Austria sets minimum price for airline tickets

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Before the current pandemic, one of the biggest topics in the airline industry was environmentalism. Much of this discussion has been put on hold given the current state of the airline industry, although that does not prevent Austria from introducing new policies which may not be very appealing to many.

New flight taxes and minimum ticket prices in Austria

The Austrian government is providing financial assistance to Austrian Airlines. In return for the aid, the government is seeking guarantees from the airline, including Vienna, which continues to be a hub for the Lufthansa group and Austrian Airlines to cut emissions.

Beyond that, Austria is also introducing higher taxes on flights, and even setting minimum prices for tickets … and could that be good for Austrian Airlines?

Austria adds tax of EUR 30 for short-haul flights

The Austrian government will add a ticket tax of 30 EUR (~ 34 USD) for flights less than 350 km (~ 217 miles). This is done to encourage people to use other modes of transportation rather than air.

This is due to the fact that CO2 emissions in Austria are expected to be cut in half by 2030, and Austrian Airlines will be encouraged to transfer passenger traffic to railways in situations where the journey time is less than three hours.

Taxes will be highest on the shortest flights

Flat-rate tax on tickets of 12 EUR added for other flights

Austria currently has a tax on air transport which varies according to the duration of the flight:

  • For short-haul flights, this starts at 3.50 EUR (~ 4 USD) one way.
  • For long-haul flights, it starts at 17.50 EUR (~ 20 USD) one way

This will be replaced by a flat-rate air transport fee of 12 EUR (~ 14 USD) for all flights (except flights of less than 350 km, where the tax is 30 EUR). This is expected to generate more than 100 million euros a year. This increase will have a disproportionate impact on short-haul flights, where this tax is almost quadrupled.

Initially, this was not to be introduced until 2021, but implementation is now underway.

Austria to set minimum ticket price

Perhaps the most controversial change is that Austria will set a minimum price for tickets. The price of a ticket must be at least equal to all taxes and fees on a combined ticket. This basically means that tickets should cost at least 40 EUR (~ 45 USD) one way.

Austria to set minimum ticket price

It’s terrible for low cost carriers

I can understand the concept behind what Austria is trying to do here. I have no problem with countries that add higher taxes for short-haul flights when there are rail alternatives. I think that’s right.

Beyond that, I have some concerns. Whether planned or not, these policies have a disproportionate impact on low-cost carriers:

  • Taxes on short-haul flights over 350 km being almost quadrupled will hit very low-cost carriers the hardest
  • A floor on ticket prices will undoubtedly reduce demand, since the flight will not be as affordable, and it will also have a negative impact on very low-cost carriers.

We have seen airlines argue these same points back and forth:

  • Lufthansa CEO said it was “economically, ecologically and politically irresponsible” for airlines to sell fares of EUR 10
  • Wizz Air CEO said business class should be banned on most flights to reduce carbon emissions per passenger

Airlines always make moral arguments that fit the story they need to continue their business model, and I guess I can’t blame them. But it seems to me that this is rather protectionist towards Austrian Airlines, and that coincides with government funding for Austrian Airlines.

New Taxes and Minimum Ticket Prices Will Hurt Low-Cost Carriers The Most

Conclusion

The Austrian government will introduce a new flight tax of EUR 30 on flights of less than 350 km and will also set minimum prices for tickets. This has a negative impact on low-cost carriers, which operate disproportionately on cheap short-haul flights.

Whether or not Austria’s policy is reasonable is something that people will likely disagree with.

I’m curious to see if there are any EU objections to this policy, as it is one of the most drastic measures we have seen on air travel from any country in the region .

What do you think of the new minimum fares and taxes on flights to Austria?



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