Dieter J. F. Haselsteiner

Environmental Cost Surcharge by the Lufthansa Group: A Confusion for Passengers

4 August 2024 | Blog #8

 

At the end of June 2024, the Lufthansa Group announced that, starting from January 1, 2025, a mandatory climate protection surcharge in the form of environmental cost surcharges would be integrated into flight fares and itemized separately. This could increase the cost of flights with the airline group by up to EUR 72 for passengers. While in Europe, only Air France-KLM has previously implemented such an eco-surcharge (since 2022, due to a French law), the Lufthansa Group is now also introducing it into its booking systems. 

Previously, passengers had the option to voluntarily participate in offsetting schemes for more environmentally friendly flying. These schemes reduce flight emissions through compensation. However, these offsetting schemes are criticized from various perspectives and should not be used as "greenwashing" to portray aviation as sustainable. There is a risk of a so-called "rebound effect," where people who offset their emissions may feel less incentive to reduce their own energy consumption. This could lead to people continuing environmentally harmful behaviors, believing that their emissions are offset by compensation. Additionally, there are uncertainties about how effective these offsetting projects actually are. Some projects may not achieve the expected CO2 savings, and there are discussions about the accuracy of measurements and calculations. 


The seriousness of this issue was recently highlighted by the reaction from Brussels. In early May 2024, the European Commission reprimanded a total of 20 airlines in Europe for greenwashing, i.e., potentially misleading advertising with promises of environmental protection. 


So, what exactly are the reasons behind the introduction of these environmental cost surcharges? According to Austrian Airlines, this surcharge is fixed depending on the route and fare and is intended to cover a portion of the additional costs that are steadily increasing due to regulatory environmental requirements. These costs apply to all departures from countries in the European Union (plus the United Kingdom, Norway, and Switzerland) from January 1, 2025, due to: 

  • The legally required blending quota of initially 2% for sustainable aviation fuel (SAF),
  • Adjustments to the EU Emissions Trading System (EU-ETS), and
  • Other regulatory environmental costs, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).


Furthermore, Austrian Airlines states: "The environmental cost surcharge is intended to make transparent the additional regulatory costs that are coming our way for a sustainable transformation of aviation. We want to itemize these separately, also to raise awareness that these costs will continue to rise. Other airlines will also have to bear these costs and pass them on to their customers as well. We are committed to transparency and do not simply incorporate these regulatory additional costs into higher ticket prices." 


Thus, it is clear that only flights from the year 2025 are affected, and surcharges only apply to departure airports located in the EU and in the United Kingdom, Norway, and Switzerland. All in all, this will make flying more expensive. 


A brief look back shows that due to significantly increased crude oil prices, many airlines were forced, starting in 2007/2008, to itemize these additional costs separately for passengers as a fuel surcharge. Similarly, the newly introduced environmental surcharge should be understood as an additional cost factor that is intended to be communicated transparently to passengers. 


However, questions remain as to why the Lufthansa Group intends to cover only part of the associated costs with this surcharge and how large this portion actually is. What exactly is meant by the maximum amount of EUR 72, and is there a tiered system or something similar? 


Furthermore, the Lufthansa Group communicated: "For Eurowings flights marketed through the Lufthansa Group, the environmental cost surcharge is already included for bookings made from June 26, 2024, for departures from January 1, 2025. For bookings on eurowings.com, the environmental cost surcharge is currently not included." This raises the following primary questions: What exactly is meant by "marketed through the Lufthansa Group"? Does the environmental cost surcharge for Eurowings flights (operated by) only apply if booked through the Lufthansa booking platform and not directly with Eurowings, and/or is it not itemized separately? 


Given these somewhat unclear statements, one can quickly conclude that the topic of the Lufthansa Group's "environmental cost surcharge" is rather complicated. Therefore, it was appropriate to take a closer look at the issue through test bookings. It should be noted that in the following exemplary test bookings (partially with screenshots), one adult was always intended as a potential passenger in Economy Class (unless otherwise specified). 


Test Booking 1: Booking via www.lufthansa.com for a round trip with Austrian Airlines from Hanover to Vienna in Economy Class, outbound flight on January 14, 2025, return flight on January 16, 2025: 

On the outbound flight, only the "Economy Green" fare mentions "Sustainable Flying with SAF (20%) and CO2 Offset (80%)" as "included," while this is not mentioned in any of the other fares. For the passenger, it appears as if only the "Economy Green" fare helps the environment, but not the other fares. This is quite confusing, as the entire aircraft is fueled with a 2% blend of sustainable aviation fuel, and this is not dependent on the passenger's choice. If the "Economy Green" fare is also selected for the return flight, the price details show that an environmental cost surcharge of EUR 4 is included—EUR 2 per flight since both departure airports are within the EU. For Business Class, the "Business Green" fare is offered. In Business Class, a 50% surcharge is added, resulting in a total environmental cost surcharge of EUR 6.

The following aspects of this flight booking are confusing:

  • If you select the "Economy Green" fare for the outbound flight, you can only select the "Economy Green" fare for the return flight; other fares are not offered.
  • If you choose another Economy fare for the outbound flight (such as "Economy Light" or "Economy Classic"), these options are also displayed for the return flight—however, "Economy Green" is not shown.
  • If you select the "Economy Classic" fare for both flights, the price details at the end still show a EUR 4 environmental cost surcharge, even though I actively chose not to fly in an environmentally friendly way as a passenger.


Test Booking 2): Booking via www.lufthansa.com for a round trip with Eurowings from Hanover to Vienna, outbound flight on January 14, 2025, return flight on January 16, 2025:

In connection with "Sustainable Flying and CO2 Offset," the Lufthansa booking system offers the "Eurowings PlanetBlu Flex" and "Eurowings PlanetBlu Fullflex" fares. The price details show an environmental cost surcharge of EUR 4 in total. However, if the same trip is booked through www.eurowings.com, no environmental aspects are displayed in the fare options or in the final price details.

This means that Eurowings does not impose environmental cost surcharges through its own booking platform, nor are they included (hidden) in other fare details.

Test Booking 3: Booking via www.aua.com for a round trip with Austrian Airlines to Yerevan, outbound flight on February 7, 2025, return flight on February 12, 2025. On this route, the "Economy Green" fare is available and is then listed in the price details with EUR 2, as no environmental cost surcharge is applied for the departure from Yerevan (outside the EU). Therefore, the same environmental cost surcharge applies to the route from Vienna to Yerevan (2,380 km) as to the neighboring country of Germany (to Hanover: 689 km).

Test Booking 4: Booking via www.aua.com for a round trip with Austrian Airlines from Vienna to Cairo, outbound flight on January 16, 2025, return flight on January 21, 2025. For the outbound flight, there is no "Economy Green" fare available, nor is there any mention of an environmental cost surcharge in terms of "Sustainable Flying and CO2 Compensation." Nevertheless, the final price details show a EUR 2 environmental cost surcharge!

Test Booking 5: Booking via www.swiss.com for an outbound flight with Swiss Air Lines from Vienna to Zurich and a return flight with Austrian Airlines, outbound flight on January 28, 2025, return flight on January 30, 2025. The "Economy Green" fare is offered for both the outbound and return flights, and the price details reflect an environmental cost surcharge of EUR 4 (Economy), EUR 6 for Business Class.

Test Booking 6: Booking via www.aua.com for a round trip with Austrian Airlines from Vienna to New York JFK, outbound flight on March 11, 2025, return flight on March 17, 2025. During the booking process, no "Economy Green" fare is selectable, nor is there any indication of sustainable flying and CO2 compensation. If the "Economy Basic" fare is chosen for both flights, the price details include a reference to the environmental cost surcharge: EUR 9 in Economy Class (EUR 27 in Business Class).

Test Booking 7: Booking on www.swiss.com for a round trip with Swiss Air Lines from Zurich to Oslo, outbound flight on January 14, 2025, return flight on January 17, 2025. The "Economy Green" fare can be selected for both flights, but there is no trace of an environmental cost surcharge in the price details.

Based on the press release from the Lufthansa Group, the statements from Austrian Airlines, and the conducted test bookings, the introduction of the Lufthansa Group's environmental cost surcharges raises several unanswered questions:

  • To what extent can the environmental cost surcharge actually influence the passenger concerning ticket prices and environmental considerations (travel habits)?
  • Will Eurowings remain an outlier within the Lufthansa Group in relation to the environmental cost surcharge?
  • Will the promised transparency regarding the environmental cost surcharge actually be implemented?
  • Why does the Lufthansa Group, according to its own statements, only cover a portion of the associated costs with this surcharge, and how large is this portion?
  • How fair is the allocation or tiering of the environmental cost surcharge based on the actual distance between two airports and the class of travel?
  • Why can the "Economy Green" fare for the outbound flight only be combined with an "Economy Green" fare for the return flight, excluding other Economy fares?
  • Why are environmental cost surcharges displayed in the price details when the "Economy Green" fare, which emphasizes sustainable flying, was not even selected?
  • With regard to the application of the environmental cost surcharge, at least for flights between Switzerland and Norway, there seems to be a gap—why?
  • Besides Air France-KLM, how are other airlines handling these new regulatory measures? Is the Lufthansa Group ahead of other airlines in this regard? What competitive advantage does Lufthansa hope to gain with this measure?
  • To what extent will the environmental cost surcharges continue to evolve?
  • With further increases in the blending quota for sustainable aviation fuel? A 20% blending quota is already mandated for 2023 (a tenfold increase compared to 2025!).
  • When CORSIA becomes partially mandatory starting in 2027 (between 2027 and 2035, all countries are required to participate if their aircraft operators contributed more than 0.5% to global air traffic performance in 2018).
  • Flight Cancellation: According to Austrian Airlines, cancellation conditions depend on the fare booked. "If a full refund is granted, this also includes the environmental cost surcharge." Thus, whether the environmental cost surcharge will be refunded in the case of a partial refund remains unclear and will only be revealed in practice.
  • For how long will it still be possible to make individual payments at the end of the booking process to mitigate the environmental impact of a flight?


The fuel surcharges have now been largely forgotten, as they are no longer included in the price/fare details. Will the environmental cost surcharge face the same fate? The climate protection surcharge is not mandatory per se; additional costs are incurred due to mandatory measures, which are passed on to passengers. In terms of transparency, the Lufthansa Group has clearly missed the mark on the environmental cost surcharge—only a confused passenger remains (if they are even aware of it). For the passenger, it's somewhat reassuring: the highest surcharge (EUR 72) is only applicable on long-haul First Class flights. Additional costs of EUR 2 per flight segment within Europe should be manageable for passengers.

  Kindly let me know your opinion about this topic.