Lufthansa to raise fares by up to $77 as environmental costs increase

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Lufthansa will add an environmental charge of up to 72 euros ($77) to its fares, the airline group said on Tuesday, joining at least one European rival in doing so as the industry battles to cover the cost of meeting new EU rules on reducing emissions.

Airlines have warned for years that regulations requiring them to use more expensive sustainable jet fuel could drive up costs.

Ticket prices have already surged in recent years in the post-COVID travel boom, raising fears that further increases could start deterring travelers from flying.

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Fares will go up between 1 euro and 72 euros, depending on the type of ticket, on all flights departing from European Union countries, Britain, Norway and Switzerland, the German airline group said. Some of the increases are effective from June 26 and others from 2025.

It said the charge would “cover part of the steadily rising additional costs due to regulatory environmental requirements” such as sustainable aviation fuel (SAF) made from bio-based materials - regarded as crucial to making flying less polluting.

Lufthansa shares hit an intraday low after the news and were last down 0.9 percent at 1226 GMT.

Aviation is deemed responsible for about 2 percent of the world’s emissions but is considered one of the hardest sectors to decarbonize as fuel for flights cannot be easily replaced with other kinds of power.

European regulators introduced rules that ask fuel suppliers to ensure 2 percent of fuel at EU airports is SAF by 2025, rising to 6 percent in 2030 and 70 percent in 2050.

Air France-KLM is considering broadly similar measures to Lufthansa, a person familiar with the matter said. The airline group already imposed a SAF contribution charge in January 2022, it said, adding a surcharge of up to 12 euros for business fares and up to four euros for economy fares at the time.

“We have a SAF contribution in place, applicable to all flights (not only on departure from Europe) to transparently reflect the additional cost of incorporating sustainable aviation fuel,” an Air France-KLM spokesperson said in an emailed statement.

Cost warnings

British Airways owner IAG, EasyJet, Ryanair and Wizz Air were not immediately available to comment on whether they would introduce similar measures to

IAG shares were down 1.7 percent at 1145 GMT, while budget carrier Ryanair’s extended gains after the news to trade up 1.7 percent.

Singapore’s government also introduced a levy on flight tickets earlier this year to help fund the additional cost of SAF.

Lufthansa CEO Carsten Spohr warned last year the EU targets would be hard to achieve and hinted that higher costs would be passed on to customers.

The price hike, which the airline called an “Environmental Cost Surcharge”, will cover part of these costs for 2025 and will apply for all airlines in the Lufthansa group except for Eurowings tickets sold directly by the company, a spokesperson

On short and medium-haul flights, the fares will go up by up to five euros in economy and seven for business class.

On long-haul flights, the costs will go up between 18 and 36 euros for business fares and up to 72 euros for first class fares from 2025, Lufthansa confirmed to Reuters.

A spokesperson said the move was not tied to Lufthansa’s high labor costs after strikes this year, which led the airline to issue a profit warning ahead of first quarter results.

He added the additional costs weren’t expected to go up further for now.

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