The Lufthansa Group, which comprises the Lufthansa airline along with Austrian Airlines, Brussels Airlines, Eurowings and Swiss Airlines, has announced that ticket prices will rise by up to €72 from next year, to compensate for the raising costs of green fuel.
The “Environmental Cost Surcharge” will apply to all flights sold and operated by any of the group’s airlines departing from the 27 EU countries as well as the UK, Norway and Switzerland. It will be levied on all tickets issued from 26 June 2024 and applies to departures from 1 January 2025, with the amount varying between €1 and €72, depending on the flight route and fare.
The surcharge is intended to cover part of the steadily rising additional costs due to regulatory environmental requirements. These include the statutory blending quota of initially two percent for Sustainable Aviation Fuel (SAF) for departures from European Union (EU) countries from 1 January 2025, adjustments to the EU Emissions Trading System (EU ETS), as well as other regulatory environmental costs such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
The airline group will not be able to bear the successively increasing additional costs resulting from regulatory requirements in the coming years on its own.
Lufthansa Group
Despite a tripling in production foreseen for 2024, it would still only account for 0.53% of aviation’s fuel needs, far less than the 2% mandated in the EU by 2025. Besides EU level, worldwide, through the International Civil Aviation Organization (ICAO), governments set an ambition to achieve a 5% CO2 emissions reduction for international aviation from SAF by 2030. To achieve that ambition, around 27% of all expected renewable fuel production capacity available in 2030 would need to be SAF, but it currently only accounts for just 3% of all renewable fuel production.
Airlines have long warned that the increasing need for SAF and limited supply would lead to increasing fares. “Some governments have mandated airlines to purchase SAF in amounts that do not exist”, IATA Director General Willie Walsh said in June. “And where they have mandated SAF production, there are no mechanisms to protect airlines from bearing the costs of supplier penalties for shortfalls. We witnessed this in France where fuel suppliers are happy to accept penalties for their failure to supply the SAF mandate. They simply exercise their monopoly power and pass those costs on airlines.”
With no solution in sight to meet the demand, the cost of green fuel will increasingly be passed down to customers. Air France-KLM already introduced a similar surcharge of between €4 and €12 to all flights, not just on departure from the EU, in 2022 and is now looking to adopt a route-based pricing similar to Lufthansa’s.
