The business environment has been very challenging for the airlines and the whole aviation industry since March 2020. First there was pandemia, which isn´t exactly even over yet, and now all of a sudden there´s a very unstable geopolitical situation in Ukraine, which is also affecting the flights with airspace restrictions. Every single stakeholder in the aviation industry has been suffering and loosing revenues during these past two years.
Because of the lost revenues, every aviation company is eager to raise their prices. At the same time the situation in Ukraine may have created cost pressures by increasing the prices for supplies like energy. Since in the aviation ecosystem everybody needs each other, raising prices is like robbing from the poor; nobody is in a good condition to accept price increases.
Sustainability is a very hot topic in aviation and to support the green transition, various companies have launched various sticks or carrots for their customers. And typically the sticks and carrots are in a form of an incentive in prices. Airports have solved the questions of incentives for flying with some interesting approaches.
London Heathrow announced to raise its airport charges 37% from the beginning of 2022. At the same time the airport has launched an incentive programme which covers 50% of the Sustainable Aviation Fuel (SAF) cost premium to reach a SAF mix at Heathrow of 1% in 2022 and increasing by 1% point each year up to 4% by 2025.
Amsterdam Schiphol Airport has published plans to raise the airport charges 37% cumulatively by March 2025. To support the green transition, the airport has announced that airlines will get 500€ for every ton of biofuel and 1000€ for every ton on synthetic fuel during refuelling.
Swedavia, the Swedish airport operator, has launched a CO2 Emission Charge from the beginning of 2022. The idea is that the flights that emit more CO2 than average should pay a penalty which finances a bonus for flights emitting less than average. This is based on the Swedish law on airport charges.
So where is the catch? Based on the flight, the cost for fuel has been about 20-25% of the total costs of the flight. The cost for the Sustainable Aviation Fuel is about 3-4 times higher than with the traditional aviation fuel. Of course normally we are talking about the fuel mixtures where there is only a few per cent of SAF in the fuel. How is this comparable to the airport charges?
Let´s take an example. According to the Airlines for America in 2019 the fuel for the flight from London Heathrow to New York JFK cost about 30.700€. Since that time the price of the aviation fuel has about doubled. Now we would be talking about the cost of approximately 60.000€. If we have 1% of SAF in it the cost would be about 61.800€. If the airport covers 50% of the SAF premium we would talk about 900€ of discount in the airport charges. Now , let´s assume that at the flight there are 280 passengers. The passenger charge last year was about 26€ and now it´s about 41€. The increase in this fee for this flight without any discounts is about 4200€. And this is not the only airport charge; there are also other charges that increase the total amount of the airport costs for the airlines.
My example is very simplified and there are many factors and variables that change and that I can´t predict without any more details. The numbers have big tolerances and they only give the direction. But still I think it gives the point. More and more airports are supporting the airlines with green incentives. This is obviously very good and it´s in everybody´s interest. But at the same time if the incentives are funded from the heavily raised airport charges, the benefits might not be as expected. And is the sustainability carrot used for justifying the raised airport charges?
We all want the aviation to go greener. At the same time the whole aviation industry is suffering from heavy monetary losses. We would need much more cooperation between all the stakeholders of the supply chain in aviation to find more ways to support the green transition. We would need ways that are also economically sustainable or that at least share the pain. True sustainability can´t be an action that is shown mainly in the press releases or is funded by the others; we all have to contribute to it and make our own part. Together, with trust and respect towards each other, we can find ways to do this.
Comments