November 6, 2014

Pressure from the Ministry of Finance and ruling by the German Constitutional Court sees ‘Flight Tax’ continue to be levied on all flights departing German airports

As part of the German Government’s 2010 austerity package, January 2011 saw the introduction of an Air Tax in Germany. In simple terms, this affected all outward-bound and internal fights only, with the tax levied at the rate of €8.00 for short-haul flights up to 2,500km, which covered most of Europe, €25.00 for medium-haul flights up to 6,000km, and a not unsubstantial €45.00 for long-haul flights. While it is the likes of Lufthansa and airberlin who have shouted the loudest over this taxation, it is the smaller airports and low-cost airlines who have been hit the hardest. Where price is so critical in the low-cost sector, an €8.00 euro hike in price saw the biggest percentage rise in ticket prices and for border airports and airlines, this saw competition from nearby airports in the Netherlands, Belgium and Luxembourg benefit. Additionally, as the penalty applies both ways on internal flights, this hit some of the low-cost carriers even harder as none could afford to raise prices and had to absorb the additional cost themselves.

The announcement by the German Constitutional Court that the attempt by the federal state of Rhineland Palatinate to challenge the legality of the tax has failed has come as a huge blow. Currently the tax brings the German Government in approximately €1bn a year, of which Lufthansa contributed €350m and airberlin €143 million last year.  The German Government cheekily state that funds raised will help the environment, however that is suspected to come simply from the number of routes and flights that have been canceled as a consequence of the tax. However despite the ruling by the German Constitutional Court, this may not be the end of the road. Some members of parliament have openly supported phasing out the tax, while Ryanair, keen to break into the German market, has been quite vocal regarding the tax, having successfully seen a similar tax withdrawn in their own country of operation, Ireland, in April of this year.



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