IAG warns UK and European green aviation charges risk higher fares and industry costs

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IAG warns on aviation charges

Highlights

IAG CEO Luis Gallego warns UK and EU green fuel mandates combined with emissions trading expansion could add billions of pounds in costs and drive up fares.
UK airlines face a steeper sustainable aviation fuel ramp-up from 3.7% to 10% by 2030 versus 2% to 6% for EU carriers, intensifying cost disadvantages.
Europe's synthetic aviation fuel production is expected at 40,000-80,000 tonnes annually by 2030, far below the 640,000-tonne requirement under the EU mandate.

Cost pressures from fuel mandates and carbon rules

As reported by the Financial Times, International Airlines Group chief executive Luis Gallego says the pace of planned green charges would "kill European aviation" because airlines are being required to meet mandates for sustainable fuel that is not available in sufficient volumes.

Gallego says the combination of green fuel quotas, import charges and the expansion of aviation into Europe-wide emissions trading is set to add billions of pounds in costs across the sector. He argues that UK carriers face especially onerous requirements, creating a cost disadvantage versus global competitors and threatening higher ticket prices.

Under the proposed framework, the share of sustainable aviation fuel in UK airlines' fuel mix is due to rise from the current 3.7 per cent next year and then to 10 per cent by the end of the decade. EU carriers face a lower path over the same period, with targets rising from 2 per cent to 6 per cent by decade-end, while second- and third-generation SAF would not be required in the EU until 2030.

British Airways chief Sean Doyle says the industry faces higher costs from both fuel and sustainability obligations, with the burden ultimately falling on consumers. Tim Alderslade, chief executive of Airlines UK, says travellers should not pay more for fuel that does not exist in the quantities required by the mandate and warns that pressing ahead would leave UK airlines less competitive internationally.

UK policy review and supply gap concerns

UK ministers are preparing to water down green fuel rules due to come into force next year after industry warnings that the original plan would cost carriers a combined £2 billion by the turn of the decade. One official says a common-sense approach to aviation fuel would help airlines keep costs down and make holidays cheaper for families.

Ministers are also considering rules that would require UK airlines from next year to buy second- and third-generation SAF, made from non-food waste or electricity, even though it is more expensive than standard SAF. Additional budget measures could force UK airlines to pay extra green charges on imported jet fuel, adding to the sector's concerns about cumulative costs.

Supply remains a central obstacle. Fuel experts warn there is not enough SAF available even to meet the lower EU targets, and Argus Biofuels reports that developers and lenders expect Europe to have 40,000 to 80,000 tonnes of annual synthetic aviation fuel capacity operating by 2030, far below the roughly 640,000 tonnes required annually under the EU mandate due to take effect that year.

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