IATA Criticizes Germany’s Tax Hike Amid Weaker Recovery

Germany has been accused of having an “unhealthy obsession” with aviation taxes following the introduction of a 19% hike from the start of May.

IATA Director General Willie Walsh described the increase—which will see a charge of between €15.53 ($16.60) and €70.83 per passenger depending on the route—as “policy madness” that will dent the competitiveness of the German economy.

“The government should be prioritizing measures to improve Germany’s competitive position and encouraging trade and travel,” Walsh said. “Instead, they have gone for a short-term cash-grab which can only damage the economy’s long-term growth.”

Changes to the tax, which was first introduced in 2011, came into effect on May 1. They see the cost per passenger swell from €12.73 to €15.53 for countries within Europe and routes within 2,500 km (1,553 mi.); from €32.25 to €39.34 for destinations beyond the first group but closer than 6,000 km; and from €58.06 to €70.83 for destinations more than 6,000 km away.

Transit passengers are exempt, while departures from and to domestic, Danish or Dutch North Sea islands will see a reduced rate of €3.11, provided that the islands are not connected to the mainland by a road or rail connection.

Germany’s federal government announced the tax plans in December after abandoning a short-lived proposal to raise a domestic fuel tax. The initial idea to tax fuel used on domestic flights was met with sharp criticism from Lufthansa and Eurowings, which argued the move would weaken their competitiveness and the group’s hubs in Frankfurt and Munich.

Following the passenger tax hike, IATA has also accused Germany’s government of breaking an agreement that originally stated revenues from aviation taxes would directly fund production of sustainable aviation fuel (SAF).

“In addition, weakening the German air transport industry with this tax makes it harder for airlines to invest in SAF, in a more fuel-efficient fleet and other decarbonization efforts,” the organization said. Walsh added, “Time and again, we see taxation that was supposed to help the industry decarbonize be stolen and then lost in the general budget.”

The introduction of the tax rise comes as Germany’s recovery from the pandemic lags many of its European neighbors. Germany was Europe's second-largest market by seats before the pandemic, behind the UK, but has since slipped to third place.

According to data provided by OAG Schedules Analyser, capacity from and within Germany’s market is at 12.3 million departure seats in May 2024—only 85.4% of its size in 2019. By comparison, the combined European market is 2.3% higher than pre-pandemic levels.

Weakness in Germany’s low-cost sector due to higher operating costs is a factor in the slower capacity return. OAG data shows that easyJet’s capacity is down by 69.3% in May 2024, compared to the same month in 2019. Eurowings is down by 24.7%, and Ryanair by 8%.