Lufthansa to raise airfares by up to €72 as environmental fuel costs increase

Airlines have warned for years that regulations requiring them to use more expensive sustainable jet fuel could drive up costs.

Ticket prices have already surged in recent years in the post-Covid travel boom, raising fears that further increases could start deterring travellers from flying.

Fares will go up between €1 and €72 depending on the type of ticket, on all flights departing from European Union countries, Britain, Norway and Switzerland, the German airline group said.

Some of the increases are effective from June 26 for departures starting from January 1, 2025 onwards.

It said the charge would "cover part of the steadily rising additional costs due to regulatory environmental requirements" such as sustainable aviation fuel (SAF) made from bio-based materials - regarded as crucial to making flying less polluting.

It follows an SAF contribution charge imposed by Air France-KLM in January 2022, which added up to €12 on business fares and up to €4 on economy fares at the time.

That group is now considering broadly similar measures to Lufthansa, a person familiar with the matter said, indicating a charge that could be higher.

"We have a SAF contribution in place, applicable to all flights (not only on departure from Europe) to transparently reflect the additional cost of incorporating sustainable aviation fuel," an Air France-KLM spokesperson said in an emailed statement.

Aviation is deemed responsible for about 2pc of the world's carbon emissions, but is considered one of the hardest sectors to decarbonise as fuel for flights cannot be easily replaced with other kinds of power.

European regulators have introduced rules that ask fuel suppliers to ensure 2pc of fuel at EU airports is SAF by 2025, rising to 6pc in 2030 and 70pc in 2050, with many arguing that these measures will increase costs for the sector.

"I think it is logical to assume that other airlines will follow Lufthansa's lead as it looks to pass on the increasing cost of environmental regulations in the EU," said Dudley Shanley, an analyst at Goodbody.

British carrier easyJet, which has focused much of its environmental strategy on carbon reductions using hydrogen technology, said it wasn't planning to follow Lufthansa's footsteps.

"We don't apply legacy carrier surcharges and have no plans to do so," an easyJet spokesperson told Reuters.

Wizz Air also said it would avoid additional surcharges, adding in a statement that "in order to avoid burdening passengers with higher costs we urge governments to provide incentives to enable the aviation industry to achieve its environmental goals more effectively."

In the United States, both United Airlines and Southwest said they don't have an environmental surcharge.

Ryanair and Aer Lingus owner IAG did not respond to a Reuters’ request for comment on whether they would introduce similar measures to Lufthansa.

Singapore's government also introduced a levy on flight tickets earlier this year to help fund the additional cost of SAF.

Lufthansa CEO Carsten Spohr warned last year the EU targets would be hard to achieve and hinted that higher costs would be passed on to customers.

The price hike, which the airline called an "Environmental Cost Surcharge", will cover part of these costs for 2025 and will apply for all airlines in the Lufthansa group except for Eurowings tickets sold directly by the company, a spokesperson said.

On short and medium-haul flights, the fares will go up by up to €5 in economy and €7 for business class.

On long-haul flights, the costs will go up between €18 and €36 for business fares and up to €72 for first class fares from 2025, Lufthansa confirmed to Reuters.

A spokesperson said the move was not tied to Lufthansa's high labour costs after strikes this year, which led the airline to issue a profit warning ahead of first quarter results.

He added the additional costs weren't expected to go up further for now.