Expensive flights become new normal on US$5 trillion green transition

THE global airline industry has long warned passengers they will eventually have to pay some of the US$5 trillion cost of decarbonising air travel. The moment has come.

Singapore’s government has announced a tax on airfares to fund purchases of pricey sustainable aviation fuel (SAF), while Malaysia has authorised carriers to charge people a carbon levy from next month.

In Europe, airlines this year lose one-quarter of their free emissions allowance, the first in a series of reductions that is already estimated to be adding to ticket prices.

“We have entered a new era,” said Rico Luman, a transport, logistics and automotive economist at ING Groep in Amsterdam. “Flying will turn more expensive.”

While the policies differ from country to country, the common goal is to clean up an aviation industry that for a century has relied on fossil fuels to function. Airline chiefs fret that unless they show they are serious about cutting emissions right now, they will face fines, flying limits or – worst of all – be grounded completely.

SAF, a cleaner-burning liquid made from waste oils or agricultural feedstock, is the industry’s primary means of reaching its 2050 net-zero target. But the new fuel is in short supply and can be more than double the price of normal jet kerosene, leaving airlines little choice but to pass the cost onto passengers.

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It means little price respite for flyers who have been whacked by soaring prices since air travel resumed after the pandemic. Now, they will have to pay to neutralise aviation’s carbon footprint, too.

“That change is expensive,” said Air New Zealand’s chief sustainability officer Kiri Hannifin. “We do need to start talking to Kiwis about what flying is doing, why it is impactful, why we have got to change.”

Air New Zealand wants sustainable fuel to account for around 20 per cent of its total fuel consumption by 2030, one of the most ambitious targets of its kind anywhere in the world. Delta Air Lines, Cathay Pacific and Qantas are among those with a 10 per cent target by the end of the decade.

Push towards SAF

SAF can cut emissions by as much as 80 per cent. The greener fuel is essential to reduce emissions from long-haul flights, the source of most air-travel pollution, because electric planes do not have sufficient range. Hydrogen propulsion is not expected to make a meaningful impact for decades.

With time running out, air travel levies or mandates to buy or supply SAF are rippling across the globe from Japan and Singapore to the European Union and the UK.

The measures are designed to forcefully accelerate emissions reductions and assure green fuel suppliers that there will be buyers for their new, relatively expensive product.

“Voluntary measures have largely failed,” said Dan Rutherford, the director of research at the International Council on Clean Transportation. The most effective policies are those that apply equally to all airlines instead of singling out carriers from a certain country, he added.

Singapore, for instance, aims to have all departing flights take off with 1 per cent SAF in jets’ tanks from 2026, rising to between 3 per cent and 5 per cent by 2030. The levy will vary depending on the length of the flight and the class of travel. An economy flight to London in 2026 would rise by about S$16 under the policy.

Malaysia will in April allow airlines flying in and out of Kuala Lumpur to impose a carbon levy, either to pay for sustainable fuel or to fund carbon offsets. Details of the policy appeared in a local Bernama media report this month that was later confirmed by the transport ministry.

Under the European Union’s ReFuelEU initiative, conventional jet kerosene must be blended with 2 per cent SAF in 2025, gradually increasing to 70 per cent by 2050. The UK also plans to mandate SAF use next year.

It is not just the price of fuel that passengers will absorb. The cost of buying new, less-thirsty aircraft is also dripping down into fares.

Qantas, which has started to receive the first of dozens of next-generation planes on order, last week said it is raising fares on most domestic routes by an average of 2 per cent to 3 per cent.

Extra cost

According to ING’s Luman, this year’s reduction to aviation’s free emissions allowance in the EU may be adding 8 euros (S$11.70) to the price of a return flight between London and Rome.

The extra cost would be more than 30 euros in 2026 at current carbon prices, he said. Luman cautioned that it is hard to isolate the precise impact of the policy because other factors including a lack of capacity are also pushing up fares.

The International Air Transport Association calculates that aviation’s transition to net zero will require investment of as much as US$5 trillion to 2050. Even those with the most to lose are acknowledging that passengers cannot escape the bill.

“It pains me to suggest that travellers are going to have to pay more,” Margy Osmond, chief executive officer of Tourism & Transport Forum Australia, said at a renewable aviation fuels conference in Canberra earlier this week. “There is going to be an additional cost to aviation. That is all there is to it.” BLOOMBERG