CORAL GABLES — International Air Transport Association Director General Willie Walsh is cautiously optimistic that Sweden’s decision to abolish its aviation tax from 1 July 2025 will prompt other EU nations to review whether taxing passengers to discourage air travel is an effective way to tackle climate change, especially when funds are not explicitly being used for investment in environmental solutions such as sustainable aviation fuel (SAF).

“I’m an optimist at heart and I think there will be change,” Walsh said today during a media briefing at the IATA World Sustainability Symposium in Coral Gables, Florida, where SAF — and indeed the intense need for more SAF investment — was front and center as industry seeks to meet its Net Zero 2050 goal.

“I think there has to be a change,” Walsh told Runway Girl Network of the tax-to-dissuade approach in the EU and indeed elsewhere. “I think there is greater awareness within Europe of the need to improve the competitiveness of the EU globally rather than just looking at the competition within the EU. And I think a number of the measures that were taken in the past are making the EU less competitive on a global scale and need to be addressed, particularly when you look at the weak economic state of the economies in Europe.”

Amid the “flight shame” movement, Sweden in April 2018 implemented a tax aimed at discouraging air travel. Passengers have since paid a levy on flights that originate in Sweden, based on their final destination. According to trade association IATA, revenues from the tax were not being used for investment in “vital” eco-solutions such as SAF.

Walsh said he’d like to think that what’s happened in Sweden “where there’s now recognition that that’s damaging economically, rather than addressing the environmental challenges” will make other nations take notice. Sweden’s move to drop the tax from 1 July comes as Stockholm-based SAS is seeing fresh wind beneath its wings following its successful emergence from bankruptcy, and its new membership in the SkyTeam global airline alliance.

But Sweden is not the first EU nation to do a u-turn on an eco-themed av-tax, with Walsh pointing to The Netherlands as an example from 16 years ago.

“We saw it in The Netherlands back in, I think it was 2008/2009, when they introduced a flight tax/environmental tax” which was greater for long-haul flights versus short-haul, “which they revoked after a year when they recognized that what it had done was changed behavior [where passengers] would be just driving across the border and avoiding the tax and this is where we need measures that are being taken to be joined up so that you don’t get unintended consequences,” he told RGN. (Today, The Netherlands spreads the levy love with a flat per-passenger departure tax.)

Walsh added:

I’d like to think that there will be greater awareness of the measures that have been taken in the past and the result of those measures, and when there’s recognition that they’re not producing the results that was intended that they would be reviewed.

In recent years, several nations — in Europe and elsewhere — have introduced or indicated they plan to introduce carbon emissions taxes and/or ticket taxes applicable to international flights, asserting the impact of aviation on climate change as a justification.

Germany, for instance, on 1 May significantly raised aviation taxes. Mirroring its criticism of Sweden, IATA joined German aviation associations in decrying Germany’s decision, noting that the plan fails to make good on a German government coalition agreement to use revenues from aviation taxes to directly fund production of SAF. Rather, the tax hike is a bid to help close a financing gap in the 2024 federal budget.

Does German flag carrier Lufthansa take a position on the German aviation tax? Earlier this month, during an event to celebrate Lufthansa’s introduction of its new Allegris generation of long-haul cabin products to the US market, RGN put the question to management.

“I think in general the infrastructure costs in Germany are high, among the highest that we have in Europe,” said Lufthansa Airlines chief customer officer Heiko Reitz. “And you can see that also the recovery in Germany is one of the slowest in Europe and we do see a correlation with that and therefore, it would be an effort of everyone who is involved in there to see how we can become more competitive, to see how we can reduce as a system overall the cost to the customer.”

Like all airlines flying from larger US airports, a 2% SAF blend requirement takes effect on 1 January 2025 for Lufthansa Group carriers. Combined with recent adjustments to the EU Emissions Trading System (EU ETS) — a cap and trade system covering all flights within the European Economic Area, and for which Lufthansa has been a participant since 2012 — plus obligations under the global offsetting scheme CORSIA, this obligation-intense paradigm prompted Lufthansa Group to on 26 June levy its own separate environmental surcharge, which is valid for travel as of 1 January 2025.

Where IATA’s Walsh takes umbrage, however, is when an aviation tax is simply used as a revenue generator for government, rather than tied to government investment in environmental solutions including SAF, which is produced at a small fraction of the volume of jet fuel. He pointed to Singapore’s model as an example of a country creating that very connection between taxation and SAF development.

“[W]e applauded what’s happening in Singapore, which is strange for us given that they’re introducing a levy which normally we don’t like. But what impressed me about the Singaporean government is they were very clear in terms of what they’re expecting from this levy and that if it didn’t produce the intended consequences, they would not just review it, but, if necessary, remove it,” said Walsh.

“So, they’re very clear. The levy is there to stimulate production of SAF. If it doesn’t stimulate the production of SAF, they’re going to stop the levy. They’re not trying to generate revenues; they’re trying to generate SAF production and I like it when I hear governments talk about that.”

Related Articles:

• Lufthansa Group on the logic behind its climate protection green tax
• EASA taps Ricardo to lead EU SAF Clearing House
• Germany’s aviation tax hike elicits rebuke from industry

Featured image credited to Jason Rabinowitz