The aviation industry has seen extreme years and somehow it is still in the midst of extremes. Hardly any other industry has suffered so much in the corona pandemic, without state aid, the majority of airlines would have gone bankrupt, Lufthansa included. The deep fall was followed by the boom that pushed the companies operationally to and beyond their limits. The cheap tickets that were thrown at people during the crisis are now followed by prices of 900 euros, for example for the short hop from Zurich to Frankfurt.
The balance between supply and demand has still not been restored in aviation. There are early signs that this is more likely to be the case in 2024 and 2025, and then many of the craziest price swings to the upside should also be history. But would it even be desirable to go back to the pre-Corona times in terms of price?
The decade after the global financial crisis was a golden one for aviation. Low inflation, a cheap dollar, low interest rates, and (apart from a few spikes) cheap kerosene have helped most to prosper. Airplanes could be financed cheaply, and when there was overcapacity, as in many places, then the prices were lowered. So you could always fill the planes somehow and in the end there was usually a profit. And if not? Regardless, new investors were comparatively easy to find.
Many of the airline’s environmental projects were just token events
Unfortunately, the industry only forgot to invest enough in climate protection, although it was the first industrial sector in the world to set an emissions target. In truth, many of the projects launched years ago, such as developing sustainable fuels, were largely token events.
Air traffic is currently not only experiencing a time of extremes, but also a kind of split in consciousness. It is in the spotlight like never before when it comes to the environmental impact of its economic activities, far more than other industries that cause far more damage. For this reason, too, and under the pressure of the Paris climate agreement, aviation tightened its goals and committed itself to climate neutrality by 2050. Many of the people who (rightly) demand more environmental commitment from air traffic have no problem with continuing to be with their families in to fly the summer vacation and complain about the high prices.
How cheap or expensive flying will be in the future is of great importance for the entire economy. Regions that are easy to reach by plane are usually better off. If private travel becomes too expensive, this has consequences for tourism, on which the economies of many countries depend. One can decide to make air traffic more expensive through taxes and duties and thus limit its climate impact, because at some point higher prices will have an impact on demand. And unlike other industries, the road to carbon neutrality is incredibly difficult, probably impossible even in the timeframe envisaged. You just have to be aware of the overall consequences.
In Europe, this must remain a constant political consideration that others are apparently saving for the moment: Air India and IndiGo, the two major airlines in the world’s most populous country, have just ordered 1,000 new aircraft, about twice as many as they currently have operate. And Turkish Airlines, a direct competitor to Lufthansa, is negotiating the purchase of 600 jets.
Nevertheless, if air traffic is serious about its climate goals, this will soon have consequences for prices. The International Air Transport Association (IATA) estimates that investments of an inconceivable five trillion US dollars will be necessary to fly in a truly climate-neutral manner by 2050. Airlines and aircraft manufacturers will not have to shoulder all of this themselves, but their costs will also rise significantly with subsidies and other aid. So there has to be a new business basis, and it will likely be painfully different than the pre-Corona years.