New Research: Aviation Taxes, Costs, & Charges Have Restricted Affect on Passenger Numbers

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Aviation demand is primarily pushed by airline methods and journey traits, economists say.

A brand new research by two economists, commissioned by inexperienced group T&E, reveals that aviation demand relies upon totally on airline technique and market traits, akin to modified journey behaviour. This refutes airways’ claims that nationwide aviation taxes and costs are solely liable for driving passengers away, says T&E.

The research appears on the relationship between location-based prices and passenger volumes for 101 European airports in 2024¹. Findings present that airports with low prices don’t assure increased passenger numbers. Actually, airports with increased prices are likely to have extra passengers. Heathrow Airport for instance has the best location-based prices but in addition the best passenger numbers in Europe. Consequently, the research finds there may be solely a weak correlation between prices and passenger numbers on this order of magnitude of taxation². That is additionally proven by an extra evaluation of the connection between modifications in ticket costs and modifications in passenger numbers thus far, which once more solely discovered a weak correlation. Hubs, worldwide agreements, and market methods usually tend to decide whether or not an airport is vital and being served.

Marte van der Graaf, aviation officer at T&E, says: “Airways are attempting to inform a straightforward story by blaming location prices for decreased demand. However that is only a marketing campaign to chop taxes and costs. Demand for flying isn’t such a easy numbers sport. In actuality, strategic choices by airways, traits in journey behaviour, and airline enterprise fashions affect passenger numbers, quite than prices alone.”

Traditionally, elevated costs in air journey haven’t curbed demand. In Germany, for instance, the 2019 jet gas worth was twice as excessive as in 2000, however in the identical interval passenger numbers grew by 75%. Demand in aviation is as an alternative primarily decided by provide. Airways set their flight schedules months prematurely after which fill seats by adjusting costs. Related prices like lodge bills might additionally have an effect on demand, the research suggests.

Lowered passenger demand is also linked to the worldwide decline in enterprise journey after the COVID pandemic. T&E’s Journey Sensible Marketing campaign finds that enterprise journey by the world’s largest firms fell by 34% between 2019 and 2023. In the meantime, leisure journey is rising in dominance. Whereas enterprise travellers often fly to financial centres, leisure journey is concentrated in the direction of vacation locations, growing air journey to southern European nations by 10 to twenty% in 2025, in comparison with 2019. General, traits in journey conduct are likely to have a larger affect on passenger demand than taxation and different prices.

T&E recommends nationwide governments to not cap or cut back levies. Slicing aviation taxes, charges and fees would imply throwing away billions in public revenues with out a tangible impact on passenger numbers. Nationwide ticket taxes needs to be designed to mirror financial externalities, i.e. probably the most climate-damaging tickets ought to have the best taxes. This implies increased tax charges for first and enterprise class tickets and better tax charges for lengthy haul flights.

“Airways tirelessly blame levies for his or her billion-dollar enterprise not doing in addition to regular. If taxes and costs had been lowered now, it might merely be a present to the airways, whereas emptying nationwide budgets from a lot wanted cash. The income from honest taxation could possibly be invested in sustainable aviation gas,” concludes van der Graaf.

¹ The research by economists Prof. Friedrich Thießen and Prof. Christoph Brützel analyzed prices for airports arising from nationwide levies and in contrast the variety of passengers touring to and from these airports. It was factored in if the airport sort modifications outcomes. Additionally, it was verified {that a} conventional worth elasticity evaluation isn’t dependable in aviation. The research amplifies a DLR research from April 2025.

² With correct taxation, which might indicate one other order of magnitude of value will increase, aviation taxation might change into a requirement administration software. However present minor variations in nationwide taxes, fees and costs don’t present a robust correlation with demand.

Information launch from T&E.