To what extent does the ticket price for air travel reflect the true price of flying, i.e. a price that reflects the full social costs and all relevant taxes? At the request of The Foundation for Nature Conservation and Environmental Protection (Stichting Natuur en Milieu), this study addresses that issue for three sample flights:
We addressed this issue by identifying the external costs of flying (environmental costs, noise costs, accident costs) that are not charged to travellers through taxes such as the air passenger tax, the EU Emissions Trading System (EU ETS) and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). These external uncovered costs comprise the first part of the social costs that are currently not reflected in the price of airline tickets. In addition, unlike most other products and services, air travel is currently exempt from VAT. This is the second part of the social costs that are not included in the ticket price. We also calculated the size of these costs.
Our study shows that, on average, the current ticket prices for air travel are lower than the actual cost of flying. If all the external costs are charged to the traveller through an increase in taxes on flying and VAT is charged on airline tickets at the same time, the average ticket price for a flight to Paris would increase by about 25% and the price for a ticket to Los Angeles would almost double in price (+86%). The reason that ticket prices for intercontinental flights would rise much more than those for short flights is explained by the fact that on long flights, a much smaller proportion of external costs are covered by taxes. While the external costs (especially climate costs) significantly increase with flight distance, taxes are only marginally dependent on flight length.