Airlines warn of higher fares from green transition

6:38 am Tuesday, December 06th, 2022

By Emma Farge

GENEVA (Reuters) – Airline passengers face higher ticket prices as the industry moves towards its target of reducing emissions to net zero by 2050, the head of a global trade association said on Tuesday.

Willie Walsh, Director General of the International Air Transport Association, which includes most of the world’s major airlines, called for swifter action in Europe to drive up scarce production of greener Sustainable Aviation Fuel (SAF).

Air fares have already jumped this year as a result of higher prices for conventional fossil-based jet fuel.

“You cannot expect an industry making on average $1 profit per customer to absorb the increases we’ve seen,” Walsh told reporters at an annual media briefing.

“Going forward as we see increases in carbon costs…there has to be an impact on ticket prices as the industry transitions to net zero. The airlines cannot absorb increased costs.”

Environmental groups argue that air higher travel costs will help to rein in emissions by curbing growth in traffic.

Walsh praised efforts by the United States to lift output of clean fuels, in apparent contrast with European objections that new U.S. incentives could create an uneven playing field.

“In the U.S. it is recognised that Sustainable Aviation Fuels are part of the answer and they are heavily focused on additional production,” Walsh said.

He dismissed as “nonsense” European Union moves to oblige airports to offer increasing supplies of SAF, which is not widely available.

“Europe’s answer to the problem penalises people,” he said.

In July, the European Parliament backed rules on aviation fuel that set binding targets for the replacement of kerosene with less polluting sources, while extending the definition of what a green fuel could be.

In the United States, the Biden administration has launched a government challenge to supply at least 3 billion gallons of SAF per year by 2030.

The airline sector is considered one of the most difficult to decarbonise as fuel for flights cannot be easily replaced with other kinds of power.

This year’s U.S. Inflation Reduction Act includes significant subsidies to the SAF industry in the form of tax credits, but European industry leaders including the head of planemaker Airbus have said the legislation is unfair.

(Reporting by Emma Farge, Editing by Tim Hepher and Louise Heavens)