Airlines Warn of Higher Fares Due to Climate Policy Push

A United Airlines Boeing 737 takes off from Los Angeles International Airport in Los Angeles, Calif., on June 16, 2022. Daniel Slim/AFP via Getty Images

Airline passengers will face more expensive flight tickets as the industry starts adopting climate change regulations, such as moving away from fossil fuel-based conventional jet fuels.

Willie Walsh, director general of the International Air Transport Association, which includes most of the world’s major airlines, told reporters at an annual media briefing that the airlines are already stretched thin on profit margins, and cannot absorb an increase in costs. “You cannot expect an industry making on average $1 profit per customer to absorb the increases we’ve seen.”

“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.”

Walsh called for European airline companies to expand production of sustainable aviation fuel (SAF), and praised efforts by American counterparts who have already made efforts to increase output. “In the United States, it is recognized that sustainable aviation fuels are part of the answer, and they are heavily focused on additional production,” he said.

Meanwhile, environmental groups are advocating higher costs of flight tickets, which they argue will reduce air traffic growth. The aircraft industry is relatively more difficult to decarbonize because it is complex to replace conventional jet fuel with other forms of power.

Used Cooking Oil for Jets?

According to European parliament members (MEPs), used cooking oil, synthetic fuel, or even hydrogen should gradually replace aviation fuel to help the European Union (EU) achieve its climate targets by 2050.

The European parliament adopted its position on new draft EU rules last July and decided to increase the uptake of sustainable fuels by planes and airports in the region. In 2025, the parliament members propose to grow the share of sustainable aviation fuel available in European airports to 2 percent, then to 37 percent in 2040, and 85 percent in 2050.

The European parliament also changed the definition of sustainable aviation fuel, covering synthetic fuels or certain biofuels, produced from agricultural or forestry residues, algae, bio-waste or used cooking oil, while MEPs included recycled carbon fuels produced from waste-processing gas, and exhaust gas deriving from production process in industrial installations under the definition. Some definitions have a time period as sustainability criteria shifts from time to time.

Cost of Sustainable Aviation Fuel

Sustainable aviation fuels are considered an eligible alternative for aircraft carriers to meet climate obligations under the Carbon Offsetting and Reduction Scheme for International Aviation.

However, SAF is considerably costlier compared to standard jet fuel. In 2020, the overall cost of jet fuel was $0.50 per liter, according to industry news portal Simple Flying. But the cost of SAF was $1.10 per liter, signifying a 120 percent increase in costs.

Since the costs cannot be absorbed by airlines, it will be passed on to customers. The price of SAF is estimated to decrease over the years, but the price of conventional fuel is on the uptick amid global uncertainties.