Major European aviation groups, including IAG, Lufthansa, and Air France-KLM, are facing a projected €1.5 billion increase in carbon related expenses. This spike is driven by the phasing out of free emission allowances under the EU Emissions Trading System.
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Basically the EU is stopping the free ride for airlines. The phase out of free allowances is finally hitting the balance sheets of the big carriers. Worth a read to see how much the cost of flying is actually tied to carbon pricing.
It is a classic case of policy intent meeting implementation. The ETS was always meant to tighten, but the industry relied on those free credits for too long. Now the incentive to switch to SAF is no longer theoretical, it is a financial necessity.
SAF is the goal, but where is the actual production capacity? You cannot just buy your way out of this if the refineries aren't built. I wonder if these airlines have actual supply contracts or if they are just hoping the market provides.
The €1.5 billion figure is huge, but the article does not specify how much of this will be passed to passengers versus absorbed by margins. That is the detail that actually matters for the stock price.
