by Flying will become “something for the rich and privileged” as airlines face major tax increases on jet fuel, according to the Jet2 boss, with some destinations becoming more expensive than others.
Speaking at the Jet2holidays conference in Turkey this week, Steve Heapy, chief executive of Jet2, said the aviation sector produces less carbon dioxide than other industries, including meat production, but airlines have to pay more carbon taxes. .
For decades, a tax holiday on jet fuel has allowed airlines operating in the UK and EU to keep prices artificially low. Now, a growing list of environmentally burdened taxes are being imposed on aviation as governments work toward net-zero targets by 2050.
So what exactly is about to change and which destinations will become more expensive?
Carbon permits and a ‘massive’ tax increase
Under the UK Emissions Trading Scheme (ETS), the cost of a permit per tonne of carbon dioxide had increased almost 16-fold in just five years. Heapy stated that Jet2 emits approximately 2.2 million tonnes of CO2 per year. In 2018, the permit cost £5 per tonne. Today, that figure has risen to 78 pounds per ton, he said.
The aviation industry may have been subject to tax breaks on jet fuel until now, but this could be about to change: Heapy warned that the implementation of a “massive” EU-wide tax on jet fuel planes could mean higher ticket prices for the consumer. .
“Imagine if your tax rate went up to 70 percent; that’s what’s going to happen with jet fuel,” he warned this week.
The rise in airfares is already underway and there are many factors at play, including rejuvenated travel demand after the pandemic, recovery of lost profits by airlines, an increase in air passenger rates ( APD) and an increase in the cost of oil after the crisis in Russia. the invasion of Ukraine and, more recently, the war in the Middle East.
The change is already underway. Earlier this year, easyJet revealed that its average fares (January to March 2023) increased by 31 percent year-on-year. Johan Lundgren, chief executive of the low-cost airline, said the increase was due to significant cost increases, particularly the price of jet fuel. Ryanair fares increased by 20 percent in 2022 and a further 15 percent in 2023.
Ryanair will reduce its routes to Portugal
Heapy’s words come just days after Ryanair said it would reduce its services from the UK to several destinations in Portugal, due to rising airport charges.
“We have recently fallen victim to the ANA/Vinci monopoly, which has dramatically increased airport charges for next year,” said Ryanair chief executive Michael O’Leary. ANA Aeroportos de Portugal manages 10 Portuguese airports.
Ryanair closed its base in Ponta Delgada in the Azores this winter and warned that a further reduction in services to Portugal could be on the horizon.
“If ANA continues these latest monopoly price increases until 2024, then Ryanair intends to downsize one of its two Madeira-based aircraft and significantly reduce our schedules to and from Faro and Porto by summer 2024. “O’Leary said.
Portugal will increase its airport charges by an average of 14.6 per cent in 2024, representing approximately €1.60 (£1.38) per passenger per flight. This, O’Leary said, would “damage Portugal’s competitiveness” and “crowd out much-needed tourism growth.”
Madeira could suffer a double blow. Because it is located in the outer regions of the EU, it has always been exempt from the EU Emissions Trading Scheme charge. However, this exemption will be removed by January 1, 2024 (when flying from other EU member states), which will likely lead to higher ticket prices. The Canary Islands will also be affected by this change. Heapy predicts this could increase the cost of flying to these destinations by £25.
The emergence of ‘green fuel’
The introduction of sustainable aviation fuel (SAF) could contribute to an increase in the cost of flying. The issue was in the news this week, when Virgin made its first transatlantic flight using the alternative to jet fuel.
Willie Walsh, director general of IATA and former chief executive of British Airways, said: “It will mean higher fares, because sustainable aviation fuel is more expensive than traditional jet kerosene. And as we transition to net zero, it will cost some money.”
There are additional concerns regarding the scalability of SAF, with suggestions that it could never be applied to more than a limited number of flights.
The increase in airline ticket prices will have an impact not only on the tourist’s pocket, but also on the destination itself. A 2022 Deloitte report titled “Flying towards a sustainable future” predicted that, for Spain, the emerging set of aviation tax measures could mean a loss of up to 11 million international tourists a year.
There are certain destinations that are more difficult to reach.
Based on average ticket prices between 2017 and 2022, the cost of flying from the UK to Istanbul has increased by 69.4 percent, according to OAG data. Other cities that have seen significant increases are Amsterdam (31.1 percent), Rome (33.3 percent) and Santander (60.9 percent).
The total cost of package holidays is also increasing. Which? Comparing average package holiday prices in six popular destinations revealed that a week-long break in 2023 rose by an average of 30 per cent year-on-year, to £867 per person. A seven-night trip to Italy cost on average £616.68 per person last year. This year, the same trip would cost £757.53, a 23 per cent increase.
