on 31 May, and another €500 million maturing in 2028. For the first tranche, a €750 “redemption premium” per bond will be paid on 31 May 2026. For those maturing in 2028, the group will pay a higher interest rate, with a 0.375 percent step-up on coupons in 2027 and 2028. This will result in an added cost of €7.5 million, according to Barclays calculations cited in a Bloomberg report.
The airline group maintains that it “plays an active role” in supporting the industry’s net zero goals and has developed a ‘Climate Transition Plan’, which includes investments in new generation aircraft that emit up to 25 per cent less CO2 per passenger kilometre, according to the group. The plan also involves the “progressive” adoption of alternative aviation fuels.
Meanwhile French hospitality giant Accor, which also reported its full-year earnings last week, stated that its failure to meet two emission reduction targets tied to a sustainability-linked bond issued in 2021 for €700 million will result in penalties of €1.75 million in 2027 and €1.75 million in 2028, with repayments starting from November 2026.
The group had previously targeted a 15 per cent reduction in its Scope 1 and 2 emissions, and a 15 per cent reduction in Scope 3 emissions by 2025, compared to a 2019 baseline.
“The group has not met its targets and will be subject to a coupon step-up of 12.5 basis points per unmet target starting from November 2026 for the remaining life of the debt,” Accor said in its earnings report.
Accor also has an unused credit facility, established in December 2023, that is tied to certain sustainability goals. If these objectives are not met, the group faces a margin increase of 0.83 basis points; if they are met, the margin decreases by 0.83 basis points. As of 31 December 2025, the margin on Accor's credit facility was “stable”, according to the hospitality giant.