Germany is moving closer toward raising taxes on domestic flights in hopes of reducing demand and eventually greenhouse gas pollution. But Lufthansa stands to benefit from the new taxes.
Like other nations, Germany finds itself falling short of the ambitious pledges it made under the 2016 Paris Agreement. Now Christian Democrats and Social Democrats, which represent the governing coalition, are finalizing a plan to as much as double taxes on shorthaul flights.
While the particulars remain under negotiation, the plan was announced this week in Berlin by Andreas Jung, a CDU member representing Freiburg and known as the party’s finance expert.
We want a doubling of the ticket tax for domestic flights which would build on the current regulation. And in the current regulation, feeder flights are exempt. This exemption would be continued.
Did you catch that? A feeder flight is a short flight that connects passengers to a longer flight. Domestic flights connecting to/from longhaul flights will not incur the fee. But this exemption applies to purely domestic travel in Germany as well. For example, a trip from Hamburg to Munich via Frankfurt would be charged the same tax as a nonstop flight, if on a single ticket.
That “exemption” greatly aids Lufthansa, limiting tax exposure and essentially penalizing low-cost-carriers like Ryanair who do not sell “connecting” flights. If you cobbled together a one-stop itinerary on Ryanair, you’d be paying the tax twice.
This fits in with a recent Christian Social Union plan to target Ryanair. It is also why Lufthansa CEO Carsten Spohr has expressed little objection to the new tax.
Currently, domestic flights are taxed €7.40 plus VAT, bringing the total to €8.78. The plan is simply to double it. With the exception of the AFD party, most center-right and left parties are expected to support the new aviation taxes.
When Germany first introduced its aviation tax in 2011, Ryanair retreated. Now it is back stronger than ever, but the new tax will significantly increase the price of a Ryanair ticket versus Lufthansa ticket on a comparative basis. Thus, the new tax might not only help Lufthansa on a short-term basis, but force another Ryanair retreat in Germany, which would further raise airfares and entrench Lufthansa as the monopoly carrier.