Airfares are set to rise across Europe as governments there start levying fees for emissions.
The additional costs come as a result of the EU's mandatory Sustainable Aviation Fuel blend quota, the EU Emissions Trading System and the Carbon Offsetting and Reduction Scheme for International Aviation.
“Flying is going to be more expensive. That is an issue. We are trying to improve efficiency to mitigate that, but it will have an impact on demand,” IAG CEO, Luis Gallego, told the Financial Times.
Gallego expressed concern that European airlines could lose a competitive edge because of stringent nett-zero targets in Europe. These include a 2% SAF blending quota for departures from EU countries from January 1, 2025, and a requirement for 6% of jet fuel to be from sustainable sources by 2030.
“We agree with decarbonisation . . . but I think we need to do it in a consistent way worldwide not to jeopardise European aviation,” said Gallego.
IAG subsidiaries British Airways, Iberia, Vueling and Aer Lingus used 12% of the world's SAF in 2023, he said.
However, Gallego explained that there was not enough SAF and that the little produced was very expensive. Airlines in the UK and EU have called for more support from the government to increase the supply of SAF and decrease the costs for airlines and their passengers.
At the end of June, Lufthansa became the first airline group to introduce a surcharge to cover the costs of SAF and other costs associated with the EU's green regulations.
