MIAMI — A report from Austrian Aviation discloses the details of the new flight tax law in Austria, introduced by the local Green Party. The report also publishes the opinion of a professor from the Johannes Kepler University of Linz, stating that the tax will have little or no effect on the industry.
However, in the opinion of the author of this Op-Ed, while the professor is right on many of his points, his point of view differs as detailed below.
When the Austrian Government outlined the rescue package of Austrian Airlines (OS), the Green Party of Austria (Die Grünen ~ The Greens) hinted a flight tax of €40 on all flights, and a rule that no flights can be cheaper than the taxes. Their other condition was that OS must close all routes which can be reached by a 2,5 hours train ride.
However, the act recently introduced on the Legal Information System of the Republic of Austria is totally different. The act called Flugabgabegesetzes (Flight Taxation Act) has been in order in a different form for many years, with its definitions and exemptions unchanged in the latest amendment.
The recent amendment introduced a short-haul tax for flights under 350 kilometers (217.5 miles, as calculated by the Great Circle distance method). However, exemptions remain unaltered: Passengers in transfer and transit, Flight Crews, and passengers under the age of two are exempt of this tax, as well as any aircraft below the Maximum Takeoff Weight (MTOW) of 2.000 kilograms (4,400 lbs).
The spirit of the Flight Taxation Law is to make the air greener, which is a good idea. Sadly, it does not help in this at all. Let’s see why by splitting the affected airports into two categories (from Vienna):
Destinations under Category 1 are easy to reach destinations like Prague (PRG), Salzburg (SZG), Graz (GRZ) and Budapest (BUD). These can be reached by train easily in a few hours from the city centre of Vienna.
Other destinations harder to reach are under Category 2. These destinations via train from the city center take longer times than flights usually because of the mountainous terrain. Among these are Klagenfurt (KLU), Zagreb (ZAG) and Kraków (KRK). Ljubljana (LJU), Katowice (KTW), Wrocłav (WRO) and Pécs (PEV) are not served from VIE at this time.
The controversy of the act is that point-to-point traffic on Category 1 flights is almost none, as these are feeder flights without many passengers paying the tax. Transfer passengers do not pay any tax on any of the two flights taken to/from/through Austria. For example a passenger flying from Graz to Münich via Vienna pays 0 instead of €42, while a passenger flying the route directly pays €30
Meanwhile, there is a need for point-to-point traffic on flights to/from the airports under Category 2, as trains (if exist) take too much time to serve the routes.
The €30 tax adds an extra cost in times of crisis for the air transport industry. It affects the airlines more than the passengers, as fares are already high, but in my opinion, it hampers any possibility for new routes (for example, to Kraków, where there is a strong market demand).
When the first rumors arose about the flight taxation act, some industry experts claimed that it would help to make Austrian Airlines competitive. By requiring a minimum fare, OS prices would be more attractive than those from low-cost carriers. However, the act achieves the exact opposite.
As mentioned before, the act has a negative side effect for Austrian Airlines, as it exerts more financial pressure on a carrier that already has to repay a €300 million loan to the government in order to recover from the losses during the COVID-19 pandemic. Also, there is a strong passenger demand for some short-haul flights, a primary revenue source for OS. The new tax will reduce this revenue. The beneficiary of the tax is also the Austrian government, but it is not part of the OS loan repayment.
Other than OS, only Croatian Airlines (OU) is affected. The airline operates 12 weekly flights from Vienna to Zagreb with its Bombardier Q400s (The routes are also served by OS up to three times a day).
Croatia Airlines will probably continue the flights and pay the tax, as Zagreb is harder to reach by train. The only other affected Austrian airport is Graz, which is connected to Münich by Lufthansa (LH) and Air Dolomiti (EN).
Strangely enough, there are two airports that are barely over the 350 kilometers range. Košice (KSC) is 351 km away, according to the Great Circle Mapper, and reaching it by train from Vienna takes eight hours approximately. The air link is also important for Slovakian businessmen who use the service from Bratislava for commuting. Banja Luka Airport, Bosnia (BNX) is 357 km away, and therefore is not affected.
Another airport is Münich, which is 356 km away. It is four hours away by train, which is much shorter than a flight. However, it is Lufthansa’s (LH) second-biggest hub, resulting in strong transfer traffic numbers, and therefore a very important route for the Lufthansa Group.
The current state of affairs show that politics should never intervene in areas where it does not have knowledge of. The Austrian Green Party will say that it made a great new act that saves both the environment and Austrian Airlines. In reality, it is the contrary.
The new Flight Taxation Act will not bring significant changes, and there will not be many route cuts. No one will get money after feeder flights and no one will get any loan back. Alas, money cannot fix the environmental issues like the Ozone Layer. At the end, customers will have to pay more, and Austrian Airlines will lose revenue.
Feautured image by Miklós Budai – @aviationmike.hu