Lufthansa to Charge Customers to Flaunt Green Credentials
(Bloomberg) -- Airlines have long found innovative ways to charge passengers for services like seat selection, priority boarding, checked bags and even carry-ons.
Deutsche Lufthansa AG is taking it to the next level: the German airline group is working on a new rewards plan to coax customers into paying for its effort to clean up greenhouse-gas emissions, tapping into their desire to be seen as environmentally conscious.
For a price, travelers will be able to demonstrate support for alternative jet fuels or carbon-offset purchases. The effectiveness of these measures has been challenged, but for now airlines have few other options to show passengers they’re trying to make a start on lowering carbon output.
Lufthansa is considering everything from marking seats green to creating digital badges that can be shown on a phone.
“We do think the eco-conscious traveler wants people to know that they’re an eco-conscious traveler,” Chief Customer Officer Christina Foerster said in an interview. “It needs to be chic to show off you’re flying green.”
Airlines face a challenge in shifting onto travelers a bigger share of the potential $2 trillion industrywide cost of reaching carbon neutrality by 2050. Lufthansa and other carriers already offer customers ways to pay extra for emissions, but just 1% pitch in.
Increasing the use of sustainable aviation fuels is likely to raise airline ticket prices, United Airlines Holdings Inc. Chief Executive Officer Scott Kirby said at the COP26 climate conference.
“That’s the way it should be,” Kirby said. “Ticket prices should be a little higher to offset the impact on the environment.” While the fuel should eventually become cheaper, in the medium-term the cost will be high, he said.
Offsets, New Fuels
Corporations cut back on flying during the coronavirus crisis, eating into the highest-margin premium seats sold by airlines. Environmentalists argue that continuing to fly less is the best way for the industry to lower carbon emissions until new planes using technologies like battery or hydrogen power come into service.
“Technology takes 10-plus years to scale up,” Andrew Murphy, aviation director for campaigners Transport & Environment, said on a panel at the COP26 climate conference in Glasgow this week. “The problem is we don’t have 10 years. So the most effective way to reduce emissions from aviation is to fly less.”
Airlines have resisted calls to scale back. The industry’s initial approach to lowering emissions was to introduce an carbon-offset program that’s been criticized for not being rigorous enough to make an impact. Companies are also pledging to increase the use of SAFs, a substitute for the kerosene powering today’s jet engines. But limited supply and high cost are obstacles to wider adoption.
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Paying for SAF, a focal point for aviation net-zero goals trumpeted at COP26, would add measurably to costs.
Lufthansa, Europe’s largest airline group, required a $9 billion government bailout to survive the Covid-19 downturn. It has committed to halving its carbon emissions from 2019 levels by 2030, including buying newer, more efficient planes and purchasing $250 million in SAF over the next three years -- about 1% of its fuel consumption. Its plan also utilizes offsets.
The carrier’s greenhouse gas emissions hit a record of more than 32 million metric tons in 2019. They fell to 11 million tonnes in 2020, the hardest-hit pandemic year, while plans for next year imply a figure of about 22 million metric tons.
Lufthansa hasn’t yet finalized the green rewards plan, which would take effect next year. The app for the company’s Miles and More loyalty program already displays the carbon footprint of a customer’s flights and allows them to spend air miles on SAF and offsets.
The SAF required to fully neutralize the carbon impact of a round-trip flight between Frankfurt and New York would cost 485 euros ($559) per passenger. Airlines are trying to get governments to help shoulder some of the expense as well.
“It’s not yet affordable for a family trip,” Foerster said. “Today people would rather spend money on the hotel or holiday activities.”
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