Lufthansa Group Introduces Environmental Cost Surcharge

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June 26, 2024

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(Lufthansa Group) Environmental Cost Surcharge applies to departures from the 27 EU countries as well as the UK, Norway and Switzerland; Charge applies to all tickets issued from June 26, 2024 with departure from January 1, 2025; Lufthansa Group invests billions annually for more sustainable flying

The Lufthansa Group is introducing an Environmental Cost Surcharge. 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 January 1, 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 Environmental Cost Surcharge applies to all flights sold and operated by the Lufthansa Group departing from the 27 EU countries as well as the UK, Norway and Switzerland. The amount of the surcharge varies depending on the flight route and fare and is between 1 euro and 72 euros. The Environmental Cost Surcharge will be levied on all tickets issued from June 26, 2024 and applies to departures from January 1, 2025. The exact amount of the Environmental Cost Surcharge is shown on the Lufthansa Group Airlines booking pages in the price details.

The Lufthansa Group invests billions in new technologies every year and works together with partners on innovations that help to make flying more sustainable step by step and drive the scaling of key technologies beyond the Lufthansa Group. In addition, the Lufthansa Group has actively supported global climate and weather research for many years. However, 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. Part of these expected costs for the year 2025 are now to be covered by the new Environmental Cost Surcharge.

The Lufthansa Group has set itself ambitious climate protection targets and is aiming for a neutral CO₂ balance by 2050. By 2030, the aviation group aims to halve its net CO₂ emissions compared to 2019 through reduction and compensation measures. For effective climate protection, the Lufthansa Group is focusing in particular on accelerated fleet modernization, the continuous optimization of flight operations, the use of SAF and offers for private travelers and corporate customers to make air travel or the transport of freight more sustainable.

Background information

SAF quotas of the EU

As part of its "Fit for 55" climate protection program, the EU has decided on mandatory SAF blending quotas that will increase over the years up to 2050. The SAF quota is to be 2 percent from 2025, 6 percent from 2030, 20 percent from 2035 and 70 percent from 2050. For the Lufthansa Group, this will lead to additional costs in the billions in the future.

EU-ETS

In the EU Emissions Trading System (EU ETS) for aviation, CO₂ emissions have been controlled and limited by means of certificate trading since 2012. The Lufthansa Group is subject to this system for all flights within the European Economic Area (EEA). Additional obligations to surrender emission certificates exist under the emissions trading systems of Switzerland (CH-ETS) and the United Kingdom (UK-ETS) for flights between the EEA, Switzerland and the UK.

CORSIA

Under the agreement on climate protection reached by the International Civil Aviation Organization (ICAO) in October 2016 - the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) - growth-related CO₂ emissions in international aviation have been offset by the purchase of certificates since 2021. All emissions from the aviation industry that exceed the CO₂ emissions of the baseline defined by the ICAO are offset. For the years 2024 to 2035, this amounts to 85 percent of the emissions from 2019. READ MORE

Related articles

Lufthansa to raise fares by up to 72 euros as environmental costs increase (Reuters)
Lufthansa adds green fuel surcharge of up to €72 on flights from 2025 (Travel Tomorrow)
Lufthansa introducing climate surcharge to pass on regulatory costs (Airport Technology)
Lufthansa to Charge Up to €72 a Flight to Cover Clean Fuel Costs (Energy Connects/Bloomberg)
Price of flying set to soar as airliners pass costs of sustainable fuel to passengers (Semafor)

Excerpt from Reuters: Airlines have warned for years that regulations requiring them to use more expensive sustainable jet fuel could drive up costs.

Ticket prices have already surged in recent years in the post-COVID travel boom, raising fears that further increases could start deterring travellers from flying.

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Lufthansa shares hit an intraday low after the news, but recovered later in the day.

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"I think it is logical to assume that other airlines will follow Lufthansa's lead as it looks to pass on the increasing cost of environmental regulations in the EU," said Dudley Shanley, an analyst at Goodbody.

Air France-KLM (AIRF.PA) imposed an SAF contribution charge in January 2022, it said, adding up to 12 euros on business fares and up to four euros on economy fares at the time. It is now considering broadly similar measures to Lufthansa, a person familiar with the matter said, indicating a charge that could be higher.

"We have a SAF contribution in place, applicable to all flights (not only on departure from Europe) to transparently reflect the additional cost of incorporating sustainable aviation fuel," an Air France-KLM spokesperson said in an emailed statement.

British carrier easyJet (EZJ.L) which has focused much of its environmental strategy on carbon reductions using hydrogen technology, said it wasn't planning to follow Lufthansa's footsteps.

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"We don't apply legacy carrier surcharges and have no plans to do so," an easyJet spokesperson told Reuters.

Wizz Air (WIZZ.L) also said it would avoid additional surcharges, adding in a statement that "in order to avoid burdening passengers with higher costs we urge governments to provide incentives to enable the aviation industry to achieve its environmental goals more effectively."

In the United States, both United Airlines (UAL.O) and Southwest (LUV.N) said they don't have an environmental surcharge.

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Singapore's government also introduced a levy on flight tickets earlier this year to help fund the additional cost of SAF.

Lufthansa CEO Carsten Spohr warned last year the EU targets would be hard to achieve and hinted that higher costs would be passed on to customers.

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A spokesperson said the move was not tied to Lufthansa's high labour costs after strikes this year, which led the airline to issue a profit warning ahead of first quarter results.

He added the additional costs weren't expected to go up further for now. READ MORE

Excerpt from Travel Tomorrow: 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. READ MORE

Excerpt from Airport Technology: While the aviation industry has been investing in SAF for years, the sector has struggled to bring the cost of the fuel to anywhere near the level of kerosene jet fuel, or scale production to levels required for widespread use.

As a result, airlines have so far only used low percentage blends of the alternative fuel, which provides emissions reductions of about 20% when used on its own. Some demonstration flights have operated to show SAF’s pure potential.

While Lufthansa also currently uses the fuel in small percentage blends, the company boasts it is one of the “five largest buyers of SAF worldwide” and is already investing $250m into procurement of the fuel over coming years. READ MORE