European airlines say sustainable fuel targets may mean higher fares, consolidation

European airline chiefs said on Thursday (Oct 12) the industry needs to make more money and may consolidate further to pay for sustainability targets, a trend likely to lead to higher fares for passengers on top of rising demand for air travel.

The head of British Airways parent IAG told reporters at a CEO roundtable that there was a more than a 90 per cent risk that the industry would not meet a European Union mandate for the availability of sustainable aviation fuel (SAF) in 2025.

The European Union has adopted rules requiring flights departing from EU airports to carry a progressively increasing amount of SAF, starting with 2 per cent of total fuel in 2025.

Luis Gallego said Europe’s tougher rules, compared with other regions, risked making its fragmented industry less competitive, putting pressure on airlines to continue a recent wave of partnerships.

“The problem we have in Europe is we have a small group or a small airline competing in a global war with mandates of sustainability that are ahead of others. We are not going to be competitive,” Gallego said.

“So we need to consolidate the industry, you know, in order to afford all these, for example, sustainability ambitions that we have. And that’s the reason why we are trying to be bigger, more efficient, and to develop better platforms for our customers.”

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Speaking to Reuters on the sidelines of the Brussels event, Ryanair chief executive Michael O’Leary forecast more consolidation with IAG best placed to buy Portugal’s TAP ahead of rivals Air France-KLM and Lufthansa.

He expressed surprise that Air France-KLM had bought a stake in Scandinavian SAS.

He also reiterated predictions that low-cost rivals Wizz Air and easyJet would fall to consolidation, with easyJet snapped up by IAG or Air France-KLM, or both, and Wizz Air getting bought by Lufthansa or a Middle Eastern buyer.

“Riyadh (Air) have lots of plans, but they have no access to aircraft,” he said.

The comments drew a frosty response from easyJet. Other carriers were not immediately available for comment.

“Millions of consumers in Europe will be relieved to hear there is no realistic prospect of Ryanair becoming the only low-cost airline in Europe,” an easyJet spokesperson said. REUTERS