EU extension of carbon levies to foreign flights threatens airline profitability as carriers face higher costs on intercontinental routes originating in Europe.
Lufthansa operates an extensive long-haul network from its Frankfurt and Munich hubs, with a high proportion of flights to non-EU destinations. The EU plan to expand emissions levies to foreign flights would directly increase Lufthansa's carbon permit costs, compressing margins unless offset by fare hikes or efficiency gains.
The exact increase depends on the scope of flights covered and carbon prices. Given Lufthansa's large long-haul exposure, additional permit costs could run into hundreds of millions of euros annually, pressuring margins if unpassed.
Yes, relative to low-cost carriers like Ryanair, Lufthansa has a higher share of long-haul international flights, making it among the most exposed European airlines to this policy.
International Airlines Group, parent of British Airways, Aer Lingus, Iberia, and Vueling, has substantial long-haul operations from London Heathrow, Madrid, and Dublin. British Airways alone generates most of its revenue on North American and Asian routes. New carbon levies would add to IAG’s already significant EU ETS costs, threatening its profit outlook.
British Airways, IAG’s largest subsidiary, has one of the highest shares of intercontinental traffic among European carriers. Aer Lingus and Iberia also operate extensive non-EU route networks, making the group collectively very carbon-intensive on an airline basis.
Possible. If the EU allows a gradual ramp-up or free allowance allocation for long-haul, IAG’s near-term hit would be less severe. The group’s financial resources also give it investment capacity to modernise fleets more quickly.
Air France-KLM’s network heavily relies on long-haul flights from Paris-Charles de Gaulle and Amsterdam-Schiphol to non-EU destinations. Expanded carbon levies would raise operational costs, particularly on high-emission routes like those to Asia and the Americas, threatening the airline’s post-pandemic margin recovery.
Its two main hubs are major gateways for intercontinental travel from Europe. Nearly two-thirds of its available seat kilometres come from long-haul flights to non-EU countries, meaning a large share of its operations would incur new carbon costs.
Partially. The airline is investing in more fuel-efficient aircraft and sustainable aviation fuel, but those measures take time. A rapid phase-in of levy obligations without offsetting support could hit earnings.
Ryanair primarily operates short-haul intra-EU routes, giving it lower direct exposure to foreign-flight levies. However, it does fly to some non-EU destinations like Morocco, Israel, and the UK (post-Brexit). The impact is smaller but not negligible, and higher fuel or carbon costs could pressure its ultra-low-cost model.
No. The vast majority of Ryanair’s flights are within the European Union and already subject to emissions trading. Only a small portion—to the UK, Morocco, Israel, and a few other non-EU states—would see new levies.
Given its limited exposure, the direct extra cost is likely in the tens of millions rather than hundreds, a fraction of its annual fuel bill. The indirect risk comes if higher permit demand lifts carbon prices across all its flights.
easyJet operates a network similar to Ryanair, dominated by intra-EU short-haul flights. Its direct exposure to foreign-flight levies is small, largely limited to UK–EU routes post-Brexit. Still, broad carbon price increases and potential future UK reciprocation add uncertainty.
easyJet has far less exposure. Its model is almost entirely point-to-point within Europe, with only a handful of intercontinental routes. The direct new levy applies to a small slice of its network.
Yes. Post-Brexit, flights between the UK and the EU are treated as foreign flights by both jurisdictions. Expanding the levy would likely increase costs on these popular city pairs, potentially hitting demand.
The European Union is set to expand its emissions trading system to cover international flights departing EU airports, raising compliance costs for airlines. Carriers would need to purchase additional carbon allowances, squeezing margins particularly for those with large long-haul networks. The move aligns with the EU’s Fit for 55 climate targets and could accelerate investments in sustainable fuels.
The European Union currently requires airlines to buy carbon allowances for intra-European flights under the Emissions Trading System (ETS). Expanding this to foreign flights means flights departing EU airports to non-EU destinations would also need to cover their emissions with permits, increasing costs.
Airlines with large long-haul operations from Europe, including Lufthansa, Air France-KLM, British Airways-owner IAG, and to a lesser extent Ryanair and easyJet (despite their mostly short-haul focus, they serve some intercontinental destinations). Full-service carriers with extensive global networks are particularly exposed.
The timeline is unclear, but typically such proposals require European Parliament approval and a phase-in period. Implementation could come by 2027-2028 if aligned with the EU's climate targets.