One year later: The German Ticket Tax

Germany has introduced in January 2011 an aviation tax (luftverkehrsabgabe). The effects of the tax are as expected : small and medium sized airports which are dependent on low cost carriers have suffered a loss of passengers. The larger airports have grown. For the country as a whole the growth in passenger numbers is 5%. This is comparable with other large European aviation nations. So, what’s the problem ? And what can be expected from the EU-ETS ?

First we give some more detailed figures about gains and losses by type of airport. We compare the results with the developments on taxation in other countries. We end with the developments around the European ETS and the opposition of non-European countries. Will there be a global carbon tax for the aviation (and maritime) sector ?

Passenger growth and decline at German airports in 2011
The German government introduced the ticket tax in January 2011. The tax is 8 Euro for European flights, 25 for mid-range flights and 45 Euro for long haul flights. No taxes on Freight or Transfers.  Low cost carrier Ryanair reacted by publishing a list of routes and flights to be scrapped from airports Hahn, Berlin, Weeze and Bremen. Indeed routes and flights were scrapped, but some were restored later on.

Ryanair cuts 2011	Route Cuts	Weekly Flights	Traffic loss (Ryanair website)	Actual loss ADV,2012
Berlin	-4	-122	-900,000	– 170.344
Bremen	-8	-58	-400,000	-111.772
Düsseldorf Weeze	-13	-84	-700,000	– 471.240
Frankfurt Hahn	-9	-150	-1,000,000	-629.939
Total Loss (to date)	-34	-414	-3,000,000	1.383.295

Table 1 Flights Threatened to be scrapped by Ryanair at German airports following implementation of air passenger tax. Sources: Ryanair, 2010 & ADV,2012

If we look at the realizations of 2011 we can observe that the real effects were less than half of what Ryanair predicted (or threatened with). However, for Hahn and Weeze the effects were very substantial : 18% and 16% loss of passengers. This finding is in line with the effects of the (now abolished) Dutch ticket tax where low cost airports near the border with other countries appeared to be the most vulnerable.

Airport size	Passengers 2010 (million)	Growth in 2011 (million)	Growth %
>10 million	134,2	10,5	8%
5-10 million	31,3	0,3	1%
1 to 5 million	21,9	-1,3	-6%

The largest German airports (Frankfurt, München, Dusseldorf, Berlin-Tegel and Hamburg) had on average a growth of 8%. The smallest airports experienced a loss of 6% and the middle airports remained stable. The overall growth was 5%.

Table 2 Passenger growth at German airports in 2011.

Compared to other large European  aviation countries (France +6,6%, Italy +6,4%,Spain +6,0 %, UK +4,1%) Germany has had a little smaller growth except for the UK. The latter experienced a substantial growth in taxation by the APD (Airport Duty Tax).

The income for the German government was expected to be 1 billion Euro. The actual income was 905 million Euro#. The difference can be attributed to the avoidance behavior of travelers# and airlines (Ryanair and Germanwings). Weeze reported# a drop in the share of Dutch travelers from 52% to 40%. Conclusion : The ticket tax leads to a drop in demand in the lowest segment of aviation. The effects are especially noticeable at smaller regional airports served by low-cost carriers.

From the start of 2012, emissions from all domestic and international flights that arrive at or depart from an EU airport will be covered by the EU Emissions Trading System. This was heavily opposed by non-European airlines and states. But the European Court of Justice ruled that EU-ETS “infringes neither the principle of territoriality nor the sovereignty of third states, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the member states of the EU”.  But important countries like the US, China, India, Japan and Russia want a world-wide system negotiated in ICAO. In total 26 countries form a ‘coalition of the unwilling’ to prevent the inclusion of non-European airlines. They prepare retaliatory measures.

Meanwhile the German government has lowered the luftverkehrsabgabe (-5.5%) with the expected costs of the ETS for the airlines and their customers. This in contrast with the UK government which does not compensate for the ETS but, on the contrary, continues to raise the tax, as indicated in the table below. According to the UK Office of National Statistics the APD-Receipts in 2011 were 2580 million pounds against 2050 mln in 2010 (+26%).

	Tax rate nov 2009 – nov 2010	Tax Rate nov 2010 – april 2012	Tax rate >april 2012
Band A (0-2000 miles)	£ 22	£ 24	£ 26
B 2000-4000	90	120	130
C 4000-6000	100	150	162
D > 6000 miles	110	170	184

What next ?
It is uncertain how the struggle around the aviation-ETS will end. But, as we observed in Aerlines 48, there is a strong, permanent pressure from environmental and fiscal considerations to also subject the aviation sector to ‘normal’ taxes. This concerns VAT, which is not levied on international tickets and excise duty on aviation fuel. The European Finance ministers eye for transport levies on aviation and maritime transport to feed a climate fund.

One might expect that there will be some international accepted taxation system.