Travel managers have been confronted with a new species of supplier cost to start the new year: sustainability surcharges. Sister carriers Air France and KLM have introduced a compulsory levy of €1-€12 on departures from France and the Netherlands to fund investment in Sustainable Aviation Fuel. Meanwhile, One Mile at a Time, a publication for frequent flyers, reports that a small number of Marriott hotels in the US have introduced a nightly 'sustainability fee' of $4.99 without explaining their rationale for this charge.
These new fees raise important questions for buyers. Will suppliers genuinely use the additional income to invest in sustainability, or are they just "a stealth tax", the view of Gavin Smith, director of Element Travel Technology? Is it appropriate to impose a separate, additional fee to fund sustainability? And should customers pay more to mitigate environmental damage caused by their travel consumption?
The environmental credentials of the Marriott 'sustainability fees' are dealt with more easily. A spokesperson for Marriott International says this was a charge imposed by certain franchisees, not Marriott itself, and “we have reached out to the franchisees to have the fee removed.”
Unlike the hotel franchisees, Air France and KLM have explained their surcharge, which will be presented on tickets as a separate 'Sustainable Fuel Contribution'. Corporate customers can make an additional voluntary contribution.
KLM in particular has been a pioneer of SAF. In its press release announcing the levy, the Dutch carrier argued: “The CO2 emissions of SAF that KLM currently purchases are at least 75 per cent lower than those of fossil kerosene. That is why, in the short term, SAF is the most important means of drastically reducing CO2 emissions. The costs for the sustainable fuel variant are at least four times higher and production is lagging behind. By increasing demand, KLM hopes to further develop the market for SAF so that supply is scaled up and sustainable fuel ultimately becomes cheaper.”
The buyer community is unconvinced. One reason is that, like airlines, they have emissions reduction targets. Who gets to book the savings from the SAF the levy finances? “Only I should take the credit for it, not the airline,” said one travel manager, requesting anonymity, who also complains about not being consulted ahead of the announcement. “It’s not transparent and it’s not clear what methodology they’re using.”
Institute of Travel Management head of programme Kerry Douglas says buyer members have several misgivings. “Some are concerned the SAF surcharge could become much like regular fuel surcharges which came in when oil was at $130 a barrel, but were never removed when the price of oil fell,” Douglas says.
“They also question who will receive the carbon credit for the fuel and whether all flights carry the surcharge, especially as not all flights have SAF on board. The overall perception could be that the SAF surcharge is a price increase under another name.
“Furthermore, there’s the issue of corporate buyers feeling they could end up paying twice, should they have their own commitments on SAF investments.
“Surcharges and fees can present a challenge to buyers. There is often a lack of transparency on exactly how they are calculated and reinvested, and can add further provocation for buyers trying to budget at a time when there is already a high level of focus on costs,” says Douglas.
Jörg Martin, owner of CTC Corporate Travel Consulting, is a confirmed surcharge-sceptic. “It’s the responsibility of airlines to make SAF happen and they should not transfer responsibility to the customer,” he says. “If this is an initiative customers want to support, that’s fine but it needs to be agreed mutually, not imposed unilaterally.”
A travel management company executive, also requesting anonymity, agrees. “You could make the same argument to impose a surcharge for introducing new aircraft because they are more environmentally friendly,” he says. “Airlines are passing the buck for the investment they have to make anyway.”
The SAF levy is also contentious because there is much debate about just how sustainable SAF is. “At altitude CO2 accounts for only half of harmful emissions from aircraft,” says Willem Melis, carbon adviser to the consultancy Climate Neutral Group. “Last year, 300 billion tonnes of kerosene were used worldwide, of which only 65,000 tonnes were SAF.”
KLM’s press release says the levy will finance an additional 0.5 per cent of SAF admixture on all flights from Amsterdam. That will hardly save the planet, but the airline says momentum will build. “Currently, worldwide SAF production is limited,” says a spokesperson. “Therefore, we are only able to start with these small amounts with the ambition to scale if sustainable and affordable supply permits us to do so. We expect SAF production capacity to increase heavily in the coming years. Therefore, we are confident we can source enough SAF for our customer propositions.
“We do not make financial profit from this blending initiative. The revenue for SAF that we receive through the tickets is administered transparently and directly used to purchase new SAF. Furthermore, we believe that it is important to create awareness and transparency about the costs of using a sustainable alternative fuel.”
In spite of questioning the effectiveness of SAF, Melis supports the AF-KLM initiative. “It’s good they are obliging customers to invest in SAF,” he says. “The more that is invested, the lower the price will be. SAF needs more attention. It’s still too expensive to buy and there should be more of it. Even if it is effectively a price increase, it’s for a good cause.”
ITM buyers take a nuanced view too. While sympathising with the broad strategic direction adopted by AF-KLM, it is the specific tactic of compulsory surcharging they challenge.
“There is no doubt that there is a cost associated to delivering a more responsible industry and ITM’s buyer and supplier community are all committed to doing that,” says Douglas. “There is a recognition that to increase usage of SAF and drive the industry forward with production and availability, there is likely to be an increased cost to the end user.
“We may need to pay more for the right partners making the right choices, but it is too early to say whether deploying surcharges is the right way to move forward without transparency and a means of attributing the carbon reduction back to the corporate.
“What buyers don’t want to see is the industry use sustainability to charge or increase costs in an attempt to recoup lost revenue due to the pandemic.”
Next time: Are carrier-imposed surcharges justifiable?