The business environment has been very challenging for the airlines and the whole aviation industry since March 2020. First there was the pandemic, which is not even over yet, and now all of a sudden there is a very unstable geopolitical situation in Ukraine, that affects the flights with airspace restrictions. Every single stakeholder in the aviation industry has been suffering and loosing revenues during the 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 everybody needs each other in the aviation ecosystem, raising prices is like robbing from the poor. Nobody is in a good condition to accept price increases.
Sticks and carrots
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 a 37 % raise in airport charges 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 euros for every ton of biofuel and 1000 euros 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 then finances a bonus for flights emitting less than average. This is based on the Swedish law on airport charges.
So where is the catch? Depending on the flight, the cost for fuel has been about 20-25 % of the total costs. 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?
A closer look at fuel costs and airport charges
According to the Airlines for America the fuel for the flight from London Heathrow to New York JFK cost about 30.700 euros in 2019. Since that time the price of the aviation fuel has about doubled. Thus, we would be talking about the cost of approximately 60.000 euros. With 1 % of SAF in the fuel, the cost would be approximately 61.800 euros. If the airport covers 50 % of the SAF premium we would talk about a discount of 900 euros in the airport charges.
Now, let us assume that there are 280 passengers on a flight. The passenger charge was about 26 euros last year and now it is about 41 euros. The increase in this fee for this flight without any discounts is about 4200 euros. This is not the only airport charge, as there are other charges that increase the total amount of the airport costs for the airlines.
The example is very simplified and there are many factors and variables that change and are hard to predict without more details. The numbers have big tolerances and they only show the direction. But still, the point is made.
Green transition throughout the whole supply chain of aviation
More frequently, airports are supporting the airlines with green incentives. This is obviously very good and in everybody´s interest. But at the same time, if the incentives are funded from the heavily raised airport charges, the benefits may 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 loss. We would need more cooperation between all the stakeholders in the supply chain of aviation to find new ways to support the green transition. We would need ways that are also economically sustainable or at least, share the pain.
True sustainability cannot be an action that is shown mainly in the press releases or be funded by others. Every actor has to contribute and do its own part. Together, with trust and respect towards each other, we can find ways to do this.