Qantas and Virgin Australia are reportedly pressing for a passenger levy to help meet the higher cost of sustainable aviation fuel, a move that could increase air fares for travellers.
The Australian federal government wants airlines to use low-carbon fuel made from agricultural by-products and waste, including used cooking oil. Such fuel can cost between two and five times more than conventional jet fuel.
Industry estimates suggest the average 260 Australian dollar fare could initially rise by about one dollar under a levy. That increase could reach between five and 10 dollars by 2040.
Graham Turner, chief executive of Flight Centre, said passengers would ultimately bear the cost.
“It’s just going to add to prices,” Mr Turner said. “Passengers have to pay a lot more. I think it’s just premature.”
Singapore began applying its own levy on Thursday, with the charge expected to add about three dollars to flights from Singapore to Australia from January.
Airbus warns levy could affect competition
Airbus supports a gradual mandate requiring airlines to use sustainable aviation fuel, but opposes introducing a passenger levy in Australia.
Stephen Forshaw, the aircraft maker’s chief representative for Australia, said the country could become a major producer of low-carbon liquid fuels.
“Australia … has the opportunity to be a super producer of these new low-carbon liquid fuels,” he said.
Mr Forshaw warned that a levy could reduce competition, although he said the market should be able to absorb the effects of a carefully designed and modest requirement to use the fuels.
“Our market is very competitive,” he said. “So the ability for the market to absorb impacts like a well thought-through and modest mandate on the use of these new fuels is very strong.”
