Rising environmental costs: Lufthansa increases flight prices by up to 72 euros
By Joanna Plucinska, Ilona Wissenbach and Tim Hepher
(Reuters) – Lufthansa will add an environmental tax of up to 72 euros ($77) to its fares, the airline group said on Tuesday, joining at least one European rival as the industry struggles to cover the costs of new EU rules to cut emissions.
Airlines have warned for years that regulations requiring them to use more expensive sustainable jet fuel could drive up costs.
Ticket prices have already skyrocketed in recent years as a result of the post-COVID travel boom, raising fears that further increases could deter travelers from flying.
Prices for all flights from EU countries, Great Britain, Norway and Switzerland will rise by between 1 and 72 euros, depending on the type of ticket, the German airline said. Some of the increases will apply from June 26 for flights departing on January 1, 2025.
The fee is intended to cover “part of the steadily increasing additional costs due to legal environmental requirements”, such as for sustainable aviation fuel (SAF) made from bio-based materials, which is considered crucial for more environmentally friendly flying.
Lufthansa shares hit an intraday low following the news release, but recovered throughout the day.
Aviation accounts for about two percent of global emissions, but is considered one of the most difficult sectors to decarbonize because the fuel used to fly cannot easily be replaced by other forms of energy.
Ripple effects
European regulators have introduced rules requiring fuel suppliers to ensure that two percent of fuel at EU airports is sustainable fuel (SAF) by 2025, rising to six percent by 2030 and 70 percent by 2050. However, many argue that these measures will increase costs for the sector.
“I think it’s logical to assume that other airlines will follow Lufthansa’s example in passing on the rising costs of environmental regulations in the EU,” said Dudley Shanley, an analyst at Goodbody.
Air France-KLM levied a SAF contribution in January 2022, which at the time amounted to 12 euros for business fares and up to four euros for economy fares, it said. A person familiar with the matter said the airline is now considering similar measures to Lufthansa, promising a contribution that could be even higher.
“We have introduced a SAF contribution that applies to all flights (not just departures from Europe) to transparently show the additional costs of using sustainable aviation fuel,” an Air France-KLM spokesperson said in an emailed statement.
British airline EasyJet, which focuses much of its environmental strategy on reducing carbon dioxide emissions through the use of hydrogen technology, said it had no plans to follow in Lufthansa’s footsteps.
“We do not impose surcharges on traditional airlines and have no plans to do so,” an EasyJet spokesman told Reuters.
Wizz Air also announced that it would not impose additional surcharges. In a statement, it added: “In order not to burden passengers with higher costs, we call on governments to create incentives that enable the aviation industry to achieve its environmental goals more effectively.”
In the US, both United Airlines and Southwest stated that they do not charge an environmental surcharge.
COST WARNINGS
British Airways owner IAG and Ryanair did not respond to a Reuters request for comment on whether they would introduce similar measures to Lufthansa.
IAG shares were down 1.8 percent at 15:27 GMT, while budget airline Ryanair extended its gains after the news broke, rising 2.3 percent.
To cover the additional costs of the SAF, the Singapore government also introduced a levy on airline tickets at the beginning of the year.
Lufthansa CEO Carsten Spohr had already warned last year that the EU targets would hardly be achieved and indicated that the higher costs would be passed on to customers.
The price increase, which the airline calls an “environmental cost surcharge,” will cover part of those costs for 2025 and will apply to all airlines in the Lufthansa Group, with the exception of Eurowings tickets sold directly by the company, a spokesman said.
On short and medium-haul flights, prices will increase by up to five euros in economy class and seven euros in business class.
From 2025, costs on long-haul flights will rise between 18 and 36 euros for business fares and up to 72 euros for first-class fares, Lufthansa confirmed to Reuters.
A spokesman said the move had nothing to do with Lufthansa’s high labor costs following strikes this year that prompted the airline to issue a profit warning ahead of the release of its first-quarter results.
He added that no further increase in additional costs is expected for the time being.
(1 US dollar = 0.9321 euros)
(Additional reporting by Paolo Laudani and Shivansh Tiwary; Editing by Mark Potter and Emelia Sithole-Matarise)
