Air France-KLM and Accor in 2025 failed to fulfill emissions reduction targets related to sustainability-linked bonds and, consequently, can have to pay penalties to bondholders.
Air France-KLM in its 2025 earnings report last week stated that its airlines didn’t meet a goal of reducing jet fuel emissions per revenue tonne kilometre by 10 per cent in 2025, in comparison with 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 as a consequence of supply chain constraints, engine issues affecting Airbus A220 aircraft and better fuel consumption “as a consequence of longer flight time on certain routes brought on 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 one other €500 million maturing in 2028. For the primary tranche, a €750 “redemption premium” per bond will likely be paid on 31 May 2026. For those maturing in 2028, the group pays a better rate of interest, with a 0.375 percent step-up on coupons in 2027 and 2028. This will end in an added cost of €7.5 million, based on Barclays calculations cited in a Bloomberg report.
The airline group maintains that it “plays an lively role” in supporting the industry’s net zero goals and has developed a ‘Climate Transition Plan’, which incorporates investments in latest generation aircraft that emit as much as 25 per cent less CO2 per passenger kilometre, based on the group. The plan also involves the “progressive” adoption of different aviation fuels.
Meanwhile French hospitality giant Accor, which also reported its full-year earnings last week, stated that its failure to fulfill two emission reduction targets tied to a sustainability-linked bond issued in 2021 for €700 million will end in penalties of €1.75 million in 2027 and €1.75 million in 2028, with repayments ranging from November 2026.
The group had previously targeted a 15 per cent reduction in its Scope 1 and a couple of emissions, and a 15 per cent reduction in Scope 3 emissions by 2025, in comparison with a 2019 baseline.
“The group has not met its targets and will likely be subject to a coupon step-up of 12.5 basis points per unmet goal ranging from November 2026 for the remaining lifetime of the debt,” Accor said in its earnings report.
Accor also has an unused credit facility, established in December 2023, that’s tied to certain sustainability goals. If these objectives aren’t met, the group faces a margin increase of 0.83 basis points; in the event that 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”, based on the hospitality giant.
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