- Decarbonization measures are pushing up ticket costs worldwide
- Energy transition means little price respite for flying public
International Air Transport Association
The global airline industry has long warned passengers they’ll eventually have to pay some of the $5 trillion cost of decarbonizing air travel. The moment has come.
Singapore’s government has announced a tax on air fares to fund purchases of pricey sustainable aviation fuel, while neighboring Malaysia has authorized carriers to charge people a carbon levy from next month.
In Europe, airlines this year lose one quarter of their free emissions allowance, the first in a series of reductions that’s already estimated to be adding to ticket prices.
“We’ve entered a new era,” said Rico Luman, a transport, logistics and automotive economist at ING Groep NV in Amsterdam. “Flying will turn more expensive.”
While the policies differ from country to country, the common goal is to clean up an aviation industry that for a century has relied on fossil fuels to function. Airline chiefs fret that unless they show they’re serious about cutting emissions right now, they’ll face fines, flying limits or — worst of all — be grounded completely.
Higher Fares
Added fuel cost per seat on a typical short, medium and long-haul flight
Sustainable aviation fuel, a cleaner-burning liquid made from waste oils or agricultural feedstock, is the industry’s primary means of reaching its 2050 net zero target. But the new fuel is in short supply and can be more than double the price of normal jet kerosene, leaving airlines little choice but to pass the cost onto passengers.
It means little price respite for flyers who’ve been whacked by soaring prices since air travel resumed after the pandemic. Now, they’ll have to pay to neutralize aviation’s carbon footprint, too.
Air New Zealand wants sustainable fuel to account for around 20% of its total fuel consumption by 2030, one of the most ambitious targets of its kind anywhere in the world. Delta Air Lines Inc., Cathay Pacific Airways Ltd., and Qantas Airways Ltd. are among those with a 10% target by the end of the decade.
Singapore, Malaysia
Sustainable aviation fuel can cut emissions by as much as 80%. The greener fuel is essential to reduce emissions from long-haul flights, the source of most air-travel pollution, because electric planes don’t have sufficient range. Hydrogen propulsion isn’t expected to make a meaningful impact for decades.
With time running out, air-travel levies or mandates to buy or supply sustainable aviation fuel are rippling across the globe from Japan and Singapore to the European Union and the UK. The measures are designed to forcefully accelerate emissions reductions and assure green fuel suppliers that there will be buyers for their new, relatively expensive product.
“Voluntary measures have largely failed,” said Dan Rutherford, director of research at the International Council on Clean Transportation. The most effective policies are those that apply equally to all airlines instead of singling out carriers from a certain country, he said.
Singapore, for instance, aims to have all departing flights take off with 1% sustainable aviation fuel in jets’ tanks from 2026, rising to between 3% and 5% by 2030. The levy will vary depending on the length of the flight and the class of travel. An economy flight to London in 2026 would rise by S$16 ($12) under the policy.
Malaysia will in April allow airlines flying in and out of Kuala Lumpur to impose a carbon levy, either to pay for sustainable fuel or to fund carbon offsets. Details of the policy appeared in a local Bernama media report this month that was later confirmed by the transport ministry.
Under the European Union’s ReFuelEU initiative, conventional jet kerosene must be blended with 2% sustainable aviation fuel in 2025, gradually increasing to 70% by 2050. The UK also plans to mandate SAF use next year.
It’s not just the price of fuel that passengers will absorb. The cost of buying new, less-thirsty aircraft is also dripping down into fares. Qantas, which has started to receive the first of dozens of next-generation planes on order, last week said it’s raising fares on most domestic routes by an average of 2% to 3%.
Price Hikes
According to ING’s Luman, this year’s reduction to aviation’s free emissions allowance in the EU may be adding €8 ($8.75) to the price of a return flight between London and Rome. The extra cost would be more than €30 in 2026 at current carbon prices, he said. Luman cautioned that it’s hard to isolate the precise impact of the policy because other factors including a lack of capacity are also pushing up fares.
“It pains me to suggest that travelers are going to have to pay more,” Margy Osmond, chief executive officer of Tourism & Transport Forum Australia, said at a renewable aviation fuels conference in Canberra this week. “There’s going to be an additional cost to aviation. That’s all there is to it.”