Will Germany's aviation tax cut lower ticket prices?

German lawmakers will vote on a proposal to reduce aviation tax starting July 1. If approved, the tax would be lowered to the level before the May 2024 increase, reducing federal revenues by about 350 million euros per year. Lufthansa policy and regulation representatives say the change is a positive signal but not a full turnaround because aviation tax is only part of a broader tax burden that has doubled since 2019. They warn that excessive taxation can shift aircraft and economic value to more attractive locations. Aviation consulting experts argue the state would lose revenue without passengers seeing reductions. The plan lowers taxes for domestic and European flights, medium-haul routes, and long-haul routes, but rising kerosene prices have already led to suspending some low-profit routes.

"German lawmakers are set to vote Thursday on a proposal to cut aviation tax, raising hopes the move could make flying slightly cheaper in the country. If it's approved, the tax will be lowered from July 1 to the level it was at before the last increase in May 2024. The measure is expected to reduce federal tax revenues by approximately 350 million ($405 million) per year."

"We are, of course, grateful for this signal to reverse the latest tax increase, but that does not yet mark a turnaround, Kay Lindemann, the Lufthansa Group's representative for policy and regulation, told DW. The aviation tax accounts for only a portion of the total tax burden, which has doubled in Germany since 2019, he pointed out."

"If we impose too heavy a tax burden in Germany, we will lose aircraft to other locations because the business conditions there are more attractive, and that will result in a loss of economic value. But some experts warn that the tax cut will not have a meaningful impact on ticket prices. "The state is giving up revenue, but passengers will not see any of the tax reduction," said Gerald Wissel, founder and CEO of Hamburg, Germany-based aviation consulting firm Airborne Consulting."

"According to the plan, the aviation tax for domestic and European flights, as well as other short-haul flights, will be reduced from 15.53 to 13.03. For medium-haul flights (destinations between 2,500 and 6,000 kilometers away), the tax will be cut from 39.34 to 33.01, while for long-haul flights, it will be down to 59.43, instead of 70.83. However, energy costs have risen sharply since the outbreak of the Iran war at the end of February. The recent surge in kerosene prices has forced us to suspend about 1% of our least profitable routes, Lindemann said."

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