Transport Minister Clément Beaune will be proposing a policy of minimum prices for flights to the EU in order to reduce greenhouse gas emissions.
In this article published by Gael Camba on Euronews, you can read what the Minister had to say: « 10 euro plane tickets are no longer possible » and further on [a very low ticket price] « does not reflect the price for the planet ».
But what are the different possible hypotheses? And what are the possible outcomes?
There are two possible hypotheses
Initially, the reasoning can be twofold:
Diagram 1: A tax is introduced on the assumption that the increase in the minimum price will generate enough additional profitability for the companies to support and finance it (and too bad for the others, who will die a natural death).
Diagram 2: By increasing the minimum price, we can bank on the fact that there will be fewer passengers, with flights that are less full and less profitable, leading to a reduction in supply on the part of the airlines. In the end, fewer flights = fewer carbon emissions. A nice 3-stripe trick.
In diagram 1, introduce this tax if you like, but let the airlines manage to increase their profitability without imposing anything on the price. They will have plenty of other levers (price other than the minimum price, load factor, cost reduction, development of ancillary revenue, etc.).
In diagram 2, the measure is unfair and ineffective in many respects Ineffective because :
- The likely fall in passenger numbers could be fully offset by the resulting rise in the average price. This will depend on the proportion of customers who refuse the increase – and will not fly – and the proportion who accept it, contributing to an increase in the average price. If the effects offset each other, there will be no impact on profitability, but the situation will be worse than before (a higher carbon footprint per passenger because there are as many flights but fewer customers per flight).
- Low-cost ancillary revenues (seat selection, baggage supplements, in-flight refreshments, etc.) can account for up to 50% of revenues. It will be easy for an experienced pricer to offset the increase in the minimum price by lowering prices on options and supplements so that the customer pays the same overall as before. The measure would then be ineffective because it could easily be circumvented.
- The price of a ticket only makes sense for a return journey in terms of carbon footprint. Because in order to make the return journey, the flight has to make the outward journey. A ticket costing €300 can be broken down into €50 one way + €250 return or €150 one way + €150 return, for example. This changes absolutely nothing. So it’s in the outward and return journeys that the carbon footprint comes into play, where an increase in the price per ticket is imposed, which is equivalent to thinking only in terms of single tickets.
Unfair because :
- Increasing the minimum ticket price is to some extent introducing a distortion of competition by targeting low-cost carriers. Low-cost carriers are often more profitable than national airlines, have higher average occupancy rates and a more modern fleet than traditional airlines. It’s not certain that their carbon footprint per passenger is higher than that of Legacies.
- It would be unfair to attack price alone when other configurations lead to an equally poor carbon footprint, for example on flights with low load factors. It is hard to imagine the Minister imposing load shedding or minimum load requirements on airlines on flights that are nevertheless an ecological disaster. This would be commercially unacceptable and unmanageable for both airlines and customers. But if the problem really is the carbon footprint (and not low-cost or low fares as such), in the interests of fairness we should focus on these flights and not on the price issue.
So why not tackle the subject directly?
For example, we have more than 40 flights a day on the Paris-Madrid or Paris-Rome routes. Under the aegis of IATA (the International Air Transport Association) or any other supranational organisation, we could consider reducing the slots distributed at the major international airports (slots being take-off and landing time slots). This could be done, for example, in proportion to each airline’s schedule. This would automatically reduce the number of flights and the carbon footprint.
Because to effectively reduce CO2 emissions, we don’t need to reduce the number of passengers per flight, we need to reduce the number of flights.
There are other levers that can be used to move in this direction: a substantial tax incentive to renew the fleet with more fuel-efficient aircraft. The latest generations of the A3210 neo type reduce emissions by more than 20% compared with previous generations. We could also talk about synthetic paraffin or solar paraffin, which could be encouraged (as the Swiss are planning to do).
So there are some really good ways of reducing our carbon footprint more directly. Let’s not hijack the discussion on price, which really has nothing to do with the subject. It would be inefficient, unfair and contrary in spirit to the rules of free and undistorted competition.
Keywords: minimum price for flights, carbon footprint, airline, low-cost
