After criticizing the dysfunctional three-party coalition for raising air taxes and prices, airlines are cutting services and moving planes to more profitable locations.
The imbalance between supply and demand has caused domestic airfares to soar, raising concerns that the Mediterranean pilgrimage that Germans make each summer will be out of reach for some.
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Those who worry about climate change (like me) may instinctively welcome these moves. Aviation is a major polluter and any move to cleaner rail services is welcome. But the loss of tourists and international flights risks worsening Germany’s economic slump.
Following February’s federal election, the next government will ensure airlines pay their fair share and reduce global warming emissions, while preventing Europe’s largest economy from becoming an “aviation graveyard” We are faced with an unenviable task. O’Leary recently characterized the German market. Also read: Germany’s new immigration policy offers unique opportunities for Indians
Frequent fliers to and from Germany have recently faced a jet stream of bad news. In October, Ryanair confirmed it would cut its German capacity by 12% for next summer, withdrawing completely from Dortmund, Dresden and Leipzig, cutting Hamburg by 60% and Berlin by 20%.
In the same month, Lufthansa’s low-cost carrier Eurowings announced it would cut more than 1,000 flights to Hamburg, warning that further reductions were to follow and airfare increases were inevitable.
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Deutsche Bank’s research department points out that in the first nine months of 2024, economy tickets in Germany cost on average around 60% more than in 2019.
The lack of flight ability is not uniform. According to the German Aviation Association (BDL), although intercontinental flights have fully recovered, domestic air traffic capacity remains at half of its 2019 level (excluding large hubs in Frankfurt and Munich). recovery is even weaker).
The latter is, in part, an encouraging development. Germany’s creaky railways need more investment, but trains should become the default option for domestic travel, and it’s good to see companies increasingly encouraging their employees to take trains rather than planes.
However, the continuing lack of flights between Germany and other European cities is a concern. Zoom calls and train trips aren’t necessarily practical alternatives to this so-called point-to-point travel. (I was happy that a direct train between Berlin and Paris started running every day in December, but I felt that the eight-hour journey was not practical for a short business trip.)
As I was recently reminded when investigating the demise of Berlin’s internationally famous club scene, a decline in international visitors can have a devastating effect on business.
Until recently, it was the airlines, not the government, that were struggling with cash. In 2020, Lufthansa was forced to seek a 9 billion euro ($9.3 billion) bailout from the German government. (The money was later repaid.)
But there is no question who currently has the upper hand. Boeing’s production difficulties and engine troubles that affected the Airbus SE planes will give airlines more choice in where they deploy their planes. They won’t have to fear that competitors will scramble to fill the gap, and they will be able to pressure governments and airports to cut prices significantly.
To be sure, increased taxes and surcharges are not the only financial strain facing the airline industry. For example, Lufthansa’s union secured significant pay increases last year.
But when airlines look around Europe, Germany doesn’t look particularly attractive from a tax perspective. In May, the government raised the tax on airline tickets by about a fifth, from just over 15 euros to nearly 71 euros per ticket, depending on the route.
Starting this year, the maximum fee for airport security will rise from 10 euros to 15 euros per passenger, and the levy for air traffic controllers will also increase. BDL’s analysis found that the total financial burden of state taxes and surcharges on medium-haul flights originating from Germany is around 4,500 euros, compared to around 660 euros in Spain.
Germany isn’t the only country raising aviation taxes: In November, Britain’s Labor government raised air passenger taxes on short-haul economy flights by 2 pounds ($2.50) per passenger from 2026, and on large private jets. announced a 50% increase.
But other green pioneers are having second thoughts. Sweden, which coined the environmental term “flight shame,” announced in September that it would abolish a tax on airline tickets introduced in 2018 from mid-2025. The airline industry’s recovery after the pandemic was even weaker than in Germany. ) Ryanair increased flights to and from Sweden in response to the tax cut.
To be clear, I think airlines and their customers should pay their fair share of taxes. Much of the flying is carried out by a few wealthy individuals, and commercial aircraft are a major contributor to climate change, accounting for around 4% of the European Union’s greenhouse gases. Gas emissions.
Unfortunately, while international airline tickets are generally exempt from VAT, jet fuel is not, as is the case in Germany, for example.
The good news is that from 2026, 100% of aviation emissions within the EU will be subject to a carbon price under the EU’s emissions trading system.
However, in the current environment of supply constraints, imposing unilateral national measures poses problems. For example, Germany’s regulations regarding airlines using sustainable jet fuel (SAF) are stricter than the EU. If one country acts more aggressively than another, airlines will be tempted to divert aircraft to other countries.
Therefore, to prevent a race to the bottom, governments must ensure that national policies are closely aligned. Additionally, revenue from aviation taxes should also be used to support the decarbonization of the aviation industry.
(Financial difficulties caused by an unnecessarily restrictive debt brake forced Germany to cut SAF subsidies last year, undermining its own climate goals.)
Friedrich Merz of the conservative Christian Democratic Union, likely to become Germany’s next chancellor, has a clear eye on the growing threat to the country’s economic competitiveness. He is also a private pilot. It is therefore no surprise that the CDU wants to reduce some headroom in the aviation sector.
The solution is not to go back to the days when airline tickets cost the same as movie tickets. However, it is also unwise for economically weak exporting countries to be cut off from the rest of the world.
